Transcript Pasture lease rates - Kansas State University

Kansas State
UNIVERSITY
Department of Agricultural Economics
Pasture lease rates
Kevin C. Dhuyvetter
[email protected] – 785-532-3527
Department of Ag Economics
Kansas State University
www.agmanager.info
www.agmanager.info
Kansas State
UNIVERSITY
Department of Agricultural Economics
Factors impacting pasture lease rates…
• 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.)
Kansas State
UNIVERSITY
Pasture Land Average Rent per Acre, 2010
Department of Agricultural Economics
15.50
Change from 2009
National average = 0.0%
KS = 0.0%; NE = 0.0%
OK = +4.8%; MO = -4.0%
Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010
* Corresponding changes in crop land rents were US=+3.0%; KS=0.0%; NE=+6.2%; OK=0.0%; and MO=+4.4%.
Kansas State
UNIVERSITY
Pasture Rent Average Annual Growth Rate
2005 to 2010, percent (geo mean)
Department of Agricultural Economics
National average = 1.3%
3.0%
Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010
Kansas State
UNIVERSITY
Pasture Value Average Annual Growth Rate
Jan 1, 2005 to Jan 1, 2010, percent (geo mean)
Department of Agricultural Economics
National average = 5.5%
9.0%
Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010
Kansas State
UNIVERSITY
Pasture Average Value per Acre Jan 1, 2009
Department of Agricultural Economics
770
Change from 2009
National average = 0.0%
KS = +2.7%; NE = +5.6%
OK = +1.0%; MO = -2.4%
Source: USDA NASS Land Values and Cash Rents 2010 Summary and Dhuyvetter (KSU), August 2010
* Corresponding changes in crop land values were US= +1.1%; KS=+6.7%; NE=+10.6%; OK=+2.7%; and MO=+5.1%.
Kansas State
UNIVERSITY
Department of Agricultural Economics
Pasture values versus rents…
• 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?
Kansas State
UNIVERSITY
Pasture rental rates in Kansas
Department of Agricultural Economics
Kansas State
UNIVERSITY
Market established rates
Department of Agricultural Economics
• 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)
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.
Kansas State
Historical rents for various regions
UNIVERSITY
Department of Agricultural Economics
Kansas Pasture Re nt
24
NW
SC
NE
SE
C ash r en t, $/acr e
22
20
18
16
14
12
10
8
2000
2001
2002
Sour ce: Kansas Agricultur al Statistics
2003
2004
2005
2006
2007
2008
2009
Kansas State
UNIVERSITY
Kansas county-level pasture cash rents
Department of Agricultural Economics
USDA NASS County-level average pasture rents ($/ac) for 2009
(available at http://quickstats.nass.usda.gov/)
Pasture rents per acre trend up over time
Kansas State
(but they do decrease 20-40% of the time)
UNIVERSITY
Department of Agricultural Economics
Average Kansas Pasture Rents over Time
20
19
Ag Land Values & Rents (avg=1.1%; % neg=25.8%)
Bluestem Report, cow/calf (avg=1.8%; % neg=23.3%)
18
Bluestem Report, stocker (avg=1.1%; % neg=40.0%)
R en t, $/a cre
17
16
15
14
13
12
11
10
1980
1984
1982
1988
1986
Sour ce: Kansas Agricultur al Statistics
1992
1990
1996
1994
2000
1998
2004
2002
2008
2006
Kansas State
Rent
per pair (head) is a better measure than per acre…
UNIVERSITY
Department of Agricultural Economics
Average Kansas Pasture Rents over Time
140
75
Bluestem Report, cow/calf (avg=1.8%; % neg=23.3%)
70
Bluestem Report, stocker (avg=1.1%; % neg=40.0%)
120
65
110
60
100
55
90
50
80
45
70
40
1980
1984
1982
1988
1986
Sour ce: Kansas Agricultur al Statistics
1992
1990
1996
1994
2000
1998
2004
2002
2008
2006
S to cker, $/h ead
C o w /calf , $/p air
130
Kansas State
UNIVERSITY
Department of Agricultural Economics
USDA NASS survey values…
• 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?
Kansas State
UNIVERSITY
Department of Agricultural Economics
Determining futures rental
rates in the absence of
publicly available reports
Kansas State
What drives pasture rental rates?
UNIVERSITY
Department of Agricultural Economics
Trend in Pasture Rent over Time, 1978-2009
500-699 Lb Stocker Rent, $/hd (ful)
75
70
Rents increase over time
65
60
55
50
45
40
1976
1980
1984
1988
1992
Year
1996
2000
2004
2008
Kansas State
What drives pasture rental rates?
UNIVERSITY
Department of Agricultural Economics
Pasture Rent versus Feeder Cattle Price, 1978-2009
500-699 Lb Stocker Rent, $/hd (ful)
75
Rents are positively related
to cattle prices
70
65
60
55
50
45
40
50
60
70
80
90
100
Average of Apr and Oct CME Feeder Cattle Futures Price, $/cwt
110
Kansas State
What drives pasture rental rates?
UNIVERSITY
Department of Agricultural Economics
Pasture Rent versus Corn Futures Price, 1978-2009
500-699 Lb Stocker Rent, $/hd (full season)
75
70
65
60
55
Rents are positively
related to corn prices
50
45
40
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
5.50
Average of May and Dec CBOT Corn Futures Price, $/bu
6.00
Kansas State
UNIVERSITY
What drives pasture rental rates?
Department of Agricultural Economics
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)
Kansas State
UNIVERSITY
Department of Agricultural Economics
Inputs
Output
(calculated values)
Kansas State
UNIVERSITY
Department of Agricultural Economics
2010
Kansas State
UNIVERSITY
2011
Department of Agricultural Economics
-1.05%
0.00%
+2.79%
+0.48%
+3.21%
+1.91%
Kansas State
UNIVERSITY
Department of Agricultural Economics
KFMA Beef Cow-Calf
Enterprise Data
Kansas State
UNIVERSITY
2009 Cow-calf enterprise budget
Department of Agricultural Economics
Starting in
2009, total
feed costs
are classified
as “Pasture”
and “Feed
Purchased.”
Kansas State
2005-09 returns over total cost
UNIVERSITY
Department of Agricultural Economics
Profitability vs. feed cost
Returns over total costs, $/cow
200
Top 1/3 ($0 / $279)
100
Middle 1/3 ($-154 / $322)
0
Bottom 1/3 ($-357) / $363)
-100
-200
-300
-400
-500
-600
-700
150
200
250
300
350
400
450
500
Total feed costs, $/cow
Based on analysis of 73 farms having at least three years of data from 2005-2009.
550
Kansas State
2009 pasture costs
UNIVERSITY
Department of Agricultural Economics
Distribution of 2009 Pasture Costs -- Beef Cows, Sell Calves
27
Percent of operations
24
21
18
15
12
9
6
3
0
25
50
75
100
125
150
175
200
225
250
>250
Pasture cost, $/cow
Total of 108 farms (avg = $127; range = $19-$327) – 96 farms between $50-$250 (avg $133)
Kansas State
UNIVERSITY
2009 pasture costs
Department of Agricultural Economics
Wide range across
all cow/calf lease
types surveyed.
Bluestem Report (combined average lease rate)
Distribution of 2009 Pasture Costs -- Beef Cows, Sell Calves
27
Average with fall calves = $127.60
Overall average = $130.10
KFMA producer enterprise data and
Bluestem survey data match up quite well!
Percent of operations
Average with spring calves = $131.30
Average = $137
24
Range = $19-$327
21
18
15
12
9
6
3
0
25
50
75
100
125
150
175
Pasture cost, $/cow
200
225
250
>250
Distribution of 2009 Pasture Costs -- Beef Cows, Sell Calves
UNIVERSITY
24
Pasture cost variability
Percent of operations
Kansas State
27
21
18
15
12
9
6
3
0
25
Department of Agricultural Economics
What is driving variability across producers?
• 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?
50
75
100
125
150
175
Pasture cost, $/cow
200
225
250
>250
Kansas State
2009 pasture costs
UNIVERSITY
Department of Agricultural Economics
2009 Pasture and Feed Costs -- Beef Cows, Sell Calves
350
Fairly weak relationship
between pasture and
purchased feed costs.
Pasture cost, $/cow
300
250
200
150
100
50
0
0
100
200
300
400
Purchased feed cost, $/cow
500
600
Kansas State
2009 pasture costs
UNIVERSITY
Department of Agricultural Economics
2009 Pasture and Feed Costs -- Beef Cows, Sell Calves
Combinations of pasture and purchased feed costs
resulting in average total feed cost of $377/head.
350
Pasture cost, $/cow
300
250
200
150
100
50
0
0
100
200
300
400
500
600
Purchased feed cost, $/cow
60 of 108 (55%) operations are to the left of the line and 48 (45%) are to the right of the line.
Distribution of 2009 Pasture Costs -- Beef Cows, Sell Calves
Kansas State
27
Pasture cost variability
UNIVERSITY
Percent of operations
24
21
18
15
12
9
6
3
0
25
50
75
Department of Agricultural Economics
100
125
150
175
200
Pasture cost, $/cow
2009 Pasture and Feed Costs -- Beef Cows, Sell Calves
350
Avg purchased
feed cost = $250
Pasture cost, $/cow
300
8.3%
23.1%
250
23.1%
200
150
Avg pasture cost = $127
100
50
13.0%
22.2%
0
10.2%
0
100
200
300
400
500
Purchased feed cost, $/cow
Identifying where your farm falls on this figure (and why) is an important benchmark.
600
225
250
>250
Kansas State
UNIVERSITY
Summary
Department of Agricultural Economics
• 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
Kansas State
UNIVERSITY
Department of Agricultural Economics
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Kansas State
UNIVERSITY
Department of Agricultural Economics
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