Abstract
(PAG Issue Brief, no. 17) The Idaho State Board of Land Commissioners Land Board) is reviewing the rate charged for livestock grazing on 1.8 million acres of state endowment rangelands. Part of the Land Board's considerations is the historic and possible future financial performance of those rangelands. This analysis used an income capitalization approach, land expectation value (LEV), to compare the value of endowment rangelands for livestock grazing over time and at different grazing lease rates. For the period FY 2011 to FY 2015, LEV at a 4% discount rate for Idaho's endowment rangelands averaged $41.4 million. Return on Assets (ROA), which is the financial return divided by the value of the assets, for the same time period averaged 3.8% with 1.7% from grazing program income and 2.1% from increases in land value. State lease rates during this time period averaged $6.08 per animal unit month (AUM). A sensitivity analysis using the FY 2015 federal lease rate of $1.69 per AUM lowered average ROA based on grazing fees to -2.5%. Using the FY 2016 average private lease rate for Idaho of $17.00 per AUM, raised ROA based on grazing fees to 7.2%. Three future scenarios were analyzed for their effects on LEV and ROA by varying assumptions about future cattle market impacts on grazing fee rates, and the impact of the Idaho Department of Lands "bonus bid" program that allows leasees to extend contracts to 20 years. The bonus bid program was assumed to be fully subscribed by FY 2020 and led to decreased income for the state grazing program. After FY 2020, net income and ROA from the endowment rangelands grazing program was reduced by almost half.