Buying a grazing property can be a daunting thing.
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The money is, of course, a big issue - and the return on the capital spent is a very important part.
The size of any business affects its profitability and sustainability. The number of stock run in a grazing business is a key thing.
Economists quite rightly measure the value of a farm business many ways. Social economists include the value of the lifestyle that’s part of running livestock.
When properties come up for sale prospective buyers often ask about the possible stocking rate the property can run over the year.
Sellers can be a bit cautious, and advertisements can be quite optimistic as to the number of cattle or sheep that can be run.
Prospective buyers often start by dividing the property price by the area, and working out the cost per hectare. Some will divide the cost by a district average stocking rate, and value it on a ‘dry sheep equivalent’ or ‘breeding cow’ area.
Higher carrying capacity land costs more. Moving into a new district requires careful information gathering. The best sources are often local producers who have lived and worked there over many seasons.
Some local beef producers have been known to understand their properties better than they understand their children.
They understand the expected production they can get from the land.
They know the number of animals they can run throughout the year without ‘mining’ the pasture base.
They know when they need to reduce stock numbers, and when to feed them
They know how much feed to have on hand. They understand when the rain and pasture growth is below normal, and when things are getting a bit tight.
But people new to the livestock game or the district may not have such in-depth knowledge when they‘re thinking of buying a property.
A great starting point is understanding the rainfall. Rainfall drives pasture growth, and pasture quantity and quality drive ruminant production.
The more rain the better. As the climate changes, annual rainfall and its distribution will play an increasing role in valuing properties.
When the NSW Department of Primary Industries released its modelling on the changing climate in Wagga, Holbrook and Tumbarumba a few years ago, the reaction was mixed.
Some producers didn’t believe it, some thought about how to make their businesses more resilient, and a couple I know discussed moving to an area less affected.
There are of course lots of things that affect property value, least of which would not be just good old supply and demand.
Most people don’t rush into property purchase – but then that’s no different to any other investment.
Knowledge is power, and knowing the seasonal vagaries of farming areas, now and into the future, may be the difference between a good and an unwise decision.
And most producers who buy properties generally keep them for some time.