Market drop has rancher feeling 'hung out to dry'
Cattle, crops fetch less as costs grow for diesel fuel, seeds
By Joanne Kelley, Rocky Mountain News (Contact)
Published January 10, 2009 at 12:05 a.m.
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Photo by Chris Schneider / The Rocky
Brooks Smith, of North Platte, Neb., leads two head of cattle to their pen at the National Western Stock Show on Friday. When the price per pound for a 1,400-pound animal drops even by 15 cents a pound, that can make a huge difference for a rancher.
Photo by George Kochaniec Jr. / The Rocky
Ben Elliott of Colorado's Best Beef Co. examines a cob in a cornfield south of Wiggins on Thursday. So far, demand for the Boulder-based company's all-natural beef remains strong, and owners are hopeful that loyal customers will stick with them during the economic downturn.
Photo by George Kochaniec Jr. / The Rocky
Colorado's Best Beef Co. says it raises its cattle, like this critter in a field south of Wiggins, the old-fashioned way - meaning no growth hormones, steroids or feed antibiotics.
Like many ranchers and farmers, R.J. Jolly spent heavily over the past year to fatten his calves and put in crops.
Soaring fuel prices made it far more expensive to do everything from buying fertilizer to running equipment to plow his fields between Kit Carson and Seibert on the Colorado plains.
None of that mattered so much when food prices hovered near peak levels.
But then the global financial crisis hit, hammering the commodities markets almost overnight.
While gasoline prices have come down, the price of diesel fuel used by farmers and ranchers remains high.
Even buying seed has become prohibitively expensive because of the high prices being fetched for new disease-resistant offerings.
"I've never gotten my head kicked in quite this hard," said Jolly, one of the thousands of ranchers who heads to Denver this week for the annual National Western Stock Show.
"We got hung out to dry. We're going to take a pretty big licking," he said.
Jolly and his brother - their family has been in the business since the 1800s - decided to sell some of the calves they had pastured, while sending the rest to a feedlot to fatten them for sale later.
They entered into some contracts to protect themselves against falling prices but they hadn't completely hedged against what turned out to be a sharp reversal of fortunes.
Live cattle were bringing $1.01 a pound at the time. The price has since dropped to 86 cents.
On an animal that weighs about 1,400 pounds when it gets to market, that's a huge price difference even for a rancher with only a few hundred head of cattle.
"The market just kept going down," Jolly said. "We're probably looking at a loss for the year."
Longtime rancher Charles Klaseen is among those kicking himself for not selling all his calves before the market plunge.
His operation in Crawford unloaded about half of them by video auction around Labor Day. It held off on the rest because Klaseen thought bidders weren't willing to pay enough.
Then the bottom fell out.
"We probably lost 30-40 percent of our value by waiting," said Klaseen, who has spent his life ranching.
Klaseen counts himself among the fortunate ranchers who have been in business long enough to own their land.
New entrants typically have to borrow heavily to lease acreage and buy supplies, making the money back when they go to market - if prices hold up.
Only a bit of relief is expected in 2009.
"We're still looking at market prices which are much lower than they were in 2008," said Tom Lipetzky, division of markets director at the Colorado Department of Agriculture. "Costs are still high, and that's going to squeeze profit margins."
After record cash receipts of about $7.6 billion in 2007, 2008 net farm income in Colorado was expected to drop to $968 million from its high of $1.5 billion the year before, according to the University of Colorado's 2009 Business Economic Outlook.
The forecast said net farm income in 2009 is expected to remain on par with 2008.
Also in the mix: competition from overseas and consumers cutting back on purchases during a recession.
"There's no question that this has been an unprecedented set of challenges for agriculture," said Steve Davies, head of Colorado State University's Department of Agricultural and Resource Economics.
"But even in tough times, people have to eat. There tends to be less of a reduction in the amount of food people eat than in the number of cars they buy," he said.
The higher end of the food chain - organics and specialty products, for instance - could suffer as people lose their jobs and rein in their budgets.
"The families that are marketing their high-end products directly to consumers are going to be harmed by the downturn in incomes," predicted James Pritchett, an associate professor specializing in agriculture at CSU.
That's the wild card for Gina Elliott, part of a two-family, Boulder-based operation specializing in all-natural beef.
"It is more expensive, and people that used to be able to afford it maybe can't right now," said Elliott, who handles sales for Colorado's Best Beef Co.
So far, demand for the company's custom-cut beef remains strong because repeat customers see the roughly $700 outlay for one-quarter of a cow "as a reasonable price to put good beef in the freezer."
Organic vegetable growers and beef producers, such as the owners of Kersey-based Monroe Organic Farms, also remain hopeful that loyal customers will stick with them during the downturn.
"We get the feeling from the years of experience we've had that food is the last thing people start cutting back on," farm owner Jacquie Monroe said. "The economy has so far not affected us. We feel we're on a teeter-totter though. It can go either way."
Still, the eternal optimism of farmers remains intact.
"My father told me if you decide to go into the farming business you will never get rich but you will never go hungry," said Bob Sakata, a produce farmer in Brighton.
"We'll be able to overcome this temporary recession. I'm confident. You just have to be a realist. Don't overinvest and don't overspend."
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January 10, 2009
2:10 a.m.
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EZBakeOven writes:
Kudos to the ranchers who are constantly battling one crisis or another, from food to water to weather. You have bigger balls than any city dweller. Good luck to you all!
January 10, 2009
6:13 a.m.
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44roger writes:
Rancher in Nebraska gave two million to UN medical center, someone knows how to do it right.
January 10, 2009
9:13 a.m.
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jbowen43 writes:
It can get worse. Years ago we were selling fat lambs at over a dollar and the price dropeed to 40 cents in three weeks. The same thing happened to the dairy cow market when the "dairy pic" program trashed that market. I knew a wheat farmer that "lost" fifty cents on every bushel of wheat he harvested for over thirty years and he still died well off.
January 10, 2009
10:14 a.m.
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goldenski9ier writes:
Welcome to the fallout fro the neocon BUSH Economy. You Voted for it. You chose it TWICE. Sorry no sympathy. I am living on reduced hours: 3/5 salary and scrimping. I am not impressed by these perpetual tales of woe. WE are ALL screwed... except the corporate execs and deal makers at the highest levels...they are enjoying their Bush tax breaks while I try to pay their share.
January 10, 2009
10:28 a.m.
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trinidad writes:
I hope Obama will "share the wealth" with the ranchers and goldenski9ier.
January 10, 2009
10:47 a.m.
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INC writes:
AAAH small town values... They did indeed Vote for their plight twice.
why not raise a herd of Bison instead of beef? As they are the native species the costs associated with maintaining the herd are far less. As well as no loss due to weather.
Buffalo meat sells for a far higher price too.
on the consumer end it is also healthier for humans to consume.
Insofar as that diesel cost... why not utilize burnt cooking oil. otherwise known as Bio-diesel? that's what Dr. Rudolph Diesel designed his engine to run on anyway.
ask Willie Nelson.
January 10, 2009
11:06 a.m.
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mytwosense writes:
Demand for meat hasn't fallen just because of high prices. Less people are eating meat because of health and ethical concerns. I just read that corn farmers, on the other hand, are experiencing profitability and less dependence on government subsidies these days because of increasing demand, as corn is now also used for biofuel production. Like it or not, the times are changing, and some forms of agriculture will be more profitable than others in the coming years.
January 10, 2009
11:28 a.m.
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blindrid writes:
INC certainly has all of the answers??
It is obvious that he has not been around the cattle business. You can make a dime on buffalo especially if you raise them for recreational hunting purposes as there are plenty of people willing to pay $2,000 - $3,500 a head to go on a buffalo hunt.
Since INC knows it all, he must be the one that donated the $2MM.
January 10, 2009
11:45 a.m.
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B300 writes:
He is not the only one. We all feel hung out to dry! Good luck to him and his family.
January 10, 2009
11:46 a.m.
homeradam writes:
(This comment was removed by the site staff.)
January 10, 2009
12:18 p.m.
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HopiMedicineMan writes:
I’m sorry, this is just too funny. Here’s a guy named SKIER complaining about his taxes. He wants fat cats to pay his share of the burden financing this country so he can ski. We’ve either arrived, or are on the brink of a mob mentality.
Only 62% of Americans pay taxes. As the boomers age into Social Security, the number will flip to its reciprocal. Guess what SKIER, you get to pay more, lots more, because the fat cats lost their wealth in the stock market crash. You have to re-cast your assumptions about wealth in America. It’s just like the Depression when all those Capitol Hill mansions were converted into boarding houses. No more rich guys, except a small handful. Cheeseman and Moffet lost everything. Charles Boettcher had to go back to work. Moffet's home was an abandoned "ghost house" most of my life, until it was razed in the 1970s.
MyTwoSense
I eat as my ancestors, anything on four legs…with fava beans and a good chianti. And what is unethical about that, oh child of the universe? You took our lands, our water, our mineral rights, now you’re going to take away our food?
January 10, 2009
12:24 p.m.
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jrod193 writes:
this article sounds like propaganda for more agricultural subsidies on top of what we already have. what makes a farmer any different than a construction worker other than some romanticized ideals about their profession? don't start with the dumb argument that we wouldn't have food if we had less farmers. contrary to the current happenings with the bailouts we do live in a pseudo-capitalist society where if there is money to be made, someone will pick up the slack and produce. with record high commodity prices the last couple years and a never ending stream of federal and state subsidy, i can have no more sympathy for the farmer than i do for the average person who just lost their job. maybe if our tax dollars didn't go to bailout the tiny segment of our population that farms the rest of us could have more money saved and be better prepared for this economic downturn.
January 10, 2009
12:44 p.m.
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mytwosense writes:
Hopi writes: "MyTwoSense
I eat as my ancestors, anything on four legs…with fava beans and a good chianti. And what is unethical about that, oh child of the universe? You took our lands, our water, our mineral rights, now you’re going to take away our food?"
Hopi, do Indian reservations operate massive agriculture operations? I'm thinking of giant corporate feedlots that pollute the air and water and spread viruses and harmful bacteria, hire countless illegal workers (and even smuggle them into the country) because they won't squawk about unsafe working conditions, shoot their animals up with questionable drugs, and keep the poor creatures in cramped, miserable conditions. Despite their laughable "Happy Cow" marketing brochures, this is the reality.
January 10, 2009
12:56 p.m.
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mytwosense writes:
And Hopi, let me assure you that if I'd lived back in the time where treaties with the Indians were systematically being decimated, I would have been the same bleeding-heart liberal complaining about that unfair treatment as I am the one posting on the forums about today's massive social injustices.
If you were the same conservative then you appear to be now, you probably would have been lambasting me for it. Although I doubt you would have been a conservative back then.
January 10, 2009
1:01 p.m.
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johnson writes:
Hey! It's the Jolly Rancher!
January 10, 2009
1:04 p.m.
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mytwosense writes:
johnson writes: "Hey! It's the Jolly Rancher!"
I bet he's never heard that before.
:)
January 10, 2009
1:31 p.m.
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MavrickG writes:
Hey goldenski9ier since the poor pay no federal taxes and you say your paying taxes then I guess your not poor. Guess you should either work harder or learn to live in your means. No one said you were in titled to a certain level of lifestyle, the promise is you had the right to go out and get it for yourself. So shut up, and focus on making your life better. The president, no matter who he is does not have that much of an affect over your life! Stop blaming someone else, and try growing a set of balls like these ranchers! They don't give up in times of trouble, the work harder! Try it you loser.
January 10, 2009
1:39 p.m.
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Deckert writes:
I worked with farmers and ranchers for over thirty years and found them to be wonderful, trust worthy and honest people. On the other hand, I never met one that didn't complain about government while holding out their hands for all the government bennies they could get. Many have an "entitlement" mindset that would do an inner-city welfare mother proud. The small farm may be an unsustainable business model ala newspapers. No one is entitled to have their lifestyle or business protected forever by the government. Farmers NEVER stop complaining.... it's a way of life.
January 10, 2009
1:49 p.m.
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mytwosense writes:
Deckert, the subsidies small farmers receive is a pittance compared to what the corporate agriculture conglomerates scoop up. And on top of that most of the smaller concerns are now suppliers to the big guys, who do collude on prices. I damn sure want to see the government protect the small guys from THAT. Especially since it's a government that according to the Constitution is supposed to look out for We the People, i.e., the little guy - not the "big business models."
January 10, 2009
2:31 p.m.
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HopiMedicineMan writes:
mytwosense
Yeah, they do all that. But I forgot what we're talking about.
January 10, 2009
2:54 p.m.
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HopiMedicineMan writes:
How would you change your assumptions if America ran out of money?
January 10, 2009
2:57 p.m.
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HopiMedicineMan writes:
Mytwosense
Indians are being decimated now, at this time. You're not paying attention.
January 10, 2009
3:07 p.m.
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HopiMedicineMan writes:
mytwosense writes:
"And Hopi, let me assure you that if I'd lived back in the time where treaties with the Indians were systematically being decimated, I would have been the same bleeding-heart liberal complaining about that unfair treatment as I am the one posting on the forums about today's massive social injustices.
If you were the same conservative then you appear to be now, you probably would have been lambasting me for it. Although I doubt you would have been a conservative back then."
It's hard to say who would have been what in history. Indians thought the whites would return to Europe. Liberals back then were as anti-Indian as they are anti-corporate today, because the very heart of liberalism is misandry.
January 10, 2009
3:20 p.m.
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seeingeyeseesall writes:
One of the more important lines in this story refers to the cost of seed.
GM seed, which will not reproduce and must be purchased every season from the agri-monopolies who've engineered and patented it.
The same monopolies who've established a global seed bank in the arctic - a bank of natural seeds in case this global experiment in patented food engineering fails.
Ranchers who got addicted to "RoundUp Ready" corn and soy are now learning the TRUE costs of GM seeds. The danger's not in the food, it's the total monopoly, with monopoly pricing, of their most basic raw material.
One line in this story ... but it will decide the future of who farms and ranches.
January 10, 2009
4:10 p.m.
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RoyalPayne writes:
I hope this rancher can make a go of it, it's hard work but a great life. As for farm subsidies, once again we are paying a business for losing money. It's another pork barrel project that has been wildly successful. As for those in farming, in my opinion, if you have to borrow from the bank every spring for money to buy seed, etc. you are in the wrong business. Never owe the bank anything, sell off a few acres if you need money. This advice from my depression, dust bowl era, Great Grandparents who lived in Kansas.
January 10, 2009
4:40 p.m.
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Bagel writes:
"because the very heart of liberalism is misandry."
This has to be the most mind-blowingly strange accusation I've ever heard. It doesn't even make me mad, because I have no idea what it's supposed to mean.
January 10, 2009
5:47 p.m.
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homeradam writes:
All I say is a negative statement against a negative statement made against the Bush administration and the RMN staff removes it. Guess what RMN......you're going BANKRUPT. All of your site staff will soon be part of the 7.2% unemployeed. Hope you all voted for the honorable Obsama.
January 11, 2009
7:11 a.m.
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vudumom writes:
Wait till the farmer's have to pay $125 per hog and $225 per cow for a enviromental fee, courtesy of the EPA. Pretty soon all our food will come from other countries.
January 11, 2009
8:44 a.m.
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SheikYurBooty writes:
There's nothing wrong here that a little more farm welfare won't solve.