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Wyoming ranchers building herd strength with record prices
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Wyoming ranchers building herd strength with record prices

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Wyoming ranchers are accustomed to storms.

Storms like 2013’s Atlas have killed thousands of cattle in the region. Drought can destroy swaths of effective grazing land. But this year, an unusual phenomenon has hit the ranches of the Cowboy state: Record high cattle prices.

With the high prices comes concern for cattle herd quality, the ability of young ranchers to join the business and even the unseen tax burden record high revenues could bring.

Some have called it the perfect storm.

“The market is different than anyone has ever seen,” said Jim Wilson, owner of the V Ranch east of Thermopolis. “We’ve seen drought before. We say we’re always within 48 hours of drought in Wyoming. You prepare for it. But this market, I don’t care who it is: no one has seen anything like it.”

At the Torrington Livestock Auction, prices for 525-pound calves are projected to average $290 per hundredweight this year. In 2013, that price hovered near $188, and five years ago it settled at $109 for the year.

Torrington Livestock Auction co-owner, Michael Shmitt points to several factors: a smaller national cattle herd in the U.S., drought conditions in cattle producing countries like Australia, and overseas markets demanding even more premium cuts.

On the V Ranch, Wilson and his wife Terry feed more than 900 Saler Angus cross cattle on 60,000 acres of grass. In 2012, drought conditions forced the Wilsons to reduce their herd size by 20 percent.

High prices mean a chance to regenerate those losses.

“You’re going to see people keeping a few more heifer calves than normal,” Wilson said. “It’s a two-edged sword. They like the money, but they know they have to build their program.”

Ranchers are using the option as an opportunity to defer income and avoid higher tax costs while regenerating herds, but keeping cattle on the ranch through a Wyoming winter carries risk.

Cold weather often causes illness and death among cattle herds. Storms can cause feed shortages. And then the market could always drop.

Beyond the risk, it costs money to feed cattle.

Ranchers must pay for protein supplements, winter hay feed and account for money they didn’t make when they decided to hold their cattle. The move is a risk, but a calculated risk.

“Our producers have been doing this for centuries,” said Derek Grant, Wyoming Depart of Agriculture spokesperson. “They’re one of the most resilient bunches of people in the industry because of the fact that they have to deal with such swings both good and bad.”

At Torrington Livestock Auction, owners are selling 20 percent fewer cattle this year than last. In recent years, cows were hard to come by.

High beef prices have led to high live cattle prices. A 2- to 3-year-old cow-calf pair is currently bringing $3,000 apiece.

The ensuing rush to breed older cows could lead to a dip in the quality of herds around the state.

But with the market looking strong, even old bulls and cows are bringing high prices.

“Today, the market looks pretty bullet proof,” Shmitt said. “Corn prices are at seven- to eight-year lows, so I don’t think you’ll see a drastic change that will make the market fall out of bed."

High prices aren’t necessarily helpful for those trying to start anew in the ranching industry.

With land prices high and live cattle prices at record highs, often a young rancher can’t find financing for the start of a new operation.

According to Shmitt, a young rancher today could easily need to spend $3,000 per head for 200 heifers, $2 million dollars to lease ranch ground and another $3 million to buy equipment for the ranch.

“There are guys out there that want in and the market could be good for four or five years, but the costs of those inputs are blocking a lot of younger ranchers’ entrance to the industry,” Shmitt said.

For Shmitt, signs point to a prolonged high for beef markets.

The conditions might be a perfect storm to some, but Jim Wilson remains wary.

“The market will go down," he said. "What we don’t know is how much it will drop and when it will drop.”

Reach general assignment reporter Trevor Graff at 307-266-0639 or Trevor.Graff@trib.com. Follow him on Twitter @TrevGraff.

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For the ambitious young farmer, agriculture is a way of life. “I was born into a farm family,” Thompson said. “They’ve told me I don’t have to choose agriculture, but I’ve always been interested in farming. I finally got to be a part of the farm more and more every year, and I kind of just merged into it.”

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