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Ranchers, beset by low beef prices, see optimism tested

Ranchers, beset by low beef prices, see optimism tested

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Black Hills Stock Show manager Ron Jeffries said snowfall and hazardous road conditions have hindered attendance at this year’s show, which put the wraps on nearly two weeks of activity Sunday.

“We’ve had a really good stock show. We haven’t set any records in attendance, that’s for sure, but overall the mood is incredibly optimistic,” Jeffries said.

That optimism is being tested for the second straight year by low cattle prices, starkly contrasting with years of high prices not long ago.

Silvia Christen, executive director of the South Dakota Stockgrowers Association, said cattle producers basked in record-high prices in 2013 and 2014 when herd numbers were at a record low nationwide and a long-term drought in Texas forced many producers to sell off their herds.

A strong U.S. dollar meant exports of beef were up and domestic consumer demand for beef was strong as well.

South Dakota ranchers were also rebuilding their herds coming off drought conditions in 2010 and massive losses, especially among West River producers from the October 2013 blizzard.

“We were moving a lot of cattle and getting a good price for them,” Christen said. “Producers were seeing prices in a range that, frankly, none of us ever dreamed of.”

Good prices helped western South Dakota families rebuild or even expand their operations after the blizzard, but prices plummeted last year, for a number of reasons that Christen and other industry leaders are hard-pressed to explain.

Ranchers purchased cattle to replace losses from the blizzard hoping for income from the calves born the following year in the $1,200 to $1,500 range, per head, Christen said.

“They got $600 to $750,” she said. “Those kinds of numbers are hard to work in anybody’s budget.

“I don’t think anyone can imagine getting a 60 percent cut in their income from one year to the next, and still have to make their payments and operate."

Christen said a number of factors have led to the severe downturn.

The 2015 repeal of country-of-origin labeling for beef and pork products meant U.S. retailers could seek cheaper imports of beef products.

Christen said her organization was also concerned with beef buyers' consolidating, leading to a reduction in the number of packers and a less competitive market.

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Stockgrowers association president Bill Kluck of Mud Butte, who runs cattle in Butte County, quoted U.S. Agriculture Department direct production costs of $756 per calf, jumping to $1,188 when investment costs and wages are added.

This year’s hard winter, with heavy snow and cold temperatures, will boost the cost of raising a calf by another $200 with the cost of feed and more time spent getting feed to cattle and even the cost of constantly needing to plow snow, he said.

Kluck said the frigid weather caused him to lose a young heifer that wandered onto a snow-covered pond, fell through the ice and drowned.

“That’s the cost of a tough winter,” he said.

Jeffries said sales of various breeds of cattle this week have largely followed upward market trends.

Ranchers are hoping prices have finally found their bottom and will start to rebound, although feeder cattle prices nationwide took a hit earlier this week. The long-term outlook is for prices to slowly come back, Christen said.

She says the story will be told by "what happens with prices this fall. A second year of depressed cattle prices is going to be really hard to withstand.”

Christen hopes the Trump administration or individual states will consider restoring country-of-origin labeling. World Trade Organization opposition to COOL, because it harmed Canadian and Mexican cattle producers, led to its repeal for beef and pork products.

“With beef supplies being this high, customers need to be able to choose to support American producers if they want to,” she said.

Christen said ranchers probably won’t be buying new pickups, opting instead for necessary maintenance on farm implements, fencing materials and barn upgrades.

Veteran ranchers know the cattle industry is a long-term game of investments, times of gain and losses. Bank loans and other family bills need to be paid, regardless.

“People are tightening their belts and making some hard decisions on their budgets,” she said.

Kluck said the continuing harsh weather may have limited the time ranchers could spend at the stock show last week, because they needed to stay home and tend their herds.

“Those of us who have been in it 50 years can weather this,” Kluck said. “But those young people are going to have a tough time of it.”

Jeffries said the optimism of the industry will see producers though this period of low prices.

“These are resilient people, and this is a long-term deal,” Jeffries said. “That’s why they’re able to hold on to optimism when they’ve been kicked in the head."

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