New Montguide available on Grazing Leases
A new Montguide on grazing leases (MT201601HR) is available online at http://www.msuextension.org. Hard copies are available at the Chouteau County Extension office located in the basement of the courthouse. Authors for the Montguide are Kate Binzen Fuller, Assistant Professor/Extension Specialist, Dept. of Agricultural Economics and Economics; and Jeff Mosley, Professor/Extension Range Management Specialist, Dept. of Animal and Range Sciences. Below are a few notes taken from the Montguide.
Livestock grazing lease rates can be expressed in a variety of ways including per acre, per whole tract, per AUM, per head, share of gain, or variable basis.
Per acre lease rates differ with the productivity of the grazing resource and lease conditions. The landlord usually receives the same rental rate each year for the duration specified in the lease. The tenant assumes the risk of annual fluctuations in forage production due to weather.
Per whole tract lease arrangements refer to leasing a block of land or ranch for a specified annual fee. This type of lease is normally used when leasing an entire ranch for a period of years or when a mixture of land types (rangeland, seeded pasture, crop aftermath, forest) are in the unit leased.
Per animal unit month (AUM) lease charges provide flexibility in allowing for different kinds and classes of livestock by using the AUM as a common denominator. However, the definition of an AUM can vary, so it is important that both parties understand the definition being used, and this definition can be included in the lease itself.
Per head or per pair lease rates, charged per month or season, vary with the type of livestock. Because even one species of animal can consume drastically different quantities of forage, depending on its age, weight, and other factors, utilizing AUMs as a common denominator may be preferable.
Share of gain applies to seasonally-grazed, weight gaining animals such as stocker cattle, replacement heifers, and lambs. These charges may consist of a pre-established charge per pound of gain or a share of the total weight gain for the grazing period. The economic charge should be justified on the relative contribution to production costs by tenant and landlord, and current or futures prices can be used to determine an appropriate charge for pound of gain. Variable leases use a base rate that is fixed for the term of the lease and a variable rate that allows the lease rate to vary annually with livestock prices. The base rate should be established by considering the relative contribution of both parties to total production costs. The variable rate is formulated by considering prices from a livestock market and developing a price index.
Regardless of how the lease rate is expressed, a grazing lease should always clearly specify the number and kind of animals allowed and the dates that these animals will be allowed to graze the leased land, and what will happen if the animals need to be removed early in the case of drought or fire. In some cases, it may be simplest to write a grazing lease on a per-acre basis and then stipulate in the lease the number and kind of livestock allowed.
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