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June 5, 2019 - By Ching Lee - Despite a weaker cattle market and trade uncertainties affecting U.S. beef exports, California ranchers say marketing heavier cattle this year has improved their returns, thanks to abundant rainfall, which produced plentiful grasses on the range for grazing livestock.
Tehama County rancher Bert Owens described the weight gain on his cattle as "excellent," adding that "tremendous" forage production on his winter range will allow him to keep his cattle there for 10 days longer before moving them to their summer pastures.
"It was just a wonderful year for the cattle," he said. "We're really thankful for that."
Being able to sell his cattle at a higher weight has helped to offset "slightly depressed" cattle prices, he said, noting that calves he sold recently were 3% to 4% lower in price than a year ago. Ample forage has also reduced his production costs, as he didn't have to buy supplemental feed, he said.
Though Riverside County rancher Andy Domenigoni did not get "the deluge of rain" that ranchers in other parts of the state received, he described his grass year as "really good—not only for the flat land but for the hill land too."
"With all the forage that we've had, the cattle just packed on the pounds," he said.
After reducing his herd about 40% during the drought, Domenigoni said his numbers are now back to where they were prior to the drought—and he plans to expand by an additional 20% to 25%, noting he's been in a "growth mode" the past three years.
Driven by heavier carcass weights, U.S. beef production is expected to reach record levels this year, and 2020 production is projected to surpass 2019 by nearly 1%, according to estimates by the U.S. Department of Agriculture.
"That's why the market is somewhat depressed," Owens said. "There's a lot of cattle on the market and plenty of beef to go around. And there's plenty of chicken and pork, our competing meats, on the market as well."
Four or five years ago, the nation's cattle herd was much smaller and beef prices reached record highs. At that time, the state was in the middle of its multi-year drought and ranchers were thinning their herds, even though market signals told them to expand.
These days, it is dairy farmers, responding to sustained low returns, who are shrinking cattle numbers and liquidating herds, which has put "a large amount of that beef on the market," said Jon Dolieslager, owner and operator of Tulare County Stockyard. But he also noted that the cull-cow market has stabilized in recent weeks after a year of weaker prices.
Dolieslager said "there should be better demand" for other classes of beef, but there are now fewer people and companies handling and buying cattle in the state, making it harder for auction yards to sell cattle for a premium. He blamed the declining trend on the state's trucking and other regulations. Higher fuel costs also have made shipping cattle out of state "extremely expensive," he said.
George Gookin, a representative for Cattlemen's Livestock Market in Galt, said the fat-cattle market has "dropped significantly" in the last two months, making heavy feeder cattle harder to sell. But he said he expects more will move once the weather gets warmer, especially in northern states and the Midwest, and the grilling season accelerates.
"We'll use the product eventually, and that'll possibly help this fat market move up," he said.
People in the cattle business say prolonged U.S.-China trade tensions have not helped, contributing to market uncertainty. And with USDA expecting U.S. meat production to continue increasing into 2020, producers say foreign markets remain an important outlet for all meats.
"Our export markets are key drivers on how the market is acting right now," San Luis Obispo County rancher Kevin Kester said. "With protein coming out of our ears, so to speak, we need the export market in all sectors to be increasing" so that production does not outpace demand.
One bright spot on the trade front, he said, is the announcement last month that Japan has agreed to lift age restrictions on beef imports from older U.S. cattle. Japan banned entry of U.S. beef from animals older than 30 months beginning in 2005, due to cases of bovine spongiform encephalopathy in U.S. cattle.
The U.S. Meat Export Federation estimated removal of the cattle age restriction will increase exports to Japan 7% to 10%, or by $150 million to $200 million annually.
News that Canada and Mexico have agreed to remove their retaliatory tariffs—imposed last year in response to U.S. steel and aluminum tariffs—will further "help trade in general," Kester said, adding that market conditions for beef "are very dependent on how well our export markets go."
"Now we just have to work on Japan-U.S. bilateral (trade agreement) and hopefully, at some point, get China back to the table where we can complete our negotiating with China," he said.
Though the current market is not where it was last year due to "political battles" related to trade, Domenigoni said he's "optimistic that next year will be better after it all settles out." That's why he's comfortable with growing his herd, he said. He acknowledged, however, that other ranchers may be more cautious about building back too quickly after the drought, "afraid that if they kept too many cattle, they'd have to sell them again."
A large percentage of them, he said, have difficulty expanding because of land availability, as more grazing ground is converted to trees and vines.
Owens and Kester agree, noting that they're both maxed out on production and capacity, unless they buy or lease additional land.
"There's no irrigated pasture hardly available in the North State; it's all trees," Owens said. "Most people in California are just trying to hold their numbers in place."
The heavier grass year has allowed Kester to buy stocker steers, which he said he hasn't done for the last eight years due to drought in his region.
(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)
Reprinted with permission: California Farm Bureau Federation
