FACTORS INFLUENCING OPTIMAL STOCKING RATES FROM A TENANT PERSPECTIVE

Abstract

The terms of grazing lease contracts potentially influence a tenant’s incentive to preserve the vegetation resource. Annual stocking rate decisions dictate the degree of overgrazing, which can be cumulative over long periods of time. The objective of this study is to identify the impact the tenant’s planning horizon and cost structure specified in the lease contract has on hi s/her profit-maximizing stocking rate. A multi-period, nonlinear programming model was developed to identify economically optimal stocking rates each year over a 24-year period. The model was solved under 1-, 4-, 8-, and 12-year leases on a “per acre” and “per head” basis. The relative importance of each lease alternative and input variable on the tenant’s optimal stocking rate wa s ranked based on standardized ordinary least squares coefficient estimates between input values and optimal stocking rates. Planning horizon and cost structure had a minor impact on optimal stocking rates relative to non-lease factors such as livestoc k prices and production costs. Holding other factors constant, per acre leases generated a 2% higher average stocking rate than per head leases. Optimal stocking rates were inversely related to the length of the lease. Twelve-year lease agreements generat ed 18 and 13% lower optimal stocking rates than the 1-year per acre and per head lease agreements, respectively. The optimal stocking rate difference between an 8-year and a 12-year lease was negligible, suggesting the 8-year lease would provide a simi lar incentive to protect vegetation as a lease with a longer planning horizon.