Blizzard's financial toll may snow under cattle ranchers

2013-10-20T06:30:00Z 2013-10-21T16:12:29Z Blizzard's financial toll may snow under cattle ranchersAndrea J. Cook Journal staff Rapid City Journal
October 20, 2013 6:30 am  • 

For South Dakota ranch families reeling from the physical and emotional stress of the Oct. 4 blizzard that killed tens of thousands of farm animals, even tougher days may lie ahead when they confront the financial consequences of the storm.

On Thursday, State Veterinarian Dustin Oedekoven estimated that between 15,000 and 30,000 cattle in western South Dakota died of exhaustion or suffocation in the unseasonably powerful storm. The blizzard that dumped up to 55 inches of snow in some places hit ranchers just as they were looking forward to the promise of strong markets for their calves, yearlings and bred heifers this fall.

"Livestock is the bread and butter of the people who work the land west of the Missouri River. There's not much farming; it's mostly cattle and sheep ranching," Curtis Everson, president of the South Dakota Bankers Association in Pierre, told the Journal Friday.

Oedekoven's numbers are preliminary, based on early loss reports, according to the South Dakota Stockgrowers Association. Nearly one-third of South Dakota's 3.7 million cattle roamed the range west of the Missouri River before the storm.

"As more producers start reporting, we're going to have more [losses]," Stockgrowers Executive Director Silvia Christen said Friday. Last week, she estimated that five percent of region's cattle died in the storm. "Honestly, we just don't know enough to make any more exact estimates."

What is certain is that for ranchers who lost cattle and sheep, this year's paycheck is gone, Christen said.

"The immediate financial needs for some of those families are becoming very apparent and becoming more and more critical," she said.

It will be months before the full financial impact of the storm is felt, predicts Scott Vance, an owner of the Faith Livestock Exchange and a member of the South Dakota Brand Board.

Timing was worst possible

For ranchers still recovering from the drought of 2012 and high feed prices last winter, the timing of the blizzard couldn't have been worse, he said.

Before the storm, ranchers looked forward to the annual "fall run." Calves were weaned or about to be taken from mother cows. With strong cattle prices, a big paycheck was just a trip to the sale barn away. That check would pay down operating loans and be used to make mortgage payments. There might even be enough left over for a big purchase.

"It was like the carrot in front of the rabbit, now suddenly the carrot is gone," Vance said. After the more than a year of hardship, "this fall was going to be the one we were waiting on."

If the storm had come two weeks later, the aftermath would have been completely different, Vance said. Thousands of calves and yearlings would have passed through the sale barns, and ranchers would have gotten paid. Or calves would have been weaned and their mothers moved to winter pastures with better protection.

This storm was particularly deadly because it packed a 1-2-3 punch of rain, snow and wind, Vance said.

"If we would have had one of the three, or two of the three, we would have walked right through it, but the third was too much," he said.

Faith Livestock hosts an annual two-day sale each fall. Livestock Week starts with a calf sale Monday, followed by another cow and calf sale on Tuesday. It's usually a time for celebration in the tiny Meade County town. Before the storm, Vance expected to sell between 9,000 and 12,000 cattle over the two days.

"I hope I can get them," Vance said. Last week one area sale barn cancelled its sale, while Faith and two others went ahead with scheduled sales, he said.

"Between the three of us, none of us sold what one of us should have with consignments and the time of the year," Vance said, looking ahead.

Some ranchers are still mired at home fighting to take care of their surviving stock, fixing fences, burying dead animals and dealing with the mud and muck that are remnants of the blizzard and subsequent rains, Vance said.

Losses still unclear

Many producers think they have an idea what their livestock losses are, but Vance believes the final counts will probably not be known for a while. There's also the unknown toll the stress of the storm took on bred cows that won't be learned until pregnancy testing is completed later on.

"There could be some ongoing effects on the bred cows, that will be the next thing coming through the winter," Vance said.

Ranching and the cattle industry is a huge industry in western South Dakota, not only to the agricultural community, but those retail sectors that serve the industry, said Craig Schaunaman, South Dakota head of the U.S. Department of Agriculture Farm Service Agency at Huron. It's likely the punch to the state economy will stretch into the tens or even hundreds of millions of dollars.

"When you have the losses of this magnitude out there, after you get through the shock of seeing the death losses, then you get into the financial situation," Schaunaman said.

It will take time for producers to recover from the loss of brood cows killed by the storm, Schaunaman said. The losses come at a time when cattle numbers, particularly cow herd numbers, are low, he said.

Ranchers will have to examine their individual financial situation to see if they can hang on to female calves or have the financial capability to buy calves or bred heifers to restore their herds, Schaunaman said.

Heifer calves bought this fall will not produce a calf for two years. With calves selling between $850 and $1,000 it will take time to see any return on the investment, Schaunaman said.

Stalled farm bill painful

These decisions all come without the safety net of a federal farm bill, which typically includes a livestock indemnity program intended to help producers manage catastrophic loses.

Both the House and Senate versions of the farm bill include indemnity programs that would be retroactive to Oct. 1 and could cover loses and hardships producers had because of the 2012 drought, Christen said.

The House has proposed an indemnity plan equal to 75 percent of the market value of the lost livestock, while the Senate version limits the replacement cost to 65 percent. Both proposals cap compensation for individual producers at $100,000, Christen said.

"That will not be enough for some of the ranchers who lost large numbers of cattle," she said.

The livestock indemnity program is not intended to make any rancher rich, but rather to help with some of the costs associated with a disaster.

The indemnity program will help producers with smaller losses, but the $100,000 cap in the former bill will not come close to meeting the loses some ranchers sustained, Schaunaman said.

"Sometimes we don't take the farm bill as relevant," Schaunaman said. A storm like this shows how important the farm bill is to ranching and the retail sector of South Dakota, he said.

A rancher who lost 75 cows, valued at $1,600 a head, lost more than $100,000, Schaunaman said. Using $100,000 as a starting point, some ranchers will "get made whole or recover some of that," he said.

"But, there are a lot of them (ranchers) out there that that's not even going to meet 25 percent of the loss that occurred," Schaunaman said.

He said Congress needs to understand that with the current cattle market value, the $100,000 cap needs to be adjusted upwards. "Some of these operations certainly lost $500,000 to $600,000," Schaunaman said.

Schaunaman looks forward to discussing the cap with U.S. Sen. Tim Johnson, D-South Dakota, and U.S. Department of Agriculture Undersecretary Michael Scuse when they tour western South Dakota this week.

Schaunaman's staff in FSA offices across the region are doing their best to gather as much information on livestock losses as possible for that visit. It's important to have detailed information to prepare for the upcoming farm bill committee hearings, he said.

A proud group

Producers are starting to discuss their losses, but for some it is hard to talk about, Schaunaman said.

In the week after the storm, agricultural lenders worried more about their customers' emotional and physical well-being as they discovered their losses, Everson said.

Each day was an "emotional roller coaster" for producers as they dug out, found livestock dead or barely alive, and then dealt with the immediate needs of their families and surviving animals, Everson said. Scenes of cattle dead en masse in creekbeds or below hillsides remain common even two full weeks after the storm.

The conversations are now turning to those tough discussions about what was lost and what the business plan for the future is going to be, he said.

"That assessment is still taking place and will take place for some time to come," Everson said. There are likely ranchers who have had little or no contact with the outside because of road conditions.

The good news is, bankers are just like their customers, Everson said.

"If you're an ag banker, you have to be an optimist and have to be in it for the long haul," Everson said. Agricultural lenders understand the business — the ups and downs — and will work with their producers and borrowers to the "nth-degree" so they can get them through this, Everson said.

Casey Cowan is an executive vice president at Dakota State Bank in Blunt and Pierre. He's been an agricultural lender for more than 20 years and has customers across western South Dakota.

The blizzard created an unprecedented situation, a once in a lifetime tragedy for many ranchers, Cowan said. There's no one pat answer as to how lenders and their customers will deal with the livestock losses, he said.

"Obviously, as lenders, we're pretty close to a lot of these folks and are just heart-sick with what's happening," Cowan said.

The producers are the "boots on the ground" people out doing the hard work now. The time will come later to sit down with lenders and see what kinds of feasible plans there might for each producer, he said.

On a brighter side, the bankers say the cattle market is at an all-time high. Interest rates are low. Two weeks of stormy weather filled dams and put moisture in the ground, bringing the promise of water and grass for next summer.

The financial hit this storm dealt will take months to trickle down, but it will be felt not only the producers who are on the front lines, but their communities, Schaunaman said.

The lose of income on the region's ranches will eventually mean leaner times in the smaller towns that serve the rural community, Everson said.

But, like their rural neighbors they know how to cinch up their belts and weather the storm, "This country was started and maintained by eternal optimists," Vance said. "There's always next year."

Contact Andrea J. Cook at 394-8423 or andrea.cook@rapidcityjournal.com

Copyright 2015 Rapid City Journal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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