The conversion of native rangeland to row-crop land in the Plains continues to push up pasture values and lease rates. One epicenter of conversion activity is Texas’ Northern High Plains. Institutions and private investor groups have converted more than 35,000 acres of grass to center-pivot irrigated cropland over the last 24 months, says appraiser James B. “Nardie” Vine, Jr., of Vine and Associates in San Antonio.

The sod-busting frenzy is centered in Dallam, Hartley, Sherman and Hansford counties. More than 50,000 acres of range in the area have been purchased in the past 12 months by buyers who intend to develop the land for irrigated crop production, says George Clift, owner of Clift Land Brokers in Amarillo. “Farmers are in a very aggressive mode to buy undeveloped land with irrigation potential,” he adds.

A Closer Look: Land Values Holding As Corn Prices Surge

In the Northern Plains, some 770,000 acres of rangeland were converted to crop production in the decade through 2007, according to a 2011 USDA study. Grassland conversion has been active in seven North Dakota and South Dakota counties in the Hyde-Hand area (Beadle, Edmunds, Faulk, Hand, Hyde, and Sully in South Dakota, and Stutsman in North Dakota). The study, which examined the role of crop insurance and other government farm programs in spurring conversion, doesn’t include the impact of the recent rise in commodity prices that began in 2007.

In South Dakota, rangeland and pasture values inflated 20.5% for the year through Feb. 1, according to South Dakota State University. Native rangeland averaged $737/acre, while tame pasture prices averaged $1,218/acre. Rental rates for private rangeland and pasture varied from nearly $62/acre in the east-central region to $11.65/acre in the southwest region, according to the SDSU survey.

(For more charts from this story, click here to download a PDF.)

Moving south to Nebraska, rents across the Sandhills range from a high of $50/cow-calf pair/month in the eastern Sandhills to a low of $25 in the west, says Cort Dewing, director of field operations with the Nebraska Board of Educational Lands and Funds, which manages more than 950,000 acres of pasture leases. The agency originally planned to raise 2013 lease rates 10-12% across the Sandhills, based on spring market data. Now, due to the drought, the state land board expects to hold 2013 rates steady. A final decision is expected early next year.

BEEF Daily Discussion: How Much Can You Pay For Land?

“We are in a healthy environment for pasture and the value of it should be good because the cost of gain in the feedlot is high,” Dewing says. Lease rates in north central Nebraska – Brown, Rock, Keya Paha, and Cherry counties – are running at the upper end of $35-$40/cow-calf pair/month, he reports.

Conversion pressure may also be helping drive this area’s tight grass market. Keya Paha County has seen significant cropland development in the last few years. “If you have any number of cattle that are looking for pasture it makes a difference,” Dewing says.

In neighboring Kansas, quality bluestem pasture is selling at $1,500-$2,000/acre, says Richard Griffin, with Griffin Real Estate and Auction Service in Cottonwood Falls. That’s up sharply from a year ago, when the top of the market was $1,400/acre. In August, a section of grass in Chase County fetched $2,030/acre at auction.

“Three years ago, we had sale after sale and you would get to $1,000 and it would quit right there,” Griffin recalls. “That’s how much the market has changed. Money is cheap, and it doesn’t hurt to have the highest commodity and cattle prices ever.”

Even the storied Flint Hills aren’t immune from the conversion craze. In July, 160 acres of grass in Butler County on the western edge of the Flint Hills brought a steep $3,000/acre at auction. The buyer plans to convert it to cropland, Griffin says.

Net lease rates to landowners in the Flint Hills region are running $70-$80/head for the April 15- Oct. 15 grazing season, says Mike Holder, Chase County Extension agent in Cottonwood Falls. That’s up 10% from a year ago. Producers typically aim for 200 lbs. of gain during the 90-day grazing season. However, this summer’s extremely hot, dry weather will likely mean cattle achieve only two-thirds of that target. That could increase cost of gain 10¢/lb. from 40¢/lb. to 50¢/lb. – still a good bargain in today’s high grain-price environment.