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Weathering the market

Ranching a slow-changing business in fast-changing world

Christine Metz

— At the Centennial Livestock Auction, prices change in a single breath. With a lift of the finger, the nod of a head or the wink of an eye, buyers sitting in rows of wooden bleachers determine what will be paid for the livestock in the ring below. Auctioneer Wayne Kruse’s voice mirrors their movements.

Years ago, Kruse said prices for cattle would change by 50 cents in a week, at most. Today, they can go up and down multiple times a day, changing from $3 to $5 to $10 in a single week.

The buyers talk on cell phones to check on the future markets, the fat cattle markets and the grain markets, their free hands still bidding.

“It is just so much more sophisticated than it use to be,” Kruse said.

As the closest auction for Routt County ranchers, Centennial Livestock Auction in Fort Collins draws sellers from Northwest Colorado as well as Wyoming, Montana and Nebraska. The cattle they buy will be trucked to Oklahoma, Texas, Utah or Kansas.

Centennial Livestock Auction is a family-run business. The auction takes cattle, sheep, goats, pigs, horses and dairy cows. On the weekends, the auctioneers sell items ranging from hay to consignment equipment to ranches, Kruse said.

And like their buyers, the auctioneers check the future markets, the fat cow markets and the price of grain every day. They use the computer and television. It’s their job to know what market prices are, Kruse said, and to get full value.

But rarely is that value a constant.

“Changes are hourly, daily,” he said. “These order buyers call people they buy for and they tell them to give a dollar more, a dollar less. It changes every 10 minutes.”

Back on the ranch

While the prices ride a roller coaster, Routt County ranchers such as Jerry and Judy Green run a steady operation.

In their remote ranch 18 miles outside of Hayden, the Greens feel the effects of the constantly fluctuating market. They watch to see what prices are going to do, but know there is little they can do to adjust to the cycle.

They survive by saving when the prices are good, so they have money to fall back on when the market turns downward.

“I was raised to believe to continue to do things the same kind of way,” Jerry Green said. “To try to outguess the prices, eventually more than likely you are not in any better shape than you would have been.”

Of course the Green’s ranch, along the meandering East Fork of the Williams Fork and below large rocky cliffs, is much different from when Jerry Green’s great-grandfather homesteaded it in 1895.

The ranch’s first money generator was potatoes. Jerry Green’s grandfather and one-time Routt County Commissioner William S. Green raised hogs. A few decades ago, they made the switch to selling calves instead of yearlings.

And like many of the ranchers in Routt County, their cattle herd has changed from the white-faced Herefords to the mostly black Angus.

They are changes that took years of planning, the Greens said, and were not based on the shifts in the global economy or the newest trend. Expanding operations means having to buy new land or purchase larger equipment, both expensive propositions.

And it’s not just the newest trend the Greens have to weather. It’s the years of drought, international politics that open and close trade borders and the competition of larger corporate operations.

“You can’t depend on what your next cattle check is going to be,” Judy Green said. “You manage with just enough to get you through the tough times.”

A global playing field

The economics of ranching have changed from the days Green’s grandfather raised milk cows, oats, wheat, pigs and beef cattle.

Andrew Seidl, an associate professor of agricultural and resource economics at Colorado State University, said agriculture is less diversified. To make a profit, ranches have had to be larger and use heavier and more expensive machinery to reduce labor costs.

With agriculture techniques advancing around the world and borders opening up for trade, the Colorado farmer is not competing with Nebraska or Texas, but with the likes of Canada, Brazil and China.

“They produce an enormous amount of food, and they can do that about as well as we can,” Seidl said.

Small American ranchers and farmers have a hard time competing with countries where crops can be grown in more optimal climates, labor costs are lower and fewer regulations are in place, Seidl said.

At Wanda and Jack Redmond’s isolated ranch tucked into the high hills leading up to the Flattops, the reach of global market forces seems distant. But even on one of the oldest family-run ranches in the county, they are a reality.

“We have to recognize more and more global considerations in terms of imports and exports and that there will continue to be effects on domestic markets. We can’t close the doors to other parts of the world and just protect ours,” Redmond said.

If Routt County were to stop agricultural production altogether, it would have little effect on the industry, Seidl said. The largest effect Routt County agriculture has outside its borders is selling hay to nearby regions. More than 320 ranches combined to produce 38,000 tons of hay in 2002.

“Much beyond the herds of Colorado, you really probably wouldn’t see much of an effect,” Seidl said.

Despite its insignificance in the national economy, Routt County sells more agriculture products than any other county in Northwest Colorado.

In 2002, Routt County sold $25.2 million worth of agricultural products, more than Moffat, Rio Blanco, Jackson and Grand counties. More than $4.5 billion in agriculture products were sold in Colorado, with almost 25 percent of the state’s total coming from Weld County, home of the Greeley feedlots.

Even in the global markets, Seidl said, Routt County remains a cost-effective place to raise cattle and is close to the feedlots, often the next step in the chain of production. Ranchers say the nutrients in the grass and cool weather mean good weight gains for cattle in the summer months.

“You have good conditions to produce beef here, relative to other places,” Seidl said. “And you have 100 years’ worth of experience with it.”

Cattle are by far the largest agricultural product in Routt County. The 2002 U.S. Agriculture Census shows that livestock accounted for 91 percent of the agricultural products sold.

More than 200 farms had 30,000 cattle and calves in 2002, and 37,000 cattle were sold. In the same year, 50 ranches sold 5,000 sheep, and 22 ranches sold 121 pigs.

Despite the swing in prices and the tendency for ranchers to sell cattle when prices are high and buy when prices are low, cattle production has reminded steady. In 1954, the county was home to 37,000 head of cattle. It’s a number that has not changed by more than 10,000 in the past 50 years.

In contrast, sheep and grain production have declined steadily over the same time span. In 1954, there were more sheep than cattle in Routt County, with almost 38,000 head.

The Redmonds used to run 200 head of sheep that produced 4-H grand champion winners for their children. Today, the ranch is home to just 50 head of Hereford cattle. They stopped raising sheep because it was too hard to control the predators, Redmond said.

The largest decline in agricultural production has come in grain crops. In 1954, more than 41,500 acres were in crop production with oats, barley and wheat grown.

In 2002, just 15 farmers had 7,400 acres in production for wheat and barley.

Picking a specialty

In the past 50 years, ranchers have been forced to specialize as their overhead costs continue to escalate and new machinery reduces the amount of labor needed. That specialization goes beyond narrowing a ranch down to one crop or a specific livestock.

Few ranchers raise their cattle from birth to slaughter and many never have a chance to taste the end product.

The Greens are like many cattle ranchers in Routt County: The mother cows give birth to their calves in the spring, the ranchers pasture the calves during the summer months and sell them in the fall or early winter.

The calves typically are shipped to Nebraska, Oklahoma, Texas or even California, where feed is cheaper. It costs less to ship the cattle out than to ship the feed in, Jerry Green said.

Some cattle return to Routt County as yearlings in the summer to graze, before being shipped out again to be finished with grain at feedlots and then slaughtered.

The same is true for pigs, Seidl said. Piglets stay where they are born for 21 days. Then they are shipped to another place until they are adults, moved to a different place to get fattened, and then slaughtered.

“It’s all market segment driven because of the cost effectiveness,” Seidl said.

But that cost effectiveness works best on large-scale ranches. To have the same buying power they did 20 years ago, the Greens would have to more than double their operation.

In old blue ledger books that contain years of accounting for the ranch, the Greens’ dilemma is spelled out.

In 1955, a 753-pound yearling sold for 19 cents a pound, or $143 a head. That year, the Greens bought a new Plymouth for $3,110. In 2002, a 748-pound yearling sold for $1.05 a pound or $785 a head. If the Greens wanted to buy a new pickup in 2002, it would have cost them upward of $35,000.

Doing the math, Judy Green said, it took 22 steers to pay for the car in 1955, where it would have taken 45 in 2002.

“Even with a better market, we need twice as many animals to stay in business,” Judy Green said.

In 2002, the county sold $25 million in agriculture products with the average ranch selling $42,431. In the same year, the average ranch had $43,697 in production expenses and the county overall had $25.8 million in expenses.

Overall, ranches in Routt County netted $1.6 million in income, an average of $2,746 per ranch.

The increase in cattle prices has not kept pace with the increase in costs of machinery, gas and especially land. To expand their operation, the Greens would have to buy more land — but nowhere in Routt County are land values equal to the agricultural production they would create.

“(Production) won’t even pay the interest,” Judy Green said.

Equipment costs also have driven up the price of production and most ranchers have kept their tractors running for decades.

The Greens’ ledger books also hold proof of the increasing cost of machinery. In 1969, the family bought a 135 Massey Ferguson tractor for $2,369. Almost 30 years later, they bought an 80-horsepower John Deere tractor for $26,780.

The advancing technology has reduced the need for labor. The Greens managed 150 head of cattle and put up 200 tons of hay by themselves. The operation used to take five people. It also used to support three generations.

Many ranchers have said 100 cattle would have supported a family 50 years ago, now it takes about 300.

“Traditionally, diversified family operations could have always absorbed one more. They would send them to school to get a degree and expect them to come home and work on the farm,” Seidl said.

That scenario has long since passed. The increasing technology that reduces the need for labor can be a double-edged sword, Seidl said.

“Some call it more efficient, but it is starting to create ghost towns,” he said. “There is less need for a community as farms get larger and larger with less and less labor.”

The effects are not as devastating in Routt County, which has a much more diversified economy, than it is on the Eastern Plains, Seidl said.

When prices fall

Prices are as good as they have ever been, but third-generation Routt County rancher Marsha Daughenbaugh said the past few years have not been easy.

“The bottom dropped out of prices not only in the cattle market, but also for sheep and grain. Then the drought hit, then the grasshoppers hit. It was everything. There were so many external factors,” she said.

When prices took a dip four years ago, the family, which includes three generations, decided it was too risky to actually own the cattle.

They sold off their herd and started grazing cattle on a weight-gain basis.

Each spring another rancher brings in cattle to graze on pastures the Daughenbaughs’ own and lease. When the yearlings leave in the fall, the Daughenbaughs are paid based on how much weight they have gained.

“We just decided to try this for a few years to get out of some debt,” Daughenbaugh said.

Hard times are not rare for most ranch families. Marsha’s father, Raymond Gray, came from Nebraska during the Dust Bowl to ranch on the lower Elk River with his father. An old log cabin still stands where Gray spent the first cold winter.

Throughout the years, the family, which has expanded to include Marsha her husband, John Daughenbaugh, their daughter, Adonna, and her husband, Troy Allen, bought more land. A few years ago, the family made the tough decision to sell 240 acres, some of which they lease back as grazing land.

Daughenbaugh would still like to know what sent the cattle prices crashing four years ago. Ranchers are in one of the few industries where buyers, rather than sellers, determine price.

“I don’t understand how we ever got ourselves into that position,” she said.

Today, the Daughenbaughs run 325 steers. Before the drought and grasshoppers the ranch was at 450 head, but they had to cut back to not overstress their pastures.

The dramatic price swings also forced the Greens to change their plans. Jerry and Judy met at Colorado State University, were married and taught school outside of Greeley saving money to buy the Green family ranch.

They planned to return to the ranch in 1974, but that was the year Jerry’s father received 28 cents a pound for a 465-pound calf. The year before, a similar weight calf had brought 65.5 cents.

“We decided to keep teaching, and it took a couple of years for the prices to come back up to the 30s and 40s,” Jerry Green said.

Pluses that can’t be measured

Not all the ranching decisions the Greens make are profit-driven. Nowhere in the ledger books was the value of living the ranching life or the views they get to enjoy while doing it.

But it’s one of the reasons they hang on.

The Greens know their largest return on their decades of hard work could come at the end of their ranching careers if the couple, who do not have any children, decide to sell the ranch.

“A lot of farmers and ranchers are more than happy to make a whole lot of money on what was only wheat ground 50 years ago and now is condo ground,” Seidl said and noted they can easily take the money and buy more agriculture land somewhere else.

As is the trend in Routt County, the land would most likely go into the hands of an owner who bought it for other means besides agriculture. And once new owners take over, Seidl said, the value of agriculture production is likely to go down.

If not developed, the land is likely to remain in agricultural use, but less intense use.

“You have a tendency to see less production on lifestyle farms,” Seidl said. “If it is not a primary income, you are less likely to be concerned about what can I make off it.”

In 2002, more than half the ranches sold $2,500 or less in agricultural products and just 16 percent of all ranches sold products worth more than $25,000 per year.

Ten years earlier, close to 30 percent of all ranches in Routt County produced $25,000 or more and an almost equal amount produced $2,500 or less per year.

“A lot of folks buy properties not only for production value, but for a whole bunch of other things, amenities, image, this rural life style, the view, the wildlife,” Seidl said.

Despite the up and down cycles, Judy Green thinks most ranchers want to keep their ranches in agriculture. At the very least, the Greens do.

“The heritage that Jerry’s family had here, it cuts pretty deep if you start thinking you are going to have to sell it. We don’t like that idea at all,” Judy Green said.

— To reach Christine Metz call 871-4229

or e-mail cmetz@steamboatpilot.com


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