Importance of Public Lands Grazing
Many Wyoming ranches are reliant on public lands to meet the grazing needs of their herds. This reliance can be problematic if reductions in federal land grazing permits occur to meet policy recommendations.
Often, analysis only sets the economic loss of these changes at the value of the permit, but this number underestimates the true cost to ranches. Especially in regards to public grazing, the permit fee itself underestimates the true cost of grazing, as the costs of moving, herding and tending cattle are not included in the permit fee, and the costs of those activities fall onto the permittee.
Also, given the short grazing season in our state, any loss of grazing can have severe economic impacts as herd numbers must be reduced or additional hay fed to cover the loss in usable animal unit months (AUMs).
Researchers at the University of Wyoming, University of Idaho and New Mexico State University have recently published an estimate of the true cost of losing BLM grazing on representative ranches across various states in the Western U.S. The paper is based on reductions in BLM permits as a response to sage grouse being listed as endangered. However, keep in mind the loss in value from losing public lands grazing would be the same regardless of the reason for the reduction.
I’ll focus on the Wyoming ranch for the purpose of this article.
The representative ranch runs 600 cows, has access to just over 1,000 AUMs on deeded rangeland, owns almost 800 acres of hay land and has access to over 500 AUMs on state rangeland and almost 3,800 AUMs on BLM land. The analysis looks at the impact to this ranch of reductions of BLM AUMs, ranging from 25 loss to full elimination, as well as seasonal restrictions by shortening the grazing season allowed on BLM land by a month in either the spring, fall or both.
If BLM AUMs were reduced by 25 percent, the ranch would be forced to carry 10 percent fewer cows and have annual net income reduced by 12 percent. The result is that, for each AUM lost, net income would be reduced by roughly $15 a year above the almost $10 cost of the AUM, when accounting for the management costs.
In addition, to cover the lost grazing potential, the ranch would need to convert hay land to pasture to ensure adequate grazing for the cowherd. When accounting for the long-term impact of reduced profitability, the value of the ranch could be expected to decline by almost 10 percent. The value of the ranch decreases by $145 for every BLM AUM lost.
If BLM grazing is eliminated completely, the herd would decrease by 40 percent, annual income would decrease by 70 percent, with each BLM AUM foregone resulting in an annual loss of over $21, and the value of the ranch would decline by roughly 58 percent. The value of the ranch decreases by $225 for every BLM AUM lost.
More importantly, the chance of having a year with negative income goes from 22 percent in the base case to over 50 percent when no BLM grazing is allowed. This increased chance of losing money in any given year is especially problematic given that good years produce less money to stockpile for the bad years.
Another option mentioned in response to a sage grouse listing is to allow total BLM AUMs to remain constant but delay turnout by a month or require animals to be gathered a month early to minimize contact with cattle during critical times for sage grouse. The analysis includes both of these options individually, as well as both restrictions simultaneously.
If either spring or fall grazing is limited by a month, the ranch stocks roughly seven percent fewer cows and has a reduction of about eight percent in annual returns. This translates to a reduction in value of the ranch of about six percent.
Interestingly, even though the ranch still has access to the full BLM allotment, due to the timing restriction and lower cow numbers, the ranch actually utilizes 17 percent fewer AUMs than it has access to. It just isn’t profitable to use all the AUMs as higher cow numbers coupled with restricted grazing would require increased hay feeding.
However, the option to use all the AUMs in a short window is better than just decreasing total AUMs available, as the probability of a negative year is only increased by one percent, from 22 percent in the base case, to 23 percent.
If grazing is restricted in both the spring and fall, herd numbers are reduced by 12 percent and annual income is reduced by 17 percent, with a resulting decrease in ranch value of 13 percent. Again, the ranch underutilizes the BLM potential by 34 percent. The likelihood of negative returns in a year is increased, but only by an additional four percent.
While the report was written to estimate the costs of federal grazing reductions in response to sage grouse listing, these results would be the same for reductions on BLM lands for any reason.
The report also highlights the reliance of western ranches on public land grazing opportunities. The cost of losing permits is much more than just the price of the permit, especially in Wyoming where climate limits the grazing season. Any cost/benefit analysis involving reducing public land permits needs to fully account for the economic costs incurred by reduced grazing potential by western ranches.
Keep in mind these costs are accurate only for the representative ranch used. Cost could be higher or lower for other ranches that are either more or less reliant on public lands to meet their grazing needs.
The entire report, it can be found at wyoextension.org/agpubs/pubs/B1258.pdf.