A Comparison of Average Variable Costs of Private vs. Public Land Ranches in Southeastern Montana

Abstract

A study was conducted in southeastern Montana to determine the effects of federal range grazing on cattle ranch average variable operating costs per animal unit. Data were obtained through personal interviews in 1980 with 68 ranches in six southeastern Montana counties. T-tests were used to determine if the average variable costs per animal unit were less on ranches that rely on federal ranges than on ranches that do not. Annual variable costs per animal unit averaged S158 and S144, respectively, for ranches obtaining O-4% and 541% of total forage from federal lands. However, this difference was not statistically significant. Regression analysis did indicate that variable costs per animal unit were significantly affected by the percentage of total ranch income from crop sales. It has been estimated that 45% of Montana’s ranchers will be out of business by 1990 and 1 in 10 is not expected to survive through 1986 (Governor’s Council on Economic Development 1985). Ranch production costs commonly exceed gross revenues. Both ranchers and agricultural lenders need a better understanding of the factors that influence livestock production costs. Federal rangelands in the western US are one potentially important factor. More than half of the total land area in several western states is in federal ownership and livestock grazing has long been a major use of much of this land. A number of studies have compared grazing fees on private land with those on public land (Nielsen 1982) but little effort has been devoted to determining the effects of public land grazing on average variable costs of livestock production. If federal land grazing fees are significantly lower than private land fees, it seems likely that total variable costs per animal unit (AU) would be less on ranching operations that rely on federal ranges for a significant percentage of their total forages. The purpose of this analysis was to determine if the average variable cost per AU is less on ranches that rely heavily on federal ranges than on ranches where federal range supplies only a small percentage of the total forage requirement. Results should be helpful to ranchers and agricultural lenders by providing additional insight into the factors affecting livestock production costs.