by Lance Johnson

By LANCE JOHNSON N.C. State University -- ANS 402 Beef Management

Capitalizing on Rented Land for Grazing Cattle

Many cattle producers, large and small, rent land from landowners to improve or increase their beef herds. As today’s land prices are increasing more and more, rented land can be a very useful resource. Rented land, however, is not always the better option. Analyzing land to rent is needed to make sure that you, as the herd owner, are capitalizing while also caring for the owner’s land. Land agreements are also needed for landowners and farmers for land security and positive relationships.

Recently, farmland prices have increased significantly due to many different reasons, including the building of infrastructure, expanding cities, and citizens moving to rural areas to enjoy the countryside scenery. Renting land can be beneficial for the producer and owner. “Six keys to determine the value of the land are knowing the pasture quality and grazing value, agreeing on a price and payment system from both parties, identifying who is responsible for checking livestock, identifying who is responsible for problems including fences, water systems, etc., putting the agreement in writing with contract format, and trying to put forth a multiple year lease” (Farm Progress, 2015).

The number one factor when deciding on renting grazing land is usually the cost or how the landowner will get paid. When calculating and paying a rate, there is usually a variety of ways to figure such (Hofstrand, 2015). “Pasture rental rates can be based on current land market rates, return on investment in pastureland, forage value, rent per head per month (AUM), carrying capacity, or rent per pound of gain” (Hofstrand, 2015).

Pasture rent can be calculated by multiplying the average land worth by 1.5-2.0 percent (Hofstrand, 2015), for example, if the land is worth $5,000; 5,000 times 1.5% = $75 per month of rent. Forage value is calculated by estimating the pasture production in tons per acre and then multiplying it by 25 percent of the price for grass hay during that grazing season (Hofstrand, 2015); more information can be seen in Table 1. Table 1 from Iowa State University shows examples of forage production for different grass species. These numbers may not match North Carolina yield and are only used as an example. For more information on forage production in North Carolina reach out to your extension agent. If orchard grass is worth $100 per ton and produces 3-4 tons of forage per acre, then multiplied by 25 percent, we get $75-$100 per acre for rent.

We can calculate rent by the pound of gain by multiplying the average weight gained per animal by the value of gain from the forage, which is usually 50-60¢ per pound of gain each year (Hofstrand, 2015). This is usually used by finisher or stocker operations; this method requires the herd to be weighed before and after being on the pasture (Hofstrand, 2015).

Another key resource for renting land is the land agreement to keep a positive outcome to please both parties. Land agreements are needed for the clarity of the landlord and farmer. The last thing a farmer wants is confusion and disagreements between them and the landowner. This helps to preserve the land rights while also keeping the operation productive. There is a land agreement on N.C. State’s Extension website that can be accessed at the end of this article.

A positive relationship can also be essential for the longevity of the lease or rent. A rented piece of land or farm can also one day be sold; in a lot of cases, the producer who is renting these properties sometimes gets the first chance of buying it before being put on the market. If the farmer can buy the rented land that they are farming, then this family’s odds of passing down the farm to the next generation increase as they have more resources.

Ways for a farmer to keep a positive relationship is by having open communication. Communicate with one another about how you feel about the agreement, and let the owner know your goals. Being specific with one another is also key to showing the owner what you have in mind and what you as a producer have done on the farm. Make sure that you and the owner are both on the same page, especially when it comes to sharecropping (Caldwell, 2012); keeping conflict to a minimum is key. “Sharecropping is the practice of the owner receiving a portion of the crop (cattle) and USDA payments instead of cash for the land resources used” (Leibold, 2021). However, the owner also pays for the same percentage of inputs such as fertilizers, pesticides, or vaccines (Leibold, 2021). Allow payment options to benefit the owner, not just you. If crop share or flexible cash rent is a better option for them, consider this for the betterment of the owner (Caldwell, 2012). Keeping up with records that have been completed around the farm while including yields and tasks allows the owner to see the management of their land (Caldwell, 2012). Show these records to the owner and make sure what you are doing is acceptable as well (Caldwell, 2012). Lastly, improving their land is key as it keeps them content with you and improves your odds of being able to rent a neighboring farm (Caldwell, 2012).

As cattle producers, many factors go into successfully renting pastureland while also taking into consideration the landlord. There are many different factors to look at while renting pastureland. There are many ways to pay for the pastureland, each of which can depend on the operation or owner. Relationships and agreements are also key so that both parties know what needs to be in place for the longevity of the negotiation.

Additional sources for producers: • N.C. State Extension Farm Lease Agreement Template - https://ncfarmlink. ces.ncsu.edu/2019/01/farm-leasetemplate-available-on-our-website • N.C. State Extension Farm Link, find farms for sale or rent near you - https://ncfarmlink.org/find-farmland References

Caldwell, Jeff. (January 2012) “A Good Land Relationship.” Successful Farming, Successful Farming. www. agriculture.com/farm-management/ real-estate/land-rents/a-good-lrelationship_302-sl21792

Farm Progress. (2015, April 6). 6 steps to determining a pasture rental rate. Retrieved March 1, 2022, from www.farmprogress.com/story-6-stepsdetermining-2015-pasture-rentalrate-10-106209

Hofstrand, Don, and William Edwards. (May 2015). “Computing a Pasture Rental Rate: Ag Decision Maker.” Iowa State University Extension and Outreach, Iowa State University of Science and Technology, www.extension. iastate.edu/agdm/wholefarm/html/c2-23. html

Leibold, K. (2021, July). “Improving your farm lease contract.” Iowa State University Extension and Outreach. Retrieved April 1, 2022, from www. extension.iastate.edu/agdm/wholefarm/ html/c2-01.html

About the Have You Herd Article Series. Have You Herd article written as a portion of ANS 402 Beef Management course requirement at N.C. State University Department of Animal Science. The opinions of Lance Johnson are not necessarily those of N.C. State University or Dr. Carrie Pickworth.