Ranchers balk at sheep prices, suspect fleecing

2012-10-29T00:15:00Z 2012-10-29T05:30:04Z Ranchers balk at sheep prices, suspect fleecingBy TOM LUTEY tlutey@billingsgazette.com The Billings Gazette

When sheep ranchers suspect they’re getting fleeced, things get ugly.

One year after receiving record prices for their lambs, ranchers have seen payments collapse to 86 cents a pound, a price too low to even pay their bills.

They suspect the nation’s biggest meatpacking companies of fixing prices, and they are leaning on Agriculture Secretary Tom Vilsack to investigate using the Grain Inspection, Packers and Stockyards Administration. GIPSA is supposed to ensure market fairness.

“The gist of it is, because of the drastic price swing, a lot of senators and representatives have been asked to send some letters to Vilsack, asking him to look into this,” said Randy Tunby, Montana Woolgrowers Association president.

Ranchers expect prices to fluctuate and plan accordingly, but they say this year’s market collapse was unforeseeable.

“We were selling a truckload of lambs for $120,000 to $130,000, now this year we’re getting $40,000,” said Mike Hollenbeck, of Molt.

Hollenbeck and his son Henry see several factors at play in the lamb market, including severe drought and rising feed costs. But the biggest factor, they say, is the shrinking number of American meatpackers butchering lamb.

The American sheep industry has been in steady decline since the 1884, when the sheep population peaked at 51 million head, according to USDA. Today, there are roughly 6 million sheep in the United States. The number of sheep ranches is also declining, having gone from 105,000 in the 1990s to roughly 80,000 today. In the Rocky Mountain states, the sheep population dropped 21 percent between 1987 and 2007.

There are just two major lamb packers — Superior Farms, based in Davis, Calif., and Brazilian-owned JBS USA, of Greeley, Colo. With that kind of market concentration, it doesn’t take much for one company’s decisions to send ripples through the economy. If one decides it has enough lambs on hand and cuts back on buying, lower prices soon follow, which thin ranchers’ wallets.

This year, there’s been an oversupply of lambs ready for slaughter as high feed costs, extreme drought and challenging economic conditions play out. Consequences of that oversupply have rippled into the market of feeder lambs — that is, lambs fresh off the farm that need weeks of fattening up in feedlots before slaughter.

Tunby thinks the bulge of slaughter lambs has almost worked through the supply line and that prices should begin slowly increasing. The Hollenbecks are seeing prices in the 90-cent-to-a-dollar range, but they say the rebound will have creep toward $1.50 to reach the break-even point.

The year has been rough on all agricultural producers, Henry Hollenbeck said as he watched 900 head of Targhee-Rambouillet ewes chew down a Molt farmer’s failed crop of dryland peas. Stunted by drought, the peas never grew tall enough to be cut. So the farmer sold his crop as sheep forage to make the best of a bad situation.

Eyeing the ewes, Henry Hollenbeck noted that they’re a little plump for this time of year. He’ll be turning rams out into the flock soon. But these sheep have endured a tough summer. The ewes spent the spring in Riverton, Wyo., where the rain never fell. They were 20 pounds too light when they returned to Montana.

The congressional push for USDA action comes mostly from lawmakers in Rocky Mountain states, including U.S. Sens. Max Baucus and Jon Tester of Montana, both Democrats; Sens. John Thune, Republican, and Tim Johnson, Democrat, of South Dakota; Sens. John Hoeven, Republican, and Kent Conrad, Democrat, of North Dakota; and Sens. Michael Enzi and John Barrasso, Republicans, of Wyoming.

“Our sheep producers are dealing with market disruptions from this year’s record drought,” Tester said in a prepared statement. “They deserve a chance to compete on a level playing field so they can get back on their feet and keep feeding our families and strengthening our economy.”

The GIPSA investigation was the request lawmakers emphasized.

“Market instability hurts producers and can affect consumer behavior at the meat counter,” Enzi said in prepared statement. “The USDA needs to explore whether our lamb producers have suffered from price manipulation and determine what changes need to be made to help producers manage risk in the market.”

In addition to asking GIPSA to investigate, the senators want the USDA Risk Management Agency to make sure the Livestock Risk Management Program is working. That program is an optional insurance program intended to help ranchers deal with market drops. Ranchers have indicated the program is not performing well.

USDA is also being asked to look at improving export opportunities.

Mike Hollenbeck said GIPSA is an aging agency that does not have a good record of solving market problems.

“If GIPSA wants to investigate it, that’s fine, but they’re not going to lead us out of this,” Hollenbeck said.

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