Negotiating a workable pasture rental agreement

A variety of factors can make pasture rental rates difficult to calculate

There are many considerations when renting or leasing pasture for cattle. What is the fair and proper way to decide on a payment method? Should there be other considerations such as a drought clause included in case of a dry year? What about fencing and insurance costs? Who should be responsible for the care and supervision of the cattle and how does that factor into the pricing?

Pasture rental rates can be difficult to calculate as many factors such as supervision, carrying capacity, supply and demand, soil moistures, fence conditions, water availability and distance from the tenant’s home base influence rates. A fair rental rate balances renter and landlord interests based on all these factors, while maintaining the health of the grass and allowing efficient use.

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Ted Nibourg, farm business management specialist at the Alberta Ag-Info Centre in Stettler, Alta., says proper pasture management is of utmost importance.

“If overgrazing is allowed to happen, no one benefits,” Nibourg says. “Quite often with damage, it might be three years before that grass comes back to usable condition again.”

An initial consideration is whether the pasture will be supervised or unsupervised. In drought years, there tends to be more supervised arrangements as tenants are forced to move cattle longer distances to find good grass, making hands-on supervision impractical and extremely cost prohibitive. Typically, in unsupervised arrangements, cattle owners will look after the health and well-being of their own cattle, along with checking water, salt and mineral supplies.

Payment options are usually based on an animal unit per month or per acre equation. “The first question that comes to mind when you’re renting out pasture is you really have to know what the carrying capacity is,” says Nibourg. “We always advise to base it on animal unit months rather than acres. My experience over the years is that when people rent their pasture out on an acreage basis, it tends to get overgrazed.”

Nibourg clarifies that an animal unit is a 1,000-pound cow with or without a calf, and that the average cow size in the province is likely closer to 1,300 pounds.

“We have a lot of big cows, 1,600-pounders chewing a lot more grass than the smaller cows are, so there needs to be compensation for that. And the total numbers of cows must drop, because you’re actually stocking to animal units, rather than cow numbers.”

Nibourg says there are pros and cons for the animal unit per month payment system. On the positive side, the owner’s land is maintained. The cows also do well and maintain productivity if the pasture isn’t overgrazed.

“The con is you have to know what the carrying capacity is and adjust the stocking rate accordingly,” he says. “That gets difficult for some people.”

There are landlords and tenants that use a per acre calculation, but it is important to be mindful in this type of arrangement as well.

“The nice thing about using an acre basis is that it’s fairly easy to calculate. But if you’re stocking 10 cows per acre, it’s going to get overgrazed quick,” says Nibourg.

A drought clause has been a regular consideration among tenants and landholders over the past number of years.

“It really became common in 2003 and 2004 when we had all the dry weather,” says Nibourg. “Now landowners will specify the right to give notice to the renter that they have two weeks to get the cattle off, so grass doesn’t become overgrazed and damaged.”

Payment can then be pro-rated or calculated to an animal unit per day rate to decide on a fair settlement.

Another pivotal question is fence condition and repair costs. Nibourg says the property owner must ensure the pasture is in working condition. That includes providing a water source, or at least provisions for one, he says.

“After that the maintenance of the fence to a large degree becomes the responsibility of the cow owner, with the exception of wildlife damage and wooded area deadfall issues in the winter or non-grazing months,” says Nibourg.

He also stresses the importance of getting the agreement on paper.

“Get a written contract because what is said in March during negotiation might be different than what happens in August if things get dry,” he says. A written agreement should include entry and pulling dates, he adds.

“Last year, in 2018, we saw a shortage of pasture because of the drought, so guys were having to pull their cattle early, causing some hard feelings.”

Nibourg adds that it’s essential the landowner and tenant also have liability insurance in case something happens, such as an animal escaping a fence and being hit on a roadway.

“That’s where insurance should come into play.”

Both parties should communicate regularly to make sure everyone is on the same page.

Cow numbers in Alberta are down. With fewer animals going to pasture this summer, there may be decent availability of rental land. The key is coming to an agreement between property owner and tenant that is mutually beneficial, financially productive and protects the health of the land. c

Bruce Derksen lives, works and writes in Lacombe, Alta. He has 30 years of experience as a hands-on participant in numerous branches of the western Canadian livestock industry.

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Bruce Derksen lives, works and writes in Lacombe, Alta. He has 30 years of experience as a hands-on participant in numerous branches of the Western Canadian livestock industry.

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