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The Red Ink Economics of Public Land Grazing

The dismal economics of public land livestock grazing run heavy with red ink for everyone involved. The public bears the brunt, government agencies lose out, and even the public lands livestock operators could not operate without considerable assistance and subsidy.

Losses for the Public

Grazing fees were initially implemented by Congress to represent the fair market value of grazing on public land beginning with a 1966 base of $1.23 per animal unit month (AUM), which in the case of cattle is the amount charged to graze a cow and a calf for a month. Even though the weight of an average cow has grown from 700 lbs. to 1200 lbs. over the last 55 years, the fee in 2021 is only $1.35. The inflation adjusted amount today would be $10.14. Name another business whose costs remain at the level of the 1960's.

There are many other supports and subsidies livestock operators get that you provide.

 

The going rate to graze a cow and calf on private land was about $20 in 2012. The $1.35 ranchers pay for using our public land is a 93 percent discount from that rate.

 

Half of the federal grazing fees are returned to pay for "range improvements" on our public lands. These include fences, corrals, cattle guards, and water projects that subsidize livestock operations while causing environmental degradation.

 

Livestock operators are also eligible for numerous federal disaster relief programs, often in violation of the ranchers’ declared principles. In 2015, for example, some Nevada ranchers illegally grazed their cattle on public land that been closed to protect it during the ongoing Western drought, denying that the drought existed at all. Yet two of the families involved had received $2.2 million in federal drought relief funds the previous year. At times, operators receive drought and flood relief in the same year.

 

USDA Wildlife Services — an opaque and ironically named agency — spends $100 million annually to kill millions of wild animals, much of that in support of livestock interests.

 

The BLM routinely removes wild horses from public lands to make way for cattle. In 2015, according to the BLM, this program cost the American public $75 million.

Losses for Government Agencies

According to a report by the Center for Biological Diversity, in 2014, as a typical example, receipts from grazing fees were $125 million less than federal appropriations. Total appropriations for the US Forest Service (USFS) and the Bureau of Land Management (BLM) grazing programs were $144 million, while grazing receipts were only $19 million. Appropriations for the BLM and USFS grazing programs had exceeded grazing receipts by at least $120 million annually since 2002.

The federal grazing subsidy is even larger when all costs to the taxpayer are accounted for. Indirect costs for private livestock grazing on public lands include portions of different federal agencies budgets, such as the previously mentioned USDA Wildlife Services; U.S. Fish and Wildlife Service, which expends part of its budget for listing species as threatened or endangered resulting from harm by livestock grazing; and other federal land management agencies that expend money on wildfire suppression caused by invasive cheat grass that is facilitated by private livestock grazing.

Losses for Livestock Operators

In his essay, "The Economics of Ranching", Montana rancher Kent Hanawalt calculates the annual cost of raising cattle came to $756 per head in 2007. Based on a 600 pound calf he shows the net revenue received for selling the calf is about $594 per head, or a $162 loss per cow. He suggests the main reason ranchers can stay in business is the constant increase in the value of their land. 

Of course, more immediately there are also all the subsidies. Even so, outside income is usually required.

According to Thomas M. Power from the Economics Department at the University of Montana, livestock operations are increasingly made feasible only because farm families have access to nonfarm employment and income. Within the Rocky Mountain region, almost 90 percent of the income received by farm and ranch operator families comes from nonfarm sources. His conclusion is that retaining public lands livestock grazing, which compromises environmental values, is not an efficient or effective way to protect open space or a ranching way of life. Power suggests that continuing to sacrifice huge areas of the West is neither desired nor necessary.

Why are these losses tolerated?

To the public, public lands ranching seems more important than it is in part because it ironically occupies so much of our public domain. Charles Wilkinson notes that more acres of the eleven western states are dedicated to cattle ranching than to any other use. According to Debra L. Donahue, domestic livestock are grazed on 258 million acres of BLM lands and national forests--"a chunk of country equivalent to the combined areas of California, Oregon, Washington, and most of Nevada." Yet, for all this abused space, livestock grazing on public lands comprise only 2 percent of all U.S. livestock.

Agriculture in general is an almost shockingly small part of the economy in the arid West. According to the Utah Economic Report to the Governor, in 2019 Utah agriculture made up only about 1 percent of the state's economy. All livestock production is only a part of that 1 percent, and livestock production on public lands is only a sliver of that fraction. According to the Department of the Interior's 1994 Rangeland Reform Environmental Impact Statement, the elimination of all public lands livestock grazing would result in a loss of approximately 0.1 percent of the West's total employment. The practice is such a vanishingly small part of the economy that it could be replaced by a day or two of normal economic growth.

 

Donahue asserts that the unjustifiable practice of private livestock grazing on public lands persists because of ranchers’ disproportionate political clout and because of a system designed to exploit it. For most of the last 100 years, two baseless arguments have been offered: that public land grazing is important economically to local communities, and that it is a privileged way of life that needs protecting. As I have suggested, neither argument is true.

 

Sustaining a single elite group's preferred lifestyle is an inappropriate goal for public policy respecting public lands. Preserving western cultural traditions and the ranching "way of life" are objectives nowhere to be found in the statutes governing federal grazing policies. To the contrary, a democratic policy for public lands would be to recognize and protect the more broadly shared western "lifestyle" values that depend on the availability of open public lands including hiking, riding, fishing, picnicking, hunting, camping, photography, sightseeing, and other forms of inspiration, not to mention land and wildlife conservation.

 

Mark Salvo raises another little known but important reason the unjustifiable practice persists. Rural banks lend to livestock operators based on the implied value of their grazing permits. This arcane and possibly illegal system has serious ramifications for range management on public lands, and for potential grazing policy reform. Because grazing is done by permit and is explicitly not a right, so-called "escrow waivers" are required to secure a bank loan. These escrow waivers help prolong the antiquated public lands grazing program by overlaying a parasitic financial system that requires high stocking rates and low grazing fees. Through the waivers, banks have loaned billions of dollars on grazing permits and they use their considerable clout in Washington DC to oppose grazing reforms that threaten their investment. The banks also become involved in perverting agency decision making where the value of an escrowed grazing permit is in jeopardy.

 

As Power maintains, economic analysis exposes continued private grazing on public lands as folly. Indeed, the ecological harm posed by livestock grazing on arid lands threatens to undermine the entire economic base of portions of the West.

 

The cost of refraining from extracting our remaining natural landscapes is small. The level of our future well-being will depend on it. Eliminating grazing in arid regions of the West would offer tremendous benefits while imposing minimal costs.

 

Private livestock grazing on our public lands in the arid West is not only economically unjustifiable, it is ecologically destructive, contrary to the intent of public law, and inequitable. We seek to create impetus for change.