By Gene Schriefer
I know it is spring when the “What’s pasture renting for?” calls start coming in.
According to the USDA National Agricultural Statistics Service, the simple answer is that the average was $44 per acre for Iowa County in 2016. We can look up that value for every Wisconsin county. While this is a technically correct answer, it paints an incomplete picture. Not every acre rents at this rate. If some pasture rents for $10 per acre, other pasture could rent for $78 per acre, and the average would be $44. There can be a wide variation in pasture rental rates.
Quality and quantity
The two greatest factors of pasture lease value are productivity of the pasture and local demand. Some pasture may produce 4 tons of forage in a season, and some only 1 ton. Would you pay the same rate for that variation in production? Probably not. Some land is more wooded, and some is more open. Other factors that come into play include fence security, water access, loading and unloading facilities, and how many acres are available. These factors all impact the pasture’s value.
The most common lease method is per acre per season. This is simple but may not capture the full forage value.
An alternative method common in Western states is leasing by the animal unit month, or AUM. One animal unit is defined as a 1,000-pound beef cow with a daily dry matter forage requirement of 26 pounds per day. An AUM is the amount of forage consumed by one animal unit for one month, which is equal to 780 pounds of dry matter forage.
Why use the AUM method? There is significant variation in forage production as well as beef cattle weights in Wisconsin. The only 1,000-pound beef cow in Wisconsin is in a 1950s textbook. There are a few at 1,200 pounds, but more and more beef cattle are 1,500-plus pounds each. A 1,500-pound animal consumes more than a 1,000-pound critter. We take the pasture AUM rate times 1.5 AU (1,500 pounds divided by1,000-pound AU) to calculate the rate for the larger cows, or maybe 0.75 AU (750 pounds divided by 1,000 pounds AU) if grazing light yearling cattle. It makes for an equitable adjustment according to what the livestock actually consume based on size.
What should the rate be? From a buyer perspective, the question is: What are your alternative costs to feed this animal without this additional pasture? You have the cost of the stored feeds and yardage (labor, equipment to feed it, manure handling expense, etc.). If this is $2 per head per day, you’re at $60 per 1,500 pounds per cow per month. From an AUM standpoint, anything under $40 per AUM is money in your pocket.
You also need to factor in the cost of getting cattle to the grazing site and home again, plus costs associated with checking the cattle, which needs to come off the top. Distance to pasture, carrying capacity and frequency of checking livestock all become overhead costs that need to be factored into the value of a pasture.
As an example, assume a pasture is 30 miles from home and can support 50 cows for 180 days. The cattle are checked once a week, with transportation costs at the beginning and end of the season. This works out to $63 per head for the six-month season, or roughly $10 per head per month. This amount ($10) would be deducted from the maximum you could afford to pay ($40 per AUM), leaving you with $30 per AUM as a top end. Pay anything more this, and you would be financially better off keeping the cattle home.
If you can negotiate with the landowner and drop this to $25 or $20 per AUM, the picture looks even better. Working forward again with a 1,500-pound cow, at $20 per AUM times 1.5 AU, that’s $30 a head per month.
As farmers consider rental values this season, the first step is determining the carrying capacity, or an estimate of the amount of forage a given pasture will produce. Then it’s time to figure out the cost of getting livestock there and back, determine what it’s worth to you, and then sign a lease — but that’s a topic for another day.
Schriefer is the Iowa County Extension agriculture agent.