Ranchers were left with a backlog of cattle earlier this year when meatpacking plants had to close or slow production due to COVID-19 outbreaks among employees and public health orders forced restaurants to shut down indoor dining.
They are now facing the compounding challenge of a drought, which is decreasing the amount of available hay and forcing more tough choices about herd management.
“We had cattle that we would generally sell in like February and March, and that market kind of fell apart right then,” said Brackett Pollard, the Holy Cross Cattlemen’s Association local president who owns a ranch in Silt.
Pollard was finally able to sell some of his cattle in mid-July.
According to data collected by the Food and Environment Reporting Network, there have been eight outbreaks in meatpacking plants in Colorado that have led to more than 500 COVID-19 cases. That includes 316 cases at a JBS facility in Greeley. The facility had to close April 15 to 24. There have been nearly 40,000 meatpacking workers infected nationwide.
COVID-19 impacts at meatpacking plants, as well as market uncertainty as demand fell off from restaurants and schools, meant that commercial feedlots — where ranchers send cows before they are slaughtered — were packed and unwilling to buy additional cattle, according to ranchers interviewed for this story and a U.S. Department of Agriculture report.
So Pollard, like many other ranchers, didn’t have any other choice but to keep his yearling cattle that would have been sold or slaughtered earlier in the year.
That meant he had to take land that he would normally use for growing hay and repurpose it to pasture these yearling cattle, which are between 1 and 2 years old. Cattle are typically slaughtered when they are between 18 and 24 months old.
The change in operations could affect him in the long run.
“We not only do have to keep them because there was nowhere to go with them, and then all of a sudden we find ourselves in the middle of a drought,” Pollard said, noting that he was running low on hay to feed his cattle. “We basically got to the point where we had to get rid of them, whatever price was being offered.”
Pollard said he sold his cattle at their current market value, but if COVID-19 hadn’t happened, he probably would have received $200 more per head.
Beef prices rose, but cattle selling prices went down
On July 22, the USDA released the Boxed Beef and Fed Cattle Price Spread Investigation Report, which investigates the nationwide surge in retail beef prices. Between late March and early April, a large number of workers at meat-processing plants got sick, which by mid-April led to facility closures and slowdowns that reduced beef production.
The weekly number of slaughters nationwide fell from more than 684,000 head at the end of March to under 439,000 at the end of April, a decrease of 36%.
“This reduced demand for cattle may have contributed to lower fed cattle prices,” according to the report’s summary of impacts related to the COVID-19 pandemic. “Feedlot placements by producers and feeders were 22% lower in April than in 2019.”
Consumers began stocking up on beef in grocery stores in March when public health orders closing restaurants to indoor dining were first introduced. Demand from restaurants fell off dramatically, and many producers struggled to quickly shift away from restaurants and toward grocery stores, according to the report.
Consumers continued stocking up in April, as news of plant closures and fears of beef shortages spread, further driving up the cost of groceries.
The weekly average choice boxed beef cutout price — which measures the value of a beef carcass based on prices paid by end users — rose from about $255 per 100 pounds at the beginning of April to more than $459 by the second week of May.
In the meantime, packers purchased fewer fed cattle and dropped cattle prices because of the meatpacking-plant closures or production slowdowns. Fed cattle prices decreased by 18% between early April and early May.
The gap between the selling price of fed cattle to packers and the retail price of boxed beef increased from $66 per 100 pounds in early April to $279 in the third week of May, a 323% increase, the largest spread since 2001, according to the report. The gap started to narrow in June, from $279 per 100 pounds in the middle of May to $119 in the beginning of June.
Working through packer issues
According to Bill Fales, a Carbondale rancher, the gap between what ranchers are getting for their cattle and what consumers are paying for beef illustrates the problem with “packer consolidation,” or fewer meatpacking firms controlling more of the marketplace.
“It really showed the problem with the kind of conventional beef system because people who had cattle ready to be slaughtered got just slammed,” Fales said. “If they could get them killed, the price they were selling for went way down, (and) the packers started paying way less and charging way more on the other side of the plant — to the consumers.”
Fales wasn’t impacted by the drop in selling prices, he said, because his cattle are part of a program called Country Natural Beef.
Country Natural Beef is an Oregon-based cooperative of nearly 100 family ranches located in 13 Western states and engaged to produce beef from vegetarian fed cattle. The co-op, which works mainly with the grocery chain Whole Foods, sets its prices in January for the fiscal year.
Fales said at the outset of the pandemic, he experienced a slowdown in the amount of cattle he could send for processing. But as Whole Foods’ shelves were emptying in April, the grocery chain began asking for more beef. The cooperative was able to shift cattle to different processors to keep up with the demand, Fales said.
Amy Daley and Nicholas Krick are partners in Daley’s family-owned ranch in New Castle that also is part of the Country Natural Beef network, and they also sell beef products through their own business, nickandamysfarm.com. Like Fales, they were able to maintain their selling prices but still were left with an excess of cattle.
“We ended up reducing the amount of head that had been scheduled to go in to be processed, which left a lot of our animals still in the feedlot or unable to be processed,” Krick said. “We’re spending more money for that feed when they should be a beef product.”
Krick said they still have a backlog of cattle but are getting back on schedule.
Dry weather challenges ranchers
Perhaps most worrying to ranchers is the drought. This summer’s windy, dry conditions have made it difficult to grow hay, which is used to feed the cattle over the winter.
The National Drought Mitigation Center’s map and data released Sept. 1 show an extreme drought in Pitkin, Eagle and Garfield counties.
For the first time since 2013, the entire state is experiencing some level of drought. About 54% of Colorado is experiencing severe drought, and more than 35% extreme drought.
When drought is considered severe, snowpack and surface water levels are low and river flow is reduced, according to the National Drought Mitigation Center. When the drought becomes extreme, which is a worse condition, wildfire risk increases, pasture conditions worsen and reservoirs are extremely low. At any stage, drought forces farmers to reduce planting and ranchers to sell cattle.
Fales was cutting hay near Catherine Store in Carbondale, a few miles from his ranch. This year’s drought didn’t allow the hay to grow as high as usual.
“I used to think that one of the advantages of ranching here is we had a really stable climate,” Fales said. “I’ve been ranching here since 1973 — I’ve never seen less hay production than this year.”
Fales, who was hoping for a better second hay cutting, said his first cutting is down 40% from what he would normally harvest. “I’m going to have to sell cows because I just don’t have enough hay and it’s too expensive to buy to feed to cattle,” Fales said.
The hay shortage will probably lead to a surge in production costs for ranchers.
“We’re going to be having to make some decisions this fall, going into reducing herd numbers or buying hay — and from where we are getting that hay,” Daley said.
When a drought occurs, Pollard said, the increase in hay prices usually leads to a decrease in production and a surge in prices paid by consumers if demand remains the same.
For ranchers, he said, spring was the cattle-raising season, so many weren’t selling cattle yet.
“Now comes October,” he said, “(and) if the market hasn’t rebounded by then, there’s a real chance it could be very difficult for young ranchers or farmers, or those who have a lot of debt.”