California’s drought conditions highlight the growing difficulty of doing business on the industry’s fringes, where agriculture competes with urbanization for precious water. A vertically integrated company, Harris Ranch Beef demonstrates how the drought affects all parts of the supply chain.
Early March in the Central Valley, and cattle country between Fresno and the Sierra Nevadas is looking pretty green and thick with forage. But looks can be deceiving.
The rain that fell in the last week of February was enough to keep up appearances, but the state’s worst drought in centuries is established firmly underneath. There won’t be a lot left to be desired once the cattle graze that tasty top layer. The 30 months leading up to January were the driest on record, and so far these parts have seen only 1.5 of the average 9.5 inches of rainfall.
California’s 600,000-head cattle herd is projected to be cut by 100,000 head this year, according to USDA, but the ranchers here suspect it will be far worse. Throughout the state they sent 7 percent more animals to feed yards as of Jan. 31 than they did a year ago as their pasture withers away.
Cattle graze in California's Central Valley, soon after the area received a rare rainfall in late February. But a historic drought, now into its third consecutive year, ensures that there won't be much to eat beneath that fresh top layer. Photo credit: Tom Johnston
California accounts for only 2 percent of the nation’s beef cow herd and 4 percent of U.S. cattle on feed, but its woes add to those of larger cattle-producing states, such as Texas and Oklahoma. They also struggle to recover from severe drought conditions that peaked in 2011 but threaten more damage this year in certain regions, such as the Panhandle.
“It’s what it is,” says John Lacey, a past National Cattlemen’s Beef Association president whose family has been ranching in California since 1870, sitting in the offices of Harris Feeding Co. in Coalinga, Calif. “The reality is here. Everyone is merchandising their cattle, not of their choice but the drought’s. California’s in a world of hurt.”
Harris Ranch tells the story of this disaster on many levels, not only because it is a vertically integrated company that controls beef production from farm to fabrication. Its owner produces 30 or so other crops that may or may not come to be this year; more than 15,500 of Harris’s acres are idle, and some 4,000 field workers will be out of work.
California’s in a world of hurt.
That’s just one operation and just one of the many sad stories in California, whose agricultural bounty includes 400 commodities and which produces half the country’s fruits, nuts and vegetables.
Between Coalinga, where Harris feeds hundreds of thousands of cattle, and Fresno, where the company slaughters them, the farm fields should be flush with veggies. They’re not; driving these roads, one sees dull brown fields against a big gray haze. Farmers are saving their water for permanent crops such as fruit trees. The snowmelt that feeds the irrigation canals throughout the valley has failed again, as the Sierras have seen a relative dusting through the winter.
Harris Ranch Beef Co.’s Richard Stober, head of cattle procurement, and Bob Martin, feedlot superintendent, explain not only the immediate impacts that California’s historic drought is having on their company but also the painstaking efforts that will be required long term to rebuild cattle genetics on which their brand is based.
No surprise the cowboys convening at Harris aren’t so keen on prospects for the next few years. They’re going through their third straight drought year, and with declining cattle numbers, packing plants closing and the economics making it too expensive for producers to re-enter the game, they’re also worried about the long-term viability of the industry.
Impact
By early March, according to Harris feedlot superintendent Bob Martin, the California cow-calf producer had sold off his older cows and calf crop and bought only enough hay for his younger cows. Stocking operations were pretty much depleted, too. At the end of April, he’d normally have begun receiving an influx of stockers off of the grass at the nearby foothills of the San Joaquin Mountains.
Not this year.
Richard Stober, who heads up cattle procurement for Harris, says the company is well over 60,000 short of its normal cattle supply, sourced from its own pasture operations and partnering ranches.
“Our supply is going to be a tough one,” Martin says. “We’re gonna have to go farther away to find some. Unfortunately the whole country is short of cattle. We’ll be competing with the big buyers in the Midwest (who pay less for feed because they’re closer to it).”
But demand for Harris’s end products are still high, and the plant near Fresno still needs 4,800 head per week to fill orders.
“You can’t say, ‘Sorry, we ran out of product.’ You’d lose market share, retail space. We have to be there 52 weeks of the year. We’re just going to spend more money on freight to get a reliable source,” says CEO Dave Wood.
Increasingly the product mix at the plant is leaning toward ground beef, as retailers try to hold the line on price for consumers. The company is grinding some 1 million pounds per week now, more than it ever has, and having to fill larger orders as the retail industry consolidates, says Brad Caudill, director of marketing.
“So far we haven’t shorted anybody,” he says. “But the price is what’s getting some pushback, you might say.”
The farther Harris has to stretch to source cattle, the more it has to pay and then upcharge to customers. So far the company has been paying an additional $1.50 per pound to compensate for the increase in transportation costs associated with reaching farther east. Going into the summer and fall, the company expects that will go as high as $8 per pound. The longer distance isn’t great for the cattle or the company; travel can bruise and shrink the muscle, making it more difficult to attain the consistent quality required for the Harris beef brand, Martin points out.
Rebuilding genetics
The long-term implications are even greater.
Harris established a “Partnership of Quality” with area ranchers 15 years ago, wherein it set parameters and helped develop the genetics to meet its requirements. Over time the system raised the quality of the carcasses to 95 percent Choice grade from 30 to 40 percent when it began. Even with perfect grass conditions it would take three to five years now to replenish the cow numbers, but it will take a lot longer than that to rebuild the genetics.
“In our ‘Partnership of Quality,’ a cow-calf operator furnishes us a yearling with our standardized genetics,” Stober explains. “What’s going on now is those are being sold away from their mothers at 300 pounds, which isn’t a manageable weight for us [it’s too small]. Two years down the road … those cattle won’t be there. Likewise, all the rest of the cow-calf producers that raise babies, make yearlings, furnish us feeders — those are gone.
We’re not talking about this immediate effect where there’s this many cattle gone. We’re talking about this year, next year and the year after, and that’s the dramatic effect that this drought is going to have on Harris Feeding Co. and Harris Ranch Beef Co.
“If you stop and think about it for a minute, we’re not talking about this immediate effect where there’s this many cattle gone. We’re talking about this year, next year and the year after, and that’s the dramatic effect that this drought is going to have on Harris Feeding Company and Harris Ranch Beef Company. We’re losing our basic supply that we depended on, that we built a brand on. … It’s going to dramatically change not only where we source but how we source. In the end, we have to make it fit the brand.”
But such is life in the California beef industry, where the options are dwindling across its supply chain. One of the starkest reminders came earlier this year when National Beef Packing Co. announced the closure of its Brawley, Calif., slaughterhouse. The facility processed nearly 2,000 head of cattle per day.
“If we wanted to buy fed steer, we’d have to go Texas,” Martin says. “There are no feed yards anymore. Well, there are some in the Imperial Valley with Holsteins, but they’re going to be going away because [National Beef’s] Brawley plant is closing. Throughout this area there were 15 feed yards or more in the 1970s. Then the L.A. packers dried up, and then the same in San Francisco. The main reason why we bought the existing plant is so we’d have a place to send our cattle.”
This is part of what Kevin Kester of Parkfield, Calif.-based Bear Valley Ranch & Vineyards is talking about when he expresses concern for the state’s beef production infrastructure. The other part is an aging rancher demographic (the average farmer is 60 years old, according to USDA) that is less likely to put up the capital to re-enter the business if they have to go out of it. The economics aren’t all that inviting to the next generation, either.
“All of this consolidation leads to … probably the bigger cattle numbers will be consolidated in the Midwest as we move on,” he says.
Lacey agrees.
“I don’t think anything is permanent, but there are some big impacts, especially for the cow-calf producer who has maybe been breeding his herd and building genetics for the last 20 years,” he says. “All the sudden, they’re out of business or if not, maybe have 20 percent of their cattle herd. We’re selling in a great market today, and thank God for that. But we’ve been through these droughts before, and I can remember back in ‘89, ‘90 and ’91, when it cost us more to get back in. Believe it or not, it can happen. And you’re not going to replace those cattle you’ve bred for the last 25 or 30 years with the same genetics that you’re going to get at the sale yard to get back into business. The biggest impact is the economics.”
Water world
So dire is the situation in California that earlier this year, with nearly 55 counties declared as primary natural disaster areas due to drought, that Congress doled $100 million in livestock disaster assistance for losses incurred this year and as much as $50 million for 2012 and 2013.
The announcement of those funds, which became available April 15, followed an announcement by USDA of $20 million to spur agricultural conservation enhancements, including irrigation efficiency improvements and protection of grazing lands; $15 million to stimulate innovative conservation technologies; and the establishment of regional “climate hubs” nationwide giving farmers and ranchers informational resources to inform decisions around climate change.
Those Californians who can survive the drought will have to deal with another problem that it has put a spotlight on: water availability.
Snow blow
A major lack of snow in California’s Sierra Nevada Mountains this winter failed Central Valley farmers and ranchers who depend on melt from the snowpack for water. The contrast between the 2013 and 2014 snowfalls is stark. Click on buttons to activate comparison
A major lack of snow in California’s Sierra Nevada Mountains this winter failed Central Valley farmers and ranchers who depend on melt from the snowpack for water. The contrast between the 2013 and 2014 snowfalls is stark. Click on buttons to activate comparison
In the Central Valley, in particular, farming and ranching success has depended on snows falling in the Sierra Nevada Mountains and melting from October to September. However, with gradually increasing average temperatures, the water season has shrunk, starting later and ending sooner, because precipitation falling as snow increasingly is evaporating before it can turn in to liquid or — more often — precipitation is simply falling as liquid.
Brian Fuchs, a climatologist with the National Drought Mitigation Center at the School of Natural Resources, University of Nebraska-Lincoln, explains that precipitation stored as snow allows liquid run-off to be released in the late spring and early summer and held in the water system’s holding positions. The trend over at least the last couple of decades, however, is that the precipitation is falling as liquid.
“If you get more precipitation as liquid water, you’re capturing that water and moving it a lot sooner than you wanted to, because you have to leave room for flood waters,” he says, explaining that this will reduce the amount of available water during spring and summer for both municipal and agricultural use. “This continues to be problematic as these uses are competing for a limited supply of water.”
Where nature is letting farmers and ranchers down, so is the man-made infrastructure and laws meant to manage California’s water, they say.
Dave Wood, CEO of Harris Ranch Beef, says water management is a way of life in the San Joaquin Valley. Harris was the first to implement subsurface drip irrigation, for example, to maximize moisture efficiency on crops. At this point, the packing plant has 1,000-foot-deep wells to draw from and supply shouldn’t be an issue — unless the drought continues for another couple years, he says..
“This whole drought could be a blessing for the state of California,” he says. “Right now the infrastructure for water in state of California was designed when it had 19 million people. Today we have close to 40 million people, and we haven’t added a dam, haven’t done anything to fix the infrastructure, because the environmentalists have been against building any new dams. So this may be a blessing that people finally wake up and realize that we need more dams so that in wet years we can store water.”
Irrigation water is released on a farm in California in May. Photo credit:
We can’t assume the normal going forward.
Fuchs, the climatologist, agrees that California’s population has boomed beyond its water infrastructure. He adds that not only is the increasing population “putting more straws in the cup,” but also that old systems, including reservoirs and lakes, are shrinking in capacity due to geological sedimentation.
Wood, meanwhile, expects increased regulations on water supply and use, hoping that those will not jeopardize California’s nearly $45 billion agriculture industry and the mouths it feeds in the name of saving, for example, certain endangered animal species.
“It will definitely complicate it,” he says. “Hopefully we’ll go back to business as usual, but our infrastructure has got to be redesigned. We need to give the environmentalists a wake-up call. Our state and federal legislature have lacked common sense.”
Despite the challenges, Harris Ranch sees a future in California, where a Mediterranean climate and 32 million acres of grazing land continues to call to cattlemen.
The future is unpredictable, but Stober is sure that “we can’t assume the normal going forward.”
In the next chapter, we explore the contrasting impacts on local communities dependent on meatpacking plants.The Communities
