Economics of Multiple Rangeland Use and Conservation · Economics of Multiple Rangeland Use and Conservation L. Allen Torell Professor of Agricultural Economics New Mexico State University

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New Mexico State University

Economics of Multiple Rangeland Use and ConservationL. Allen TorellProfessor of Agricultural Economics


Las Cruces, NM

[email protected]

Outline of Topics• What gives ranches value

– Income earnings

– Land appreciation

– Way of life

• Economics of Conservation Practices – Valuing ecosystem services


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USDA Reported Pasture Values


0

500

1,000

1,500

2,000

2,500

3,000

3,500

01 02 03 04 05 06 07 08 09 10 11

Pa

stu

re V

alu

e (

$/A

cre

)

Year

Pastureland Value ($/Acre)

California

Idaho

Utah

Washington

Oregon

Nevada

Montana

Wyoming

Source: USDA-NASS, Agricultural Land Values and Cash Rent Survey

Rent-to-Value Ratio

Year

Pasture Value

($/Acre)

∆ Pasture Value

($/Acre)Appreciation

Rate Cash Rent

($/Acre)

Rent-to-Value Ratio

Appreciation + Cash Rent

($/Acre)

Total Rate of Return

1998 1,050 12.00 1.14%1999 1,050 0 0.0% 10.00 0.95% 10 1.0%

2000 1,000 -50 -4.8% 9.00 0.90% -41 -3.9%

2001 1,040 40 4.0% 11.00 1.06% 51 5.1%

2002 1,400 360 34.6% 11.00 0.79% 371 35.7%

2003 1,500 100 7.1% 10.60 0.71% 111 7.9%

2004 1,600 100 6.7% 11.50 0.72% 112 7.4%2005 1,910 310 19.4% 12.00 0.63% 322 20.1%2006 2,160 250 13.1% 13.00 0.60% 263 13.8%2007 2,800 640 29.6% 14.00 0.50% 654 30.3%2008 3,020 220 7.9% 15.00 0.50% 235 8.4%2009 2,900 -120 -4.0% 14.00 0.48% -106 -3.5%2010 2,850 -50 -1.7% 13.00 0.46% -37 -1.3%2011 2,800 -50 -1.8% 12.50 0.45% -38 -1.3%Average 1,934 135 7.8% 12.04 0.62% 180 8.5%


Source: USDA-NASS, Agricultural Land Values and Cash Rent Survey

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Ranching As a Way of Life

• Rural Values and Living

• Open Space

• Quality of Life

What key factors influence the value of New Mexico Ranches?• Scenic mountainous area

– Northern NM ranches• $1,200/acre

• $71,000/AUY

– Other Areas• $150/acre

• $6,000 - $8,000/AUY


1996 - 2010

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What key factors influence the value of New Mexico Ranches?• Amount of Public and State Trust Land

– 659 sales (1996-2010)


0

50

100

150

200

250

300

350

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

$/T

AC

$/A

UY

% Public and state Land

Amount of Leased Land (%)

$/AUY $/TAC

Factors Influencing NM Ranch Values• Population Density – People like more

densely populated areas

• Elevation – higher is better (decreasing rate)

• Distance to town

• Houses, Buildings, Improvements


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Factors Influencing Ranch Values

• Add $1,500 annual livestock income– $2,420 ↑ ranch value

– V= A/r

• Add a $1,500 antelope permit– $37,400 ↑ ranch value

– 15 times more


$ ,

.=$37,500

Allocation of California Ag Land Market Price


Commercial Production Benefits

43%

Amenity Lifestyle Benefits

57%

Source: Contingent Valuation of Woodland-Owner Private Amenities in Spain, Portugal,and California, Campos et al. (2009)

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Economics of Range Improvements

• Objectives – Forage for Livestock

– Ecosystem Services• Healthy rangelands

• Watershed Improvements

• Wildlife habitat improvement

• Reduced fire hazard


NPV for Broom Snakeweed Control

TimeAdded

HerbageAdded AUMs 50%

ruleAnnual Value

Discount Factor NPV

0 -$22.00 1.000 -$22.001 500 lb/ac 0.313 AUMs/Acre $4.38 0.935 $4.092 500 lb/ac 0.313 AUMs/Acre $4.38 0.873 $3.823 500 lb/ac 0.313 AUMs/Acre $4.38 0.816 $3.574 500 lb/ac 0.313 AUMs/Acre $4.38 0.763 $3.345 500 lb/ac 0.313 AUMs/Acre $4.38 0.713 $3.12

Amount of forage added = 500 lb/acHarvest Rate = 50% -$4.06 NPVForage Value = $14/AUM -0.19% IRRTreatment Cost ($/Ac) = $22/Acre 0.82:1 B/C RatioDiscount Rate = 7%Treatment Life (years) = 5 Years

Traditional Range Improvement Economic Analysis (NPV)

Added Forage

Added Economic

Value

Time Value of Money

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What the traditional Economic Analysis Shows• Forage production increases 3 to 5 times

• Livestock production benefits alone do not economically justify the majority of range improvement projects– NPV generally negative

– Livestock production pays for about 50% to 80% of total treatment cost

– Cost share treatments

Major Change in Emphasis

• Millions have recently been spent on restoration cooperative efforts – Land agencies

– Private individuals

– Conservation groups

– NGOs

• Individuals and agencies seek ways to realize non-grazing benefits from rangelands

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Restoration and Rangeland Health


• Many cooperative efforts for rangeland restoration– Sage grouse habitat

– Fire prevention and fuels management

– Healthy Rangelands

Restore New Mexico is a Cooperative Effort lead by New

Mexico BLM

New Mexico Quail, Inc.

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Creosote Controlnear Las Cruces, NM

$20/Acre

The NRCS Conservation Effects Assessment Project (CEAP) - 2011

• Literature Review

• Assess and quantify the effects of conservation practices– Prescribed Grazing

– Prescribed Burning

– Brush Management

– Range Planting

– Wildlife Habitat Improvement

– Weed Control

Available onlineSearch for “Rangeland CEAP”

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CEAP Project Economic Findings

• Benefit/Cost Assessment:– Societal benefits from ecosystem services and

multiple uses are an increasing priority influencing public land use decisions

– Economic consideration of nonmarket ecosystem services is essential for improved investment decisions for conservation programs


We know very little about the economics of rangeland ecosystem services for Multiple Uses• Wildlife habitat improvement

• Watershed benefits

• Carbon sequestration

• Reduced fire hazard


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Sparrowk Livestock Conservation Efforts

• Stream Restoration• Willow Restoration• Timed grazing of Riparian areas

Conservation Practices

• Water Quality• Wildlife habitat• Aquatic Habitat

Benefits

• How much more?• How does society value the change?

• Can SparrowkLivestock economically benefit?

Convert to economic

value


Putting an economic value on ecosystem services

Two types of information needed:1. Changes in rangeland output levels

(resource effects, weak link)

2. People’s valuation of those outputs

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Restoration Practices have PositiveEffects on Breeding Bird Communities in the Chihuahuan DesertJohn Coffman, Brandon Bestelmeyer, Timothy Wright, Jeffrey Kelly, & Robert Schooley

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Cassin’s sparrow

Eastern meadowlarkLoggerhead shrike

Scaled quail

Bird responses to historical treatments

Horned lark

Grassland specialistsfavored by treatments

Black-throated sparrow

Black-tailed gnatcatcher

Generalist found intreated and untreatedshrublands, but thatrequires shrubs fornesting

Grassland specialist not reliably favoredby treatments

Shrubland specialist favored in untreatedshrublands

Aspidoscelis tesselata

Aspidoscelis tigrisAspidoscelis uniparens

Aspidoscelis inornata

Grassland specialistsfavored by treatments

Shrubland specialistsfavored in untreated shrublands

Lizard responses to historical treatments

Checkered whiptailLittle striped whiptail

Desert grassland whiptail Tiger whiptail

from Brad Cosentino et al., in review

How many more?

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Procedures for Valuing Ecosystem Services• Market value and productivity

• Contingent valuation and choices– Ask people their willingness to pay

– Scenario preferences

• Travel cost method

• Replacement cost– Cost of removing sediments

• Hedonic pricing models

Some Ecosystem Services provided from rangeland improvements are major

• Livestock benefits

• Improved wildlife habitat and numbers

• Reduced sediment and runoff

• Weed control

• Landscape scenic appeal

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Sustainable Rangeland Roundtable (SRR)


http://sustainablerangelands.org/

Identify a direction of change-- - 0 + ++

We know little about the economics of ecosystem services

We are implementing restoration projects because decision makers think it is the right thing to do!• Economic justification is very

limited and not forthcoming

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We know little about the economics of ecosystem services

The failure to economically value ecosystem services means we undervalue the net benefits of investments in conservation

Economics of Multiple Rangeland Use and Conservation · Economics of Multiple Rangeland Use and Conservation L. Allen Torell Professor of Agricultural Economics New Mexico State University

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