July 22, 2008

Cattle Industry Experiencing Hard Times

OKEECHOBEE, Fla. -- On a July morning just after sunrise, Frank Wesley "Wes" Williamson III, a third-generation beef cattle rancher, rides his horse through lush pasture with his cowhands, rounding up cows for pregnancy testing.

The cowboys guide the herd of Brangus _ a mix of Brahman and Angus _ a mile or so away to a wooden holding pen built under the shade of a giant live oak. There each cow is sonogrammed by a team of veterinarians to check for pregnancy.

Under the stark economics of beef-cattle ranching, some cows may survive eight or 10 years, but only by producing as many offspring. "Every cow has to produce a calf every year, or she has to pay her bill by going to slaughter," said Williamson, 52, who runs the ranch with his 78-year-old father, Frank "Sonny" W. Williamson Jr., and his son, John Williamson, 31.

These days, even starker economics are weighing on the Williamson Cattle Co. Soaring fuel, feed and fertilizer prices are squeezing the 9,000-acre family spread outside Okeechobee and other ranches around the state and nation, even as the price the calves fetch at feedlots in the Midwest and West has fallen from a year ago.

In a sale this spring, for instance, instead of making roughly $50 a head, the ranch lost as much as $135 on every head of cattle sold. "This is the most unusual, unbelievable market I've ever seen because of the cost of energy and feed," said Wes, who packs a BlackBerry and a cellphone that frequently interrupt him. "A year ago, we thought prices for fuel and feed were high. Now last year's prices look good."

The Williamsons, who also have citrus groves on the ranch and run a big catfish farm in Alabama, provide a window into an often-forgotten facet of Florida, the 12th-largest state in beef-cattle production.

The family's long-term commitment to the land contrasts sharply with the get-rich-quick mentality that shapes much of the state's land use.

The Williamsons, whose Florida roots stretch back seven generations, have enjoyed an idyllic lifestyle: good country living amid a bounty of wildlife, including Osceola wild turkey, deer, and bald eagles. But they've also endured hurricanes, drought, crop insects, disease and now unfavorable economics.

"It's a great place to grow up and raise a family," said Wes. "It's a romantic business to be in. The downside is it's not very profitable."

His grandfather, Frank Williamson Sr., bought the vast stretch of swamp, hammocks and pine forest around 1950. It sits in the heart of Florida cattle country, 130 miles northwest of Miami near the northern edge of Lake Okeechobee. Early on, he balanced his holdings with orange and grapefruit groves.

"Granddaddy was smart enough to know the importance of diversifying," said Wes, a tall, athletic man with a soft Florida drawl. "Every year when he got money he'd plant more citrus groves."

Even so, the ranch reaps only about 1 percent return on investment. "If we sold this place and put the money in a CD, we'd make four times as much," he said.

That's about the going rate for the beef cattle business. "By and large, cattle ranching is a labor-intensive, capital-intensive business, with low returns on investment," said Kenneth Mathews, an agricultural economist with the U.S. Department of Agriculture. "You either really like doing it, or you find something else to do."

Like most in Florida, the Williamson ranch is a cow-calf operation: The family breeds and raises calves until they reach 500 pounds or so, then ships them out West. In the Great Plains states such as Texas, Oklahoma, and Kansas, the cattle are put out to fields for more grazing or sent directly to feedlots, where they are fattened on corn until they reach 1,100-1,200 pounds before slaughter.

Such specialization works best here, because South Florida's subtropical climate, which provides grass nearly year-round, is ideal for cow-calf ranching. But the same hot and wet conditions make the state unsuitable for fattening cattle later in their life cycle. And it's cheaper to ship the cattle to the grain than vice versa.

These days, the biggest challenge for Florida ranchers is coping with high input costs. Diesel fuel _ used on the ranch and in trucking the cattle to feedlots _ costs about $4.84 a gallon, compared with $2.95 a year ago.

The cost of fertilizer, used to help grow grass, has soared to more than $400 a ton from about $200. And the price of corn has roughly doubled from its 2007 average of $3.40 a bushel, reflecting the combined wallop of strong international demand, U.S. policy mandating ethanol as a gasoline additive, and the impact of Midwest floods on crops.

Meanwhile, the feedlots are paying less for calves than a year ago, because the high cost of trucking them to facilities and fattening them on corn makes them less valuable.

"We're price-takers, not price-makers," said Sonny, a tall, lean man, who started working cattle in the 1940s, when he'd rise at 4:30 a.m. to feed the horses and hit the sack shortly after nightfall. "Our ultimate boss lady is the housewife in the supermarket, when she sees the price and says, 'I think I'll buy chicken.'"

Crunching numbers, Wes figures it costs $71 to haul a 500-pound calf 1,700 miles to a feedlot in Amarillo, Texas, compared with $45 a head last year. Meanwhile, the cost to gain _ how much it costs to add a pound to a calf _ has risen to 91 cents, up from 66 cents last year. That means it costs an additional $190 a head to fatten a cow at the feedlot than it did last year.

As a result, feedlots and ranchers are getting hammered with losses.

Mulling ways to save, Wes is considering keeping calves on the ranch for 60 to 100 days after they are weaned. They can put on weight by foraging grass before they are sent out West. "I could put on another 100 pounds almost free," said Wes, who keeps close track of cattle and feed prices and futures. "Any gain you can put on them in grass, you're money ahead."

The ranch, which has 17 employees, provides health insurance and a 401(k) retirement plan _ an easy target for cutting costs in lean times. But the family refuses to squeeze employees. Many workers have been with the ranch more than 20 years, and treating employees well makes good business sense long term, Wes said.

"We want to know if there is a hurricane they will show up," he said. "We have workers whose fathers worked for my father and one whose grandfather worked for my grandfather."

Despite the high cost of inputs, Wes predicts the ranch will make a small profit on cattle this year. But that is because the family has owned the land for decades and doesn't have to pay rent. Many other ranchers aren't in such a solid position. "You damn sure couldn't buy a ranch and pay for it with cattle," Wes said.

The orange crop should also be profitable, he anticipates, but grapefruit will produce a loss because most will go for juice, rather than higher-margin fresh fruit.

Even on his deathbed, the elder Williamson reminded his family of the peaks and valleys of ranching and urged them to plan accordingly.

The founder also instilled a sense of stewardship toward the land that figures prominently in the family's mind set. Large sections of the ranch remain in a natural state, with clusters of pine forest, swamp and oak hammocks that provide habitat for deer, wild boar and turkey, and a wealth of birds.

Wes says he looks to balance sustainability and profitability, because the ranch won't survive without both. The ranch easily could add 1,000 head of cattle to the more than 3,000 currently there, he figures, but the family doesn't believe in intensifying operations at the expense of the environment.

"From the very beginning, we decided a large area would be left untouched," said Sonny, as he steered his Chevy 4x4 truck along a dirt stretch just before a flock of wild turkeys crossed in front of him.

"Daddy had an idea: You can make money and go on vacation to a beautiful place, or you can keep the beauty where you are and enjoy it all the time," he said.

The ranch has received several environmental stewardship awards, including a 2004 national award from the National Cattlemen's Beef Association. Currently, the Williamsons are participating in a pilot project with state and federal agencies and the World Wildlife Fund, a nonprofit conservation group, to retain more water on the ranch in a bid to cleanse it of nutrients such as phosphorus before it flows into Lake Okeechobee.

"The Williamson Cattle Company is one of our environmental pioneers," said Sarah Lynch, a director in the World Wildlife Fund's agricultural unit in Washington. Beef-cattle ranching is a preferred land use, which provides habitat for wildlife, she said. One aim of the project is to help keep ranching economically viable.

During the real-estate frenzy a few years back, real estate agents came calling to sound out the Williamsons on whether they wanted to sell all or part of their land. Some other ranchers have succumbed to temptation, selling holdings to developers or subdividing land into smaller "boutique ranches" run by hobby ranchers.

But not the Williamsons. "I don't even want to know the price. It's not anything I want to consider," said Wes. "I feel a real obligation to my grandfather and my father, who put so much work into this and to my descendants to maintain this property."