Financial leasing of dairy cattle

Extract: The character of investor schemes involving the leasing of dairy cattle are reviewed and a procedure for lessor analysis of dairy leasing alternatives is outlined. A lessee analysis of seven existing dairy cow leases using discounted cash flow techniques is presented. Leasing is generally less profitable than purchase when borrowed funds are available at an interest rate of less than 20 percent. Lease profitability is only modestly sensitive to interest rate levels. Leasing is most likely to be profitable for dairymen when (1) marginal tax rates are low (2) investment tax credit cannot be used (3) cow prices are declining or (4) high quality animals can be leased at average rates. Dairy cattle leasing is likely to provide only modest amounts of capital for agriculture within the current economic environment