Ranchers Must Look at All Possible Income Sources to Keep Their Holdings, Communities and Western Way of Life Viable

A lot of ranchers whose property has been in the family for generations have figured out the most profitable use for their acreage: sell it, take the money and run. A Colorado State University Cooperative Extension economist who’s been looking at rural communities, the urban-rural interface and tax-zoning issues that affect livestock producers said ranchers face a difficult choice for themselves and their families: sell the land to the highest bidder or stay in ranching and earn substantially less.

Andrew Seidl said that, due to the current tax structure, the choice is forced upon ranchers when they seek to pass agricultural land on to heirs. If the landowner does not place an agricultural conservation easement against the property before his death, inheritors must pay taxes based on what the land would be worth under its most profitable use-the "best use" concept. Seidl said many such decisions will be made in the next few decades, since the average age of a Colorado agricultural landowner now is about 58.

"The economic returns to ranchland are very low on a per-acre basis," Seidl said. "Ranching is not a very profitable enterprise, and it’s probably least profitable when commodity prices are normal. It’s a lifestyle choice with a high price tag. When ranchers in high growth areas take a look at what they can earn producing cows vs. condos, condos win every time."

Most big ranches do OK financially. In 1999, state statistics indicated there were 280 feedlots in Colorado, with 2.64 million head of cattle. The 24 largest feedlots housed 74 percent of those animals. Similarly, federal figures in 1997 counted 15,592 Colorado ranches raising cattle and calves. The majority of these ranches accounted for 3.3 million head of livestock. Ranches with herds of 5,000 head or more accounted for 1 million, or one-third of the total.

However, for small- and medium-sized ranches, often family owned, the financial picture is a different story.

Seidl, an assistant professor in Colorado State’s agricultural and resource economics department, said agricultural lands in the state were converted to residential or other uses at the average rate of 141,000 acres a year from 1987-97. In the past five years, that rate has nearly doubled.

"In traditional beef-producing areas, we’re seeing 35-acre ranchettes replacing 350-acre ranches," Seidl said. "No longer working ranches, the smaller properties require services such as water, electricity, schools, fire and ambulance services, and they don’t pay for themselves very well. County or municipal taxpayers end up picking up the tab."

The alternative to selling 350 acres for 10 ranchettes is, depending on local zoning laws, economically unfeasible.

"When ranchers plan to pass their operation on to heirs, the issue often is whether the land is worth more in something else than in cattle ranching," he said. "Then, it’s assessed at its highest and best use. The sons and daughters of ranchers who might like to keep the ranch as a ranch are assessed taxes as though the acreage held condominiums."

Aging landowners who don’t place an agricultural conservation easement against their property (i.e., sell or donate development rights to the land) that minimizes their heirs’ tax burden can expect the land to be converted to higher density uses in high-growth areas. This private choice has important public implications, Seidl said.

A community is "a loose network of individuals tied together by place." However, newcomers, 35 acres of buffer, commuters and part-time occupants make for a weak sense of community. Such residents don’t invest money, time or effort in creating and nurturing community and the result, Seidl said, "is ruinous, in my opinion."

One issue that Seidl pursues is the changes that happen in a community when growth and diversification put pressures on its economic and cultural base. For example, growth on the Western Slope and conversion of agricultural lands there is driven largely by the purchase of second homes and the relocation of retirees, he says. That can result in positive change-more cultural opportunities, better health care, improved telecommunications-or not, as the influx of former town and suburb dwellers reduces emphasis on "the rural life-style."

Native or longtime "rural" dwellers may feel disenfranchised and no longer empowered, no longer in charge of their values and, in fact, no longer "at home."

"What’s rural?" Seidl asked. Having railroad tracks through the middle of town, knowing everyone at the feed store and café, an undiversified agriculture-based economy, no movie theater or a 50-mile drive for groceries and commercial goods? The answer is important, he believes, because "understanding ‘rural’ helps define what’s being lost and what we might want to try to regain or retain."

Keeping ranches viable is possible. Increasingly, private, county and state-level land trusts and government programs will support ranches as urban buffers, for flood protection or wildlife habitat and for a variety of other needs that keep people on their ranches. The public’s ability and willingness to pay for the management of private lands in pursuit of public objectives is an upshot of Colorado’s recent affluence. But ranchers still face challenges.

"Ranchers have to become increasingly sophisticated and flexible to make it in the Colorado agricultural economy," Seidl said. "Not only do they have to be extremely astute to make a profit producing beef, but they also have to be on the lookout for other ways to make a living at ranching-protecting natural resources, for example, and being compensated for their traditional stewardship of the land."