Voices in the Wilderness

When the Northern Nevada Development Authority compiled its study of agriculture in Nevada (pdf) the report offered some insight into the political views which inform economic practices.

Unsurprisingly, the report cited the following survey results concerning the lack of expansion or “impediments to business growth,” “The biggest impediments to business growth were identified as laws and regulations (23.0%),transportation costs (20.9%), cost or availability of goods or materials (15.3%), reduced consumer spending (10.2%), and financing (10.2%).” Also unsurprisingly, the Federal government was the “impediment” for 65.5% of the respondents, 20.2% cited the state, and 10.8% blamed county or local governments.

“Regarding Federal agencies, the primary challenges for Nevada Agricultural companies are reported as excessive fees, burdensome permits, adjudication and process time and the lack of empathy in dealing with real world issues.” [AgriNV pdf]

The problem with words like “excessive,” “burdensome,” and “lack of empathy,” are that they describe qualitative impressions rather than quantifiable factors.  Let’s look at the fees first.

Grazing FeesNow, we might ask is the grazing fee “excessive” when it’s $15 in Nevada, but $19.40 in California? Or $33.50 in Nebraska? Or $17.50 in Colorado. Or is it “excessive” because the fees are $9.00 in Arizona? Or, $13.50 in Washington? [NASS]  For those wishing to delve into the weeds and details of the formulation, the National Agricultural Statistics Service provides the calculations. (pdf)

Is it “excessive” when the price at the Fallon Livestock Exchange (pdf) ranges from $144 to $242/per for steers? From $118 to $210 for heifers?  And, we should note at some point that states without federally available land for grazing have their cattle operations on private land, land often subject to modified property taxation.  Eastern growers complain Western ranchers are getting a government subsidy, while Westerners complain about the cost of transporting cattle.

There are those who accept the notion that “ranching for profit is an oxymoron,” however, this doesn’t have to be the case.  A major caveat should be inserted at this point — size matters.  Because profit margins tend to be tight the larger operations will almost inevitably be more profitable than the smaller ones.  IF the ranch is not one of the major models, then keeping labor costs low is essential, as is placing more emphasis on grazing than on feeding.

There are two other factors which bear consideration. First, the debt/equity ratio is an essential factor just as it is in any business.  For example, some cattlemen have fallen for the siren call — buy more land — or buy more ‘stuff’ — and profits will increase.  However, there is a point at which the debt level impinges on the credit capacity and the manager/rancher is headed toward the predictable financial disaster.

Secondly, altogether too many ranches have too much overhead.  There are buildings, shops, assorted equipment, etc. all of which must be depreciated and all of which can be a drain on the business end of the operation. [BFmag]

Are fees “excessive” if the rancher is getting a reasonable price for the cattle at auction, BUT has a ranch too small to be economically viable in this general economy, or has taken on too much debt, or has too much overhead, or has hired or taken on too many people on the payroll?

And, those “burdensome regulations?”  Is a regulation burdensome if it entails too much time to fill out paperwork? Or, if it cuts the profits? Or, must it do both?  Is the regulation a burden if it requires the individual to change methods or means of production instead of maintaining the status quo?  If a person were to consider any imposition a burden if it caused him or her to make any changes in means or methods then nearly all restrictions of any nature could be considered “burdensome.”  In short, the term may well be an instance in which an ideological expression is translated to an economic factor.

Here’s where the conflicting interests in a multi-faceted economy come into play.  The rancher may want to graze cattle ‘fence to fence,’ but the local tourism sector may need for grasses and other vegetation to remain on stream banks to enhance the trout fishing which draws enthusiasts and their dollars to the communities along a river.  The rancher may want to let cattle munch down the fire prone cheat grass in an area, but fire fighting interests would be better served if the burned areas were restored with alternatives to invasive vegetation, which might need to be restricted until the new vegetation takes hold.  A rancher may not consider local wildlife much more than pests, however in a wider, broader, view the wildlife may have environmental and economic value beyond the measure of a ranch’s profit margin.

Lacking empathy?  If we accept the definition that empathy is the ability to understand another person’s condition from their perspective, then other questions arise.  Are the respondents to the survey looking for empathy or sympathy?

Empathy generally means that one person understands the situation in which another person finds him or herself; sympathy acknowledges the condition and seeks to offer comfort or support.  A official may very well understand with some precision what a rancher is concerned about, but a rule or regulation might easily be such that there is little comfort or support which can be rendered.  If by ’empathy’ the individual wants the official to fix his or her problem, make it go away, or modify general rules so that he or she doesn’t have to make any changes then this goes well beyond empathy, and often beyond sympathy.

Generally speaking none of us wants to readily admit that a goodly portion of our problems are of our own making.  And, it’s entirely more satisfying to assert that they are the result of onerous forces beyond our control.   So, when we hear from an individual that “excessive fees,” “burdensome regulations,” and “lack of empathy” prevent him from creating a better business (of any type) how do we factor in his possible superfluous overhead? Her potential debt to equity ratio which impinges on management flexibility? His prospective over-extension of employment costs? Her conceivable  lack of capacity to utilize economies of scale?

How do we interpret responses such as “the federal government is impeding the expansion of my business” when we don’t know if the operation in question, whether agricultural, commercial, or industrial, had any viable capacity for significant economic growth in the first place?

It’s not that agriculture is unimportant, or that we might be justified in  dismissing the complaints out of hand. Agricultural activities add about $5.3 billion annually to Nevada’s economy.  The sector employs approximately 60,700 persons.  Alfalfa hay is the predominant crop, worth approximately $232,100,000 in a 2012 USDA report. This makes sense considering that cattle operations represent 62.5% of all agricultural receipts, or about $732,883,000. [AgriNV pdf]  However, the numbers pale when we consider that the total civilian workforce in the state totals 1,367,000. [BLS] Thus agricultural employment is about 4.4% of the total Nevada labor force.

The voices are real, they are in the wilderness, and they are complaining.  However, the time it takes to get permitting accomplished will not be reduced by cutting personnel from the Department of the Interior, or from the Department of Agriculture.  The time available for the BLM officials to attend to individual problems will not be enhanced by stripping its budget or freezing the number of people who can be hired to fill vacant positions.

Wishing that the Taylor Grazing Act had never been enacted, or that the Federal government didn’t exist, or that  clean water regulations don’t matter, will not make it so.  Empathy for “real world” issues means coming to terms with the business environment in which any enterprise must operate.  Even in the wilderness.

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