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ARS Home » Plains Area » Fort Collins, Colorado » Center for Agricultural Resources Research » Rangeland Resources & Systems Research » Research » Publications at this Location » Publication #323282
Title: Economic impacts of increasing seasonal precipitation variation on southeast Wyoming cow-calf enterprises

Author
item HAMILTON, TUCKER - University Of Wyoming
item RITTEN, JOHN - University Of Wyoming
item BASTIAN, CHRISTOPHER - University Of Wyoming
item Derner, Justin
item TANAKA, JOHN - University Of Wyoming

Submitted to: Rangeland Ecology and Management
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 1/30/2019
Publication Date: 12/19/2016
Citation: Hamilton, T.W., Ritten, J.P., Bastian, C.T., Derner, J.D., Tanaka, J.A. 2016. Economic impacts of increasing seasonal precipitation variation on southeast Wyoming cow-calf enterprises. Rangeland Ecology and Management. 69:465-473.

Interpretive Summary: Risk management strategies are needed to address decision making for ranchers associated with forage production resulting from precipitation variability in the Northern Plains. Here we utilize existing forage production and cattle performance data from the USDA-ARS High Plains Grasslands Research Station in Cheyenne, WY, coupled with spring precipitation and economic data, in a ranch-level mathematical programming model. We estimate economic impacts for three scenarios across a 35-year planning period with 100 iterations of different price cycles including five levels of increasing spring precipitation variation (10, 20, 30, 40 and 50% increases). Our first scenario examines the impact of resulting forage production from spring precipitation variability; the second scenario examines the impact of precipitation variability on calf gains; and the final scenario examines these two factors combined. Annual expected profit variability increases largely due to the increase in herd number variability rather than variability in calf gains. Overall, higher annual expected profit variability results in greater risk of negative returns from cattle. An important implication from our results is that the wet years do not overcome the negative impacts of the dry years given relationships between precipitation, forage production, and calf gains utilized in our model. Results indicate greater profitability in maintaining lower herd numbers in preparation for drought rather than destocking during drought events and restocking during good years for cow-calf operations.

Technical Abstract: Economic impacts of predicted increases in precipitation variability on cow-calf enterprises, through influences of precipitation on both forage and cattle productivity, are needed by land managers for risk management strategies. Here we utilize existing forage production and cattle performance data from the Northern Mixed-grass Prairie, coupled with spring precipitation and economic data, in a ranch-level mathematical programming model. We estimate economic impacts for three scenarios across a 35-year planning period with 100 iterations of different price cycles including five levels of increasing spring precipitation variation (10, 20, 30, 40 and 50% increases). Our first scenario examines the impact of resulting forage production from spring precipitation variability; the second scenario examines the impact of precipitation variability on calf gains; and the final scenario examines these two factors combined. Annual expected profit variability increases largely due to the increase in herd number variability rather than variability in calf gains. Overall, higher annual expected profit variability results in greater risk of negative returns from cattle. An important implication from our results is that the wet years do not overcome the negative impacts of the dry years given relationships between precipitation, forage production, and calf gains utilized in our model. Results indicate greater profitability in maintaining lower herd numbers in preparation for drought rather than destocking during drought events and restocking during good years for cow-calf operations. The results also illustrate the need for producers to diversify their operation and/or income sources if they are to cope with increased precipitation variability even if mean annual precipitation remains constant.