Economics of Size of Cattle Ranches and Wheat Farms and a Comparison of Management Alternatives for Marginal Cropland in Utah

• Main Author: Workman, John P.
• Format: Others
• Published: DigitalCommons@USU 1970
• Subjects: Cattle Ranches; Economies; Marginal Cropland; Utah; Life Sciences
• Online Access: https://digitalcommons.usu.edu/etd/2970; https://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=3950&context=etd

Five long-run average cost curves were derived from questionnaire and interview data by connecting points corresponding to the per unit production costs and levels of beef output for four cattle ranch sizes (50, 150, 300, and 500 head of breeding cows). Analysis of the long-run average cost curves in combination with the 1968 weighted Utah beef price revealed that all four ranch sizes studied are capable of meeting cash costs. If the goal of the ranch operator is to meet both cash costs and depreciation, a cattle ranch supporting 105 breeding cows is the minimum size necessary. If provision is made to cover cash costs and depreciation in addition to receiving a fair return for operator and family labor, the ranch must support at least 360 breeding cows. None of the four ranch sizes studied were capable of meeting all production costs including five per cent interest on investment. The minimum ranch size necessary to cover all production costs including 1 . 4 per cent interest on investment is 500 head of breeding cows. Farmer questionnaires and the machine capacity technique provided data from which five long-run average cost curves were derived by connecting points representing average production costs and levels of wheat output for four sizes of wheat farms (500, 1000, 2000, and 3000 acres). The long-run average cost curves were analyzed in combination with the 1968 Utah wheat price. All four wheat farm sizes studied are capable of meeting cash costs. In order to cover both cash costs and depreciation a wheat farm of at least 940 acres is required. The minimum wheat farm size necessary to meet cash costs and depreciation as well as provide a fair return to operator and family labor is 2430 acres. None of the four sizes of wheat farms studied was large enough to cover all costs including interest on investment at five per cent. In order to cover all production costs including 0,64 per cent interest on investment a wheat farm of at least 3000 acres is required, Costs and returns to five management alternatives for marginal Utah cropland ( (1) wheat production by owner-operator, (2) leasing crop.. land to tenants for dryland wheat production, (3) leasing forage on an AUM basis, (4) leasing of forage on a livestock gain basis, and (5) stocker cattle production by the land owner) were compared in the shortrun, in the long-run assuming that all inputs were variable, and in the long-run assuming that land and operator and family labor were fixed, For the marginal cropland owner who also owns wheat production factors, wheat production on an owner-operator basis is the most favorable short-run alternative. Wheat production on a tenant basis is the only short-run alternative open to cropland owners who own neither wheat production factors nor the improvements necessary for grazing enterprises. Leasing forage on a livestock gain basis is the most favorable short-run alternative for cropland owners whose holdings are equipped with grazing improvements. For the long-run situation in which all inputs were considered variable, all five management alternatives yielded negative returns. Under such conditions a rational land owner would refuse to choose from among the five alternatives studied and would instead liquidate his land holdings. When operator and family labor and land were considered fixed, leasing cropland to tenants for dryland wheat production proved to be the most favorable long-run management alternative. Showing the second highest internal rate of return was leasing forage on a livestock gain basis followed ~ stocker cattle production by the land owner. Wheat production ~ the land owner and leasing forage on an AUM basis proved to be the least favorable long-run management alternatives on marginal cropland.