Buying a Farm – a Valuer’s persepective | Grazing and land value

In this article, I will focus on the valuation of grazing and natural veld.

Let me start off with a statement that usually catches most people’s attention:

“There is no direct correlation between grazing capacity and grazing land values.”

Yes, this is actually true. Although it seems to go against all logic, the value of veld or grazing does not change directly in correlation with the change in carrying capacity. That only happens in the calculations made in terms of budgets related to a farm’s carrying capacity. This direct correlation is often found amongst agricultural economists treading into the professional valuer’s domain. Grazing capacity does influence grazing land values though. The plain fact is that there are more factors than carrying capacity that determine the value of grazing in an area.

Examples of these factors include alternative uses, for instance grazing land that is bought for mining purposes, further residential or commercial development, conversion to a game farm, leisure ect. In the same way as cultivated dry lands, irrigated land, permanently established pastures and permanent crop land, grazing and veld are not valued according to production capacity, but rather according to the comparable sales method.

Two critical aspects when valuing veld or grazing are:

• Natural grazing and permanently established pastures are valued separately.
• Infrastructure such as fences, water reticulation, cattle handling facilities and roads are Class B improvements and as such are valued as part of the grazing land and not separately or additionally.

Factors influencing veld value on a specific farm are:

• The terrain / topography

This has an influence on the ease with which all grazing on the farm can be accessed by animals and management. Making and maintaining fire breaks on farms with steep mountains or baboon cliffs are difficult, and soils are usually very shallow.

• Camps / grazing systems / farm plans

Over the years a large variety of grazing systems have been developed, all suited to specific situations. A system should minimize the trampling of veld close to the watering point and that animals do not have to walk too far to a watering point.

• Availability and quality of water

Quality of water plays a major role, not only in irrigation but also in livestock farming.

• Condition of infrastructure (fences and water reticulation)

• Grass species and veld types

Different veld types can be found on adjacent farms and even on a specific farm. When in the same area, the differences come into play mainly where there are grazing plains, mountains, broken country, veld and marshland in the same area.

• Occurrence of poisonous plants

There are numerous plants in South Africa that are poisonous to animals in different degrees. If this causes substantial problems on a farm, a lower land value than normal should be considered.

• Grazing capacity, condition of Veld

The grazing capacity of a farm influences its value, but the grazing capacity of sections or camps is influenced by the condition of the specific veld. Veld can be in a good condition, or show signs of overgrazing, but can recover with good management.

Carrying capacity is measured in:

Ha / large stock unit (Ha/LSU), an LSU = 1 mature head of cattle with a mass of 450kg

Animals in production (cows and sheep in lactation or pregnant) = more than 1 LSU at 450kg

Climate and soil play a major role in the development of different veld types. The two broadest veld types are sweet- and sourveld. Sweetveld is found in low-rainfall areas with mild winters and has good grazing in winter. Sourveld, on the other hand, is found in high-rainfall areas with cold winters and has the best grazing in spring. The foremost publication on veld types is a publication by Acocks: Veld types of South Africa, 1988.

Veld type is a unit of vegetation whose range of variation is small enough to permit the whole of it to have the same farming potential. Acocks grouped the 90 veld types with 75 variants into 11 veld-type groups. The 11 groups are:

Coastal Tropical Forest, Inland Tropical Forest, Tropical Bush and Savanna, False bushveld, Karoo and Karoid, False Karoo, Pure Grassveld, False Grassveld, Temperate and transitional forest and scrub, Sclerophyllous Bush & False Sclerophyllous Bush.

*This article was originally published on the Farmer’s Weekly website