Pasture Cash Rental Rates

One of the most common questions fielded by Extension pertains to rental rates. In Illinois, pasture land can be variable, not just county to county, but also farm to farm. Because of this variation, a producer needs to use tools and resources as a guide in renting pasture. Ultimately, the value or rental rate is a figure that can be agreed upon by the two parties involved in the rental agreement.

Websites like USDA’s National Agriculture Statistics Service can be beneficial when obtaining a base price. They allow producers to reference survey data for renting pasture within their county. Understanding the information provided is the most important part. For instance, Pike County’s average pasture rental rate was $55/acre in 2010. In 2016, it dropped to $42/acre. However, between these years, the price fluctuated even more.

Many factors, such as acreage, terrain, forest, water access, fence quality, ease of loading/unloading, and others, play an integral part in determining the rental rate per pasture.

The number listed on the NASS site is an average of survey responses for that county. Even in one county, the pasture rent can vary. One producer renting land from the same owner for generations could pay less than a renter who has just started. For instance, if an average for one county reads to be$33/acre, one producer could be paying $10/acre while another pays $56/acre.

Knowing several factors dictate rent value, it truly only matters if a renter and land owner can agree on a price. Be willing to negotiate and come into the discussion open-mindedly. This will ensure the best results for both involved individuals.

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Calculating Your Own Pasture Rent

Many factors play a role in determining pasture rent. While looking at tables, graphs, and maps can be helpful, it may be beneficial to calculate rent based on hay price, land value, or stocking rate. Every situation is unique, and for that reason, different calculations are available to determine the rent for any pasture.

Options for calculating pasture rent:

• Based on hay price or forage value.
• Percentage of land value.
• Rate per head per month.

Forage Value

Forage Value is based on the amount of forage that the land will produce and what hay is worth. To use this equation for calculating pasture rent, start with the value of the hay and subtract the costs to harvest the forage, transport the livestock, and the time needed to travel and check livestock. The end number will give a maximum to be paid for the forage.

• Formula: [Value of hay/ton-expenses = max. value of pasture rent] 

As economists at Iowa State Extension suggest, producers can take the value of their hay and multiply it by 25% or 35%, depending upon the type of forage. It is 25% for grass hay during grazing season for pasture, and 35% for an established hay stand.

• Formula: [Price of hay/ton x 25% or 35% depending on forage = rent/acre]

Return on Investment

Another option for determining pasture rent is using the Return on Investment method. This method is usually based on interest rates at a bank. Right now, that rate is considerably lower, around 3 to 4%. For example, if an acre of land costs $3,400 and the bank is charging an interest rate of 4% on the loan, the landowner can break even on payments if charging $136/acre of pasture. 

• Formula: [$3400/acre x 4% = $136/acre]. 

AUM (Animal Unit Months)

This value can be useful when stocking rate is fluctuated on an average. This method is a formula that uses forage quality and price of hay and makes it easy to plug in numbers to get quick results. One AUM is the amount of forage that a 1,000 lb. cow will need to sustain herself and her calf for 30 days, roughly 26.1 pounds per day.

• Formula: [Number of Animal Units x Average Hay Price Out of the Field Per Ton x Pasture Quality Factor = Rate Per Head Per Month]

Using a 1200 lb. cow with her calf at her side at a time when hay is $100/ton, and the rented pasture is of high-quality grass and legumes, the equation would be as follows: [1.20 AU x $100/ton x .20 Quality Factor = $24/AUM].
Remember that there are always other determining factors in the price of pasture, such as fence quality, water, and shade availability, proximity, quality of forage, etc. Producers are tasked with doing what works for their operation.

Sources

• Illinois Society of Professional Farm Managers and Rural Appraisers 2024 Land Values Report, University of Wisconsin Extension, USDA’s National Agriculture Statistics Services, USDA’s National Agriculture Statistics Services, Computing a Pasture Rental Rate - Iowa State University Extension and Outreach, and Onpasture.com.