What Price for the Right to Go a-Droving? A Derived Demand Approach

Travelling stock reserves (TSRs) were established in Australia as a way of allowing the passage of livestock through settled lands to facilitate stocking of new lands. Subsequently, they remained important as a way of moving livestock from property to property or from property to market. Today, the area of land dedicated to TSRs in NSW is estimated at 2.3 million hectares, which are used more as a source of feed than as a livestock thoroughfare. The value of TSRs as a source of feed is particularly important during drought periods, and pricing of access for walking stock has become a subject of contention within the Rural Land Protection Boards (RLPB). The price of TSR permits for walking stock is considerably lower than for agistment, thereby compromising the capacity of the system to be self-funding. The objective of this study is to explore possible pricing arrangements using a derived demand approach. A representative linear programming model was developed for a farm in Nyngan, NSW. The model was used to obtain estimates of the demand elasticity for TSR services with respect to their own price, the price of supplementary feeds and the price of wool. The effect of drought on these elasticities was also explored.