EDGAR — The drive to the local feedlot from Scott Blain’s Joliet farm is 6.4 miles, but getting there takes the better part of the year.
Blain rolled into Oswald Feedlot on Wednesday with calves in tow and maybe a few gray hairs poking from beneath his Case baseball cap after early worries of devastating drought and $200-a-ton hay. In May, the 34-year-old rancher considered partially liquidating his stock because he just wasn’t sure he could afford to feed them all. But the rain picked up, pastures filled with grass and Blain delivered his Minnesota-bound calves to the feedlot with his wife, Ellen and 2 1/2-year-old son Weston.
“We got rain pretty much just in time,” Blain said. “The way it was looking in May, there was no hay, no pasture. We were getting ready to sell, starting with the oldest ones, the ones that were going to be sold this fall anyway.”
Now cattle prices are higher than most ranchers can remember, with premium calves selling for more than $2 a pound, which has made cow-calf operations like Blain’s the success story of the year for Montana agriculture. Ranchers were teetering on the edge of economic disaster, but are now seeing strong payouts and lower than expected feed prices. Gross receipts for Montana cattle should be well over $1 billion for the fourth year in a row, with everyone from local feed dealers to shopping malls benefiting as the money makes it to Main Street.
“It’s as good as we’ve ever had,” Blain said. Nine years ago, the young rancher began raising cattle and grain while teaching in Red Lodge to supplement his startup. He and Ellen both worked for a while, but the agriculture economy has been strong enough that both Blains now farm full time.
"Montana producers are on the right side of the market,” said George Haynes, agriculture economist at Montana State University. “I tell them every talk I give, ‘Boy are we lucky to be in the cow-calf business.' "
The number of cattle in the United States is at a 60-year low and has been for more than two years. That small supply, coupled with rising foreign demand during the roughest part of the recession, pushed prices upward beginning in late 2009. By 2010, cattle prices were at record highs, and with the exception of a few dips, have steadily increased. Foreign buyers kept the U.S. beef economy in the black, as recession-minded American consumers passed on beef and went for lower-priced chicken and pork. From 2010 to 2011, U.S. beef exports, valued at $5.4 billion, increased 33 percent, according to the U.S. Meat Export Federation. By 2012, exports had added $216.73 to the per-head value of U.S. cattle.
Export demand has softened some, but the U.S. appetite for beef has steadily increased as the country slowly crawls out of the recession. In addition, cattle numbers declined in 2011 and 2012 as ranchers in drought-stricken parts of the United States liquidated. Though 2013 isn’t done, there’s reason to believe it will be the third straight year of drought-related sell-offs.
“I think 2013 will probably go in the books as another liquidation year, but it all happened in the first half of the year,” said Derrell Peel, beef economist at Oklahoma State University.
Peel, who grew up on a Montana cattle ranch, has been saying for the last few years that conditions are right for ranchers to begin adding cows to their herds. With so few cattle in the country, ranchers are positioned to add livestock without driving down prices because of increased supply.
However, the weather hasn’t cooperated. Ranchers uncertain whether they’ll have enough rain to green pastures and grow hay have been reluctant to take the risk.
“What we wanted to do and what we could do were two different things,” Peel said.
Numbers for cattle, including calves, have fallen significantly since 2010. That January, the U.S. inventory of cattle, including calves, was 93.8 million. The population slipped to 89.2 million by January 2013, according to the United States Department of Agriculture National Agricultural Statistics Service. Montana's cattle numbers during that time have remained steady at about 2.6 million head. Drought was a significant contributor to the national decline.
The need for more cattle is good for cow-calf operations like the Blains'. There can be no supply increase without ranchers willing to expand. The market will reward those that do, Peel said.
“The source of supply in the industry all comes down to cow-calf operations,” Peel said. “I’ve been telling producers for some time now that for the next three or five years I don’t think the market is going to be the challenge. If you got something to sell, it’s going to sell.”
What’s more likely to happen, said White Sulphur Springs rancher Bob Hanson, is that ranchers will take advantage of the anything-sells market to get rid of their older, less productive cows, which is what Hanson is currently doing. Cattle prices are promising, but after drought conditions stretching back to July of 2011, Hanson’s pastures have been chewed down.
President of the Montana Farm Bureau Federation, Hanson doesn’t think his land can take additional mouths to feed. So, he’s taking his old maids to market and replacing them with new heifers more likely to give him a calf a year.
“My range is really at a minimum,” Hanson said. “It’s not beat, but it’s not in good shape, either. So, I can’t see why, unless something changes next spring, I would want to put more cattle out there.”
Hanson, like Blain and other Montana ranchers, talks about the last-minute turnaround in the weather last May with amazement. It was like Rocky Balboa in cowboy boots draped across the turnbuckles until suddenly with a thundering blow, rain beat back the drought.
“It was one of those times, if you were there, you better write it down,” he said.