John Nalivka: What is the ranch production value of Federal grazing?
July 21, 2016
I have mentioned in previous articles the push in Malheur County, Oregon to create a "monument" for national conservation on 2.5 million acres of federal land. I will say at the onset, I oppose this as do 90 percent of the people in the county as indicated by a county-wide vote taken this spring. This isn't a large county population-wise, but it is large from the standpoint of land area. The land in question supports grazing and recreation and of course has the potential for mineral exploration. There are 261,442 AUMs of federal grazing. Of this total, the Bureau of Land Management (BLM) indicates 170,207 AUMs "could be potentially affected" by the "Monument." That statement can certainly be left up to interpretation.
Grazing is the lifeblood of any ranch whether it be deeded, leased, or any combination thereof. In the Western U.S., grazing on federal lands is an important resource to many if not most ranches with dependence ranging from a relatively small percent of the total grazing to 100 percent on year-round grazing operations. The ranch must be balanced with regard to forage and water or it wouldn't exist and all resources make a contribution to a ranch's productive capacity, profitability, and thus, its long term value. The ranch is sustainable.
Going back to the federal grazing, federal grazing permits have value because they are critical to the ranch's (business) ability to generate income, i.e. convert grass and water to beef. In terms of a cow or a yearling grazing, they are no different than grazing on deeded land with the one very important exception; those federal grazing AUMs are at significant risk from a regulatory standpoint as well as politically. So it is extremely important to know both the microeconomic and macroeconomic value of federal AUMs of grazing; that is the value to the individual ranch as well as to the local economy. And this doesn't even take into account the value of fire suppression through sound grazing.
So, what are those grazing AUMs worth? There are different methods to calculate this value. While a real estate agent might use the sale value of a ranch to determine the value of grazing on the ranch, I prefer to use the ranch financial statement. The quantity and quality of forage are directly related to both the revenue and costs associated with the ranch. So, capitalizing the net income per federal AUM for a ranch yields both a realistic and defendable value. While the calculated values are unique to the circumstances of individual ranches, it is not unwarranted to generate a value that would represent the value for ranches that in given region.
Next week, I will work through an example and apply that example to those 170,207 "affected" AUMs in the proposed Owyhee Canyonlands Monument.