Today, farmers, ranchers, and investors can work together to create cattle lease agreements. In this type of arrangement, one party to the agreement is leasing cattle from the other party. In general, both parties to the agreement need to see a profit from the arrangement, while also sharing all of the associated costs of raising, feeding, and carrying for the herd.
In general, a cow-calf beef operation or a purebred herd ranching operation can use the same general type of lease agreement. The best way to determine a fair agreement for this arrangement is to know how much the cost of maintaining the herd. This is the expenditure side of the lease, and how involved both parties are in covering those expenses should be a direct reflection of the profits they will earn.
What to Consider
There should be an estimate or a projection of the costs of the production of the herd for the year. This includes all types of related operating costs, including equipment, buildings, and labor. It is helpful to have a standard time frame for the lease, and weaning to weaning is a good marker. This also keeps all expenses similar between years.
Be sure the lease includes specific language as to decision making for feed, breeding genetics, cull cows, replacement heifers, leasing or buying bulls, managing breeding, and how to terminate the lease agreement. Taking the time to have an attorney familiar with cattle leasing agreements review the contract before you sign is also a wise decision that may save a lot of conflict down the road.
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