A new report commissioned by the Saskatchewan Stock Growers Association (SSGA) and the Saskatchewan Stock Growers Foundation (SSGF) looks at the differences in profitability between cow-calf and annual crop production in southwest Saskatchewan.
Over a 50 year time period, the returns from grain farming are $508/acre higher than cow-calf production, according to the research modelling done by Dr. Jared Carlberg, agriculture economics professor at the University of Manitoba.
The study compared net present values per acre over 10, 25, 50, and 100 year timeframes, with an annual cropping system providing higher values ranging from $79/acre over 10 years to $577/acre over 100 years.
Acknowledging that economic incentive for converting grasslands to annual crops, the Stock Growers say this data should be used in developing compensation rates and policies for term conservation easements, to reward landowners for keeping their grasslands intact over a certain period of time.
“There needs to be a compensation formula or mechanism based on the alternate use value for the land to ensure the landowners are compensated appropriately. I’m now convinced more than ever that term easements are the best and fairest way to move forward with grasslands conservation,” notes SSGA president Garner Deobald.
Carlberg’s report notes that using a “fair market value” approach based on selling prices of nearby land to determine compensation rates for conservation easements may not reflect the actual value of grassland, depending on broader agricultural markets, the number of buyers, and future cash flow, among other factors.
The model was based on a three-year crop rotation of durum wheat, green lentils, and canola. Revenues and costs were based on data from the 2022 Saskatchewan Crop Planning Guide, and a hypothetical 245 head cow-calf operation in the Canadian CowCalf Cost of Production Network. Carlberg applied a 5 per cent discount rate to account for inflation, risk and time preference.
“Enabling generational transition, often done over 25-30 years, is a key element for ranching stability that is overlooked,” says Ray McDougald, SSGF chair. “The lack of viability of rangeland operations is especially troubling for the next generation and this report highlights the importance of the SSGF working towards term conservation easement compensation options. Term CEs can be a tool to help take us towards that goal of successful transition into the next generations.”
You can read the entire report, entitled “Returns to Cropping & Cow-Calf Production Systems in Southwest Saskatchewan,” here.