Do you want to lease land for your cattle business in Texas? If YES, here are 6 factors that determine how much it cost to lease land for cattle in Texas. Pasture lease, especially in Texas, is one major expense most cattle producers negotiate on a yearly basis and it can fluctuate based on competition from other grazes. The USDA publishes cash lease prices based upon responses from producers for each state across the country.
In Texas in 2017, the average cost to lease an acre pastureland was $6.60, non-irrigated farmland was $26.20, and for irrigated farmland $74.90. These numbers are significantly less than the national averages, which are $12.50 for pastureland, $130.00 for non – irrigated farmland, and $212.00 for irrigated farmland.
According to the same report, the most expensive county to lease pasture in 2017 was Snohomish County, Washington with $128/ acre. The cheapest county to lease pasture in the same year was Culberson County, Texas with $0.60/ acre.
Also note that forty nine of the 50 lowest pasture cash lease counties are located in western states with rocky or desert terrain like Texas, New Mexico, Colorado, Arizona, Wyoming and Utah, with prices being $3/ acre or lower.
It tends to be very hard to figure out what a pasture lease is worth, especially since there are many factors that come to play in pasture value in any given year. Some pastures have better quality forage than other pastures, some are already fenced and have water, and others will require investment of time and money to make them usable.
In addition, there are also dry years when demand for pasture rakes up maybe since everyone needs additional pasture to graze and farmers are open to paying a premium for whatever pasture is available. There are so many ways to calculate the cost of a lease including yearly leases, a monthly fee paid per head, animal unit, or cow-calf pair, or variable rates that depend on pounds of gain.
One ideal way to start figuring out what a pasture may be worth especially in Taxes is to check in with the State Agricultural Statistics Service. One of the key duties of this agency is to keep track of what folks are paying in different parts of the state in different years. While this information is only historic, it’s a step in the right direction.
There are several methods for analysing a pasture lease rate, and several factors that influence the lease rate. Pasture lease rates vary according to the quality of stand, type of forage species, amount of timber, condition of the fences, availability of water, and previous fertility practices on the pasture. A pasture lease rate in Texas or the cost to lease land for cattle can be based on:
6 Factors That Determine the Cost to Lease Land for Cattle in Texas?
Table of Content
1. Present Market Rates
First have it in mind that pasture lease per acre can be formulated by charging a lease rate similar to what others are charging. Average pasture lease rates or the cost of lease by county and region of the state are shown in Annual Cash Lease Rates for Texas Survey. These rates are based on a survey that is conducted every spring; include rates per animal unit month as well as per acre per year.
2. Lease per Head per Month
Most livestock owners in Texas use this method to pay lease according to the number of animals grazed and length of time the pasture is used. This is measured by analysing the animal unit months (AUMs). Note that an AUM is the amount of forage required to support a 1,000 pound cow with a calf up to 4 months of age for one month. Note that forage consumption normally parallels the weight of the animal.
Lease is figured by multiplying a lease rate per AUM by the number of AUMs. A lease rate per AUM can be figured by using the current hay price and the quality rating of the pasture. For instance, let’s imagine the pasture is brome (tall grass) pasture.
Also, imagine the average grass hay price during the summer is $100 per ton. The lease rate per AUM is $20 ($100 x .20). If ten, 1,000 – pound cows with a calf by their side are pastured for three months, 30 AUMs of pasture are used during the summer. The lease is $600 (30 AUMs x $20 per AUM) for the summer.
3. Carrying Capacity
Have it in mind that this method is based on the carrying capacity of the pasture. The lease rate per AUM is simply multiplied by the carrying capacity of the pasture in AUMs per acre. Then the lease rate per AUM is analysed by either multiplying the hay price during the grazing season by the pasture quality factor, or by using typical lease rate information provided by the USDA or the Texas Agricultural Survey.
For instance, a $100 grass hay price and a tall grass pasture rating of .20 results in a lease rate per AUM of $20 ($100 x .20). A brome grass pasture may produce four AUMs per acre during the grazing season. Multiplying the rate per AUM by the AUMs per acre results in a lease of $80 per acre ($20 per AUM x 4 AUMs).
4. Return on Investment
This is another method used by farmers to analyse a lease rate based on the sale or market value of the pastureland. Pasture lease may range from 1.5 to 2.0 percent of market value. For example, pasture with a sale value of $3,600 per acre will lease from $54to $72per acre ($3,600 x 1.5% to 2.0% = $54to $72). Also have it in mind that determining the market value of pastureland is difficult because pasture is seldom sold separately from the farm.
5. Forage Value
To effectively analyse a lease rate based on forage value, you will have to estimate the expected pasture or hay production per acre and multiply by either 25 percent of the price of grass hay during the grazing season for pasture, or 35 percent of the price of hay for an established stand of hay.
In addition, if the tenant supplied labour and machinery for establishing the hay crop and pays half of the seed and fertilizer costs, then a lease rate equal to 50 percent of the value of the hay crop would be more appropriate.
For instance, let’s imagine a summer grass hay price of $100 per ton and an unimproved bluegrass pasture yield of from one to one and one – half tons per acre. The lease rate per acre is from $25 ($100 per ton x 25 percent x 1 ton per acre = $25.00) to $37.50($100 per ton x 25 percent x 1.5 tons per acre = $37.50).
For lease of established hay, an alfalfa/grass summer hay price of $120 per ton and an alfalfa/grass yield of from four to six tons per acre results in a lease rate per acre of from $168 ($120 per ton x 35 percent x 4 tons per acre = $168 per acre) to $252 ($120 per ton x 35 percent x 6 tons per acre = $252 per acre) for hay production.
6. Per Pound of Gain
This involves a pasture lease calculated based on the added weight the livestock gain while they are on pasture. This approach is best suited for stocker and feeder cattle rather than beef cows. To efficiently dictate the lease payment, it is pertinent for the cattle to be weighed or an average weight estimated before they are placed on pasture and after they are taken off pasture. This may not be practical in some situations.
Note that gains from pasture forage can be valued at about two – thirds to three – fourths the feed cost of gain in a feedlot. In a normal year, the value of gain of livestock on pasture is from 50 to 60 cents per pound of gain. Lease is figured by multiplying the value of the gain by the total amount of gain.
For instance, imagine the average weight per animal is 585 pounds at the beginning of the period and 815 pounds at the end. That brings the amount of gain to 230 pounds (815 pounds – 585 pounds). If the lease rate is 60 cents per pound of gain, the lease charge is $138 per head (60 cents x 230 pounds).
Remember that both cropland and pasture cash rents are surveyed by USDA’s National Agricultural Statistics Service. For more information on the program go to the USDA’s website.