Nevada’s cattlemen feel like teetotalers standing at the edge of the crowd flocking to an open bar.
While skyrocketing prices usually signal business owners that it’s time to hurry more product to market, the state’s ranchers worry that a rush to take advantage of the highest cattle prices in history is likely to be a sucker bet.
Their worry: Production costs have risen, too, and continuation of Nevada’s drought could push even more cattle off forage and into expensive processed feed.
In short, higher prices don’t necessarily mean higher profits — or any profits at all.
Ron Torrell, an Elko-area rancher who serves as president of the Nevada Cattlemen’s Association, said livestock producers in the state aren’t likely to begin increasing the size of their herds until they’re convinced that the drought is coming to an end.
Beef cattle account for nearly 94 percent of the 470,000 cattle and calves in Nevada — dairy cattle account for the other 6 percent — and the federal rangeland of northeastern Nevada dominates the state’s cattle industry.
Elko County alone was home to 140,000 cattle and calves at last count, the Nevada Department of Agriculture said, while Humboldt County was home to 65,000 head.
It’s a business driven almost entirely by supply and demand.
Cattle prices have risen in the past couple of years as the result of the prolonged drought in the nation’s mid-section. Also boosting prices has been strong demand from China and other international markets.
Faced by rising prices for feed after the drought reduced crop yields in the Midwest, cattlemen across the nation have been trimming their herds for the past couple of years.
Live-cattle futures for April delivery were trading at $144.55 per hundredweight on the Chicago Mercantile Exchange last week, up more than 12 percent in the previous 12 months.
Those prices are encouraging ranchers to begin rebuilding their herds in most parts of the country, especially because improved rainfall in the Midwest brings larger harvests — and lower prices — for feed crops.
But three years of drought has left supplies of forage scant on the federally owned rangelands that feed a large majority of Nevada’s cattle.
About 550 ranchers in the state pay a monthly fee of $1.35 per animal unit — that’s a cow and her calf — to graze livestock on federal lands.
That fee has remained unchanged for eight years, but Torrell noted that ranchers have felt other cost pressures. The expense of transporting livestock, for instance, is near record highs.
And drought means that forage on federal lands must be supplemented by high-priced processed feeds whose purchase kills profits.
“It’s extremely tough when we have no forage,” Torrell said.
(Although Nevada’s dairy herd is growing to meet the demands of a major new dry-milk plant at Fallon, Torrell noted that dairy cattle require high-nutrient feed. That means the dairy industry isn’t competing for the feeds purchased by cattle ranchers in the state.)
Nevada’s ranchers still have time to get back to the party of high prices. An analysis by Cattle FAX, a Colorado-based research firm, estimates five years will be required to rebuild the nation’s cattle herd.
“There is nothing wrong that an end to the drought wouldn’t solve,” said Torrell.