How to effectively calculate grazing land values
Determining pasture rental rates for 2014.
Pasture land has been in short supply in recent years throughout the Midwest primarily due to record high grain prices and other commodity pressures. It appears the trend has peaked for corn and is headed back to a “new normal” trading range for grain. Pressure may still be on grazing lands in the short term as livestock producers looking to expand or find new grazing opportunities stay competitive in the market and bid pasture prices higher than national averages. Over time, pasture values tend to follow cattle and corn prices. Following those prices and local land rent for cropping systems will help determine pasture prices in your region. The main focus when leasing pasture is for both parties to receive a fair value for the land resource and grazing opportunity.
For Midwest producers to prosper in the cow-calf or stocker business, they must have access to reasonably priced pasture lands from May-October. National pasture land prices are generally benchmarked from the Flint Hills area and Kansas State University does a nice job of laying out the prices paid for pasture based on rental surveys. Below is the link to an excellent resource on pasture values from KSU.
Determining the market value for pasture is influenced by many factors. Below are the key factors Michigan State University recommends that everyone should consider when developing a pasture rental agreement.
- Determine pasture quality and project grazing value with flexibility build into the lease
- Select a pricing and payment system that both parties agree on
- Identify who is responsible for checking livestock inventory on a regular basis
- Identify who is responsible for “problems” with livestock, fences, water systems, etc.
- Put the entire lease agreement in writing under a contract format with signatures
- Work toward multiple-year leases that benefit both parties
- Pasture Lease Agreement Link