Deciding between corn or cows
From 2007 to 2012, when corn prices rose to $7, Iowa lost about 21% of its total pasture acres, according to USDA Ag Census data. The biggest loss, at about 73%, was tillable pasture, or land that could be converted to crops without improvements. Meanwhile, Conservation Reserve Program acres also decreased, by about 36%.
“We realized there was a need for a tool farmers could use to compare not only the income and expenses of converting pasture to cropland, but also look at erosion potential and the cost of bringing soil erosion down to acceptable levels,” says William Edwards, retired Iowa State University professor and Extension economist. “Since then, the price ratios have flipped. We may have people looking at reseeding pastures and expanding the cow herd.”
ISU Extension, with the help of the Natural Resources Conservation Service and the Farm Service Agency, has developed a “corn vs. cows” tool to help with these decisions, budget alternatives for land use in southern Iowa and their potential long-term effects. The tool compares up to three crop rotations, which can be corn, soybeans, oats, alfalfa or alfalfa-grass hay, and a fall-seeded cover crop. Three types of pasture can be compared, as well as CRP enrollment.
• With altered price ratios, some producers consider reseeding pasture.
• New “Corn vs. Cows” decision tool can help with land-use decisions.
• Factors to consider are long-term price ratios, conversion costs, land history.
Livestock enterprises include cow-calf and summer stocker cattle. A summary of hay and pasture production and requirements is provided; labor requirements are estimated; and potential soil loss resulting from each combination of crops and livestock is calculated. The tool, titled “Crop and Livestock Land Use Analyzer” at extension.iastate.edu/agdm, helps with:
• Long-term commodity price ratios. They help determine the opportunity cost of converting pasture or CRP to row crops or vice versa. “We don’t want people to get caught up in current prices alone. This is a long-term decision,” Edwards says. “A lot of these decisions aren’t easily reversible. For example, constructing terraces, establishing grass waterways and buffer strips — we wouldn’t do that with the expectation of reversing it in a couple of years. It’s a long-term investment, so we need to look at long-term price relationships.”
Annual budgets for each crop and livestock enterprise are given, but users can change costs, prices or production values. A database of all Iowa soil series is stored, and by specifying the county and number of each soil series on the farm and the number of acres, users receive data about potential yields, slope and erosion class.
• Conversion costs. These are the cost of converting the land, and cost of changes in infrastructure that might need to be made. For pasture, this means fencing. “You can’t have pastures without fences. If the permanent fences are gone, people may consider temporary fences for rotational grazing,” Edwards says. Water supply is another factor. “In southern Iowa, we have plenty of ponds, but if you’re rotational grazing, you’ve got to have more sources of water.”
There’s also a substantial investment to be made in breeding stock if the producer is expanding a herd. “Cow prices are as high as they’ve ever been, so you need to think twice about buying additional breeding stock or saving replacements when the price of selling calves is pretty high,” says Edwards. “That’s a substantial investment, and we need to consider what future prices will allow us to pay back the cost of investment in breeding stock right now.”
For crops, the biggest cost is breaking up sod. The user can also specify several permanent conservation structures, and the cost of installing them. “If it’s been in pasture a number of years, we’re going to have to do some heavy tillage to break up that sod layer to start with,” Edwards says. “In some cases, some land clearing might be needed; red cedars tend to appear everywhere in pastureland, particularly in southern Iowa.”
• Land history. Land history must be reviewed for some programs. Sodbuster rules require landowners who break out land that wasn’t cropped from 1980 to 1985 to comply with an approved conservation plan to be eligible for farm commodity programs. For multiperil crop insurance, “newly broken” acres get an actual production history yield of 65% of the county T-yield until an actual yield history is established. Former CRP acres start with an APH yield of 100% of the county T-yield.
To enroll in CRP, land must have been planted to crops four out of six years from 2002 to 2007, and have an erosion index of 8 or higher. Landowners must submit a contract offer. Each parcel gets an Environmental Benefits Index score, and the highest-ranked parcels are accepted until funding runs out.
“The idea is to compare potential revenue with a potential cost, the annual operating costs as well as any new investment, conversions, conservation structures, fencing and so on,” Edwards says. “The bottom line is, we’re looking at revenue minus costs from an economic bottom line, but it also includes potential soil loss and that bottom line as well. We have to balance the two.”
This article published in the March, 2015 edition of WALLACES FARMER.
All rights reserved. Copyright Farm Progress Cos. 2015.
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