Current Edition

current edition

Hello and welcome to almost-spring in Wyoming. This usually means four things. The wind is going to blow. Folks are gearing up for calving, lambing and spring farming. Basketball tournaments are in full swing, and the Legislature has just finished another session.

The first order of business that I would like to relay to our producers is a change in Board members. We would like to give our sincere thanks and offer our appreciation to our two outgoing members, Joe Thomas of Meeteetsee and Donna Baldwin Hunt of Newcastle, for their years of service to the Board and the industry. Their input and insight has been invaluable to the Board and the State, and we look forward to their continued input as valued and knowledgeable producers.

The Wyoming Livestock Board (WLSB) would also like to welcome our two newest members and thank them for their offer to serve the livestock industry of the state. Please welcome Martin Mercer of Hyattville and Warren Crawford, DVM of Sundance. We look forward to their contributions to the Board and our industries.

Before I give a review of the legislation that affects the Livestock Board, we would like to recognize the challenges that have been faced by all in the state in the recent years declining revenues. From our vantage point, we are particularly aware of those faced by our citizen Legislature and our fellow Executive Branch agencies to apply reductions to budgets and services.

There were a few pieces of legislation which affect us directly, the first of which would be Senate File (SF) 115, an additional section of language added to Wyoming Statute (WS) 6-3-203, Aggravated animal cruelty.

The new language reads, “A person commits aggravated cruelty to animals if he:

(vii) Shoots, poisons, or otherwise intentionally acts to seriously injure or destroy any livestock of domesticated animal owned by another person while the animal is on property where the animal is authorized to be present.”

The animal cruelty statutes fall under those the WLSB can enforce pursuant to WS 7-2-101 (E)(I).

The next would be SF 147, which amends the language in WS 11-20-408(b). This statute refers in part to the Wyoming Livestock Board’s ability to raise fees. Current statute allows the Board to adjust fees, “… not more than one (1) time per fiscal year and by not more than 20 percent in any one fiscal year…”

  This has changed from 20 to 25 percent and becomes law on Oct. 1, 2017.

The third is inside the supplemental budget bill in reference to our agency budget. In June, the Livestock Board responded to the Governor’s recommendation for all agencies to find an eight percent cut to our General Fund appropriation. Included in these was a cut to our Brand Inspection General fund of $558,936.

The Joint Appropriation Committee (JAC) accepted all these cuts and added an additional cut of $500,000 to the Brand General Fund for fiscal 2018. These cuts of $1 million will carry forward into the next biennium, as well.

Inside our budget in the supplemental bill, JAC removed funding for three of our four criminal investigators, beginning Jan. 1, 2018. In short, that means next year we have one criminal investigator for the entire state. The Livestock Board will form a subcommittee to bring forward options to the producers, to discuss potential adjustments to our program in a manner that allows us to maintain a viable ability to perform our mandated duties and continue to provide service to our producers.

Please feel free to contact me with suggestions and ideas at This email address is being protected from spambots. You need JavaScript enabled to view it., and we will carry these suggestions forward into committee meetings. Stay tuned and monitor our Board meeting schedule to avail yourself of the opportunity to provide input.

We are living in interesting and changing times. Our nation has just carried out one of its most profound responsibilities by electing individuals to serve in positions of local and national leadership. Wildfires are burning longer and bigger, and one of the most severe bark beetle infestations in living memory is taking place in Wyoming and beyond. And perhaps, reassuringly, as ever it does, winter is nearing and in some parts of the state, is already upon us. We are prepared, being hardy Wyomingites, accustomed to finding beauty and a myriad of ways to pass the time through our long and windy winters.

Change has not been a stranger to Wyoming State Forestry Division (WSFD), either. As have many state forestry agencies across the country, baby boomer retirements and increased mobility of the nation’s workforce have led to a plethora of new staff in WSFD. This has brought with it the opportunity to welcome fresh ideas and energy. In light of the challenges facing Wyoming’s forests, there could be no better time to capitalize on change – in our personnel and in the forces impacting the landscape – as a catalyst for achieving healthier, more resilient forests and landscapes in our state. 

As I look ahead at the best ways to approach change and make it work most effectively for WSFD and our work across the state, I find myself landing on three big ideas as the keys to success: Innovation, Integration and Diversification.

Innovation

There is an old saying that goes “100 years of tradition, unimpeded by progress.” I sometimes think this is an apt description of a sentiment held onto by many in the forestry and land management sector.

Yet if we are to accomplish our goals of achieving healthy and resilient forests and landscapes, we must innovate – in our ideas and thinking generally, as well as in our approaches to problems and problem solving. We need creative solutions if we are to solve old problems, problems that old solutions haven’t solved.

  We also need to consider stepping back and redefining some of the problems we face and then work to find relevant and forward thinking solutions.

Integration

Integration is a word many of us have heard frequently over the last 10 years. We have developed State Forest Action Plans, talked about the need for more “cross boundary” cooperation and discussed endlessly ways of better working together.

Nevertheless we still have work to do.

Programs remain relatively stove-piped within our agency, which impacts our ability to deliver diverse services to the public in a holistic way. I believe this presents us with an opportunity to look hard at ourself as an agency and at our relationships with partners and to seek out ways of better working across programs and organizations to achieve the cross boundary successes needed on the ground.

Diversification

I also believe we need to consider how to diversify our programs and projects, as well as our partners, people and ideas. We all serve an increasingly diverse public and workforce; not only do we need to accept this, but we should and can be leaders in embracing this diversity.

We need to grow our understanding about what makes forestry and management relevant to a diverse audience and strive to address those issues. We must look at ways to encourage and promote diversity in our workforce and sector and actively foster interest in natural resources from all groups.

Finally, we need to diversify our ideas and, in some cases, our preconceived notions. This means moving away from a “we have always done it this way” way of thinking and embracing a “yeah, let’s try that” mentality.

Bottom line, we need to strive to be ever more open to new and different ideas and thinking.

These ideas are a pretty tall order, and by no means do I think we will achieve complete success right away. I do believe that these ideas can guide us in the right direction and enable us to better carry out our important roles of protecting forests and landscapes from harm, conserving working forests and lands and enhancing the public benefits that derive from trees, forests and landscapes.

We have no interest to wade into the political debate and are fully cognizant of the fact that passions run high after a very heated election season. But the reality is that a Trump presidency was, for the most part, discounted as unlikely by the markets, and at least initially, we expect some panic trading to occur.

The role of markets is, in part, to price risk, and until proven otherwise, market participants will look to price the risk of trade war(s) with some of our largest trading partners. A selloff is likely but may be tempered by the realization that the immediate material impacts could be limited. In the short term, we think the currency shifts have the more immediate impact. One thing to notice is the dramatic drop in the value of the peso and what that does to the ability of Mexican importers to source U.S. red meat and poultry products. Longer term, however, no one really knows how this will play out.

The only thing we have to go are statements and positions taken by the President-elect Trump during the election. Promises of heavy tariffs on imports, the erection of a physical barrier with one of our largest trading partners, the commitment to do away with North American Free Trade Agreement (NAFTA), no Trans-Pacific Partnership (TPP), limits on free trade to stimulate domestic jobs and other such commitments may have a significant detrimental impact on the meat industry.

Economists can argue about the overall macro effects of such policies and what the general impact may be on the economy. But for livestock producers, the issue is much more parochial. And some livestock producers stand to lose more than others. This chart on page 21 shows the evolution of net trade in the last 20 years, since NAFTA and General Agreement on Tariffs and Trade (GATT) went into effect.

The biggest beneficiary during this process has been pork, largely because the opening of new markets, including Mexico, allowed low-cost U.S. pork producers to better compete in world markets. In 1995, U.S. pork exports were 787 million pounds on a carcass weight basis, and our pork imports were 664 million pounds. The net trade effect then was just 123 million pounds. Total U.S. pork production in 1995 was 17.8 billion pounds, and only about 4.4 percent of that went to export markets.

For the past 20 years, however, the U.S. pork industry has expanded dramatically, and most of the growth is due to booming pork exports. Last year, total U.S. pork production was 24.5 billion pounds, 6.7 billion pounds or 37.6 percent higher than was it was in 1995. Pork exports were 5 billion pounds while pork imports were 1.11 billion, thus leaving a positive trade balance of 3.9 billion pounds.

In other words, more than half of the expansion of the U.S. pork industry in the last 20 years is due to the increase in exports. Last year, one out of five pounds of pork produced in the U.S. went to exports.

The supply of chicken going to exports has also continued to increase since 1995 although exports always have been a significant driver for that industry. Back in 1995, exports accounted for 15.7 percent of overall U.S. chicken production. Last year chicken exports were constrained due to bird flu bans but in prior years the share of exports in chicken has been around 19 to 20 percent.

For the beef industry, the trade deficit that was in place 20 years ago has gotten larger. In 2015, we had a 1.1 billion pound trade deficit in beef, i.e. imports exceeded exports by that amount. However, consider why that is the case. Over the last two decades, the beef industry has become more efficient. We are getting more beef per animal in the herd, and therefore, the beef cowherd has declined. As we generate more fat trimmings, more lean beef is needed to mix into an acceptable hamburger meat block. Exports accounted for 9.6 percent of U.S. beef production in 2015 compared to 7.3 percent in 1995. The main reason why a more restrictive trade environment could be bad for beef is because of ample supplies of competing proteins; lack of access to growing markets in Asia; and our competitors establish trade pacts with our current customers and undercut U.S. competitiveness.

Would you like to know how to bypass capital gain taxes on the sale of your land and have the U.S. government pay you? I know it sounds too good to be true but that is exactly what we have helped many Wyoming ranchers do. Allow me to explain.

IRC Section 1031 Exchange

Section 1031 of the Internal Revenue Code allows a person with appreciated land to sell their land, to purchase or exchange into other real estate and to defer taxes on the sale. Many agricultural families who are transitioning into retirement use the 1031 exchange to preserve their wealth and to generate passive income by exchanging into various types of commercial property.

While land may offer good growth potential, the cash flow returns on land are generally significantly lower than those offered with other types of commercial properties, such as office buildings.

For this reason, many agricultural families prefer to exchange into commercial properties because they can typically earn about three to four times what they can leasing land. And, by hiring a property management firm, you can free yourself from the responsibility of actively managing your property.

Tenant credit ratings

The value of commercial income-producing real estate is largely based on the financial security of the tenant the property. When investing in commercial property, you want to make sure your tenant can pay their rent and meet all terms of a lease. If your tenant defaults on their lease, you could end up with an empty building, and you’re stuck with paying all the property expenses.

A credit rating is an evaluation of the credit risk of a prospective debtor, either a company or a government, which predicts their ability to pay back the debt. It measures a company or government’s financial strength  and the likelihood of them defaulting on a lease agreement.

The higher the credit rating of a tenant, the greater assurance you have of their ability to pay the rent. Examining a tenant’s credit rating is an important step when evaluating commercial property investments.

Three of the most reputable credit rating companies are Standard and Poor’s (S&P), Moody’s and Fitch. S&P assigns credit ratings that range from AAA, which signifies an “extremely strong capacity to meet financial commitments, to D, which indicates “payment default on financial commitments.” Investment grade properties have a rating of BBB or higher. A BBB rating indicates that a company has “adequate capacity to meet financial commitments but is more subject to adverse economic conditions.”

The U.S. federal government maintains the highest credit rating in the world, making it arguably the most secure tenant in the world. After all, they are the only tenant that can print their rent.

Many people, however, don’t realize you can personally own properties leased to the federal government.

U.S. government agency real estate market

The federal government is the largest user of real estate in the nation, occupying more than 370 million square feet of office and related space. Currently, over 180 million square feet of that space is leased.

According to the General Services Administration (GSA), property manager for the federal government, the amount of government-leased space continues to grow. During the 10-year time span of 2005-14, the federal government increased its occupancy of leased office space by 38.3 million square feet, representing a 25 percent growth rate. The federal government currently leases over 8,000 separate locations throughout the country to run its missions.

Although there is a large amount of government leased office space, finding government leased buildings available for purchase and effectively analyzing them for investment can be difficult. Many of the newly constructed federal government buildings are not publicly listed for sale. Locating these buildings largely depends on knowing the contractors who constructed the buildings.

In addition to being difficult to find, federal government buildings have unique leases. Understanding the nuances in these leases is very important if you are going to invest in them.

U.S. federal government real estate leases

With an average lease term of 10 years, U.S. federal government real estate leases provide consistent, predictable cash flows. Due to their high historical lease renewal rates, U.S. federal government tenants have remained in single locations for an average of nearly 30 years.

The credit strength of the federal government, combined with their high historical lease renewal rates, makes federal government leased office buildings an attractive investment for the typical agricultural family who is selling their ranch and transitioning into retirement. With a federal government building, you have the upside potential of commercial real estate with the credit of a Treasury bond.

Chris Nolt is the owner of Solid Rock Wealth Management, Inc. and Solid Rock Realty Advisors, LLC, sister companies dedicated to working with families around the country who are selling a farm or ranch and transitioning into retirement. For more information, visit: solidrockproperty.com and solidrockwealth.com.