Severe winter, serious drought mean tough times for cattlemen
Dorchester, Neb. — Bob Weber is hunched over a desk. His mood is not particularly bright. ''My outlook is guarded,'' says this large Nebraska cattle producer. ''A year ago, we didn't think it could get any worse. Everyone was planning on things being a little better this year.''
But in the past few months, the outlook for cattlemen like Mr. Weber has become far less rosy. A second year of severe drought in large areas of the Southwest is ruining many crops and forcing ranchers to sell livestock. Here in the Midwest, the picture is worse than a year ago.
The indicators ''are all bad,'' says John Marten, a staff economist with the Farm Journal. Feed prices and interest rates have increased, while prices for cattle ready for market have slumped. He predicts the cash price for such cattle to hold steady at about $66 per hundredweight for the rest of the year - a break-even price for many producers.
What does this mean for consumers?
Last December, retail prices for choice beef fell to $2.30 a pound, the lowest average since spring 1981. In April, they had climbed back to $2.45, says Ron Gustafson, livestock analyst with the United States Department of Agriculture.
And that could well be the high through most of the rest of this year, says Tommy Beall, director of market research of Cattle-fax, an information service. ''We're in a fairly stable situation.''
The main source of problems for the Midwest has been weather.
Last summer's drought and acreage-reduction programs cut into supplies of grain and other feed and boosted feed prices. A severe winter increased cattle losses. The cold weather also extended the feeding, since cattle don't gain weight as quickly during very cold weather.
Still, some cattle producers were able to make money.
''Our profit wasn't bad in '83. I've had worse years,'' says Weber, who managed to sell some cattle at the right time. ''We'll be hard-pressed to do as well in '84.''
On this large Nebraska farm - which, with a capacity for 3,000 head of cattle , supports five families - Weber generally buys year-old calves, weighing about 750 pounds, and feeds them for four to five months, until they are ready for market, at an average of 1,150 pounds.
Another segment of the industry - cow-calf operations - has been the most severely hurt, Mr. Beall says. With feed prices high and calf prices low, a farmer selling a 450-pound calf typically loses $40 to $50 in out-of-pocket costs alone.
With these kind of conditions, Beall says the cattle herd is continuing to shrink.
Currently, the herd stands at some 114 million. And Beall expects the number to shrink to 113 million before the population stabilizes. He foresees no signs of growth until 1986 at the earliest. But if current per capita consumption is to be maintained in 1990, Beall estimates the cattle herd will have to reach 118 million to 120 million by that time.
Many farmers, meanwhile, are finding grain production more profitable than livestock. The trend is especially noticeable in neighboring Iowa, a big cattle-producing state. As of May 1, the number of cattle on feed was only 77 percent of the total a year ago.
What is the long-term outlook for the industry? Murky, observers say.
Americans are eating less beef. Per capita consumption peaked in 1976 at 94.4 pounds, according to the USDA. Last year, the figure was 78.5 pounds. But given that the market was glutted with beef in 1976, Mr. Gustafson is not at all convinced that recent declines indicate a trend.
US beef exports have met resistance in recent years.
Debt problems in such countries as Mexico, which used to be considered a top prospect to import US beef, have severely dampened expectations, according to Alan R. Middaugh, president of the US Meat Export Federation.
A strong dollar has also hurt.
''Our meat is priced too high for most of the world,'' Mr. Middaugh complained at a March agriculture trade forum in Chicago. High US prices have benefited other competitors, such as the European Community, Australia, and Canada.
Middaugh warned that US cattlemen must produce the kind of meat the world will accept if America is to remain competitive.
Cattlemen, like other segments of agriculture, are gradually becoming larger and more specialized, but their overall numbers are declining. Many observers, including Weber himself, expect this to continue.
''I think the cattle business and profitability is such that it will attract no new participants,'' he says. ''Some part-time and even full-time (producers) will go out of business.''