Influence of grazing lease terms on economic optimal stocking rates

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 was to identify the impact the tenant's lease length and lease type has on profit maximizing stocking rates. 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 ha" and "per head" basis. The relative importance of each lease alternative and other input values in explaining the tenant's optimal stocking rate was ranked based on standardized ordinary least squares coefficient estimates. Lease length and lease type had a minor impact on optimal stocking rates relative to non-lease factors such as livestock prices and production costs. Holding lease length constant, per ha 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 leases generated 18 and 13% lower optimal stocking rates than the 1-year per ha and per head leases, 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 similar incentive to protect vegetation as a lease with a longer planning horizon.