The importance of estimating the cost of grazing
June 9, 2014
Following the 2014 winter, many believed abundant grass would be available for summer grazing in South Dakota. However, said Shannon Sand, SDSU Extension Livestock business management field specialist, producers are now asking the question: where has all of the grazing land gone?
The Agricultural Marketing Service (AMS) branch of the USDA reports 2014 summer grass prices are in the range of $25-$50 (mostly $30-$50) with instances as high as $70 for cow/calf pairs. "AMS indicated increased summer grazing prices are due to a lack of availability of summer grazing land," Sand said.
Southwest South Dakota grazing prices increased by $5 to $10 per pair from last year, with wide price ranges in all areas. This is an increase of between 7-45 percent from 2013 prices, Sand said. "Eastern South Dakota is rated as abnormally dry for this time of year. Because grass has been slow to grow this spring, few producers have turned out cattle. Therefore, producers continue to feed hay and grain," Sand said. "However, according to AMS, South Dakota has adequate supplies of carryover hay and forage to meet current needs."
Because of the current grass situation Sand said it is important for producers to estimate their returns to grazing. "For example, if a producer's cost of leasing grazing rights has increased from $37.54 per pair to $43.17, or by 15 percent; this increase will affect the returns a producer will realize," Sand said.
By calculating the returns to grazing and incorporating it into the budget, a producer is better able to accurately predict the increase in returns needed to be profitable, Sand said. For example, if the breakeven price needed was calculated at $138.09 per hundredweight in 2013 based on the $37.54 per pair lease, in 2014, given the pasture rental price of $43.17 per pair, the breakeven price would be $146.33 per hundredweight. This means a producer must have at least a 5 percent increase in their selling price in order to breakeven.
"The importance of creating a grazing budget is particularly relevant when the rental cost of grazing land increases. Calculating the cost of grazing helps a producer better prepare for the future and know where they stand in the current economic environment," Sand said.