Colorado Agriculture Plummets12/20/2016
Statewide income from farms and ranches is projected to fall to $444 million in 2016 from about $1.3 billion in 2015.
It’s a level that Colorado agriculture hasn’t seen since 1986, according to a report from the University of Colorado Boulder.
The fall can be largely attributed to the decline in cattle prices because the industry accounts for the largest portion of the state’s agriculture economy, said Stephen Koontz, a professor at Colorado State University.
He expects prices for cattle will not level off until 2018, and producers will likely not see the gains that the Trans-Pacific Partnership could have fueled because President-elect Donald Trump does not support it.
“TPP really put us on a more level footing,” Koontz said.
The trade agreement would have moderated the tariffs that beef faces and helped expand the reach of the U.S. into large markets around the Pacific rim.
But now American beef could lose to meat from Australia and New Zealand over the next five to seven years, he said.
The rise in prices was driven by droughts and steep prices in hay that led many producers to sell off their herds, leaving the market without sufficient supply.
But around the time that the markets were rebuilding their herds, demand from U.S. consumers dropped off.
“Consumers got tired of paying at record high prices,” Koontz said.
Cattle prices peaked in 2014 but then fell steeply in mid-2015 and remain down.
Calves had been selling for $1,500 each, but after the fall in prices, producers were only being paid $700 or $800 each, said Duane Cugnini, owner of Hi-Country Cattle Auction in Breen.
While prices were high, younger and more inexperienced people bought into the industry and the fall will likely hurt them the most, he said.
“When cattle (prices) get high, a lot of people jump in,” he said.
Some with more experience took advantage of the prices to save for the downturn, Koontz said.
“The cattle market is real erratic – you can’t think it’s going to be good forever or you’ll go broke,” Cugnini said.
The other major crops for Southwest Colorado, hay and alfalfa, also have fallen, which can help those with cattle. But many producers raise both.
Koontz expects the entire agriculture sector in Colorado to be down for a while because a strong dollar will depress exports and that ripple effect could be felt across rural Colorado.
“Ag has benefited from those international markets pretty tremendously,” he said.
While the markets are down, producers on the Western Slope are likely to face demand for their water because other sectors of Colorado’s economy are expected to grow and attract more people to urban areas.
“I think we will go back to some very serious fights,” Koontz said.
Durango’s economy is diversified, but for many rural Colorado towns, water preserves income.
Turning the tide for agriculture will likely require a weaker dollar internationally that will help drive exports, he said.
Source: Mary Shinn, The Durango Herald