by Aaron Berger, University of Nebraska Extension

The trend in cattle prices over the last year has been up and down with a general trend toward the upside. These changes in market values and higher interest rates are having an effect on beef cow share and cash lease agreements in determining what is “fair” to both cow owners and those who are leasing the cows.

For a cow owner, four major drivers 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 value leaving the herd or weigh-up price;
• replacement rate; and
• expected rate of return (interest rate) on cow value.

The lease should accurately reflect what each person will contribute to the production of weaned calves and what their compensation should be either in cash or in a percentage of the calf crop.

The average market value of weigh-up cows and bred cows are generally strong. Even with areas being affected by dry conditions, most areas are seeing hay and grain prices lower this fall than they were last year. The change in market value is affecting what is “fair” in terms of the amount of cash lease that would be expected to go to cow owners, or the percentage of the calf crop a cow owner should receive. This change is due to the current market value of a bred cow vs. what bred cow and weigh-up cow values were valued at just two years ago. Higher interest rates are affecting what is a fair share and cash lease rate, as well. The change in cow value, as well as increasing interest rates, means the person owning the cows may need to receive a larger cash lease payment or percentage of the calf crop to reflect more accurately what is fair compared to where things were a couple of years ago.

For the upcoming year, cow-calf share leases or cash leases should be reviewed. The lease should accurately reflect what each person will contribute to the production of weaned calves and what their compensation should be either in cash or in a percentage of the calf crop.

For cow share or lease agreements to be successful long term, they must work for all parties involved.

The Center for Ag Profitability hosted a webinar titled “What is Fair in Cow Leasing: Cash vs. Shares,” which highlights the differences between these lease agreements. The webinar also presents information on key things that cow owners and operators need to discuss before entering into or when reviewing an agreement. The UNL Beef website has additional resources that can help both cow owners and those leasing cows in determining what a fair lease arrangement should be. Two resources are:

• Extension Circular 841: Beef Cow Share Lease Agreements
• A video explaining the use of the Cow-Calf Share Lease Cow-Q-Lator (an Excel^®-based spreadsheet)

Annually reviewing cow-calf share or cash cow lease agreements is prudent under fluctuating market conditions. For cow share or lease agreements to be successful long term, they must work for all parties involved.

Editor’s note: Aaron Berger is an beef educator with University of Nebraska Extension. The podcast from which this article was written is available at https://go.unl.edu/podcast. [Lead photo by Aaron Berger .]

Angus Beef Bulletin EXTRA, Vol. 16, No. 9-B