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Department of Agricultural Economics Kansas State U N I V E R S I T Y www.agmanager.info Pasture lease rates Department of Agricultural Economics Kevin.

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Presentation on theme: "Department of Agricultural Economics Kansas State U N I V E R S I T Y www.agmanager.info Pasture lease rates Department of Agricultural Economics Kevin."— Presentation transcript:

1 Department of Agricultural Economics Kansas State U N I V E R S I T Y www.agmanager.info Pasture lease rates Department of Agricultural Economics Kevin C. Dhuyvetter kcd@ksu.edu – 785-532-3527 Department of Ag Economics Kansas State University www.agmanager.info

2 Department of Agricultural Economics Kansas State U N I V E R S I T Y Supply (availability) –Competing uses of grass (hunting, urban, crops) -- acres –Growing conditions (rainfall, competition) – lbs/acre Demand –Cattle numbers –Feed prices –“Quality” of pasture (size, fence, water, productivity) S&D factors can vary considerably regionally (and even within a county) Other factors (L/T relationship, information, etc.) Factors impacting pasture lease rates…

3 Department of Agricultural Economics Kansas State U N I V E R S I T Y Change from 2009 National average = 0.0% KS = 0.0%; NE = 0.0% OK = +4.8%; MO = -4.0% * Corresponding changes in crop land rents were US=+3.0%; KS=0.0%; NE=+6.2%; OK=0.0%; and MO=+4.4%. Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010 Pasture Land Average Rent per Acre, 2010 15.50

4 Department of Agricultural Economics Kansas State U N I V E R S I T Y National average = 1.3% Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010 Pasture Rent Average Annual Growth Rate 2005 to 2010, percent (geo mean) 3.0%

5 Department of Agricultural Economics Kansas State U N I V E R S I T Y National average = 5.5% Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010 Pasture Value Average Annual Growth Rate Jan 1, 2005 to Jan 1, 2010, percent (geo mean) 9.0%

6 Department of Agricultural Economics Kansas State U N I V E R S I T Y Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010 Change from 2009 National average = 0.0% KS = +2.7%; NE = +5.6% OK = +1.0%; MO = -2.4% * Corresponding changes in crop land values were US= +1.1%; KS=+6.7%; NE=+10.6%; OK=+2.7%; and MO=+5.1%. Pasture Average Value per Acre Jan 1, 2009 770

7 Department of Agricultural Economics Kansas State U N I V E R S I T Y In recent years, pasture land values have been increasing at faster rates than pasture rents Buying pasture ties up a lot of equity that is not generating a cash return unless some other income stream exists (e.g., lease hunting) Is this starting to change --- i.e., are rents going to start increasing at faster rates? Pasture values versus rents…

8 Department of Agricultural Economics Kansas State U N I V E R S I T Y Pasture rental rates in Kansas

9 Department of Agricultural Economics Kansas State U N I V E R S I T Y Kansas Agricultural Statistics (KAS) collects data annually from landowners and producers regarding land values and cash rents – –Agricultural Land Values – reported at the county level in 2009 (CRD level in years prior) – –Bluestem Pasture – 14-county area, discontinued in 2010 Local and regional surveys of leasing practices With surveys there is often a trade-off between statistical validity and level of aggregation (tremendous variability always exists, i.e., think S&D factors) Market established rates

10 Kansas Agricultural Statistics surveyed market rental rates (available at http://www.nass.usda.gov/Statistics_by_State/Kansas/index.asp) Switched to county-level in 2009.Discontinued in 2010.

11 Department of Agricultural Economics Kansas State U N I V E R S I T Y Cash rent historical perspective

12 Department of Agricultural Economics Kansas State U N I V E R S I T Y Historical rents for various regions

13 Department of Agricultural Economics Kansas State U N I V E R S I T Y Kansas county-level pasture cash rents USDA NASS County-level average pasture rents ($/ac) for 2009 (available at http://quickstats.nass.usda.gov/)

14 Department of Agricultural Economics Kansas State U N I V E R S I T Y Pasture rents per acre trend up over time (but they do decrease 20-40% of the time)

15 Department of Agricultural Economics Kansas State U N I V E R S I T Y Rent per pair (head) is a better measure than per acre…

16 Department of Agricultural Economics Kansas State U N I V E R S I T Y Values represent average paid (received) from survey respondents Typically there is no information reported regarding variability within a county or region Question that arises is, How well do these average values reflect the “going market” rates? USDA NASS survey values…

17 Department of Agricultural Economics Kansas State U N I V E R S I T Y Determining futures rental rates in the absence of publicly available reports Department of Agricultural Economics

18 Kansas State U N I V E R S I T Y What drives pasture rental rates? Rents increase over time

19 Department of Agricultural Economics Kansas State U N I V E R S I T Y What drives pasture rental rates? Rents are positively related to cattle prices

20 Department of Agricultural Economics Kansas State U N I V E R S I T Y What drives pasture rental rates? Rents are positively related to corn prices

21 Department of Agricultural Economics Kansas State U N I V E R S I T Y What drives pasture rental rates? Publication on agmanager.info that reports historical pasture rents and equations that can be used to forecast future rents (where forecasts are a function of time, feeder cattle prices, and corn prices). Equations are also built into an online web tool… (tool could be helpful in helping to determine how to change rents from year-to-year)

22 Department of Agricultural Economics Kansas State U N I V E R S I T Y Inputs Output (calculated values)

23 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2010

24 Department of Agricultural Economics Kansas State U N I V E R S I T Y -1.05% 0.00% +2.79% +0.48% +3.21% +1.91% 2011

25 Department of Agricultural Economics Kansas State U N I V E R S I T Y KFMA Beef Cow-Calf Enterprise Data Department of Agricultural Economics

26 Kansas State U N I V E R S I T Y Feeder Cattle Futures Price Price range is for Jan 1 to Oct 15 each year.

27 Department of Agricultural Economics Kansas State U N I V E R S I T Y Feeder Cattle Futures Price Price range is for Jan 1 to Oct 15 each year.

28 Department of Agricultural Economics Kansas State U N I V E R S I T Y Feeder Cattle Futures Price Price range is for Jan 1 to Oct 15 each year.

29 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2009 Cow-calf enterprise budget Starting in 2009, total feed costs are classified as “Pasture” and “Feed Purchased.”

30 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2005-09 returns over total cost Based on analysis of 73 farms having at least three years of data from 2005-2009.

31 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2009 pasture costs Total of 108 farms (avg = $127; range = $19-$327) – 96 farms between $50-$250 (avg $133)

32 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2009 pasture costs Bluestem Report (combined average lease rate) Average with fall calves = $127.60 Average with spring calves = $131.30 Overall average = $130.10 KFMA producer enterprise data and Bluestem survey data match up quite well! Average = $137 Range = $19-$327 Wide range across all cow/calf lease types surveyed.

33 Department of Agricultural Economics Kansas State U N I V E R S I T Y Length of grazing season –Trade-off between pasture cost and purchased feed cost –Ability to graze stalks in late fall/winter Pasture management / intensity –Rotational grazing –Pasture size / efficiency of use Lease rate paid Other? What is driving variability across producers? Pasture cost variability

34 Department of Agricultural Economics Kansas State U N I V E R S I T Y 2009 pasture costs Fairly weak relationship between pasture and purchased feed costs.

35 Department of Agricultural Economics Kansas State U N I V E R S I T Y 60 of 108 (55%) operations are to the left of the line and 48 (45%) are to the right of the line. Combinations of pasture and purchased feed costs resulting in average total feed cost of $377/head. 2009 pasture costs

36 Department of Agricultural Economics Kansas State U N I V E R S I T Y Pasture cost variability Identifying where your farm falls on this figure (and why) is an important benchmark. 22.2% 10.2% 23.1% 13.0% 23.1% Avg pasture cost = $127 Avg purchased feed cost = $250 8.3%

37 Department of Agricultural Economics Kansas State U N I V E R S I T Y Publicly available data for analyzing and setting pasture rental rates is changing… –Bluestem Pasture Report -- discontinued –CRD-level rates being replaced by NASS county-level rates Problems with using reported pasture rates –survey averages do not always reflect the “market” –$/acre is not particularly useful w/o knowing productivity –$/hd (pair) will become less meaningful as practices change Tremendous variability in rates exists and it is important to understand drivers of this Make sure you know if the rates you are paying on rented land are competitive and thus sustainable Summary

38 Department of Agricultural Economics Kansas State U N I V E R S I T Y Questions ??? www.agmanager.info If interested in receiving weekly AgManager.info Update or any of our other Ag Econ newsletters via email, please let me know.

39 Department of Agricultural Economics Kansas State U N I V E R S I T Y D S PEPE QEQE Q P

40 Department of Agricultural Economics Kansas State U N I V E R S I T Y Pasture Land Average Rent per Acre, 2009 Source: USDA NASS Land Values and Cash Rents 2009 Summary and Dhuyvetter and Kastens, August 2009 Change from 2008 National average = 0.0% KS = +6.5%; NE = 0.0% OK = 0.0%; MO = -3.8% * Corresponding changes in crop land rents were US=+5.3%; KS=+9.4%; NE=+3.1%; OK=-1.8%; and MO=+12.5%. 16.50

41 Department of Agricultural Economics Kansas State U N I V E R S I T Y National average = 1.8% Pasture Rent Average Annual Growth Rate 2004 to 2009, percent (geo mean) Source: USDA NASS Land Values and Cash Rents 2009 Summary and Dhuyvetter and Kastens, August 2009 4.6%

42 Department of Agricultural Economics Kansas State U N I V E R S I T Y National average = 14.2% Pasture Value Average Annual Growth Rate Jan 1, 2004 to Jan 1, 2009, percent (geo mean) Source: USDA NASS Land Values and Cash Rents 2009 Summary and Dhuyvetter and Kastens, August 2009 11.8%

43 Department of Agricultural Economics Kansas State U N I V E R S I T Y Pasture Average Value per Acre Jan 1, 2009 Source: USDA NASS Land Values and Cash Rents 2009 Summary and Dhuyvetter and Kastens, August 2009 Change from 2008 National average = 0.0% KS = 0.0%; NE = -6.3% OK = +1.0%; MO = -5.6% * Corresponding changes in crop land values were US=-4.0%; KS=2.9%; NE=6.3%; OK=1.8%; and MO=-5.6%. 750

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