Market values of cattle, interest rates, pasture rental rates and feed costs can change significantly from year to year, Aaron Berger, beef systems specialist with the University of Nebraska Extension, said in a news release.
Discussing how the share or lease is working and if adjustments need to be made is a good way to ensure the agreement is fair.
For a cow owner, the following are the four major drivers that determine what is fair in terms of a cash lease or percentage of the calf crop the cow owner should receive:
- Average cow herd value
- Cow salvage value
- Replacement rate
- Expected rate of return (interest rate) on cow value
If the cow owner is providing other inputs into the lease or share agreement beyond cows, these need to be reviewed as well. Cow owners may provide inputs such as bulls, pasture or facilities as well as share in veterinary expenses as part of the share agreement.
For the person who is the operator caring for the cows, the main things that they need to include are:
- Pasture and feed
- Equipment expense
- Operating expense
If the operator is responsible for providing bulls and veterinary expenses, these should be included as well, Berger said.
Sometimes the operator is asked to develop replacement bred heifers for the cow owner. This activity should be treated as a separate enterprise and not included in the cow-calf share agreement.
The beef.unl.edu website has resources that can help both cow owners and those leasing cows determine what a “fair” lease arrangement should be.
Try Beef Cow Share Lease Agreements Extension Circular 841 at https://bit.ly/2FEWsBk.