January 15, 2015
If you rent pasture and drought lowers pasture production below expectations, what can you do about it? It depends on how the lease is structured, says Bruce Anderson, University of Nebraska-Lincoln forage specialist.
Drought can play havoc on pasture leases. All too often, pasture leases fail to include an appropriate plan to adjust to this problem.
Without a plan, both the landowner and the tenant are at risk, according to Anderson. Landowners risk having the pasture become overgrazed, resulting in future weed problems, reduced long-term production and lowered value. The tenant risks poor performance or health of the livestock due to less forage and lower quality feed. This can lead to higher supplemental feed costs or being forced to sell the cattle.
Here are some important questions to consider: Who decides when drought has lowered pasture production low enough to remove the cattle? And, what should be the adjustment in the rent payment? And who gets insurance or government payments?
"Unfortunately, I can't give you a specific answer," Anderson says. "Instead, now is the time to discuss these issues as landlord and tenant. Be sure to list the length of the grazing period in the lease along with beginning and ending dates."
He also recommends making sure that stocking rates are specified in the lease and that adjusting those stocking levels for increased cow size should be considered.
"Usually, it is best to design the lease so both landowner and tenant share in the opportunity and risk associated with drought by adding an appropriate escape clause due to drought," he says. "Indicate how a drought adjustment will be made and how that will affect rent payments. And get it all in writing to avoid any misunderstandings later."
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