| | As with any commodity, the price of pasture rent is often dictated by the law of supply and demand. Preliminary indications for the 2005 grazing season are that demand will be the same as last year. While not all of the retained 2004 calves will go to grass, early indications are that more 8 – 9 weight calves than usual will find their way to wide open spaces this summer. This due mainly to the effect of seasonality in the slaughter market coupled with a closed border. The third quarter (prime grazing season) is historically a low price period for finished cattle. The lows will likely be compounded by increased numbers of finished cattle available as well as the effects of current trade distortions. Consequently, some producers with heavier calves will be reluctant to take them through to finish and may wish to “stretch” them to take advantage of later price strengthening. All of these factors point to more animal units being turned out to pasture this summer.
On the supply side, numbers are not as definitive. Soil moisture seems decent, late summer and fall rains did materialize in 2004 and winter snow appears to be adequate throughout most of the province. Still, it’s the spring moisture that really grows grass. Environment Canada’s precipitation outlook for April, May and June is near to below normal for most of the province. This will impact the supply of grass going into the grazing season.
With these demand and supply factors in mind, it would seem that pasture rent will stay in a holding pattern compared to last year’s rents of $25 to $35 per animal unit month range. The current return outlook in the beef sector seems to be having little effect on pasture rent. Cattle need to eat regardless of profitability. If market forces come into play, reduced profitability should also reduce overall cow numbers in the long term. This should in turn affect the supply side of the pasture rental economics with a subsequent softening of rental prices.
What factors will soften pasture rent?
Certainly an open border would change the demand side tremendously. An open border would likely see a tremendous demand for feeder cattle south of the line, even pulling a good percentage of lighter grassers off pasture.
Average moisture levels will have little effect on supply side pressures. On the other hand, excellent spring moisture in the spring could actually allow some producers to bale their excess forage, as cattle will be unable to keep ahead of the growing grass.
What can I do to keep my pasture rental costs reasonable?
A producer can manage pasture costs by making efficient use of the rented grass. It may mean making use of cost effective rotational grazing, putting more efficient cattle on expensive grass, early weaning of calves or even moving cattle to areas of the province where grass is less expensive.
Another option would be to not use perennial pasture at all. There is some indication that if pasture rents push above $35 per animal unit month, it may be more economical to dry-lot cows if sufficient forage and grain is available at current prices. Current feed costs for maintaining a cow range from $1.20 to $1.40 per day, which is equivalent to a grazing fee of $36 to $42/AUM.
The use of annual forage is another option for graziers. Annual forage is certainly gaining attention, particularly with the current outlook for returns in cereal grain production. Economic studies indicate the use of annual pastures can bring grazing rates down to the lower end of the range or around $25/AUM, assuming the fencing and water infrastructures are already in place on grain land. If capital costs for establishing an annual grazing system were substantial, then these costs would need to be spread over a number of years in order for this option to be feasible. This is something many producers overlook when considering annual systems.
Choosing Between Annual Pasture and Cash Crop
Annual Crops for Grazing
Swath Grazing in Western Canada: An Introduction
Prepared by Ted Nibourg, Ag - Info Centre, Alberta Agriculture and Rural Development |
|