High prices for beef across the nation are encouraging ranchers in Southwest Colorado to consider expanding their herds again after the drought conditions last year forced reductions.
Nationally, the average retail price for a pound of beef was $5.72 in March, which was an all-time high, according to the U.S. Department of Agriculture. This was about 46 cents higher than the same time the previous year.
The high price for beef is driven in part by a low supply of cattle nationwide. Recent droughts in Texas, California, Oklahoma and other areas across the West have forced many ranchers to sell livestock. The herd levels have been reduced to a number not seen since the 1950s, said Bob Bragg, a local farm and ranch consultant.
Lower corn prices also have allowed feedlots to pay more for calves than in previous years. Corn is now on average $2 cheaper per bushel than last year, Bragg said.
High demand from foreign markets including Mexico, Canada and the Pacific Rim have also contributed to the demand.
The high prices may persist for about a two years because that is about the length of time it will take to rebuild herds nationally, said Kevin Good, a senior analyst with Cattle Fax.
“People are definitely excited the market is as strong as it is,” said Drew Gordanier, a local rancher.
A wetter winter than in previous years has set the stage for local ranchers to potentially take advantage of market conditions.
“Everybody seems to be pretty upbeat and pretty optimistic,” said Phyllis Snyder, who raises cattle and is on the state board of directors for the Colorado Farm Bureau.
McPhee Reservoir is filled to 70 percent of average and will be able to deliver 15 inches of water per acre this year, according to the Dolores Water Conservancy District.
Last spring, ranchers faced tough conditions, including 4 inches of water per acre on pastures. The U.S. Forest Service also allowed only 70 percent an individual’s herd to graze, said Snyder. This forced some ranchers to sell cattle they couldn’t afford to feed.
Conditions are now encouraging ranchers to think about expanding a little bit, Gordanier said.
But it is difficult to rebuild because the prices for calves are high, and the other option for rebuilding is keep heifers off a hot market to breed.
If ranchers in areas that are recovering from drought across the country decide to keep heifers, it can make the market even tighter by reducing supply, Good said.
Currently, ranchers with calves to sell are getting contract agreements in the $1,100-$1,200 range per calf, said Gordanier. The ranchers will sell the calves in the fall.
However, profits are offset by rising costs of operation which include paying for fuel, veterinary costs and livestock supplies, Bragg said.
“It’s a matter of catch up with livestock prices,” he said.