Research unwraps costs of five grazing situations, determines which most profitable

Courtesy of: University of Wyoming

Preserving and passing the land on to future generations has been noted as one major reason ranchers stay in the livestock business despite its mental, physical, and financial hardships.

Although profit and economic incentives are not always the driving forces behind decision-making, ranchers would still choose the most profitable management strategy to ensure the legacy of the ranch.

Many ranchers use rotational grazing to rest pastures from grazing each season and change the timing of grazing in pastures across years; however, rotational grazing is reported to be more expensive regarding initial costs for infrastructure (fencing and water), and ecological advantages have been elusive in scientific literature compared to other grazing systems, specifically continuous grazing systems.

A review of past research shows many instances in which continuous grazing outperformed rotational grazing in both plant and animal production and economics, or where there were no significant differences between the two systems; however, there must be some reason ranchers choose rotational grazing despite these findings.

Compare continuous, rotational grazing

A collaborative long-term study comparing continuous and rotational grazing systems using a ranch-scale approach was started in 2012 between the University of Wyoming, the USDA Agricultural Research Service, Colorado State University, Texas A&M, and a stakeholder group of resource management professionals.

Data is collected on the effects of each grazing system on vegetation, wildlife numbers, and habitat (specifically grassland bird species of concern), and livestock productivity. Our focus is on the economics of the two grazing systems taking into consideration the infrastructure and labor costs and the revenue generated based on livestock performance.

The cost differences between the two grazing systems include fencing and water (including wells, windmills, and stock tanks) infrastructure, and labor required for regular care of the cattle and for moving the cattle among pastures.

diagram illustrating steers, fencing and water tanks for each scenario
Figure 1. The five scenarios we use to model costs are: 1) one large pasture, grazed continuously, 2) one large pasture subdivided using permanent barbed-wire fencing, rotationally grazed, 3) one large pasture subdivided using temporary electric fencing, rotationally grazed, 4) ten non-contiguous pastures, grazed continuously, and 5) ten non-contiguous pastures, rotationally grazed.
We assessed five scenarios to cover a larger variety of actual ranch configurations (Figure 1):

One large 3,200-acre pasture, continuously grazed,

One large 3,200-acre pasture cross-fenced into ten 320-acre individual pastures using barbed-wire fencing or

One large 3,200-acre pasture with temporary electric fencing and rotationally grazed,

Ten non-contiguous 320-acre pastures grazed continuously, and

Ten non-contiguous 320-acre pastures with larger water tanks rotationally grazed.

We assume improvements to infrastructure will be mortgaged, with costs spread over the life of the infrastructure to mimic real-world conditions. For example, ranchers do not install new fence or replace fence all at once, so we calculated the equivalent annual cost for all infrastructure spanning the payments across the life of the infrastructure while also accounting for interest, depreciation, and risk.

Decreased labor offsets infrastructure increases

As expected, costs increased across the scenarios as the amount of infrastructure required increased (Figure 2). However, contrary to the rotational grazing increasing infrastructure costs, the consolidation of the entire herd in a 320-acre pasture decreased weekly checking times (labor costs) for Scenarios 2, 3, and 5.

Due to size, the large 3,200-acre pasture increased checking times in Scenario 1, but the largest time requirement came with checking all 10 individual, dispersed pastures of Scenario 4.

Scenarios 4 and 5, being non-contiguous pasture systems, also had the added cost of moving the cattle out to and back from pastures at the beginning and end of the grazing season (Scenario 4), as well as through the pastures for the grazing rotation (Scenario 5). Added labor costs for rotational grazing were not realized compared to the added costs of checking cattle in dispersed or contiguous pastures with continuous grazing.

After determining annual cost differences between grazing systems, we then calculated revenues generated by the sale of livestock (yearling steers in this case). Prior controlled, scientific studies have consistently shown that even when stocked at the same rates, rotational grazing results in similar or lower seasonal weight gains for individual animals than continuous grazing systems.

Here, the stocking rate was the same between grazing systems, but stocking density was 10-fold greater with rotational grazing, and the yearling steers in the rotational grazing treatment consistently exhibited a 12-16 percent reduction in seasonal individual animal weight gains. However, a market phenomenon known as a price slide has the potential to make this difference much less impactful in terms of revenue generated per head. The price slide results in lighter weight steers selling for a slightly higher price per hundredweight (cwt) than their heavier counterparts.

We used market price data from Colorado over the last 20 years for each weight class of cattle at the start and end of the grazing season for each study year. The prices were run through a Monte Carlo simulation to determine the probability of the steers selling for each price over multiple years and ensuring correlations of cattle prices across weight classes.

When comparing the value of gain on a per-head basis across the average simulated prices for each year (value per animal at the end of the grazing season less the value of the animal at the start of the grazing season), we found there was statistically no difference in the values of the steers from each grazing system based on actual animal performance in most years.

Non-contiguous grazing highest costs

Graph showing total annual cost for each scenario with multi-pasture rotational being the most.
Figure 2. Total annual costs for fencing infrastructure, water infrastructure, and labor costs for each of the five scenarios.
Given we only accounted for costs that changed between the two grazing systems, and not total costs, we can only suggest the differences in profits related to switching from a continuous to a rotational grazing system. Due to our revenues generally not differing between the two grazing systems, profit differences are a direct result of the cost differences between the different scenarios. These profit differences range $2,000 to $12,000 a year for our contiguous pastures depending mainly on the type of cross-fencing used, and about $2,000 a year for our noncontiguous pasture systems; however, when looking at the contiguous compared to the non-contiguous pastures, the profit differences increase to as high as $38,000 a year.

Our results suggest ranchers who have contiguous parcels of land incur much lower infrastructure costs than those who have noncontiguous ranches and will likely have more profitable operations by using a continuous grazing system.

One caveat in this study is that the noncontiguous pastures are no more than 6 miles away from each other, but in a landscape as vast as Wyoming, noncontiguous ranches could have much greater distances between pastures.

One application of this data is for young ranchers just starting out and who may not have the funds to lease or purchase a contiguous ranch. An additional eight hours a week spent checking cattle would be necessary for our Scenario 4 costs to equal Scenario 5 costs, a difference that could easily result from greater travel distances.

All of the rotationally grazed scenarios, although requiring a higher infrastructure investment, had lower labor costs and used 20-60 percent less time on a weekly basis than the continuously grazed scenarios.

Future economic research should focus on additional returns, such as grass banking opportunities for drought mitigation, bird habitat creation, or other risk management and ecosystem services that rotational grazing might create to offset some of the added infrastructure costs.

Posted in

Tagged keywords...