A Model for Assessing Investments in Intensive Grazing Technology

Abstract

The financial profitability of intensive grazing management techniques such as short duration grazing (SDG) and the Savory Grazing Management (SGM) has received very little attention in the range management or economics literature. Most research has emphasized variables which measure technical rather than economic efficiency. A conceptual economic model is presented which illustrates the importance of the management factor in determining the optimal stocking rate and profitability of cell grazing practices. Empirical results yield internal rates of return on an after-tax basis for a $10,000 grazing cell for 11-40% assuming cow herd productivity is maintained at, or increased above, pre-adoption levels. As cell costs increase and stocking rates increase, ranch profitability declines and increases respectively in almost all cases. The principal determinant of long-run profits is found to be livestock productivity since this factor has a greater impact on profitability than stocking rate levels or cell investment costs. Increased stocking rates with intensive grazing technology do not insure increased profits unless concurrent improvement in range, livestock, and business management practices are adopted.