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Pasture Rent

Pasture rents climbing higher, faster? Blame it on ethanol.

Story by Troy Smith

Advocates hail ethanol's value as an virtually all other crops, including hay and U.S. pastureland values increased by 6%, eco-friendly substitute for at least some pasture." on average, compared to the previous year. portion of our nation's fuel needs, and as Nationally, the average increase in pasture a way to reduce dependence on foreign Looking at the numbers rent was 8.3%. oil. Its detractors have called ethanol an Dhuyvetter says a look at figures gathered In most regions, rent increases were more imposter thinly veiled in green, claiming the by the U.S. Department of Agriculture modest. That's true for most of the Northern renewable fuel delivers less (USDA) National Plains, Southern Plains and Mountain energy than is required to Agricultural Statistics Regions, which collectively represent about The biggest jump produce it. A few critics Service (NASS) shows 85% of all rented pasture in the U.S. The in rental rates say, rather than reducing what's been happening biggest jump in rental rates occurred in pollution and easing the with pastureland values the Corn Belt states of Iowa, Illinois and occurred in the Corn effects of global warming, and pasture rents during a Missouri. On average, that region's rented ethanol production and five-year period. Between pasture cost $4.50 per acre more in 2008 Belt states of Iowa, its combustion actually January 2003 and January than in 2007 -- an increase of more than Illinois and Missouri. 2008, the value of U.S. contribute to both 14%. problems. It has been pastureland increased blamed for rising food prices, too. by an average of 15.2% per year. That's a Looking to the future In the search to lay blame for a multitude national average. Among the states whose Now the question is whether the cost of of ills, ethanol has become one of the usual pastureland increased in value most were renting pasture will continue to increase. suspects. Florida (30.7%), Montana (27.5%) and Evidence suggests that it could. High grain The ongoing debate between ethanol's Nevada (24.4%). prices translate to high costs of gain in the accusers and its defenders has left cattle Contrary to previous years when pasture feedyard and greater reluctance to place producers divided. The side on which a rental rates made relatively small shifts up lightweight cattle requiring long feeding producer stands often depends on whether and down, 2003 initiated a five-year period periods. The alternative is to grow calves he or she also raises corn as a cash crop or of steadily increasing rates. However, rental to heavier weights prior to placement on must buy corn for feed. Producers falling rates did not climb nearly high-forage diets, affording into the latter category are more apt to voice as rapidly as land values. a cheaper cost of gain. High grain prices concern over government policies aimed at Nationally, rental rates Historically, the cheapest shoring up the ethanol industry, as ethanolincreased by an average of gains are achieved through translate to high driven demand for corn pushed feedgrain 7.6% per year. States showing grazing programs utilizing costs of gain in prices to last summer's record levels. the most annual growth crop residues, wheat pasture All feedgrain prices are higher, of included Wyoming (14.9%), or permanent pasture. the feedyard. course. Increased demand for corn has Louisiana (13.3%) and New That promises to increase shifted more cropland to corn production, Mexico (13.4%). demand. lowering production levels for other "Generally, pasture rental rates lagged The supply of pasture is not increasing. crops. That has been supportive of those behind land value. Pastureland values There is only so much grazing land available. markets. But competition for acreage has were driven upward by nonagricultural And now there is a little less, as higher also affected alfalfa and other harvested influences, such as tax exchanges, urban grain prices have brought land previously forage supplies and their prices. And now, sprawl and recreational uses like fee hunting. considered marginal into row-crop it appears to be influencing the cost of Those things had less effect on rental rates," production. the most basic grazed forages. According Dhuyvetter says. Although corn prices retreated from their to Kansas State University (K-State) Toward the end of the five-year period, summertime highs, most pundits seem to agricultural economist Kevin Dhuyvetter, things started to change. During 2007, agree that the ethanol industry is going to be the ethanol-driven corn market is affecting pasture rents actually climbed at a more with us for a good long while, continuing to pasture rents paid by cow-calf and stocker rapid rate than pastureland values. bolster the market for corn. It represents an operators. The accompanying illustrations show element of demand that didn't exist before, "Historically, there's been little average pastureland values (Fig. 1) and and it could continue to influence the value relationship between corn price and average pasture rental rates (Fig. 2) per of virtually all feed resources, including pasture rents," Dhuyvetter states. "But that each of the contiguous 48 states as of rented pasture. has changed. High prices for corn affect January 2008. According to Dhuyvetter,

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Fig. 1: Pastureland avg. value per acre, Jan. 1, 2008

3,254 800 910 700 1,900 570 2,100 530 760 1,350 3,050 800 860 1,920 2,700 4,100 1,000 950 370 2,360 2,700 7,800 2,270 3,100 2,800 2,800 3,400 2,100 5,700 5,250 500 350 2,378

1,752

1,550 1,200 2,250 2,800 3,700

10,179

10,012 9,595 12,500 8,260 10,474

1,610 2,290 8,000

Pastureland Value, $ per acre 5,000 to 12,500 2,500 to 5,000 1,000 to 2,500 500 to 1,000 150 to 500

Change from 2007* National average = +6.0% KS = 16.2% NE = 23.3% OK = 11.1% MO = 5.5%

Source: USDA NASS Land Values and Cash Rents 2008 Summary and Dhuyvetter and Kastens, August 2008. *Corresponding changes in cropland values were U.S. = 10.4%; KS = 15.7%; NE = 20.1%; OK = 13.4%; and MO = 8.6%.

Fig. 2: Pastureland Average Rent per Acre

7.5

13.4

21 43

15.9 7 42 14.2 40 14 15 5 15.5 29 29 22 10 3 19.5 28 8.7 19 30 22 30.29

25

Pasture Rent, $ per acre 25 to 50 15 to 25 10 to 15 5 to 10 0 to 5 na

Change from 2007* National average = +8.3% KS = 6.9% NE = 1.4% OK = 5.3% MO = 11.5%

Source: USDA NASS Land Values and Cash Rents 2008 Summary and Dhuyvetter and Kastens, August 2008. *Corresponding changes in cropland values were U.S. = 12.9%; KS = 9.8%; NE = 20.3%; OK = 7.4%; and MO = 7.6%.

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Pasture Rent

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