Leasing Out Buffer Strips for HuntingLeasing Out Buffer Strips for Hunting

Dr. Joe ParcellDr. Joe ParcellAg. Economist, University of MissouriAg. Economist, University of Missouri

2001 Bootheel Irrigation Conf. & Tradeshow2001 Bootheel Irrigation Conf. & Tradeshow

Income Enhancement on Buffer StripsIncome Enhancement on Buffer Strips

Conservation Reserve ProgramConservation Reserve Program

Agriculture Non-point Source PollutionAgriculture Non-point Source Pollution– Special Area Land Treatment (SALT) ProgramSpecial Area Land Treatment (SALT) Program

Hunting leasesHunting leases

MethodsMethods

Analyzed over a five-year periodAnalyzed over a five-year period

Use Net Present Value (NPV)Use Net Present Value (NPV)– This method discounts future earnings to the present.This method discounts future earnings to the present.

» For example, how much money would I need to put into a For example, how much money would I need to put into a savings account, at 4%, to equate to $100 5 years from savings account, at 4%, to equate to $100 5 years from now?now?

– If I put $82.19 in the bank today, then 5 years from now the If I put $82.19 in the bank today, then 5 years from now the value of this investment, at a 4% earnings rate, would be value of this investment, at a 4% earnings rate, would be $100$100

AssumptionsAssumptions Crop returns & CRP establishmentCrop returns & CRP establishment

– University of Missouri budgets University of Missouri budgets (David Reinbott (David Reinbott & Melvin Brees)& Melvin Brees)

» Irrigated corn & soybean Irrigated corn & soybean » Land costs not included & no taxesLand costs not included & no taxes

Alternative yield and price levelsAlternative yield and price levels– YieldYield

» Look at as land qualityLook at as land quality» Look at difference in managementLook at difference in management

AssumptionsAssumptionsCRP Payments = $85/acreCRP Payments = $85/acre

– continuous CRP....$100 upfront incentivecontinuous CRP....$100 upfront incentive

SALT Payments = $400 ($80/year) for 5 yrs.SALT Payments = $400 ($80/year) for 5 yrs.» Full payment made in year 1Full payment made in year 1

Establishment cost for buffer stripsEstablishment cost for buffer strips– 50% cost share for CRP50% cost share for CRP– 75% cost share for SALT75% cost share for SALT

Buffer stripsBuffer strips SALT can generate revenueSALT can generate revenue CRP has mowing costs on 1/2 of acresCRP has mowing costs on 1/2 of acres

Least Hunting AssumptionsLeast Hunting Assumptions

Revenue sideRevenue side

Annual rental income with straight lease

Potential daily lease income with additional

services provided Farm Game:

Quail/rabbit $1 to $5 /acre $150 to $465/person/day

Dove $20 to $40 /acre $5 to $20/person/day

Forest Game:

Deer $1 to $10 /acre $200/person/day

Turkey $1 to $10 /acre $150 to $350/person/day

Grouse $1 to $5 /acre ---------------------------

Squirrel $1 to $3 /acre ---------------------------

Wetland Game:

Ducks $30 to $300 /acre $50 to $150/person/day

Geese $30 to $300 /acre $100 to $200/person/day

Lease Hunting AssumptionsLease Hunting Assumptions

Cost sideCost side– $100/year for liability insurance$100/year for liability insurance– $100 for legal fee for establishing contract$100 for legal fee for establishing contract– Annual management costsAnnual management costs

» Will depend on the quality of hunting desiredWill depend on the quality of hunting desired

Low PricesLow PricesNet Present Value of Returns over a 5-year period

Average PricesAverage PricesNet Present Value of Returns over a 5-year period

High PricesHigh PricesNet Present Value of Returns over a 5-year period

High Prices & High Prices & Higher Yield LagHigher Yield Lag

Net Present Value of Returns over a 5-year period

High Prices & High Prices & Higher Buffer %Higher Buffer %

Net Present Value of Returns over a 5-year period

SummarySummary More incentive to use buffer strips at lower priceMore incentive to use buffer strips at lower price

More incentive to use buffer strips at lower yieldsMore incentive to use buffer strips at lower yields– Management or land quality?Management or land quality?

Hunting leases may not help bottom lineHunting leases may not help bottom line

Tax issues ==> no self employment on cash rentTax issues ==> no self employment on cash rent ==> self employment on CRP==> self employment on CRP