Record beef prices a double-edged sword for ranchers

Nov 11, 2011

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There’s good news in the economic forecast for ranchers in Wyoming. A wet winter and spring made for plenty of good grass, and now demand for beef is pushing cattle prices to record highs. Wyoming Public Radio’s Kathryn Flagg visited the Torrington Livestock Market and filed this report.

KATHRYN FLAGG: Inside the ring at the Torrington Livestock Market, heifers wheel and turn as auctioneer Shawn Madden rattles off the rising price at breakneck speed. Meanwhile, buyers scattered in the seats above the ring signal their bids with almost imperceptible flicks of their wrists or nods of their heads.

SHAWN MADDEN: Sold! Fourteen-ten.

FLAGG: “Fourteen-ten” – in other words, the cows sold for a dollar-forty-one per pound. A gate at one end of the pen swings open, and then the cows head out into the livestock yard, where they’re herded along by handlers on horseback.

All told, some 900 cows will pass through the ring today here at Wyoming’s largest livestock market. Wholesale beef prices are at a record high, and this year the industry is on track to set record prices for livestock producers, too. Lex Madden co-owns the livestock market and, like his brother Shawn, is a world champion auctioneer.

LEX MADDEN: We’re in one of the highest cattle markets that we’ve been in the history of this. So it’s fun to go to work. People are making money, they’re in good attitude, way less stress than you’ve seen over the last two or three years.

FLAGG: Already, calf prices are up 16 percent from this time last year. Live cattle prices are up thirteen percent in Chicago futures trading, placing cattle among the few widely traded commodities besides gold to be up by double digits. This is all good news for ranchers in Wyoming, who are easing out of an extended drought.

There are a couple of reasons for the high prices. The biggest is this:

JIM MAGAGNA: Cow numbers are today are the lowest point they’ve been since in the mid-1970s at least.

FLAGG: Jim Magagna is the vice president of the Wyoming Stockgrowers Association. Cow numbers have been dropping steadily for a long time, a result of economic pressure, aging rancher populations, and in some cases, Mother Nature.

MAGAGNA: Certainly this year it’s being influenced by the drought in the southwest. A lot of cows are going to market because they simply don’t have pasture for them.

FLAGG: A quarter of the nation’s cattle reside in regions now gripped by severe drought. Some ranchers in the southwest have liquidated their operations, and by January the national herd size will have taken a two percent hit as a result. Fewer cows means higher prices. Jim Robb directs the Livestock Marketing Information Center in Denver:

JIM ROBB: We have two kind of fundamental economic forces at work. The supply side, which is very tight, and we also have the demand side for our beef prices, and that is actually improving. That’s why we get these very high prices.

FLAGG: Higher prices in the supermarkets mean Americans are buying cheaper cuts of meat, like hamburger. But the overseas market for U.S. beef is booming. The country is on track to top its all-time high export record by 10 percent this year. 

ROBB: The underpinning is clearly growing incomes around the world, and they’re demanding U.S. beef.

FLAGG: Back in Torrington, buyers and sellers take a break from the auction to grab a bite to eat in the adjacent cafe. Andy Nelson is a rancher from Manville.

ANDY NELSON: Oh, I just come once in awhile. Looking for some fall calvers today, is all.

FLAGG: Do you have your heart set on buying anything today, or are you just looking?

NELSON: Just looking. If they bring cheap enough. The cattle are awful high, but we need them high as everything else.

FLAGG: What Nelson means is that input costs for things like hay and fuel are going up across the board for ranchers. Higher cattle prices compensate for those increases, but they come with some downsides as well. Nelson is visiting the auction with his granddaughter, who recently leased a ranch and is looking to buy cows. High prices make it that much harder for young ranchers to get a start in the business. Land is expensive, and now, so are cattle. 

All this leads beef specialist Steve Paisley to take the high cattle prices with a grain of salt.

STEVE PAISLEY: It’s still a good time to be in ranching, but if you strictly look at the prices received, it paints maybe a little too rosy of a picture to some extent.

FLAGG: So Wyoming ranchers remain cautious in their optimism. After the sales, Morris and Jeanie Kronk grab a seat in the cafe. The Kronks have a cow-calf operation in Fort Laramie. They’re in the market to buy and sell, and today they’ve been scoping out prices. Prices might be historically high now, Morris Kronk says, but then again…

MORRIS KRONK: Prices have been quite low historically for many years. This isn’t a get rich time for ranchers. It’s a catch up time.

FLAGG: Ranchers can play catch up for a while longer yet. Industry analysts are predicting cattle prices to continue their bull run well into next year. For Wyoming Public Radio, I’m Kathryn Flagg.