Financial Values

1. Gross income of Agribusiness versus Tourism

2. Net income of Agribusiness versus Tourism

We begin our analysis by comparing how much money is at stake, both to preserve the Buffalo National River and to develop it. On the side of preservation, we will count the income generated by tourism and recreational use, and the number of people employed in providing those services. On the side of developing the watershed, we will count the income generated by all other "agribusiness" uses, specifically from logging, dairy farms, and livestock operations. The "conventional wisdom" is that developing the watershed provides income and employment, while preserving the watershed represents a loss to northern Arkansas. We find that the conventional wisdom is untrue.

Finding 2.1: Gross financial value of recreational use of the watershed

Tourism and recreation activities bring $39 million per year to the BNR watershed,
and provide for 550 jobs.

$38,700,000 represents the gross earnings from all concessionaires, hotels, and travel-related services in the three-county area (see Appendix B.2.1 for trend). About 1,035,000 visitors come annually to the BNR (see Appendix C.2). Dividing those two figures, the average visitor spends $37 dollars per day. Each increase in the number of recreational visits to the BNR of 1,000 visits per year would bring an additional $37,000 in gross earnings and would provide for an additional 0.5 jobs. (Of course, the marginal change would differ after any large increases because earnings and costs would change at higher usage levels). The number of recreational visits to the BNR is growing by about 45,500 visits per year (we discuss the growth trends in detail in Finding 4.1.1 below). At current growth trends, gross earnings from tourism and recreation in the BNR can be expected to increase by $1.7 million per year, and employment can be expected to increase by 24 jobs per year.

Finding 2.2: Gross financial value of agribusiness in the watershed

Logging, livestock, and farming activities bring $69 million per year to the BNR,
and provide for 1,800 jobs.

$69,300,000 represents the gross earnings from all livestock, crop farming, and forestry activity in the three-county area (see Appendix B.1.3 for farm details and Appendix B.1.6 for forestry details). The gross earnings from all agribusiness and tourism activities is summarized in Table 2.1. The gross earnings for the state of Arkansas are included for comparison. We have also calculated a per-acre gross income, both for the BNR region and for Arkansas as a whole. These figures are used later in chapter 3.3, regarding intrinsic lifestyle values, and in chapter 7.6, regarding expected market value for conservation easements. The per-acre earnings for agribusiness are the gross earnings divided by the number of acreage under each type of activity (details in Appendix B.1.1 for farms and Appendix B.1.4 for forests). The per-acre earnings for tourism are only included for comparison, since tourism does not generate income based on land. The acreage used for the per-acre calculation for tourism is the total BNR park area, plus the national forests and wildlife areas within the watershed (343,730 acres, as detailed in chapter 1.4). The Arkansas tourism acreage is considered the entire land area of the state, so its true value per acre is higher than shown.

Gross Income: Agribusiness & Tourism                                       Table 2.1           

(1991$ & 1993$)          3-County    3-Co. Gross              Arkansas      AR Gross                         Gross Income       per acre          Gross Income      per acre 

Livestock             $48,550,000                       $2,915,131,000                

Crops & Misc.         $11,038,000                       $2,366,208,000                

Farming               $59,588,000        $138.23        $5,281,339,000       $367.89  
Subtotal                                                                              

Forestry               $9,708,000         $11.30          $364,767,000        $63.66  

Agribusiness          $69,296,000    avg. $53.71        $5,646,106,000   avg. $281.11 
Total                                                                                 

Travel &              $38,716,000        $112.63        $2,935,000,000       >$88.09  
Tourism

Table 2.1 indicates that per-acre gross farming earnings in the BNR watershed are somewhat lower than the state as a whole. This is presumably because the conditions are not ideal for growing crops nor keeping livestock, and because transportation costs are higher due to few highways. The forestry income is considerably lower than the state as a whole, presumably because of the large presence of the US Forest Service. The USFS "distorts" the market by employing non-market-based pricing mechanisms, and hence lowers the price of timber for the whole region. Specifically, USFS "below-cost timber sales" compete with private timber sales to reduce the gross income per acre of forest.

A more meaningful comparison is to compare net income. Gross income measures only how much money was spent, while net income measures how much value was created. Gross spending is just a transfer from one part of the economy to another, while net income is the actual benefit to the economy. Measuring net income is not as clearly done as measuring gross income, since many private parties are involved who do not reveal their profit margins. However, we make an estimate in Table 2.2. Farming and livestock net income is accurately determined from agricultural census data (see Appendix B.1.3). Forestry net income is assumed to be at the same margin as for farming (see Appendix B.1.6). A more accurate appraisal of forestry net income would account for USFS distortionary economics and is beyond the scope of this study. Tourism net income is determined at a 10% profit margin, based on anecdotal evidence from concessionaires around the BNR watershed. That net income level is considerably less than those for agribusiness, which is reasonable since tourism is a service industry, but the low value ensures that the tourism value is conservative.

Net Income: Agribusiness & Tourism                                         Table 2.2           

(1991$ & 1993$)          3-County      3-Co. Net              Arkansas        AR Net 
                       Net Income       per acre            Net Income      per acre 

Farming               $31,815,000         $73.80        $1,364,028,000        $95.02  

Forestry               $4,479,000          $5.21          $208,330,000        $36.36  

Agribusiness          $36,294,000    avg. $28.13        $1,572,358,000   avg. $78.28  
Total                                                                                 

Travel &               $3,871,600         $11.26          $293,500,000        >$8.81  
Tourism

A good analysis of the financial values of agribusiness versus tourism income would stop at this point (a bad one would stop at gross comparison). The net income analysis which would seem to indicate that agribusiness benefits the BNR economy about ten times as much as does tourism. From a financial perspective, that statement is correct -- agribusiness brings in more money and more jobs to the BNR watershed. From an economic perspective, where values other than money are measured, that statement is incorrect -- we explore the economics next.

Finding 2.3: Net financial comparison of agribusiness and tourism

Agribusiness in the BNR watershed creates a net financial benefit of $36.3 million/year,
while tourism in the BNR watershed creates a net financial benefit of $3.9 million/year.