High cattle and corn prices will push this year’s pasture rental rates up 6-10% higher than 2010 rates, predicts Kansas State University agricultural economist Kevin Dhuyvetter.
Numerous factors influence the rental rate for any tract of land, including forage quality, stocking rate, size of pasture, water availability and more, says Dhuyvetter. But three primary factors explain much of the variability in average rental rates over time.
“First, rates trend up over time and so are expected to increase from year to year, all else being equal,” he says. “Second, rates are positively related to cattle prices. Rental rates tend to increase more when cattle prices are high compared to when cattle prices are low. Third, rental rates are positively related to corn prices, suggesting that producers will pay more to rent grass when feed prices are high.”
Dhuyvetter and a team of economists built those relationships into a tool that can help pasture owners and livestock producers as they negotiate rental agreements. The tool and related resources can be found online at http://www.agmanager.info/farmmgt/land/lease/.
The percentage change for the previous 30 years has averaged roughly 1.5 to 2% per year. “It is important for landowners to recognize that, while the current economic conditions suggest pasture rental rates likely will increase more than average, rates also may need to decrease if and when conditions go the other direction,” says Dhuyvetter.
If cattle or feed prices change significantly in the next month or two, producers and landowners may want to plug those values into the model to see how the changed values impact projected rental rates, he says.