Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 11, 1995 TAG: 9506090059
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: GREG EDWARDS
DATELINE: LENGTH: Long
But another less predictable cycle, one of prices, also rules the lives of the people who raise beef cattle, the region's most important farm commodity.
As surely as they expect spring and summer to pass into fall and winter, beef producers know that the good times, when it comes to cattle prices, never last. Prices began dropping over a year ago, pushed downward by oversupplies of beef and competing meats, and they aren't expected to recover anytime soon.
"There's less money to pay your expenses and have some left over to pay yourself, too," said Montgomery County farmer Floyd Childress III, summing up the predicament facing cattle producers.
Cattle prices have fallen by roughly one-fourth in the last two years. An 800-pound yearling steer that sold in the $75 to $85 range two years ago goes for $55 to $65 now, according to Reggie Reynolds, executive secretary of the Virginia Cattlemen's Association in Daleville.
The drop in prices can be attributed to both increasing supplies of meat and changing consumer demand. It's a very visible example of market mechanisms at work.
While consumer demand for pork and poultry products has grown over the past 20 years, the consumption of beef products has declined, according to the U.S. Agricultural Statistics Service. In 1970, Americans consumed an average of 79.1 pounds of beef each year. By 1993, beef consumption had dropped to 61.4 pounds per capita.
On the other side of the equation, the number of cattle on farms nationwide grew from 96 million head in 1990 to 104 million last year. Poultry and pork producers followed suit. "Everybody built numbers, to where we've got more red and white meat out there than we can sell at a profit," Reynolds said.
It's hard to say how much the consumer has benefited from lower prices to farmers because other things, such as transportation and marketing costs, go into the price of beef by the time it reaches grocery store meat counters.
There is evidence, however, that the lower farm prices may be making their way to consumers. Roanoke Valley shoppers paid lower prices for beef in May - as much as $1.04 a pound lower than last year for round steak and $1.01 per pound less for veal cutlets, according to the Virginia Department of Agriculture and Consumer Services. Rib roast was down 60 cents, and hamburger declined by 11 cents.
Reynolds thinks that negative psychology has helped push cattle prices a little lower than the market would require. Once that passes, prices could rebound some, he said. On the other hand, the prospect of higher corn prices this year could cause Midwestern feedlot owners to buy fewer cattle on the open market and further depress prices.
In any case, substantial recovery of cattle prices will probably not occur anytime soon.
The market cycle for beef cattle tends to run about 10 years, explained Bill McKinnon, a marketing specialist with the Virginia Cooperative Extension Service at Virginia Tech. The cattle herd nationwide has been expanding for the last four years, and it will take three years for market forces to work it back down, he said.
The lower prices put pressure on farmers who may have to turn to their bankers to help get them through. Many beef producers, though, have off-farm sources of income, such as factory jobs or wives who work, to fall back on, McKinnon and others noted.
"People who have been in the cattle business a number of years realize there are ups and downs," said Michael Beahm, a Botetourt County beef producer.
When cattle prices are low, farmers cut back on some purchases and are more cautious with the ones they do make. Beahm and others said you have to be careful, though, not to cut back too much because of the danger of doing long-term damage to the farm operation.
You maybe try to market your cattle a little better and look for places to cut costs, but you don't want to cut back in the wrong areas, said Bill McDonald, a beef cattle and sheep producer in Montgomery County. For instance, he said, producers don't want to use cheap bulls because the inferior breeding could cost them money in the long run.
Joe Hunnings, Montgomery County extension agent, said he doesn't think cattle prices have hit bottom yet. And when farmers are hurting others, such as farm suppliers, are hurting too, Hunnings said. "There's a ripple effect through the entire local economy. There's less being spent at Kmart and at Hardee's," he said.
"You'd better believe it," said Sam Williams, manager of the Southern States Cooperative in Bedford County, when asked if he had felt the effect of the lower cattle prices on his farm supplies business.
Farmers don't cut back much on things they have to have, such as fertilizer and seed to raise feed for their livestock. But, they may do things like switch to a lower-priced worm medicine or delay putting up a new gate they may have bought in better times.
Eddie Stephens, who manages the Roanoke-Hollins Stock Yard, makes part of his money from a commission on the 50,000 head of cattle the yard sells each year. Although the number of cattle being sold through market is about the same this year as last year, the yard took in $6,000 less in commissions during the first four months of the year than it did last year because of the lower prices, Stephens said.
Farmers, however, tend to complain more about prices when they are higher than when they're lower, Stephens said. When prices are higher, they sometimes grumble because their cattle didn't bring as much money as some other farmer's cattle, he said.
Like the weather, everybody talks about the prices, McDonald, the Montgomery County producer, said. "Like the weather, there's not much you can do about it," he said.
by CNB