Economic theory suggests that the value of land is derived from the net present value of future returns, including agricultural uses, recreational uses, exurban low density residential uses, and the option to convert to urban uses. Agricultural characteristics such as soil productivity, land improvements, tract size, and rainfall are common factors used to explain differences in both pasture and cropland values across time and space. Government payments are relatively unimportant factors in explaining pasture values as farm programs are largely associated with crop production. For pasture land, agricultural returns are typically derived from livestock production, primarily cattle.

Pasture land has attributes that differentiate it from cropland for both recreational income and residential uses. Recreational income is primarily derived from leasing for hunting. Pasture land more often includes trees and shrubs which add value for wildlife habitat (especially deer) and recreational purposes. Trees together with the open space that pasture provides may also increase land’s attractiveness for rural housing. A tract of land with a single house is still classified as agricultural land whereas if it were converted to a housing subdivision it then is classified as urban.

Agricultural Influences

The beef enterprises that dominate pasture acreage in the Plains States include both cow/calf production and grazing of weaned calves prior to placement in feedlots. Returns to the cow/calf enterprise have historically been cyclical as cow numbers and calf prices vary over time. Recurring droughts also impact cow numbers and pasture returns. In recent years, the cow herd has shrunk to historical lows. Higher costs of cattle feed ingredients, including corn and soybean meal, have increased the incentive to grow cattle for a relatively longer period on grass. High fertilizer prices lower returns on both cropland and improved pasture. In the Plains States, most pasture is rangeland which does not require fertilizer so returns to native pasture are less impacted by highly variable fertilizer prices. Thus, the factors leading to high prices for crops and cropland also indirectly affect the demand for pasture and the returns to pasture land and pasture values.

Pasture land also lends itself more readily to beginning, small, and part-time farms, which are common in the Southern Plains. While a quarter section of land is uneconomical for crop farming because of economies of size, a similar amount of pasture land can support a few cows and/or goats. Census of Agriculture data show that more than half of the farms with beef cattle have fewer than 20 cows. The number of farms with fewer than 10 head of cattle increased from 2002 to 2007. While small farms account for only 7 percent of the cow herd, small and part-time farmers have relatively more off-farm income and are willing and able to pay higher prices for pasture land than established producers, particularly for small parcels. Smaller parcels, especially those near urban areas, command higher per acre prices.