• September 18th, 2019

The economic value of grass



Kafula Sakeus

On a visit to a Brahman stud farmer in the maize triangle, we were greeted by a veldt fire that seems to have spread from the neighbours at the farm gate. With a sense of concern in one eye and yet grateful that the inferno was quelled before any serious losses, the farmer lamented on how small his holding (productive asset) is and that he just lost 14 hectares of his annual grazing. Well, 14 hectares might sound insignificant, but assessing the biomass and rangeland health of the property, 14 hectares can sustain a productive medium sized cow in a year of normal to above average rainfall.

Moving towards the farmhouse, it becomes evident that the fire was contained just in time before it could reach the grass reserves, a mere 20 meters away from the burnt area. Inquisitive and eager to understand what a veldt fire meant to the farmer, I pondered on the following question. What if the fire reached the grass reserves, how much could you have lost? Well, the response was short and straight to the point, “It could have been worse”. In summary, the tractor’s entire diesel from cutting, raking, baling and transporting the grass to the shed could have been lost. In addition, the cost of labour, storage, and deprecation of the farm machinery and infrastructure could have gone with it. 

At this inflection point, one could hypothesize that to a conventional farmer, grass only gains an economic value when it’s either baled or if a buyer purchases such in the form of beef, mutton or goat. This is not far away from the truth such that, if one offered to purchase the grass bales, such an offer would most likely only be entertained provided that the price is market-related. The principle for attaching an economic value to a bale of grass is straightforward, its market price or we talk another day. But, what if one offered to lease the grazing for the production slaughter oxen or simply put, attempting to feedlot on rangeland resources. How will the economic value of grass be calculated in order to negotiate for a market-related price? 

In an event where an agreement is concluded below market value, lessee reaps the glory. However, if negotiated over market price, the risk of producing an expensive slaughter ox on grass goes beyond what the market is willing to pay and hence the lessee will suffer a significant cost-price squeeze. 

Fodder-flow planning/budgeting, stresses the importance of quantifying available grass biomass (kg/ha on a dry matter basis) for optimal resource utilization. However, quantity alone is not enough, the nutritional quality of the grass is equally important as a direct indicator of the rangelands production potential. It is only after these two (quantity and quality) questions have been deciphered, that an objective economic value can be attached to standing grass biomass.

Grass is the main provider of energy for slaughter ox raised on rangeland, while its counterpart in feedlot diets remains white or yellow maize. Thus, maize serves as the ideal benchmark for attaching an economic value to standing grass biomass. Well, both hold energy, protein, fibre, ash and fat in various proportions and at most times the Safex maize price is known or just a few clicks away. Assuming a Safex yellow maize spot price N$2 840 of 09 June 2019. Provided that one concludes an agreement to lease a 4 000 hectare farm with an average of 707 kg/ha (DM) biomass for a period of one year. Then this farm has N$2 069 727.04 worth of grass, provided that the grass nutritional value equates to 29 percent in comparison with maize. 

The critical question, how much of this value locked-up in grass can be optimally exploited such that, it can reflect on the lessees’ balance sheet? All of this is dependent and influenced by chance factors, management and the quality of animals at the lessees’ disposal to utilise and convert the resource into a quality product as demanded by the market. The significance of fodder flow planning to meet the nutritional needs of livestock can never be overemphasised, but knowing how much value in dollar terms one has in grass is critical at analysis the efficiency by which, each dollar in grass is converted to dollars on the balance sheet. 

As primary producers, farmers are price-takers and to survive the effects of the cost-price squeeze, it is imperative to benchmark their respective unit production cost against that of a neighbour or other producers further up field. Making an informed decision to continue on the trajectory of producing more costly oxen is not good for the balance sheet as it only serves to erode the profit base.

*Kafula Sakeus is a Junior Technical Advisor, Agriculture Capacity Building at AgraProVision
 


Staff Reporter
2019-06-25 10:27:14 2 months ago

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