Every year livestock producers and landowners negotiate terms to graze wheat pasture. Oftentimes the rental rates negotiated in these grazing leases are based on minimal information. As a result, producers and landowners may ask Extension personnel and other sources what the current market rate is. In many cases, producers, landowners and Extension sources will rely on historical information as a starting point for current discussions. However, variability in grain, forage, and livestock prices can result in large differences in grazing rates over time. As little public information is available on historical or current grazing rates, this report is an effort to use alternative feed sources as a means to estimate wheat pasture grazing rates.
In order to use an alternative feed source to estimate wheat pasture grazing rates, the alternative source must: 1) be publically available 2) have a sufficient historical database, and 3) be easily comparable in terms of nutritional value. The data source used which meets all of these requirements is the Focus on Feedlots report from Kansas State University. This monthly report contains corn price and projected feeding cost of gain data from selected feedlots. From this data, a statistical relationship between corn price and feeding cost of gain can be determined.
Using data from 2000-2012, the relationship between corn price and cost of gain for steers and heifers can be expressed in the following formula:
Steer Cost of Gain ($/cwt) = $16.56 + ($13.58 x Corn Price).
Heifer Cost of Gain ($/cwt) = $16.95 + ($14.23 x Corn Price).
For example, if the price of corn was $5.00/bushel, cost of gain for steers would equal $84.46/cwt ($16.56 + $13.58 x $5.00). Based on this formula, cost of gain will increase $13.58/cwt for every $1.00/bushel increase in the price of corn (Table 1). Cost of gain for heifers is slightly higher ($14.23 vs. $13.58) for every $1.00/bushel increase in the price of corn. The intercept values ($16.56 for steers and $16.95 for heifers) reflect other costs associated with feeding cattle (e.g., labor, equipment, facilities, etc.)
The relationship between corn price and cost of gain is useful in that it provides a nutritional baseline to compare other feedstuffs. By calculating the nutritional value of alternative feed sources, it is then possible to price those feeds relative to corn. If we assume the primary determinate of animal performance (gain) in beef cattle systems is energy content of the feedstuffs the animal is consuming, then the respective energy content of the feeds (dry basis) may be used to compare the relative value of different feeds. For example, corn on a dry matter basis contains approximately 1.0 Mcals NEm per lb and wheat pasture contains 0.73 Mcal NEm per lb, approximately 70% the value of corn on a dry basis.
Table 2 shows the relationship between corn and wheat pasture feeding cost of gain for steers based on nutritional value. For example, if the price of corn is $6.00/bushel, the estimated cost of gain for a corn-based ration would be $98.04/cwt. Due to the lower energy content of wheat pasture , a cattle owner could pay $68.63/cwt for wheat pasture and be as well off as feeding $6.00/bushel corn—all other factors being equal. Of course, other factors such as fencing, water availability, location, care, quality, and relative supply and demand can influence the price of wheat pasture . Nevertheless, utilizing simple nutritional relationships and publically available corn prices can provide landowners and cattle producers a starting point in negotiating wheat pasture grazing rates.
Source: Troy Dumler and Justin Waggoner
1 Extension Agricultural Economist and Beef Systems Specialist, K-State Southwest Research Extension Center, Garden City, KS 67846.