Pasture Leasing Questions

salmonslayer · #1 01/22/13, 02:44 PM

I plan to offer to lease up to 8 acres of fair pasture from a neighbor and looking at the Missouri NASS from 2011 it looks like average rental rates are about $25 - $60 an acre per year.

There is a convenience factor in play for me as this adjoins one of my existing pastures and I already have a gate to this property from my property so access isnt an issue. I would like to propose a rental rate of $100 an acre per year if I can get a 5 to 10 year lease and I want the longer lease because I will have to fence it.

Some additional factors:

1. This would be a written lease with payment due up front roughly Feb 1st of each year of the lease.

2. The pasture is currently unused and the owner has been paying me $300 a year to keep it brush hogged.

3. The owner is a great neighbor but very poor and he is currently unable to afford to fertilize the pasture or otherwise maintain it.

4. There are no buildings, no live water, and no roads involved.

5. I would want an addendum to the lease that I would have first right of refusal if he decides to sell it.

My questions to everyone are as follows:

1. Do you think this is fair to both parties? He gets some money each year off of fallow land and at the end of the lease if he doesnt sell it to me he gains a fence while I gain additional pasture up front which is a concern of mine with the drought.

2. Land prices here are stagnant so I am thinking a long term lease protects both parties as it gives both of us stability and unlike farm land leases for volatile commodities like corn and soya beans its not likely that the value of this land for leasing will significantly appreciate. Any input on that?

3. From any of you that are or have done this am I missing any pitfalls or considerations?

I want this to be a win for both of us as he is a good neighbor and though its a small amount of money for me it would be a significant windfall to him; I just want to be fair and not come across as taking advantage of his situation.

dkhern · #2 01/22/13, 06:16 PM

i would suggest something to address the possiblity he passes and the land goes to heirs

Alice In TX/MO · #3 01/22/13, 06:26 PM

I get $800/year for grazing rights on 80 acres of improved pasture. I think you are offering waaaay too much money for 8 acres.

jwal10 · #4 01/22/13, 07:54 PM

Seems high to me too. He gets a new fence, does not have to pay for mowing and gets $100/acre. I think $50.00 would be enough. I would like to have you for a neighbor....James

Sawmill Jim · #5 01/22/13, 08:36 PM

Neighbors like you are hard to find

Just check on the farm lease laws in Mo in Tn. it is max five years but think you can include a renew clause .

Good on you for being generous

Le Petit Norman · #6 01/22/13, 09:34 PM

Like dkhern said you should make sure you address the risk of him passing away. according to your post you will benefit from it in the long run .... so will him he will be getting an extra $1100 a year for a poor person in this is a lot of money ... on top of it he will more likely get a fenced off improved pasture ... sounds like he will be a winer in this deal no question ask ... even at $500 a year he will be a winner ... can't wait to see the fencing going up along that field in your blog

rambler · #7 01/22/13, 09:38 PM

Some folks don't like long long leases, and as mentioned, they can become a problem if heirs get involved - if not written/ recorded properly you get shafted as the lease is beween you and a dead guy, not enforcable....

If the long term lease bothers your neighbor or is a hassle to implement, you could try a buy-out deal.

You lease the pasture for a year or 3, build the fence for free, but pro-rate the fence value over 10 years. If you don't get to rent the pasture for whatever reason, your neighbor or whomever owns the lands has to pay for X number of years of the fence.

This allows a way out for the landowner or heirs, and it allows you a hook to stay there, or they need to come up with a lump sum to get rid of you.

It is a 'softer' way to tie yourselves together if a set in stone 10 year lease does not appeal to someone.....

You need to feed cattle for 50 cents a day, so offering the $100 seems pretty steep, on top of the fence. I'd be inclined to be closer to $50 as others mention, but of course that is all up to you.

If this doesn't work out, would baling the patch pay both of you more than just mowing it? I understand it's run down, but.....

--->Paul

salmonslayer · #8 01/22/13, 09:49 PM

Quote:

Originally Posted by dkhern

i would suggest something to address the possiblity he passes and the land goes to heirs

Good point.

I know this is a generous offer but the factors that make it worthwhile to me are that it abuts an existing pasture of mine and I literally would never have to even leave my property or cross any of his other property to get to it and frankly, I am hoping to eventually buy it and if I dont take care of it he cant and wont.

I appreciate the input and perhaps I will offer a little less and see where that goes. We live in an area where there will be one place where the owners are doing well and next door folks are literally barely eking out an existence and some of the haves can be predatory and I definitely dont want to come across as predatory (I am not claiming to be one of the haves...I just have a little more than he does).

I'll have to think on it some more.

farmerDale · #9 01/22/13, 11:03 PM

Would he consider a barter type lease? I once rented out some pasture, with the agreement for half a hanging beef. No cash which was good for the young farmer who put his cows on my land, and a nice bunch of beef for me. You mentioned the owner is kinda poor. Just thought maybe this would be a way to alleviate some of his food needs for the year, if he can store it???

Maybe another way to look at it???

salmonslayer · #10 01/22/13, 11:47 PM

I posted when some others were posting so I will respond to some good advice you guys are giving.

I am sure he would do a barter for say half a steer or something and I may mention that to him. He would also just let me bale the hay thats there but the pasture is in need of renovation and I am leery of dropping time and money on renovating a pasture without a formal agreement. I am also looking for a few more acres to incorporate into my rotational grazing scheme as I expand my small herd.

Thanks for the kind words Norman, we will be back to fencing next week since the weather looks to be moderating and the pasture I am looking at is on the other side of that fencing I am doing.

And once again, thank you Paul. I had never thought of pro-rating the fencing and that seems like a great solution that I will pursue. As for feeding for 50 cents a day, the drought has pretty much eliminated that possibility around here. Square bales are going for $7.50 - $10 and large round bales for $65 (sage grass junk) to over $100. I figure its costing me about $2.00 a square bale for my own hay and though we had enough this year, last years drought cut our hay production in half and this year doesnt look much better.

We are a very small operation and 8 acres doesnt sound like much but it would give us some cushion and allow for some flexibility.

rambler · #11 01/23/13, 12:26 AM

I do like your idea, just offering other options so you have a full barrel to pull from if the first idea doesn't fly.

We have acres and acres and acres of cornstalks around here, so cattle hay will never get that expensive. Dairy and horse hay, yes for sure, but roughage for cattle has a natural limit around here, don.t see small squares top 3 bucks very often, even 10 years ago it was common to see bids of 90 cents on ditch hay....

Good luck with it, I can see why it appeals and fits in for you.

Paul

ceresone · #12 01/23/13, 06:10 AM

From someone who lives in the area, I suggest you go back to your original plan-inthis part of the country, good neighbors are hard to find--don't do so much second guessing, and do what you think it right--for him too

haypoint · #13 01/23/13, 06:36 AM

The better the lease, the less reason for him to sell.

salmonslayer · #14 01/23/13, 09:11 AM

Quote:

Originally Posted by ceresone

From someone who lives in the area, I suggest you go back to your original plan-inthis part of the country, good neighbors are hard to find--don't do so much second guessing, and do what you think it right--for him too

Oh I plan on being generous and fair. We are friends and he works 6 days a week trying to stay afloat but as you know, jobs around here are scarce and low paying so whatever we end up with I want it to be mutually beneficial..

And Haypoint, that is a good point I have considered. There is a lot of land around here for sale though and the economy is in such bad shape that people are selling land, vehicles, farm implements etc just to make mortgage payments so I dont think this small lease would influence him much on whether to sell. It seems like every time we go to town we see another place with a foreclosure notice on the door.

harvestmoonfarm · #15 01/23/13, 09:15 AM

Quote:

Originally Posted by Alice In TX/MO

I get $800/year for grazing rights on 80 acres of improved pasture. I think you are offering waaaay too much money for 8 acres.

We charged $1500/yr for 40 acres with auto waterers. I think it depends on your area and what you're willing to spend.

theemon · #16 01/23/13, 09:05 PM

why dont you offer to buy it?

JLMissouri · #17 01/23/13, 09:37 PM

I like Ramblers idea, it seems fair for both sides. Fences are expensive and would improve the value of his land. I run electric fence so I would just use that, but a good perimeter fence is nice to have. I also like farmerdales idea of offering some beef for rent. I am not sure what ground rents for in my area, but I will have to find out soon as I outgrow my property and nothing is for sale.

Alice In TX/MO · #18 01/23/13, 09:43 PM

My pasture is cross fenced, there are cattle pens, and the water is provided and has auto floats, too.

salmonslayer · #19 01/24/13, 06:04 AM

Quote:

Originally Posted by theemon

why dont you offer to buy it?

He has a standing offer from me but not enough equity in his place to parcel out 8 acres. He has owned the place 15 years, bought when prices were a lot higher and now owes about what the place is worth and if he ever decides to move I will just buy his whole place.

We can buy land not contiguous to our existing place which we may do but I have been trying to avoid that unless its just a screaming deal. I dont know about anyone else but with things the way they are and so uncertain we have been trying to preserve capital.