Relating Ranch Prices and Grazing Permit Values to Ranch Productivity

William E. Martin and Gene L. Jefferies

American Journal of Agricultural Economics, 1966, vol. 48, issue 2, 233-242

Abstract: Costs and returns research on western cattle ranches invariably shows low or negative net returns. Yet ranch sale values, including the sale values of public grazing permits, remain at high levels. There appears to be confusion in either the facts or their evaluation. This confusion carries over into public-grazing-fee policy. The authors offer the hypothesis that not all "outputs" produced by an investment in a cattle ranch have been included in previous conventional analyses. Since these additional outputs are as much a part of the return on investment as is the output beef, they should be considered in evaluating use fees on public lands. Measurement of these extra marginal value products not directly associated with the utilization of grass is difficult. Therefore, the total MVP of the bundle of resources is estimated by the use of regression analysis with information on actual ranch sales as data. These estimates, when compared with data from other sources, give insights into the relative importance of several motives for purchasing a ranch. A policy conclusion is that change to a bidding procedure in setting use fees would be desirable.

Date: 1966
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