An evaluation of the federal grazing fee formula

Abstract

The federal grazing fee is currently set using the Public Rangeland Improvement Act (PRIA) fee formula established in 1978 and modified in 1986. The formula is adjusted annually using indices of private land grazing lease rates (Forage Value Index, FVI), prices received for beef cattle (Beef Cattle Price Index, BCPI), and costs of beef production (Prices Paid Index, PPI). The FVI tracks price movement in the private forage market and was the only index originally proposed to be included in the fee formula. Public land ranchers and the Interdepartmental Grazing Fee Technical Committee assigned to study grazing fee alternatives in the 1960s questioned the ability of the FVI to account for short-term demand, supply, and price equilibrium, and, for this reason, the BCPI and PPI were added to the fee formula. Nearly 40 years of data are now available to evaluate whether adding the BCPI and PPI did, in fact, help explain short-term market fluctuations. Analysis shows that if tracking the private forage market is the primary objective, the fee formula should have included only the FVI. Including the BCPI and the PPI has caused calculated grazing fees to fall further and further behind private land lease rates. Had the 1.23 base fee in the PRIA formula been indexed by only the FVI, the federal grazing fee would have been 4.36 AUM-1 instead of 1.43 AUM-1 in 2002. It is time to consider the feasibility of a competitive bid system for public lands, or, at the very least, drop the BCPI and PPI indices and adopt a new fee formula that generates more equitable grazing fees.