A cattle lease agreement allows a farmer to gain the benefits of a cow, bull or a herd of cattle without having to pay the full purchase price. Depending on the terms of the agreement, the farmer may also avoid other expenses, such as the cost of having to replace a cow that dies, some of the costs of feeding the cattle and some veterinary bills.
A cattle lease agreement can provide tax benefits for the seller. When a farmer purchases a cow, the seller immediately recognizes the full gain on the sale. According to Colorado State University, a lease allows the seller to recognize the sale income over time, and the seller gets the greatest tax benefit from a calf share agreement.
A cattle lease agreement allows a farmer to gain income from a herd, even if the farmer can no longer afford to feed and take care of the herd, without permanently selling the herd. If the farmer temporarily has a shortage of money, the farmer can lease out the herd and then take back the cattle when funds are available without having to borrow money to purchase many new animals.
A cash lease agreement is one type of cattle lease agreement. In a cash lease agreement, the farmer pays a specific amount of money for full rights to each cow or bull. According to the University of Nebraska, Lincoln, cash lease agreements are most common for dairy cows. The farmer can simply compare the cost to purchase each dairy cow to the cost to lease a dairy cow to determine if the lease is worthwhile.
A share lease agreement gives the farmer a share of a herd of cattle instead of granting rights to an individual cow or bull. A share lease agreement is more common with beef cattle. The share lease agreement gives the lessor a percentage of the income that the lessee earns instead of a fixed rate per animal. This factor makes a share lease agreement more risky, because a drop in beef prices or an increase in pasture fees may reduce the lessor's income.
Either type of cattle lease agreement should include a list that gives exact details about which costs each partner has the responsibility to pay. The lease example that the University of Nebraska, Lincoln provides separates the pasture cost, the cost of grazing fees and the cost of grain and hay, and the lessor and the lessee each pay a different proportion of each of these bills.