Wednesday, April 13, 2011

Beef booming, but expenses loom

Rising prices donít mean rising profits, ranchers say

Express Staff Writer

A Simmental-Angus cow and calf rest in a Picabo Livestock field before being moved to another pasture. Beef prices are at an all-time high, due to the reduced number of beef producers and increased demand from abroad. However, ranchers say their expenses are going up as well. Photo by Willy Cook

Beef prices are high this year, with the average steer price rising far above the five-year average.

Though rising prices could be a sign that the agriculture industry is recovering from the recession, ranchers say high beef prices come with costs of their own.

"If you're selling, it's good," said Katie Breckenridge, who raises organic Angus beef on the B-Bar-B Ranch near Picabo. "If you're buying, it's a risk."

The average steer price rose to $200 per 100 pounds last month, far above the roughly five-year average of $147, with peak selling season still to come.

According to the U.S. Department of Agriculture, prices for "dressed steer" have been climbing steadily since the average price of $170 per 100 pounds in January.

What's causing the rise?

"It's all about supply and demand," said Nick Purdy, owner of Picabo Livestock in southern Blaine County.

Both Purdy and Breckenridge said the recession took a toll on beef producers, forcing some of the smaller, less successful producers to shut down, and reducing the amount of beef on the market.

The number of cattle being raised in the United States has dropped steadily since a high of 97.1 million in 2006. In 2009, the last year for which data are available, there were only 94.5 million cattle in the country.

Mike Deering, communications director for the National Cattlemen's Beef Association, said he didn't have a more current number for cattle production, but that Purdy and Breckenridge are generally on target.

"[Beef production] has been dropping for many, many, many years," he said. "Logically, prices have reached record highs this year."

The earthquake in Japan is also having an impact on the prices, or at least the demand. Japan is one of the top five importers of American beef, buying $546 million in beef and veal last year, up 133 percent from 2009. Threats of radiation are likely to lead to an even further increase in demand, Purdy said.

"I don't think Japan is going to be worried about mad cow disease," he said.

However, big prices and high demand don't always equal big payoffs for ranchers, Deering said. The price of corn has gone up 128 percent over last year, boosting the cost of feeding stock. As fuel prices continue to rise, Deering said, beef prices have to rise just to keep up.

"You can't look at it in terms of beef ranchers getting rich," he said.

Breckenridge agreed, saying she's not making any more than she used to.

"Our profit margin is about the same," she said. "If these prices had not climbed, there would have been an extremely negative bottom line for us."

Deering said it's almost impossible to predict steer prices, but he couldn't imagine they would go much higher.

"We've probably reached a peak here," he said.

Breckenridge said she'll be watching the prices extremely closely until June or July, when she sends much of her beef to market.

"Where are the prices going to stop? That's very hard to predict," she said.

Brekecnridge said she will keep watching trends and talking to traders, eventually taking a guess—and a chance—regarding the best time to sell.

"None of us need to go to Las Vegas," she said of herself and fellow ranchers. "We gamble every day of our lives."

Katherine Wutz:

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