TOPICS > Economy

Recession Hurts Ranchers Who’ve Seen Price of Stock Plummet

January 19, 2009 at 4:35 PM EDT
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The recession is squeezing cattlemen on all sides, with the costs of supplies rising and beef prices down. Tom Bearden reports from the National Western Stock Show on how the plummeting economy is hurting ranchers.

JIM LEHRER: And next, NewsHour correspondent Tom Bearden reports from Denver on what the recession is doing to cattlemen out west.

TOM BEARDEN, NewsHour correspondent: There aren’t many cities where office workers can descend from their glass towers and watch a parade of longhorn cattle during the lunch hour.

This was the kickoff of the National Western Stock Show in downtown Denver. Billed as the world’s premier livestock show, it’s a more than just a parade.

For more than 100 years, thousands of livestock producers from all over the country have hauled cattle to the old railroad stockyards for two weeks of auctions, exhibitions, competitions, and old-fashioned sales pitches.

CAR SHOW MARKETER: See how fast that works? If you blinked, you missed it. It picked up that whole bowl full of water and see how it locks it in?

TOM BEARDEN: But for all of the bells and whistles, the stock show is about the business of buying and selling livestock, the economic heart of the rural Midwest.

This year, it’s also about what the recession is doing to cattlemen. Dave Klompein and Leo McDonnell raise angus cattle in Montana. Klompein says ranchers are caught in a classic squeeze. Costs for things like fertilizer and feed are up; prices for their beef are down.

DAVE KLOMPEIN, Montana cattle rancher: Cattle prices last year were probably $1.20. This year, they’re down in the, what, Leo, probably 80, 90 cents, so, you know, it’s down a lot.

Recession hurts rural main street

TOM BEARDEN: McDonnell says it's the worst recession in his lifetime and that the impact is rippling through the whole economy.

LEO MCDONNELL, Montana cattle rancher: It's going to affect all our little communities, all your service industries for agriculture, and agriculture is a huge industry in this country. People forget it, that everybody is involved.

I mean, there might only be 2 percent producers, people in the United States that produce this product, ag, but there's a lot of people that service it and 100 percent of the people consume it. You know, so everybody's involved in ag.

But here in these rural states, it's going to have a real impact as you take this income out of Main Street, rural Main Street communities.

KEVIN GOOD, senior market analyst, CattleFax: We thought there was 400,000 more offset of feed yards starting Jan. 1. I don't know...

TOM BEARDEN: Kevin Good says a lot of people are struggling to stay afloat. He's a market analyst with CattleFax, a cooperative of 5,000 ranchers who share market information.

KEVIN GOOD: It's very marginal today. Over the last few years, with higher prices, it looked positive, but then Mother Nature was another factor. We've had droughts, especially in the south and the southeast.

TOM BEARDEN: He says cattle prices are down 3 percent to 4 percent from last year, 15 percent since the peak in 2005.

KEVIN GOOD: So the cow-calf segment has gone from a profitability standpoint, other than weather concerns, to now where they're very marginal, and therefore we expect to continue to see some liquidation over the next couple of years.

'I don't think we're at the bottom'

TOM BEARDEN: Some ranchers may feel like they've been at a perpetual rodeo because the last three years have been a pretty rough ride.

And the Douthit-Downey family says it's more than just the profit squeeze that makes it hard to hold on. Chuck Downey and Megan Douthit-Downey are from St. Francis, Kansas, and trying to take over the family cattle business and the farm from their dad.

They're facing competition from investors who are moving their money out of the stock market and into agricultural land. They then lease the land to farmers at rates that make it tough to expand.

MEGAN DOUTHIT-DOWNEY, Kansas cattle rancher and farmer: It's hard when investors, when the stock market falls, then they start looking at investing in ground, which hurts us, because we depend on the ground to make a living. They're looking at it as an investment, and it's hard for us to compete with them when they're making outside money and we have to make a cash flow.

It's scary, especially when we're young and getting started in farming. A lot of people don't understand the input costs and expenses it takes to start up farming. Most people don't have a clue.

And we're both in our 20s, and it's a whole different ball game, trying to get established and, you know, a lot of investors are running up land prices.

TOM BEARDEN: Generations of this family have attended the stock show for 66 years in a row. Walter Douthit wonders if they'll be able to continue the tradition in the future and about his daughter and son-in-law's long-term future in raising cattle.

WALTER DOUTHIT, Kansas cattle rancher and farmer: I don't think we're at the bottom of it, that's for sure. And I don't know what $1 trillion is going to do, but hopefully it'll do something to stimulate the economy.

TOM BEARDEN: The family will find out exactly how the market is running in the next few days, when they put their bulls on sale. In the meantime, many cattlemen hope the spring will bring higher prices and stronger demand for their products.