At the beginning of 2022, ranchers had a lot of reasons for hope in their herd and growth strategy. Cattle prices per hundredweight (cwt) were up significantly from 2021. As a result, many had reason to look at the market and plan growth potential. This led to bullish projections of how to handle purchasing and management this spring through summer.
Now, the markets have shifted. While feeder cattle are up roughly 14% from a year ago, the cost of all other goods has risen, including fertilizer, hay, fuel, and labor. These changes are making the increase in funds from the sale of cattle not enough to fulfill those mid-winter dreams.
Since 2021, the Biden administration has renegotiated 232 tariff agreements with the EU and UK, providing better access for US exports like butter, cheese, pork, and liquor. The administration has also set up new agreements with Japan regarding safety triggers as part of the US-Japan negotiated Trade Agreement for agriculture. While recent market access provides ranchers and farmers with more markets, it isn’t enough to cover the extended cost.
On March 16, ranchers noted that the cost for cattle feed was up to twice as much. What does this mean for farmers and ranchers? A considerable amount of US land is owned by farmers and ranchers. The less profitable it is to operate a farm or ranch, the more likely it is to see farmers and ranchers seek to sell their land for a profit or find a larger farm that can take over their land.
This cycle has been seen before. From 2006 to 2008, feed costs doubled, and the result, according to the USDA, was lower meat production in 2009. While feed costs fell in 2009, it was too late to impact the feed provided to cattle in the years prior, which led to the weight needed to make for production.
The increased cost of fertilizer and fuel have been items that are easy to detect. For farmers that produce products that require numerous field hands, finding farm labor has been more complex, and the price being paid in labor has significantly increased.
This has been good for the job seekers and has lowered unemployment to record lows, but that tightening has meant that manual labor jobs require higher pay.
Creative Ways to Make Money Off Your Land
In 1985, musicians gathered in Champaign, Illinois, to raise money for family farmers. Farm Aid raised over $7 million, roughly $18 million inflation-adjusted to today. Farmers struggled to find solutions to hold onto family lands that had been with them for generations. Farmers and ranchers in 2022 have new options that just weren’t available to them in 1985. Thanks to a booming energy market and technology market, combined with a rise in population, farmers have new ways to utilize the land they already own.
Crop and cattle markets can be very volatile. Signed leases, though, hold steady. The 1980s gave ranchers and farmers access to the oil and gas industry, bringing them a regular monthly income to supplement them and help keep farms running. Now, farms have access to an array of suitors seeking use of their land for their businesses. Wind, solar, and cellular companies are all looking for potential land to lease. These leases give many families access to a long-term agreement of guaranteed funds.
Farmlands have also been creative about new ways to make money off the ground they hold. For example, they could set up a wedding venue outside a barn. Corn mazes. Pumpkin patches. Hunting grounds. Stocked ponds. Farmers and ranchers are looking at every way possible to generate income.
It isn’t always about generating income; however, ranchers are looking at ways to reduce costs. The USDA points to the rising cost of hay and grain as problematic for ranchers. For ranchers looking to lower their costs and retain their herd, leasing land may be a strong option. Jim Gerrish, the author of Management Intensive Grazing, notes that many fields provide perfect leasing spaces and can give cattle solid feed while drastically lowering the reliance on hay.
If you are a landowner with land, you are not using or owning dormant land in another state, contacting the USDA field office or FSA in the area where your land resides can benefit both sides of the equation. Ranchers can get a tax deduction by leasing new land and caring for the land by seeding and rotating the cows can extend the life of the land while using less hay and relying on more on-field grazing.
In addition, the owner leasing the land generates another source of income that covers the cost of property taxes and more. The landowner has lowered his cost by covering his property taxes while generating revenue in one step. Meanwhile, the rancher has reduced his price as they can either expand at a lower cost than purchasing or move into mob grazing to lower feed costs. New opportunities require new knowledge.
Revenue generated by a cell phone tower, carbon offsets, a windmill, or solar panels can be very attractive to landowners looking to generate steady monthly income. First, however, ranchers should seek out a land expert to make sure they get a good deal. Companies that represent wind, solar and cellular energy businesses have all the research done before entering the room, and they know the offer they want you to accept.
That first offer can seem incredibly attractive – especially when this new revenue stream gets you one step closer to a stable and profitable ranch. However, a well-researched land expert can make sure the first offer is the highest and best offer you will receive, and over the term of your agreement, the benefit can be significant.
How to Recalculate the Worth of Your Land
Too many ranchers value their land based on yesterday’s values. If you have decided the market is too tricky, or maybe family members do not want to take over the land, selling your land may be something you are considering. You don’t have to sell your land based on yesterday’s valuations.
With a better understanding of the surface and mineral estates, you may understand that your land is worth more than you expected. Land values can be entirely recalculated when the buyer is aware of a potential wind, solar or cellular lease. Hunting leases and stocked ponds can also add value.
Selling land that has been in the family is difficult. If families can avoid it, many choose that option. However, if you discover that you sold that land for far less than it is worth, you may regret losing it. The grain and cattle markets are making things very difficult for small ranchers to survive.
Everyone benefits when we all understand how to use our land to get the most out of the current market. Above were listed several suggestions for maximizing the use of land.
Of course, as said, the input from professional consultants can and will often make necessary complements to what is acquired through own investigations and study.