The cattle producers tending to their animals in the yards at the National Western Stock Show in Denver on Wednesday were fighting the cutting, cold winds. But when it comes to the industry itself, ranchers for now are riding tailwinds of strong customer demand and high cattle prices.
“It’s a great time to be in the beef industry,” said Amanda Hilbrands of the Hilbrands Cattle Co. in Clara City, Minn.
Although high cattle prices mean higher prices at the grocery store, consumer demand remains robust, agricultural economists say.
Jane Evans Cornelius, who owns the family-run business Coyote Ridge Ranch in LaSalle, said the impacts of the high prices ripple throughout the industry. Coyote Ridge doesn’t raise cattle that wind up in grocery stores. Their Herefords provide breeding stock.
“We’re benefitting (from the high prices), but the net income is not as dramatic as you would like,” Cornelius said. “It’s being eaten up by inflation.”
The beef industry weathered the disruptions of the coronavirus pandemic, but faces headwinds of high feed and fuel costs even as ranchers’ animals are fetching top dollar. High interest rates for equipment are another bite out of profits.
And state policies and laws on water conservation, overtime pay and wildlife, including the restoration of wolves to Colorado, are creating angst among ranchers, said Erin Karney, executive vice president of the Colorado Cattlemen’s Association. She said some in the industry see the strong market as an opportune time to sell out.
Ongoing drought across some of the country’s major rangelands has helped drive up feed prices and led ranchers to reduce their cattle numbers. The U.S. cattle herd inventory of 29.4 million as of July 1, 2023, is the lowest in decades, driving up cattle prices due to tight supplies.
The inventory is based on the number of cows and their calves and doesn’t include dairy cows and other kinds of cattle. The U.S. Department of Agriculture is expected to release the full-year inventory for 2023 soon.
The Colorado herd size was 642,000 as of July 1, 2023, compared to 792,000 in 2019, before the coronavirus pandemic closed beef processing plants when thousands of employees across the country got sick. Hundreds of the workers died. Feedlots filled up when the animals couldn’t be slaughtered and sale prices slid for ranchers.
It’s a different market now. The USDA reported that the average calf price in November 2023 was $290 per hundred pounds, double the average price of $149 per hundred pounds in July 2020.
The increases are the result of the low herd size, which is part of a natural cycle that occurs when ranchers respond to low prices and high supplies by decreasing their cattle numbers.
“As prices go up, they keep more of their calves and raise them to maturity to become a cow and produce more calves,” said Daniel Mooney, assistant professor of agricultural and resource economics at Colorado State University.
But it takes three years to raise a mature cow, so there’s a lag in rebuilding herds, Mooney added.
“We’re at a natural low point, but then shocks to the economy and to the production system are also really important,” Mooney said. “Drought, inflation and COVID are all shocks that have recently occurred that are also impacting the size of the beef herd.”
At the start of 2023, more than 90% of beef cows were in states where most of the pasture and rangeland conditions were poor to fair, Mooney said. “As pasture and rangeland conditions worsened, there was an increase in beef-cow slaughter. People were culling more animals.”
The steaks are high … in price
Ranchers are seeing higher prices. So are customers.
“Prices are up about 10% from a year ago. If you go back to 2019 levels, you’re talking about closer to a 30% increase,” said Brian Earnest, lead economist for animal protein for CoBank, which provides financial services to agricultural businesses.
Besides the small herd size, general inflation and higher production costs — fuel, transportation, feed, interest rates — are keeping the cost of beef elevated, Earnest said. He believes consumers should be prepared for beef prices to remain high in 2024.
Dawn Thilmany also expects that people will have to keep paying more because the cattle supply will remain tight for a while and, despite beef’s sticker price, consumer demand is strong.
Thilmany, a professor of agricultural economics at CSU director of the Northwest and Rocky Mountain Regional Food Business Center, said economists looked at people’s food-buying habits during the pandemic and since then. People are back to spending about what they did pre-COVID on eating out.
“But people are still spending more at home than they were spending for food before COVID, even when we adjust for inflation,” Thilmany said.
Annual U.S. beef consumption averaged 57 pounds per capita 2013-2022, according to the USDA. Despite the recent disruptions, beef consumption has trended higher, Agricultural Economic Insights reported. The rate was 59.1 pounds per capita in 2022, the highest level since 2010.
Thilmany said economists believe cooking at home became a kind of recreational activity during the pandemic, one that has continued. “Steak demand has been very high, so we kind of start getting a sense that maybe this is a treat people will give each other once a week at home.”
A good rib-eye steak is going for more than $20 a pound, or at least 10% above a year ago and at least 30% above pre-pandemic prices, Thilmany said.
Some of the costs and constrained supplies might be offset by beef imports. The U.S. normally imports different types of beef than it exports, such as leaner meat, but 2023 could set a record. With one more month of data to go, the Livestock Marketing Information Center said the imports totaled 3.421 billion pounds. The record is 3.679 billion pounds in 2004.
As of November, U.S. beef exports totaled 2.785 billion pounds in 2023, a 15% drop from 2022, Katelyn McCullock, the center director said in an email.
While economists marvel at customers continuing to purchase pricey cuts of meat, several Denver-area shoppers responding to questions about their buying habits said they’ve cut back on beef because of budgets or concerns about their health and the environment.
“This past year is probably the least meat I’ve eaten in a year,” Robert Adams of Denver said in an email.
Adams said he and his wife probably have steak once a month and typically buy the meat at Costco.
A number of people replied online that eating beef is bad for their health and for the environment because of the methane produced by cattle. One person said cows “farting is destroying the Earth.”
Actually, cattle belches rather than farts are a bigger source of methane, a potent greenhouse gas that contributes to climate change. The USDA said beef production and consumption in the U.S. accounts for 3.7% of the nation’s greenhouse gas emissions.
Several Denver-area residents replied they’re cutting out meat entirely or eating more poultry or plant-based proteins. However, one person said she’ll always eat beef because of the high amount of protein. “I hope we can finally just let farmers make money, let truckers do their job and support our local grocery stores,” she said.
Pickup trucks and calves
Tim Ritschard’s great-grandfather used to say that a semi-load of calves would buy a pickup truck.
“Anymore, with all your costs and stuff, that’s not the case,” said Ritschard, whose family has ranched in the Kremmling area since 1891.
Cattle prices are up, but so is the cost of diesel fuel. “Prices went from $1.80 or $2 (a gallon) to $3 or $4. When you’re running eight pieces of equipment every day, that adds up pretty quickly,” Ritschard said.
Last winter’s big snows in northwest Colorado provided plenty of moisture for the rangeland and allowed the Ritschards to put up a lot of hay for the cattle. “That’s money in the bank,” Ritschard said.
So far this winter, though, the weather has been drier. Ritschard said by this time, snow in some spots should be over his knees. “It’s not even covering my boots.”
Despite the challenges, Todd Inglee, executive director of the Colorado Beef Council, said ranchers are “eternal optimists.”
“They’re always saying next year it’s going to be better,” Inglee said.
He pointed to the beef industry’s focus on sustainability. Industry groups are helping finance research into beef production’s impacts on greenhouse gas emissions. The industry hopes to show that ranching can be part of the solution to climate change by keeping range land intact to help store carbon dioxide.
Janie VanWinkle ranches with her husband, her son and his family outside of Grand Junction. They have updated their irrigation systems to use water more efficiently and manage cattle grazing to keep the land in good condition.
“The grass is good. The market is good. Life is good,” VanWinkle said.
The VanWinkles got more than $1,800 per calf in November, exceeding the $1,600 per calf in 2014 they thought they’d never see topped. But other prices are rising, too.
“We need to replace a couple of pickups on the ranch right now and they’re at record highs as well,” VanWinkle said. “It takes a lot of calves to pay for that, even at $1,800 a head.”
Through the years, VanWinkle has seen people get in and out of ranching during droughts and up markets. What is new, she said, is the current exit of ranchers who don’t plan on returning to the business.
“In western Colorado, we’ve lost about three or four legacy ranches. The ranches have been in the families three, four, five even six generations,” VanWinkle said. “That’s going to have a long-term impact, bigger than the drought.”
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