How to Structure a Win-Win Grazing Lease for Land and Livestock Owners

Podcast Notes

We were delighted to get back with Pete Bauman who is a Natural Resources and Wildlife Field Specialist for SDSU Extension.  Pete specializes in range, pasture, and grassland management with an emphasis on educating producers about how profitability and ecological balance are complimentary. Pete’s focus areas include alternative grassland management tools such as fire, biological control, controlled grazing, and reduction of inputs for systems health.

We got together specifically to discuss contract grazing and structuring of grazing leases. Pete, who wrote an SDSU Extension article on Structuring Grazing Leases (see link below), explains that at the core of contract grazing is an agreement between two parties with parameters that are beneficial and acceptable to both parties. Contract grazing can be beneficial if both parties are committed to mutual goals and objectives, leading to better resource management and a recognition of the other’s needs and goals. Pete warns against the conventional paradigm of prioritizing short-term income and profit maximization over the long-term relationship and ecological impact, what happens then is the land “gets trampled in the dust” and the relationship between lessor and lessee is either strained or broken.  The time that lands – and relationships – are most vulnerable are when cropland rental prices are high, driving grazing land rental prices up.  This mechanism is explained by Pete in the podcast. Overgrazing, often leading to costly weed problems, and pressure on water systems and fences, leading to costly repairs, can often lead to unexpected costs that the landowner has to bear – it is these unexpected costs that can have negative effects on the relationship between lessor and lessee.  Parameters can and should be established in the lease agreement to prevent such consequences, and both parties should have a clear understanding of their partners’ contract's goals and objectives - good communication between the landowner and the livestock owner is key to this process.

If you take nothing else from the podcast, get the agreement down on paper, a handshake agreement may work for a while, but when things go wrong, the more that is spelled out, the less there is to dispute.

Pete talks about the importance of setting goals (e.g., financial, input cost, aesthetic, ecological goals) for managing grazing land and how landowners should assess the current state of their property and set a desired future condition, based on their gals – this ought to be communicated to the livestock owner as well. A good lessee's role is to enhance the long-term viability, productivity, and ecology of the leased property to keep it or improve it toward being a well-functioning system; when the lessor’s goals should align with the current lessee's goals, they can create a mutually beneficial agreement between the parties. As long-term relationships build, many good landowners consider the value of their lessee beyond short-term arrangements; a landowner who values their lessee is often willing to take less, conversely some lessees are willing to pay more – all of this points to the inherent (financial and other value) of a good partnership.

Bauman believes that instead of renting by acre, it is better to rent per head, per day, which is based on the amount of grass consumed by the lessee's livestock. By having a predetermined agreement, both parties can avoid misunderstandings and conflicts over conflicting goals.  Buz and Pete also discussethe services provided by the landowner and lessee during the grazing period. He provides examples of both extremes, where some lessees are responsible for everything, while others have contract graziers that provide all services, including infrastructure, rotation labor, water systems, and even medical treatment.


SDSU Extension Article on Structuring Grazing Leases

South Dakota Grazing Exchange

September 19, 2023

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