While dry conditions reduce winter wheat production this year, multiple years of drought have forced many cattle producers to cull their herds. Nationally, the U.S. cattle herd currently stands at 96 million head, making it the smallest since 1952.
Now that seems like a textbook case for higher prices, but there’s a limit to how much consumers will pay and plenty of competition from other sources of protein. Per capita beef consumption has declined for at least two decades. And slumping demand has resulted in a 10 percent decline in futures prices this year – despite historically tight supplies.
Colorado has the seventh-largest cattle herd in America and with annual cash receipts of more than $3 billion, the industry accounts for nearly 50 percent of the state’s agricultural sales. But, as David Miller discovered this spring, persistent drought is weighing heavily on Rocky Mountain Ranchers.
Tim Canterbury runs a cow/calf operation in the high country near Howard, Colorado. Canterbury, along with his son Ryan, run about 300 cows and their calves on the family ranch situated along the Sangre de Christo Mountain range.
Normally, the cattle would be eating meadow grasses, but the drought gripping Colorado for the past two years has reduced new growth. As the arid conditions drag into a third year, Canterbury is digging into his reserve of hay that his son and brother Bill harvested last season. In a good year, the trio would roll-up nearly 1,500 bales but the extreme lack of moisture cut that number to just 300.
Tim Canterbury, Canterbury Ranch: “Everybody else is in the same boat and trying to figure out how to survive. So we’ve had to make some really, really drastic management choices, not that we wanted to, but because of necessity we just had too. So I guess the trigger point was last fall. We didn’t have the hay, had to purchase hay.”
While the 5th generation rancher and his son each manage separate herds they were faced with the same problem of high feed costs and lack of moisture. The issue forced the Canterbury’s to sell off nearly half of their stock, culling at least 280 head between both ranchers.
While an easy fix might be waiting for things to pencil-out and buy back animals there is a catch. The cattle the Canterbury’s need for replacements must be bred for high altitude. Animals without the right genetic makeup run the risk of suffering from bovine high mountain disease, more commonly known as “brisket disease.” At heights of over 3,000 feet, fluid can form around a cow’s heart, potentially killing the animal. That concern is foremost in their minds when they select replacement cattle because a good share of the 35,000 acres of pasture the Canterburys either rent or own is at 7,500 feet above sea level.
Tim Canterbury, Canterbury Ranch: “We can’t just go down to the market and buy cows and replace cows. It’s a little tougher out here, and you have to have that, be able to find those high altitude cattle or hold back heifers and come back. When you’ve sold, 45 percent or 50 percent of your cow herd it’s going to to hurt and it is definitely going to take us time to get back.”
Last year, Canterbury realized he might be forced to sell-off some cattle. Insufficient meadow grass, a smaller than normal hay crop and reduced grazing days on Bureau of Land Management meadows made it clear changes would have to be made. The issue has forced family members to think about taking off-ranch jobs for the first time in many years.
Ryan Canterbury, Canterbury Ranch: “Due to the drought I had to get a second job and some days a third. I work in the construction business now. Bought a building, a lot of excavation work, things of that nature because I just don't have the amount of cows, I've had to sell a lot of cows in this drought.”
Last fall, the Canterbury’s sold some of their cattle. They received $70 per hundredweight for the best animals but many sold for $60 per hundred, a price lower than what the senior Canterbury felt the animals were worth. Either way, the decision was clear cut.
Tim Canterbury, Canterbury Ranch: “I guess we’ve got to start looking at the balance sheet. Obviously, as you know, my son has had to take an outside job and I’ll tell you what, I’m right on the brink of it. You know, you get under 100 head of mother cows and it gets really tough to pay the bills. The bills for this ranch that normally has 300 mother cows on it are the same, it doesn’t matter whether there’s 300 mother cows or 100 mother cows, the bills are the same.”
The slump in the cattle market has impacted ranchers in all phases of beef production, including those who breed top genetics in to replacement cattle. Mitch Rohr is the Chief Operating Officer for the Spruce Mountain Ranch in Larkspur, Colorado.
Mitch Rohr, Spruce Mountain Ranch: “We’re not experiencing a drop in price. In fact, in 2012, our average price per animal sold was higher than we’ve ever had. However, we didn’t sell as many. So people are very limited, the cow calf ranchers, farmers, they’re limited on their production because of the cost, the high hay cost, the high grain cost and no pasture. And it’s hard to look a year down the road or two years down the road and say, ‘ We need to survive this, we really need to work through how we do this so we can capitalize on this market down the road.”
Spruce Mountain’s primary business is selling registered Black Angus replacement cattle to cow-calf operations. Along with choosing blue-ribbon traits, Rohr keeps a close eye on the habits of beef consumers.
Mitch Rohr, Spruce Mountain Ranch: “What I'm seeing being around a metro area is we're seeing a lot of families still go out to eat, still order steak, beef, hamburgers, what have you. We're just not seeing them quite as often. Maybe they used to go out two or three times a week, now they're going out once a week. They will spend a little more that ‘one-time’, based upon our surveys, and the data that we've been able to compile. However, when you go back to the beginning of the beef chain, what I'd consider the seed stock producer, that affects us indirectly so we have to kind of watch those forecasted markets and say, okay, how do we improve what we do, less input costs but still achieve that output and create that revenue for our operation.”
Spruce Mountain started its Angus operations six years ago. Much of the herd is raised at the East Ranch, near Kiowa, Colorado about 45 minutes from the home office. For several years, forage needs for the 1,000 head of cattle were handled within an hour of the 16,000 acre operation. Now Rohr is forced to travel more than 10 times that distance to find hay.
Mitch Rohr, Spruce Mountain Ranch: “The past couple of years we've seen the prices go up, not so much that you can't find the hay and not so much that the price of the hay is so high tat you can't afford it, it's the fuel cost, it's the trucking. We have to reach farther out. Instead of going 50 or 60 miles to help bring in some supplemental hay resources we have to go out 500, 600 miles.”
Rohr is concerned about the future and is working hard to avoid reducing numbers in a herd that he has invested time, hard work and tons of feed.
Mitch Rohr, Spruce Mountain Ranch: “...nobody likes a quitter. So I'd say right now we're not even looking down that road. We've got to stay positive. There's a lot of people that look from the outside in whether it be from a metro area, whether it be from a rural area, they look in and they want leaders and we're trying to step up to that point and also help equip others with our genetics to be in the forefront of that.
Rohr and Canterbury remain optimistic and both men are conscious of the legacy they will leave behind.
Tim Canterbury, Canterbury Ranch: “You know, this ranch has always been my life. Born and raised here. It's what I love to do. It was opportunity, you know, for me and I want to pass that opportunity to my sons. I have two sons ... And I'm not saying that they have to stay on this ranch but I'm saying I want to give them the opportunity to make their own decision whether this is what they want to do or not.”
For Market to Market, I’m David Miller.