Leasing Out Buffer Strips for Hunting Dr. Joe Parcell Ag. Economist, University of Missouri 2001 Bootheel Irrigation Conf. & Tradeshow

Income Enhancement on Buffer Strips Conservation Reserve Program Conservation Reserve Program Agriculture Non-point Source Pollution Agriculture Non-point Source Pollution –Special Area Land Treatment (SALT) Program Hunting leases Hunting leases

Methods Analyzed over a five-year period Analyzed over a five-year period Use Net Present Value (NPV) Use Net Present Value (NPV) –This method discounts future earnings to the present. »For example, how much money would I need to put into a savings account, at 4%, to equate to $100 5 years from now? –If I put $82.19 in the bank today, then 5 years from now the value of this investment, at a 4% earnings rate, would be $100

Assumptions Crop returns & CRP establishment Crop returns & CRP establishment –University of Missouri budgets (David Reinbott & Melvin Brees) »Irrigated corn & soybean »Land costs not included & no taxes Alternative yield and price levels Alternative yield and price levels –Yield »Look at as land quality »Look at difference in management

Assumptions CRP Payments = $85/acre –continuous CRP....$100 upfront incentive SALT Payments = $400 ($80/year) for 5 yrs. SALT Payments = $400 ($80/year) for 5 yrs. »Full payment made in year 1 Establishment cost for buffer strips Establishment cost for buffer strips –50% cost share for CRP –75% cost share for SALT Buffer strips Buffer strips SALT can generate revenue SALT can generate revenue CRP has mowing costs on 1/2 of acres CRP has mowing costs on 1/2 of acres

Least Hunting Assumptions Revenue side Revenue side

Lease Hunting Assumptions Cost side Cost side –$100/year for liability insurance –$100 for legal fee for establishing contract –Annual management costs »Will depend on the quality of hunting desired

Low Prices Net Present Value of Returns over a 5-year period

Average Prices Net Present Value of Returns over a 5-year period

High Prices Net Present Value of Returns over a 5-year period

High Prices & Higher Yield Lag Net Present Value of Returns over a 5-year period

High Prices & Higher Buffer % Net Present Value of Returns over a 5-year period

Summary More incentive to use buffer strips at lower price More incentive to use buffer strips at lower price More incentive to use buffer strips at lower yields More incentive to use buffer strips at lower yields –Management or land quality? Hunting leases may not help bottom line Hunting leases may not help bottom line Tax issues ==> no self employment on cash rent Tax issues ==> no self employment on cash rent ==> self employment on CRP ==> self employment on CRP