How many cattle ranchers will survive the downward spiral?
Montana State Roundup
Published July 1, 1995 | July 1995 issue
Montana ranchers are tightening their belts as a result of a downward trend in cattle prices that's expected to last another two years.
"Two years ago I could sell steer calves for 93 cents, in 1994 some calves brought 83 cents, and this year I'll be lucky if they brings 70 cents," says Jim Peterson, executive vice president of the Montana Stockgrowers Association in Helena and a cattle rancher. Ranchers worry about the low price for their cattle, but an even worse scenario would be little or no fall bidding for their calves, Peterson says.
The low prices are largely attributed to overproduction, Peterson says, which was a natural follow-up to about five years of a booming market. There is at least a 12-month lag period for cattle ranchers to adjust their plans, but once they begin to trim their herds, prices should rise, Peterson predicts.
Competition with other meat products that are flooding the market, may be another reason for low prices, according to Peterson. He points out that the hog market was saturated not too long ago. But, it is easier for poultry and pork producers to correct their production more quickly than cattle ranchers because of shorter gestation periods for those animals and shorter times from birth to breeding.
Peterson notes that all the fallout from these lower prices has yet to be felt. "When your basic operating expenses haven't gone down, but revenues have dropped by 25 percent, the squeeze is on," Peterson says. "Only the most efficient operators will make any kind of profit," he says.
And as the situation becomes more serious, he expects to see a lot of finger-pointing and speculation on causes for the downward trend, such as packer concentration or price manipulation, but Peterson says the biggest factor is simply oversupply.
The effects on other businesses have only begun to be felt, Peterson says, citing equipment dealers whose sales are down dramatically. "A couple of years ago the inventory of new horse trailers was way down," Peterson says, " but you go past those dealerships now and the lots are full. Hardly anyone is driving a new horse trailer or pickup truck. The ripple will be felt throughout the western economy."