Private, working ranches provide valuable “ecosystem services,” the benefits people derive from ecosystems including food, water, open space, carbon sequestration, recreational opportunities, and many more. While ranchers are compensated for services such as food and other livestock products, they are generally not compensated for other public benefits derived from their land stewardship. Development pressure compounded by low profit margins in the livestock industry make ranching an economically difficult undertaking, and conversion of working ranches to other land uses is a well-established trend across the western US. New income sources are being explored to create more diversified ranch business models in order to deliver financial benefits to ranchers and conservation benefits to the public.

The objective of this study was to investigate the barriers and opportunities for developing more diversified business models for working ranches that integrate traditional livestock income sources with additional conservation-oriented sources. As part of this investigation, we examined the potential role of payments for ecosystem services (PES), a major new market-based tool for conservation in working landscapes. We investigated this topic through a detailed case study of ranchers and natural resource practitioners in Larimer County, Colorado - a region with a long tradition of ranching that continues today amidst escalating pressures that threaten the viability of ranching and conservation values in the region.

Using a qualitative semi-structured interview approach, we interviewed 18 ranchers (comprising 16 ranch operations) and 7 natural resource practitioners who work closely with ranchers in the study region. We concentrated on topics including current ranch business models and practices, challenges ranches are facing, and barriers and opportunities for more diversified future ranch business models, including a particular focus on PES. Participants identified 58 current challenges, 70 concerns for the future, and 85 opportunities for diversification in the future. Costs of inputs, unprofitability, development pressure, time and energy, and water scarcity were mentioned most often within the wide range of challenges. Invasion of privacy, traditional thinking or fear of change, and regulations emerged as concerns important to participants. Future business opportunities were divided into three main categories: (1) reducing costs (e.g. tax credits), (2) enhancing revenue (e.g. carbon credits) and (3) building regional capacity (e.g. capitalizing on the increasingly collaborative ranch culture). After discussion regarding a hypothetical PES program, all participants were at least potentially interested in a new payment program. This interest was tempered, however with caution and questions about how such a program would be structured. Any new program developed would need to provide complete, transparent information regarding costs, benefits, rules, and requirements.

This research contributes to diverse efforts at local (e.g., rancher coalitions) to national (e.g., USDA Office of Environmental Markets) scales working to develop a model for the "ranch of the future", which aims to integrate conservation and agricultural production practices on working ranches.