— Rental rates climb, also.
— Calf pressure from corn costs, not pasture.
Pasture values across the major cattle grazing regions of the U.S.
continue to rise and along with that, another uptick has been seen in
average pasture rent, according to USDA’s National Agriculture
Statistics Service (NASS). While land values bode well for those looking
to sell all or a portion of their land, it could become a hindrance to
cattle producers looking to expand their operation or buy more
“seasonal” grazing acres.
Market analysts said they don’t expect calf prices this fall to decline
directly because of increased rental rates, however, profits could
decline because of the extra cost to graze cattle. Most market onlookers
said the possible price increase of other feed resources—in particular
corn—could wreak more havoc on calf and yearling prices this fall.
According to the agency’s 2005 Agricultural Land Value Report, the
southern Plains region of Oklahoma and Texas has an average pasture land
value of $695 per acre, up $71 from last year. In the Northern Plains
states of Kansas, Nebraska and the Dakotas, per acre value is $325,
compared to $279 the previous year. The average pasture price in the
Mountain region—Arizona, Colorado, Idaho, Montana, Nevada, New Mexico,
Utah and Wyoming—was $346, compared to $302 last year. In the Pacific
region—California, Oregon and Washington—the average pasture value is
$1,120 per acre, up $100 from 2004.
According to NASS, the 17 states in those four regions account for over
85 percent of the total privately-owned pasture acres in the U.S. The
western state with the highest valued pasture land is California, valued
at around $1,750 per acre.
Along with the bump in land values this year, USDA also indicated that
pasture rent has increased as well. The average rent for pasture in the
northern Plains is $12 per acre per month, compared to $11.80 last year.
In the southern Plains, average pasture rent is around $8.40 per acre,
30 cents more than 2004. The average pasture rent for Mountain states is
$3.80, up from $3.60 last year. Pacific states have an average rent of
$13.50 per acre, steady with last year, according to NASS. However,
California reported a 50-cent increase in pasture rent, coming in at $12
For the 17 most western states, not including Alaska and Hawaii, the
average pasture rent this year is approximately $9.42 per acre, two
percent higher than the $9.25 average rent last year.
According to Chris Bastian, agricultural marketing specialist with the
Department of Agriculture and Applied Economics at the University of
Wyoming, the jump in pasture value this year was due to historically
high feeder and stocker cattle prices and additional competition coming
from non-agriculture buyers.
“There is a strong correlation between cattle incomes and pasture
values. When prices for calves and yearlings are where they were last
year, producers will be more active in looking at and purchasing land.
High prices also increase their willingness to pay more for that land,”
He also said there has been a significant increase in the amount of
“urbanites” that are looking at getting out of metro areas and buying
smaller tracts of pasture or rangeland with the thought they will regain
“In a lot of instances, 120 acres of pasture can be broken into several
20-, 30-, or 40-acre parcels, which are in demand by a lot of buyers
coming out of the city,” Bastian said. “In most cases, these people have
more money to spend on purchasing these tracts, thus bumping up overall
pasture values, nationwide.”
In analyzing the impact of higher pasture values and rental rates on
this fall’s calf market, Bastian and several of his colleagues felt any
price decreases would be the result of increased corn prices and some
possible pressure from additional Canadian cattle being weaned starting
“I don’t think a lot of prospective calf buyers this fall will be in the
market for additional pasture, particularly after paying record prices
last year and prospects for higher priced corn looming. Cow/calf
producers that sold cattle for those prices will be the ones in the
market for higher priced pasture,” said Greg Abernathy, consultant with
NP Livestock Services, Grand Island, NE.
Moving further west, several sources said that renting pasture was still
cheaper than buying it and that both stocker operators and cow/calf
producers would lease more pasture instead of purchasing it outright.
“Even paying $35 per month (per cow), it’s cheaper to run a cow or
cow/calf pair on leased land than it is to pay for pasture right now,”
said Allen Torell, professor of rangeland sciences with New Mexico State
According to Torell, stocking rates across much of the Southwest and
Intermountain West range anywhere between 8-25 head per section. As a
result, the economics of buying pasture for the sole purpose of running
cows isn’t very economical.
“Appreciation of pasture land alone has out-returned the running of cows
by five to eight times over the past six years, or longer,” Torell said.
“If producers are relying on cattle to return their investment, it will
be a long time before that happens, in most cases 10-15 years. If
pasture value continues to increase, it will be even longer.”
Market analysts indicated that stocker and feeder cattle markets could
be softer in the fourth quarter of this year and first quarter of 2006,
however, most said the extra cost of running cattle on pasture wouldn’t
be a primary reason for that happening.
Instead, more price pressure is expected to come from a projected
increase in corn price because of a fall in corn production this year.
Most analysts have indicated that a nationwide average yield of 145
bushels per acre will keep corn prices mostly steady with prices seen
most of last year and the first half of this year. However, a lot of
analyst projections are that corn yields will fall below 140 bushels and
that corn prices could start getting upwards of $2.50 or more.
Additionally, yields of 130-or-fewer bushels could force prices over $3.
“The fall calf market really depends on where the corn situation goes
the rest of this year,” said Bastian. “There is a lot of corn damage in
Illinois, but other Corn Belt states are still unknown. We will know
more when USDA comes out with its next production report.”
As a rule of thumb, most analysts say that for every 10 cents of
movement in the corn price, a reverse move of $2-5 per cwt is usually
noted in feeder cattle prices. If corn hits $3 later this year, that
could mean calf prices could range anywhere between 12-30 cents per cwt
below current levels.
The next crop production report was scheduled to be released last
Friday, Aug. 12, a day after WLJ went to press. — Steven D. Vetter, WLJ
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