Discouraging words back home on the range. Ranchers' troubles include drought and a beef surplus
As far as the eye can see -- and that's pretty far out here -- the Teigen family's 1,500 head of Angus-herefords dot the scrubby range. The 24,000-acre ranch, settled 101 years ago by Mons Teigen, still looks like a part of the tame-the-Wild-West American dream. And now, in today's financially troubled agriculture sector, the debt-free Teigen ranch seems like just that -- a dream.
The cattle sold this spring and the calves being fattened up during the summer grazing season point to prosperity here. But, in fact, Western ranchers are facing tougher times than they've had in years, says Peter Teigen, the grandson who runs the ranch today.
Analysts agree that this independent segment of American agriculture -- which accounts for the biggest share in dollar volume of the agriculture industry -- faces the same financial troubles as the farming industry in the Midwest.
In the short term, ranchers' problems result in surpluses of beef on the market -- and lower prices for shoppers, industry analysts say. But in the long run, shrinking cattle stocks could drive prices much higher. Others even suggest that cattle ranching in the West may be on the wane: Nationally, there are 25,000 fewer cattle businesses now than in 1984.
The problems, as Mr. Teigen and his colleagues see them, are these:
Americans, looking for quicker and cheaper ways to eat, have foresaken pot roast for poultry. Witness the Chicken McNugget promotion at that bastion of burgers, McDonald's.
Plummeting real estate values and high interest rates have hit ranchers in the same way they've hit the Midwestern farmer. In his community, Teigen knows of four ranchers who in the past year have been foreclosed or who have sold out.
A five-year drought in the Western states has thinned the ranchers' summertime hay crop, forcing them to replace it with high-priced grains for winter feed. Ranchers and feed-lot owners say the food-supply problem is complicated, too, by artificially high grain prices. They blame the high prices on federal subsidies to grain producers, who are paid to reduce their crops.
As hard times force many ranchers to thin their herds or liquidate, a glut of beef is now on the market and prices are down. At 110 million head of cattle, the United States cattle inventory is at its lowest in 17 years. And that figure is expected to drop even further, to 105 million, by year's end, according to Cattle-Fax, a beef-marketing organization.
``Nationally, everyone is having a hard time. But there is severe liquidation in Montana, Wyoming, and the Dakotas, where things have been accelerated with the drought,'' says Jay Wardell, vice-president of the National Livestock and Meat Board.
While the industry is traditionally cyclical, ranchers are concerned that this current low may be about all they can expect from a market now saturated with alternatives to beef.
``No industry continues to grow forever. Now the growth of beef has ended,'' says Jim Riley, an economist with the National Cattlemen's Association. Per capita consumption of beef has fallen from 96 pounds in 1976 to 76 pounds this year, he says. Meanwhile, poultry has moved up from 50 pounds per capita in 1976 to 68 pounds in 1985, he explains.
With these market changes, ``there certainly is the possibility we won't have ranching in Montana [or other arid Western states],'' Mr. Riley says. If business is poor, and if transportation costs get high enough, it may not be viable to raise cattle so far from urban markets, he says.
Most in the business echo Teigen's idea for a solution to the current problems: Unify a fragmented industry to cull inventories (rather than glutting the market) and to promote beef.
``We call ourselves a `macho' industry, and everyone feels self-reliant. So, it's a fragmented industry,'' says Jack Eidel, vice-president of the Montana Stock-growers Association and a feed-lot owner in Great Falls. ``We've only got 2,500 members in the association out of about 6,000 [ranchers] in the state,'' he says.
``Advertising is probably what we've got to get done on a national basis. Before, we were top dog and we could sit back,'' he says. But recent demographic changes -- the trend toward ``health foods,'' for instance -- have reduced the nation's penchant for red meat.
``We can't change the basic economics, but we can work on the demand side by trying to improve people's willingness to by beef,'' says Mr. Wardell of the National Livestock and Meat Board. The board has been collecting money for beef promotion and research, as much as $1 per head of cattle sold in some states.
The board's budget has quadrupled in four years from $2.8 million to $10.8 million. But to illustrate how far the cattle industry still has to go, Wardell notes that promotion for Florida orange juice alone runs $40 million annually and the dairy industry spends $200 million.