Plan for drought when preparing pasture lease
Many ranchers rent pasture, but what happens when drought lowers pasture production below expectations? There are ways to address this issue directly in the lease.
All too often, pasture leases fail to include an appropriate plan to adjust to this problem. Without a plan, both the landowner and the tenant are at risk. The landowner risks having the pasture become over-grazed, resulting in future weed problems, reduced long-term production and lowered value. The tenant risks poor performance or health of the livestock due to less forage and lower quality feed. This can lead to higher supplemental feed costs or being forced to sell the cattle.
Who decides when drought has lowered pasture production low enough to remove the cattle? And what should be the adjustment in the rent payment?
Unfortunately, there is no specific answer after the fact.
However, careful attention when drafting a lease agreement can solve the problem before it’s an issue.
It is best to design the lease so both the landowner and tenant share in the opportunity and risk associated with drought by adding an appropriate escape clause due to drought. Be sure to list the length of the grazing period in the lease. Also make sure that stocking rates are specified in the lease, adjusting these stocking levels for increased cow size if necessary. And get it all in writing to avoid any misunderstandings later.
Drought can cause a lot of headaches. But if you’ve planned ahead, making sudden adjustments to your pasture leases won’t be one of them. — WLJ