North Dakota State University
North Dakota Agricultural Experiment Station
Central Grasslands Research Center


An Economic Analysis of Grazing, Haying and Cropping Marginal Highly Erodible Crop Land in Southcentral North Dakota

By Paul E. Nyren, Bob D. Patton, Brian S. Kreft and Cole Gustafson

The Conservation Reserve Program (CRP) began in 1985 with the first sign up authorized by that year's Farm Bill. The 1995 Farm Bill not only reauthorized the CRP program but placed more emphasis on wildlife habitat making the Prairie Pothole Region of North Dakota a high priority area. The emphasis on protecting waterfowl habitat in the region has meant an increase in CRP acres during the last several contract periods. This study was originally designed to assist Coteau area producers in making the difficult decision of whether to hay, graze or crop CRP land when the contracts expired. Many of these acres have now been re-enrolled in the CRP which means that these decisions have been postponed for the duration of the new contract. However, information gained from this study also pertains to land being reseeded to introduced perennial grasses and used for haying or grazing. The project includes the following comparisons:

  1. Cash crop farming using a rotation of sweetclover, oats for grain, wheat, and barley.
  2. Oat-sweetclover rotation of oats for either grain or hay under-seeded with sweetclover, followed by sweetclover, either cut for hay or haylage.
  3. Grazing CRP land.
  4. Haying CRP land.

Cash Crop Farming and Oat-Sweetclover Rotation

Forty acres of previously cropped land located on the CGREC are used for the cash crop and forty adjacent acres are used for the oat-sweetclover rotation. Costs of farming and forage harvesting operations are custom rates from extension circular Custom Farm Work Rates (EC 499). Other costs are best estimates. All costs were figured and tabulated in the year they occurred (table 1). Potential value of the land to the owner is included in the analysis and is the rental value as published annually in North Dakota Agricultural Statistics. Since the cropping part of the study is located in Kidder County and the grazing and haying on CRP land is nearby in Stutsman County, the cropland rental rates were averaged for the two counties and used as the cropland cost. The returns to each of the enterprises reflect the costs of the and, i.e. the return to the crop rotation in 1997 was $34.61 which includes a land cost of $27.75/acre (table 2). These returns were the second lowest during the study and reflect the dry spring weather's effect on the crop yields. It will come as no surprise to see that returns from both cash crop farming and the oat-sweetclover rotation are as dependent upon Mother Nature and the vagaries of the market as they are on good farm management. It is also important to remember that in this analysis, custom rates are being charged against returns. The profit side of custom work and the somewhat inflated land rental values will modify the net returns per acre considerably.



Grazing CRP Land

Three hundred and seventy acres of privately owned CRP land located 4 miles southeast of the Center are used for grazing. This land was seeded in 1985 to a mixture of tall wheatgrass, intermediate wheatgrass, sweetclover and alfalfa, and is now subdivided into a season-long treatment and a twice-over rotation treatment. The economic returns from both grazing systems are combined in this study.

For the purpose of this study, the livestock and CRP land enterprises are combined. Economic principles would suggest that each be separated, but because we are evaluating a system of grazing CRP land we have combined them into one enterprise. The land rental value would be $11.30 or $27.75 depending on whether the land was pastured or cropped in 1997. In calculating the costs associated with the grazing enterprise the crop land rental rate of $27.75 was used.

The value of the livestock inventory at the beginning and end of each calendar year is included in table 3. This inventory includes animals purchased during the year which could be sold and converted to cash at any time. It was assumed that the entire herd of bred females was purchased on January 1, 1992. Since there were no replacement females in the CRP herd in 1993, it was necessary to purchase 17 replacements. In 1994-1997, seventeen heifers saved from the 1992-1995 calf crops were bred and ready to calve and became the replacements.

The livestock inventory affects the returns to the operation because the value of the females on hand fluctuates during the year. As table 3 shows, the herd was valued at $69,356.10 at the end of 1996 but was worth $71,797.25 on December 31, 1997. This change in the livestock value was recorded as $2,441.15 in table 3 under inventory change. Also recorded in table 5 is the net return excluding inventory change. Since most cattle producers do not consider the change in value of their livestock as a net gain or loss this line is a more practical reflection on the true return to the operation.

Table 4 is a listing of the costs associated with operating the livestock herd during the year. The cost of replacements is the cost of maintaining the replacement heifers from the time of weaning until they join the herd. This includes pasture costs during the summer and feed costs for the time they are kept separate from the main cow herd. Cost for herd sires is similar to the replacement budget. Annual per acre costs for maintaining a cow for six years of the study varied only slightly, from a low of $75.69 in 1995 to $85.82 in 1997.

Table 5 shows the value of animals sold during the six years of the trial. Each year it was assumed that 17 heifer calves were retained as replacements and 17 cows sold as culls. The value of the animals was calculated at the time of weaning in consultation with a local cattle buyer who is familiar with the herd. Each year an opportunity cost was deducted from the returns from livestock sales. This is the amount of interest that could have been earned if the livestock had been sold and the money invested in a 12 month certificate of deposit at 5.3% interest. While economists use inventory change as a part of the net return, most producers do not consider these changes as a part of their net income. Table 5 shows the net return excluding inventory change to reflect the more commonly used figures. Results of the six-year study varied from a high of $27.16 in 1993 to a low of $17.39 in 1996 with an average return of $7.68.



Haying CRP Land

Ninety acres of CRP land adjacent to the grazing systems are cut for the hay crop. These were also seeded in 1985 to the same species used in the grazing study. Costs and returns for haying CRP land are shown in table 6. In 1992 the 90 acres of CRP hayland produced 403 bales averaging 1100 pounds. The quantity produced was the result of haying a field that had not been cut since 1985. The quantity was high but the quality was low, resulting in a lower return than for average grass-alfalfa hay for that year. In 1993 the quality was better since much of the old material had been removed. However, the value of the hay in the wet year of 1993 was about the same. In 1994 both quantity and quality increased and returns were appreciably higher than in 1993. Due to above-average precipitation in 1995, production increased to 288 bales averaging 1400 lbs/bale. Hay production in 1996 decreased to 236 bales each weighing 1300 lbs. Due to the abundance of hay on the market, hay prices dropped to $28/ton. Hay production again decreased in 1997 with only 152 1320-pound bales produced. Due to the dry conditions in 1997 hay prices increased to $45.00/ton, and helped increase returns to $5.17/acre. The average net return per acre for the five-year period was $3.33.


Conclusions

Table 7 summarizes the net return to each management system or enterprise. This is the amount of profit or loss after the value of the land and labor are deducted. Also listed is a return to land, labor, and management for producers who do not want to consider renting their land or charging for their labor. The cost of labor on the cropping and haying systems was not deducted because it could not be separated from the custom work rate. As already observed, returns from all systems are as dependent upon weather and current prices as they are on good farm-ranch management.

Cost figures shown in tables 1, 4, and 6 for custom work, land rental and cow maintenance are from Ag Statistics, Ag Extension publications, or are best estimates. In any given operation, the poorest cropland was enrolled in the CRP. When making decisions for future use of these acres, it is important to remember that this land will always be marginal in quality; therefore, each producer should substitute his costs of operation to arrive at his potential net profit or loss. Government payments should not be included in this estimate.

Should you cash rent your land? On land valued at $289/acre, cash rent of $27.75/acre is a 9.6% return on investment. This would indicate that land rental rates are too high in relationship to the land's ability to return a profit. Results of this study to date show grazing and hay production to be the most profitable options. Consideration should also be given to additional uses such as wildlife easements or fee hunting.

 

Table 1. Costs/Acre For Cropland
             
  Sweetclover Oats Wheat Barley Wheat Oats
  1992 1993 1994 1995 1996 1997
             
Seed $3.36 $2.01 $8.12 $5.25 $10.65 $2.60
Fertilizer $0.00 $6.45 $3.55 $20.21 $6.62 $9.60
Herbicide $0.00 $7.13 $9.16 $34.07 $15.81 $8.30
Herbicide Application $0.00 $2.50 $2.48 $5.70 $2.85 $2.94
Deep Chisel $2.14 $5.00 $4.28 $4.93 $4.93 $5.08
Field Cultivation $2.09 $5.00 $4.17 $5.44 $4.13 $4.25
Seeding $2.62 $5.00 $5.24 $5.24 $6.00 $6.18
Swathing $4.23 $4.00 $4.23 $4.23 $4.37 $4.50
Mowing $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Land Costs $26.90 $26.20 $27.45 $26.05 $27.25 $27.75
Piling & Packing $2.09 $0.00 $0.00 $0.00 $0.00 $0.00
Harvesting $8.77 $12.00 $12.59 $12.59 $13.72 $14.13
Hauling $4.95 $5.09 $1.80 $3.55 $2.37 $3.28
Rock Picking $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total Costs $57.15 $80.38 $83.07 $127.26 $98.70 $88.61
             
Oat-Sweetclover Rotation
             
  Sweet Oat Sweet Oat Sweet Oat
  clover Hay clover Grain clover Grain
  1992 1993 1994 1995 1996 1997
             
Seed $3.36 $6.28 $0.00 $7.75 $0.00 $2.60
Fertilizer $0.00 $6.45 $0.00 $5.78 $0.00 $9.60
Herbicide $0.00 $0.00 $0.00 $0.00 $0.00 $8.30
Herbicide Application. $0.00 $0.00 $0.00 $0.00 $0.00 $2.94
Deep Chisel $2.14 $5.00 $0.00 $4.93 $0.00 $5.08
Field Cultivation $2.09 $5.00 $0.00 $4.13 $0.00 $4.25
Seeding $2.62 $5.00 $0.00 $5.24 $0.00 $6.18
Swathing $4.23 $5.00 $6.34 $4.23 $4.37 $4.50
Mowing $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Land Costs $26.90 $26.20 $27.45 $26.05 $27.25 $27.75
Piling & Packing $2.09 $0.00 $0.00 $0.00 $0.00 $0.00
Harvesting $8.77 $12.50 $15.81 $12.59 $9.71 $14.13
Hauling $4.95 $2.50 $3.25 $2.64 $3.66 $3.28
Rock Picking $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Total Costs $57.15 $73.93 $52.85 $73.34 $44.99 $88.61



Table 2. Returns From Cropland
             
  1992 1993 1994 1995 1996 1997
             
Acres 40 40 40 40 40 40
Crop Sweet Oat Wheat Barley Wheat Oat
  clover Grain Grain Grain Grain Grain
Yield-bu. or Tons/A 2.025 57.81 19.78 39.00 26.00 36.00
Price/bu. or /Ton $21.10 $1.16 $2.75 $1.80 $4.00 $1.50
Deficiency Payment $0.00 $0.15 $0.50 $0.00 $0.00 $0.00
Gross Return/A $42.73 $75.73 $64.29 $70.20 $104.00 $54.00
Total Cost/A $57.15 $80.38 $83.07 $127.26 $98.70 $88.61
Total Return/A -$14.42 -$4.65 -$18.78 -$57.06 $5.30 -$34.61
             
             
Oat-Sweetclover Rotation
             
  1992 1993 1994 1995 1996 1997
             
Acres 40 40 40 40 40 40
Crop Sweet Oat Sweet Oat Sweet Oat
  clover Hay clover Grain clover Grain
Yield-bu. or Tons/A 2.025 1.75 2.09 29 1.2 36
Price/bu. or /Ton $21.10 $35.00 $40.00 $1.30 $28.00 $1.50
Deficiency Payment $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Gross Return/A $42.73 $61.25 $83.60 $37.70 $33.60 $54.00
Total Cost/A $57.15 $73.93 $52.85 $73.34 $44.99 $88.61
Total Return/A -$14.42 -$12.68 $30.75 -$35.64 -$11.39 -$34.61



Table 3. Livestock Inventory
             
             
  1992 1993 1994 1995 1996 1997
             
Beginning Inventory $0.00 $72,418.50 $89,072.33 $79,530.76 $70,432.08 $69,356.10
No. Purchased 87 17 0 0 0 0
Cost/Hd $850.00 $875.00 $0.00 $0.00 $0.00 $0.00
Purchase Value $73,950.00 $14,875.00 $0.00 $0.00 $0.00 $0.00
Beginning Inv + Purchase (includes $5,400 for Bulls in 1992) $79,350.00 $87,293.50 $89,072.33 $79,530.76 $70,432.08 $69,356.10
             
No. Steers Born* 46 41 55 49 42 40
No. Heifers Born* 41 46 32 38 45 48
Steers Sold 46 41 55 49 42 40
Heifers Sold 24 29 15 21 28 31
No. Kept for Replacement 17 17 17 17 17 17
Value/Replacement $580.50 $592.49 $628.28 $534.24 $423.30 $479.25
Value/Bred Heifer $0.00 $900.00 $750.00 $650.00 $630.00 $650.00
No. Culls Sold 17 17 17 17 17 17
Value/Cow $825.00 $850.00 $750.00 $650.00 $675.00 $700.00
No. Cows Kept 70 70 70 70 70 70
             
End Inventory Bulls $4,800.00 $4,200.00 $3,600.00 $4,800.00 $4,200.00 $3,600.00
End. Inv. Heifer Calves $9,868.50 $10,072.33 $10,680.76 $9,082.08 $7,196.10 $8,147.25
End. Inv. Bred Heifers $0.00 $15,300.00 $12,750.00 $11,050.00 $10,710.00 $11,050.00
End. Inventory cows $57,750.00 $59,500.00 $52,500.00 $45,500.00 $47,250.00 $49,000.00
Ending Inventory $72,418.50 $89,072.33 $79,530.76 $70,432.08 $69,356.10 $71,797.25
Inventory change -$6,931.50 $1,778.83 -$9,541.57 -$9,098.68 -$1,075.98 $2,441.15
* In 1997 one set of twin calves were included in the study



Table 4. Costs Per Cow
             
Year 1992 1993 1994 1995 1996 1997
Number of Acres 370 370 370 370 370 370
No. of Head 87 87 87 87 87 87
Fuel & Elec. $36.90 $37.64 $37.70 $37.90 $39.04 $40.21
Dep. bldg. & Equip. $14.56 $14.85 $14.90 $14.90 $14.95 $14.95
Feed $114.72 $86.04 $101.64 $73.80 $68.88 $110.70
Salt & Mineral $9.00 $9.05 $9.08 $9.12 $9.39 $9.67
Replacements $16.15 $33.18 $31.07 $30.13 $30.60 $17.31
Bulls $11.43 $9.90 $10.55 $9.84 $17.19 $19.51
Veterinary $5.25 $5.30 $5.40 $5.45 $5.61 $5.78
Marketing $4.00 $4.00 $4.00 $4.00 $4.00 $4.00
Labor $16.78 $16.85 $16.85 $16.85 $16.85 $16.85
Land Costs $114.40 $111.43 $116.74 $110.79 $115.89 $118.02
Death Loss $9.12 $10.03 $10.24 $9.14 $8.10 $7.97
Total/Cow $352.31 $338.27 $358.16 $321.92 $330.50 $364.97
Total/Acre $82.84 $79.54 $84.22 $75.69 $77.71 $85.82
Total Costs $30,650.80 $29,429.35 $31,160.25 $28,007.04 $28,753.60 $31,752.39



Table 5. Livestock Returns
             
  1992 1993 1994 1995 1996 1997
             
No. of Acres 370 370 370 370 370 370
No. Heifers 24 29 15 21 28 31
Avg Wt. 497.0 526.8 576 524 443 515
Price/Lb. $0.90 $0.85 $0.73 $0.62 $0.62 $0.77
Return-Heifers* $10,198.44 $12,336.34 $5,986.64 $6,481.36 $7,305.96 $11,678.40
             
No. Steers 46 41 55 49 42 40
Avg. Wt. 539.5 577.0 622 562 466 576
Price/Lb. $0.95 $0.90 $0.78 $0.65 $0.66 $0.85
Return-Steers* $22,397.34 $20,226.74 $25,349.61 $17,004.72 $12,271.64 $18,604.80
             
No. Culls 17 17 17 17 17 17
Avg. Wt. 1280 1372 1336 1346 1212 1352
Price/Lb. $0.45 $0.45 $0.46 $0.30 $0.32 $0.35
Return Culls* $9,302.40 $9,971.01 $9,921.43 $6,521.37 $6,263.62 $7,642.18
             
Total Returns $41,898.18 $42,534.08 $41,257.68 $30,007.44 $25,841.22 $37,925.38
Inventory Change -$6,931.50 $1,778.83 -$9,541.57 -$9,098.68 -$1,075.98 $2,441.15
Opportunity Costs $3,967.50 $3,055.27 $4,453.62 $3,976.54 $3,521.60 $3,675.87
Total Herd Costs $30,650.80 $29,429.35 $31,160.25 $28,007.04 $28,753.60 $31,752.39
Total Cow Costs/A            
(table 4.) $82.84 $79.54 $84.22 $75.69 $77.71 $85.82
Net Returns/A Including
Inventory Change


$0.94
$31.97 -$10.53 -$29.93 -$20.30 $13.35
             
Net Returns/A Excluding
Inventory Change


$19.68
$27.16 $15.25 -$5.34 -$17.39 $6.75
* =Less 5% shrink



Table 6. Costs and Returns for CRP Hay
             
  1992 1993 1994 1995 1996 1997
             
Acres of Hay 90 90 90 90 90 90
Avg. Bale Wt. (Lbs.) 1100 1500 1325 1400 1300 1320
No. of Bales 403 209 220 288 236 152
Land Costs/Acre $26.90 $26.20 $27.45 $26.05 $27.25 $27.75
Mowing/Acre $4.23 $5.00 $4.23 $4.89 $4.90 $4.95
Baling/Bale $4.60 $5.00 $5.02 $5.25 $5.25 $5.30
Stacking-Hauling/Acre $8.85 $4.59 $4.83 $6.32 $5.18 $3.34
Total Costs $5,451.73 $4,265.93 $4,390.27 $4,865.62 $4,598.78 $4,048.91
Costs/Acre $60.57 $47.40 $48.78 $54.06 $51.10 $44.99
CRP Hay Value/T. $25.00 $25.00 $35.00 $30.00 $28.00 $45.00
Gross Returns $5,541.25 $3,918.75 $5,101.25 $6,048.00 $4,295.20 $4,514.40
Net Return/A. $0.99 -$3.86 $7.90 $13.14 -$3.37 $5.17



Table 7. Six-year and Average per Acre Returns to Land, Labor and Management for each Enterprise/system on the CRP Study.
               
              6-Year
  1992 1993 1994 1995 1996 1997 Average
               
Net Return to System
Cash Crop -$14.42 -$4.65 -$18.78 -$57.06 $5.30 -$34.61 -$20.70
Oat-Sweetclover              
Rotation -$14.42 -$12.68 $30.75 -$35.64 -$11.39 -$34.61 -$13.00
Grazing $0.94 $31.97 -$10.53 -$29.93 -$20.30 $13.35 -$2.42
Haying $0.99 -$3.86 $7.90 $13.14 -$3.37 $5.17 $3.33
               
Return to Land, Labor and Management
Cash Crop $12.48 $21.55 $8.67 -$31.01 $32.55 -$6.86 $6.23
Oat-Sweetclover              
Rotation $12.48 $13.52 $58.20 -$9.59 $15.86 -$6.86 $13.94
Grazing $33.50 $63.88 $22.63 $1.83 $12.72 $46.86 $30.24
Haying $27.89 $22.34 $35.35 $39.19 $23.88 $32.92 $30.26

 


March 1998


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North Dakota State University
North Dakota Agricultural Experiment Station
Central Grasslands Research Center