It is grammatically correct, just semantically ambiguous. Buffalo is a proper noun, a noun, and a verb.
A semantically equivalent form preserving the original word order is: “Buffalonian bison that other Buffalonian bison bully also bully Buffalonian bison.”
People who say that this is grammatically correct need to resit GCSE English
It is grammatically correct, just semantically ambiguous. Buffalo is a proper noun, a noun, and a verb.