Ranchers in Santa Cruz County are not strangers to being affected by factors outside their control. The timing and amounts of winter rain and the monsoons, the price of hay and supplements, trade policies, the futures market and more have always influenced the rancher’s bottom line, but this year’s pandemic has left local ranchers scrambling to adapt their business models in the face of a lot of unknown variables.
Ranching is a major player in the economy of Santa Cruz County. According to the 2017 USDA agricultural census, the market value of livestock sold in the county was $10 million. A study released in April by the National Cattlemen’s Beef Association predicted a $13.6 billion loss to the industry nationwide because of the coronavirus pandemic.
Beef processing plants have closed or are working at greatly reduced capacity due to coronavirus outbreaks in workers at these plants. The closing of these plants across the country has had a major ripple effect throughout the industry.
Ian Tomlinson, of the Vera Earl Ranch in Sonoita, estimates that the packing plants are operating at only 65%-70% capacity. This has created a backlog of cattle in feedlots and the price of fat feeder cattle has dropped 20%, according to Tomlinson.
He has cattle in two feedlots in Texas which should have gone to the packing plants one month ago. Not only is it costing more money to continue to feed these cattle, the quality of the carcass declines.
“When they sit in the feedlot an extra month it completely skews your break-even point,” he said.
The slowdown in production at the packing plants is not the only factor cutting into ranchers’ bottom lines. Tomlinson pointed to “erosion of demand” as a worry for beef producers. Traditionally, “hotels, restaurants and institutions account for 33% of beef sales in volume and 50% of the value. And we zapped that right out of the beef pipeline. How much of that comes back?” he said. Added to that is the forecast that fewer people may be buying beef in the stores due to higher prices and to high unemployment.
“There’s a ton of unknowns. That’s the worst thing out there,” he said. “I’m ever the pessimist. We are planning for an 18-month bear market.”
To adjust to these uncertain times, he is looking at different ways to market their calves. He usually sells them through one of the summer video auctions. “This year we are exploring spreading out over more than one sale. In addition, “We are much more reserved in how we buy cattle,” he added. The Tomlinsons have also started a successful direct marketing program to sell their beef locally.
Dean Fish, owner of Anchor F Cattle, based north of Nogales, runs a “100% cow-calf operation” raising stocker cattle. Beef production begins with the raising of calves, known as stockers, who are sold to feed lots. These cattle are then referred to as ‘feeders. When feeders have attained the optimum weight, they are sent to packing houses to be processed into the meat sold in retail outlets.
“There are disconnects in the supply chain now,” Fish said. This “has negatively impacted the bottom of the chain. You take what you can get.” Fish, who usually sells his calves in the fall, worries about the market for his calves. “I think it will be depressed. How much, I don’t know,” he said.
He is adjusting his program by “making sure I’m being as conservative as I can. I have fixed costs, like vaccines and feed. Now I need some bulls. Instead of a $6000 bull, I’ll buy a $2500 bull.” He is also putting off upgrades to his facilities. “We had a good winter,” he said, referring to the plentiful rainfall that has producing decent spring grass, “so we don’t need so many supplements.” If the summer rains are late, that will drive up costs, as the cattle will need more supplemental feed. “I’m trying to imagine every scenario that I can and plan for it,” he said. If he had to, he would sell his open (unbred) heifers and older cows.
Fish sells many of his calves as ‘club calves’ for 4-H and FFA students to raise and show. In addition, he is the beef project leader for Santa Cruz County 4-H and runs the junior livestock auction for the County Fair. Plans for holding this year’s fair, scheduled for September, are still uncertain. “I’m not closing the doors to anything. We’re rolling forward as if we’re having the fair,” Fish said. “Pima County held a virtual show and online auction. It was well supported. We are prepared to do it an alternative way if we have to.”
“There’s a lot of uncertainty in the market, it is so dependent on the futures market. There’s so many factors and tremendous fluctuation,” Fish said. Despite that, he is not pessimistic about the long-term picture. “I don’t see a loss of ranches here,” he said. People are still going to eat. Beef is still the protein of choice.”