Sunday, July 12, 2009

Recession impacts Oregon's cattle industry

From the Oregonian:

"It's never been easy to make a living," says Ken Holliday, who runs a 10,000-acre ranch near John Day. "But now, you kind of wonder why you even do it."

In Oregon's vast cattle country, where life yields to nature's whims and business bucks with the market's whiplash, the global downturn is bearing down. At the start of a food chain that ends on your plate, Oregon ranchers are trying to hang on through a sudden swing that could mean a losing year for an industry that roped $664 million in gross sales last year.

In 2008, ranchers paid record high prices for corn, hay and feed -- an investment now all but lost as beef competes against falling prices for poultry and pork. People worldwide are buying less meat. Restaurants are ordering fewer steaks. And the hides that make shoes, car seats and furniture aren't worth much in a recession that has curbed consumer lust for material things...

Over a lifetime, a typical cow may eat thousands of pounds of corn, hay and feed before it ends up at the slaughterhouse. And last year, the cost of those ingredients went sky-high.

Feed shot up 22 percent, fertilizer and chemicals went up 26 percent and fuel rose 14 percent, according to the USDA National Agricultural Statistics Service. Corn, the primary diet of cattle in the last months of their lives, has tripled in price over recent years.

The high input costs are a big reason economists predict a money-losing year for the industry nationwide, with losses of up to $130 a head, which ripples throughout the chain, according to CattleFax, a market research firm. With 26 million head of cattle in the U.S., the losses multiply fast.

Even in a normal year, consumers might have hesitated to pay for beef at last year's production prices. But with the recession, world demand for beef has dropped, tamping a decade of growth fueled by rising incomes from here to India...

"This downturn is more severe and occurred quicker," Penick says. "The cycles have been much more extreme, the highs are higher, and the lows are lower. All of our industries in agriculture will have to adjust to the new economic realities that we face."

The article is fairly long but a good read.