Booming cattle market ripples through region’s ecnomy

| Sunday, January 29, 2006

Previous Page

Share

• del.icio.us
• Digg
• NewsVine
• Fark

Print

Email

Cary and Codi Reese and Cary’s mother, Colleen Popham, went home happy from the Jan. 19 sale at the Belle Fourche Livestock Exchange.

The Upton, Wyo., area ranch family had sold 50 older butcher cows for an average of 65 cents a pound, about double similar types of cows were bringing three or four years ago.

“I’ve been ranching 50 years,” Popham said. “These are the highest prices I’ve ever seen.”

The higher prices mean more profits to spend.

Dean Strong, owner of Belle Fourche Livestock, said calf and cattle prices have been at record levels over the past year. Last fall, calves were generally selling from $1.25 to $1.50 a pound on the hoof, depending on weight and other factors. “That amounted to $30 to $40 more a head than last year, and last year was pretty good,” Strong said.

The improved market has been a welcome turnaround from the low prices that had persisted for the previous 15 years or so. Three or four years ago, calves were bringing 70 to 80 cents a pound.

For a 600-pound calf, at even $1.25 a pound today, that’s a difference of $300. If a rancher sells 100 calves in the fall, that’s a $30,000 bigger paycheck.

Cattle prices have been good for two years now, according to Carrie Stadheim, executive director of the South Dakota Stockgrowers Association.

At Faith Livestock earlier this month, 600-pound, drug-free calves were bringing $1.40, and the others were bringing $1.25 to $1.30 a pound, Stadheim said.

“You just never heard of a $700 calf in past years until last year and this year,” Stadheim said. “Now, it’s kind of a norm.”

“It’s fun to go to a sale now,” she said. “After the gavel hits, there’s a smile on the rancher’s face. It wasn’t that way for a while. It was almost depressing to take their calves to town.”

A large part of the run-up in prices is due to the short supply of cattle after drought forced Great Plains ranchers to sell off much of their herds.

But despite uncertainties over moisture, most ranchers now are optimistic, Stadheim said.

Profits go to town

Ranchers are taking their optimism and their cash to town.

Popham said she and her husband, Rick, and her two children, Cary and his family, and her daughter, Christa

Jones and her son, occupy three houses on the ranch southwest of Upton. They buy their groceries and incidentals in Newcastle.

But they drive the 150 miles to Rapid City for most of the big items.

Last year, good cattle prices allowed them to buy carpeting for several rooms, living room furniture and a dining room set from Freed’s Fine Furnishings. The family bought a washer and dryer, a refrigerator and a microwave from Larkin and Jones.

They shop at Seeley’s, at Landstrom’s, and at RCC Clothing and other stores in Rushmore Mall.

Popham said when the cattle market is down, ranch families tighten their belts and get by with what they have. Miles pile up on their pickups. “If things are bad, you run them ’til they have no value,” she said.

But last year, with a booming cattle market, the families bought a Ford F-350 4-wheel-drive pickup, a diesel Ford Excursion and a Ford Expedition, all from Integrity Ford in Spearfish. This month, Cary bought a new Ford 250 pickup at Integrity.

Another rancher at the Jan. 19 Belle Fourche sale, Clint Snook of Hulett, Wyo., said he bought a new Chevy Yukon last year, as well as a used tractor. He said many of his neighbors have bought new haying equipment. “I think everybody’s doing better,” Snook said.

A brief survey of other area businesses shows the same trend in varying degrees.

McKie Ford in Rapid City had a record year for truck sales in 2005, according to salesman Andy Storms. Part of the reason was the improved cattle market, he said.

“Because of cattle prices, they’re pretty optimistic,” Storms said.

For Kennedy Implement in Philip, 2005 was the best sales year in a long time, according to president Dennis Kennedy. “The cattle market has been a savior,” he said.

Kennedy said that during the heart of the drought, area farmers and ranchers weren’t buying anything.

He said the Philip region had some timely moisture last year, yielding a decent wheat crop and some hay. “But the cattle market has really made a difference in our business,” he said.

Ranchers had some money from their sales, and to take advantage of tax breaks, they bought equipment toward the end of the year, Kennedy said. “This year, we had a good year-end business like we used to have back in the old days.”

Kennedy refrained from laying off workers during the worst years of the drought, and now, he is considering hiring additional help. “It’s completely turned around,” he said.

Jenner Equipment in Rapid City also saw healthy sales of tractors, balers and pull-type mowers in 2005, especially toward the end of the year after good fall calf sales, president Dennis Jenner said.

At E-T Sports in Belle Fourche, all-terrain vehicle sales have been much better than they were three or four years ago, said Chris Tripp, a member of the family that owns the business. “The cattle market has definitely helped,” Tripp said.

Holding onto herds

The good cattle prices helped the Popham-Reese-Jones family of Upton hold on to their cattle numbers, Cary Reese said at the Belle Fourche sale.

The families calve about 800 cows and 400 heifers each year. Usually, they don’t have to buy hay for the open winters. But during the drought, there wasn’t enough grass, so they had to buy hay.

“We always figure it’s better to keep your cows and buy feed than sell your cows and have to buy them back when they’re expensive,” Reese said.

The rising cattle prices, along with grazing leases on the Black Hills National Forest, helped the families hang on to their herd.

And the good prices help them make payments on their operating loan, Reese said.

Also, good cattle prices actually prompted some ranchers to take out additional loans, according to Doug Theel of Farm Credit Services of America. “We saw a good increase in loan business this year,” Theel said. “When you have a good year, people will buy that pickup, and some will make an improvements to the house.”

Ranchers are reinvesting in equipment, too.

Even during the worst of the drought, some ranchers borrowed money to dig wells and install pipelines so they could continue to use their land even in dry years.

Paying down debt

Also, Theel said ranchers are becoming more sophisticated financially. The drought forced many of them to sell parts of their herds. Some of them took that extra money and paid down their debts.

In fact, Theel said the loan delinquency rate throughout the four-state Farm Credit region is below 1 percent, the lowest it has been in 40 to 50 years.

After getting some moisture last year and at least raising a hay crop, some ranchers are now restocking their herds, Theel said, although they are hoping for more moisture this year. “At least, the optimism is there and cattle prices are holding,” he said.

Snook had sold nearly all of his cattle in 2002 during the worst of the drought. But he went to the Belle Fourche sale Jan. 19 and bought 52 bred cows.

Black Hills Stock Show & Rodeo officials hope the good cattle market helps prices at the stock show’s cattle sales this week, beginning with the commercial heifer sale today.

Ranchers’ profits also are showing up in places such as Pete’s Clothing in Belle Fourche, according to Pete Krush, who has owned the business for the past 40 years.

“The last two years have been very good for us,” Krush said. “Most ranchers who come in the store are pretty happy. It doesn’t take much to make them happy. If the grass starts to grow and prices in the fall are good, that’s all they hope for.”

Krush said he believes other area businesses are doing better, too, because of the good cattle market.

“There’s one thing about cowboys, when they got a little jingle in their pockets, they’re going to spend it. But when things get tight, and those cattle go back down, they just pull that belt one notch tighter.”

Of course, if cattle herds grow in the Great Plains, the increasing supply could push prices back down.

But area ranchers and the businesses that depend on them hope that doesn’t happen for a couple of years.

Kennedy said he hopes the reopening of foreign markets will offset the increase in supply. Of course, the reimposition of the ban on U.S. beef in Japan adds to the uncertainty.

Stadheim said the market will eventually turn down. But imports have a big impact, she said. The Stockgrowers Association and its national affiliate, R-CALF USA, were among ag groups that fought the reopening of the border to live Canadian cattle last year.

“Cattle markets are always going to be on an up and down cycle,” Stadheim said. But there hadn’t been an upside for about 15 years, she said.

Stadheim predicted cattle prices should stay strong through this fall and then start dropping a bit.

Krush compared the cattle business to gambling in Las Vegas. “It’s just a big gamble with Mother Nature and with price. You throw the dice on the table, and they might come up sevens. Or you might never get a seven again. These guys are finally getting their sevens.”

Show, sale today

The Commercial Heifer Show & Sale is today in the north parking lot of Rushmore Plaza Holiday Inn next to Rushmore Plaza Civic Center.

The show begins at 10 a.m. with the sale to follow.

Purebred cattle shows and sales in the civic center’s Rushmore Hall run from Monday, Jan. 30, through Saturday, Feb. 4, with the Supreme Row grand champions announced Saturday evening.