The Cattleman April 2009 - SPA 4: Land Resources

SPA 4: Land Resources
BY LORIE WOODWARD CANTU

Editor's Note: This is the fourth installment in a 12-part series on Cow-calf Standardized Production Analysis (SPA) that was developed by the IRM Committee of the National Cattlemen's Beef Association. This series has been created in partnership with Dr. Damona Doye, Regents Professor and Extension Economist at Oklahoma State University/Oklahoma Cooperative Extension Service, and Stan Bevers, Professor and Extension Economist at Texas AgriLife Extension Service, Texas A&M University.

The monthly articles are supplemented by monthly "homework" assignments and links to related educational publications that are posted on The Cattleman's website, www.texascattleraisers.org.

Land has always defined the ranching industry. In recent years, outside forces have come into play that make it even more essential that ranchers review their land resources with a critical eye.

"Since 1975 we've lost 25 percent of the cow herd in this country because of outside forces dictating the economics of the cattle business to us," Stan Bevers, professor and Extension economist with the Texas AgriLife Extension Service, says. Those forces include a growing population that demands more land for housing and recreation.

Texas, which is home to the nation’s largest cow herd, is losing agricultural land faster than any other state.

"Obviously as the demand for land rises, so does its cost and value, making it difficult for agricultural producers to acquire new holdings," Bevers says. "The availability of lease land is also affected because landowners may choose to sell their land instead of leasing it for agricultural purposes or they may choose to lease it for hunting or other high-value recreational purposes."

In areas where the stocking rate is one cow per 30 acres, one cow can generate enough income to cover a $4 per acre payment or $120 per cow, Bevers says. In those same areas, hunting leases are currently $10 to $15 per acre, he says. To compete with the income generated by hunting, each cow would have to cover $300 lease expenses, which is an impossibility, he says.

Some landowners have seen the increased revenue opportunity from hunting and have quit leasing land to ranchers, he notes. The availability and affordability of lease land is important because the average operation involves 45 percent of owned land and 55 percent leased land, Bevers says.

"When it comes to SPA, the analysis of land resources isn't difficult, but the implications are large," he says. "The analysis will provide data for immediate operating decisions and for those long-term decisions that will shape the future of a ranch – and a family."

The data requirements for the analysis are straightforward. Initially, the total number of acres used is broken into two categories -- owned or leased.

Then the owned land and leased land are further categorized into grazed acres or raised feed acres. Grazed acres are those where cows continually graze or the acres are deferred. Raised feed acres are those, such as land used for hay production.

The grazed and raised feed acres then are identified by type:

Native unimproved (rangeland and meadows) is land on which the indigenous vegetation is predominantly grass, grass-like plants, forbs or shrubs and is managed as a natural ecosystem.

Native improved is land devoted to the production of introduced forages for harvest primarily by grazing, managed as a natural ecosystem.

Improved perennial is land devoted to the production of introduced perennial forage for harvest primarily by grazing. Improved perennial pastureland must be managed to arrest successional processes.

Annual pasture or forage crop is a crop of cultivated annual plants or plant parts produced to be grazed or harvested for use as feed for animals.

Woodlands ("grazeable" forest) is forestlands that produce, at least periodically, sufficient understory vegetation that can be grazed. Forage is indigenous or, if introduced, it is managed as though it were indigenous.

Crop aftermath is the forage remaining on the land as a consequence of harvesting of a crop.

For leased land, the ranchers capture the total number of acres by type and determine what percentage of their operation takes place on leased land.

Owned land takes an additional step of analysis.

"Because owned land can be leased out, as opposed to being held for forage production, it is important to identify the opportunity cost of such an action," Bevers says. An opportunity cost is the benefit, profit, or value of something that must be given up to acquire or achieve something else. In this case, the opportunity cost equals a lease equivalent, Bevers says.

The lease equivalent is the annual amount that the owned land could be leased for, he says. Essentially, to figure the lease equivalent, ranchers must ask themselves two questions: What would I earn if I leased this land out? What would I still pay in maintenance costs and property taxes if I leased it out?

"n this day and time, every piece of information is valuable," Bevers says. "By collecting and analyzing all the aspects of your ranch using SPA, you'll see things with fresh eyes."

"SPA 4: Land Resources" is from the April 2009 issue of The Cattleman magazine.