Animal Unit Months

Here’s more math for figuring out how to feed our livestock while making a good living on leased pasture. Even if math isn’t your strong suit, we take it one step at a time so that it’s as easy as it can be.

AUM Breakdown

Animal Unit Months

Figuring pasture use rates by Animal Unit (AUM) is more common in the western United States where it is the basis for public lands leased to ranchers for their stock. The nice thing about this method is that it makes it easy to plug numbers into a formula to give you a good idea of how many animals you can feed for how long. The formula factors in pasture quality, and the market price of hay so that you can come up with something fair to both parties.

An Animal Unit Month (AUM) is the amount of forage required to sustain a 1,000 pound cow with her calf at her side for 30 days. That works out to about 26.1 pounds per day. Forage requirements for all the other classes of livestock are shown in relationship to that 1,000 pound cow and her calf.

Here’s the formula:

Number of Animal Units x Average Hay Price Out of the Field Per Ton x Pasture Quality Factor = Rate Per Head Per Month

Pasture Quality Factor(Note: This formula works well for irrigated pasture, but may over-estimate non-irrigated, arid range rental rates where there is less forage and very little infrastructure.)

Here’s an example of what the formula looks like using a 1200-pound cow with her calf, during a time when hay is going for $10o per ton, and you’re hoping to rent an excellent grass and legume pasture:

1.20 AU x $100/ton x .20 Quality Factor = $24/AUM

From here the landowner and prospective lease can negotiate price based on expectations for management of the pasture, past experience, water and fence infrastructure and other requirements.

Don’t like that formula?  Here’s another option:

Hay Value Per Ton / 8.5 Rule of Thumb Forage Equivalent x Animal Unit = Rate Per Animal Unit Per Month

Using the same cow-calf pair and hay price, here’s that formula in action:

($100 per ton/8.5) x 1.2 = $14.12 per AUM

This is also just a starting point and depending on the result may point out whether you’ve over- or under-estimated the value of your hay.

Sharing Profit and Risk

If you intend to graze Stocker Cattle, establishing a rental rate based on pounds gained means that the landowner and the lease share the profit if there is one, and the risk if gain isn’t as great as expected. If you’re considering this method, you’ll have to have base values for the cost of gain, the expected gain, how long the animals will graze, and the per animal costs for caring for them through the grazing season.

All of the formulas I found for this method start with a Pasture Charge per Head per Month, also called a Seasonal Cost.  None of them told me where they got that number, but they all started with $10.  So starting with that as my full disclosure, we’ll go through this figuring process.

Pasture Charge Per Head Per Month x Number of Months = Seasonal Cost

$10 x 6 months = $60 per head

We use this as our base and then we divide by the pounds of gain we expect. This will change depending on the kinds of animals you’re running, grazing management, health and parasite load of the livestock and forage quality. This is where the risk sharing comes in. Let’s say that we think our stock will gain 200 pounds each while they’re on pasture.  Now our formula looks like this:

($10 x 6) / 200 pounds = 30¢ per pound of gain.

Thirty cents per pound is our break-even price and if the animals all gain 200 pounds each, that’s what the landowner gets. If the stock gain more, say 240 pounds, here’s what the landowner gets per animal:

240 x .30 = $72 per head

But if the animals only gain 175 lbs each, the landowner gets less money per animal:

175 x .30 = $52.5 per head

2019 Nebraska Cow-Calf Pair and Stocker Rental Rates

Recent findings published from the Nebraska Farm Real Estate Market Highlights 2018-2019 indicate changes in cow-calf and stocker monthly rental rates trended slightly lower when compared to 2018 (Table 1). Nebraska monthly grazing rates represent a typical fee for one month of grazing during the summer. Many leases run for a five-month grazing season subject to annual weather conditions.

The University of Nebraska-Lincoln Department of Agricultural Economics annually surveys Nebraska land professionals including appraisers, farm and ranch managers, and agricultural bankers. Results from the survey are divided by rental rate class and summarized by the eight Agricultural Statistics Districts of Nebraska (Figure 1).

Reported rates for cow-calf pair and stocker from the Nebraska Farm Real Estate Market Highlights include by district the average, high third quality, and low third quality. The range in these averages reflect the differences in the quality of the grazing land. Features influencing the quality of the grazing land might include the mix of the forages present during the growing season, livestock water sources, fencing upkeep, and general market competitiveness for the area.

To determine a cow-calf pair rental rate for a five-month period, the monthly rate for a district would be multiplied by five to calculate the seasonal rate. For example, the Central District average cow-calf pair monthly rental rate of $50.70 multiplied by five would be $253.50 per cow-calf pair for the 2019 grazing season.  This rate would vary depending upon the district of the state and provisions considered as part of the lease.

Negotiations on contractual terms for the grazing season include considerations on the landlord and tenant’s willingness to provide fencing maintenance, weed or brush control, and monitoring or providing water. Depending upon the willingness of either party to maintain, control, or provide these resources as part of the lease, the final rental rate may vary accordingly as panel members noted.

In addition, panel members also reported on the need for reviewing leases to account for different kinds of weather-related disasters such as flooding or drought. Reviewing these provisions by the appropriate agency or organization providing disaster assistance ensures compliance on grazing land in the case of an adverse weather event.

Survey results shown and discussed in this report are findings from the University of Nebraska–Lincoln 2019 Nebraska Farm Real Estate Market Survey. Complete results from the survey may be found at the Nebraska Farm Real Estate website: http://agecon.unl.edu/realestate.

Please address questions regarding preliminary estimates from the 2018-2019 Nebraska Farm Real Estate Survey to Jim Jansen at (402) 261-7572 or jjansen4@unl.edu.

Jim Jansen, (402) 261-7572
Agricultural Economist
University of Nebraska-Lincoln
jjansen4@unl.edu

Jeff Stokes, (402) 472-1742
Professor, Agricultural Banking and Finance
University of Nebraska-Lincoln
jeffrey.stokes@unl.edu

 

Interviews with the authors of BeefWatch newsletter articles become available throughout the month of publication and are accessible at https://go.unl.edu/podcast.