How much should I charge for land in a contract grazing situation?
Answer: Calculating prices for grazing services can be difficult, especially for a beginner. The two most common price structures are flat rates and incentive rates. Flat rates are used by many graziers; these are constituted by the charges for grazing services on a per-animal, per-day basis. There are many factors that go into figuring a flat-rate charge:
- Estimated value of the land that is being grazed
- Level of labor and number of services provided by the grazier
- Type of cattle grazed
- Weights of the cattle received (cattle that are heavier at receiving are often charged more than lighter cattle, as they typically will be on grass for less time than lighter cattle)
- And, most importantly, reputation of the grazier
Incentive rates can be applied to a flat rate for special care that is given to the animals by the custom grazier. These can be thought of as goals for excellent management, and might include weight gain or high conception rates for heifers. Average custom rates for your region may often be obtained from your state’s Cooperative Extension Service.
There are many variations of rate calculations. For instance, custom grazier Kevin Fulton’s daily fee is a good example of a structure that captures all his costs associated with grazing:
(weight of the animal) X (forage intake) X (forage price) + daily management fee = daily grazing fee
The fee can easily be adjusted (and written into the contract) based on animal gain each month and billed to your customer on a monthly basis. For experienced contract graziers, rates calculated as shown can be beneficial, and can capture all costs associated with the operation, especially if the grazier is highly respected and is known for achieving good results. If you’re going to set your price based on gain, it’s important to know the cattle you’re receiving. Make sure they have good genetics for gaining on pasture and have the ability for compensatory gain.
Iowa State University Extension and Outreach has produced a fact sheet, Pasture and Grazing Arrangements for Beef Cattle, which can help you calculate your fee.
To learn more on related topics, check out the Livestock and Pasture section of ATTRA’s website, where you’ll find links to videos, podcasts, publications, and more.