Calf, heifer ranches fight their own economic battles

By Ron Goble

Few businesses connected to the dairy industry were not adversely affected by the long stretch of low milk prices that hammered dairy producers nationwide. Calf and heifer ranches were no exception. They fought their own economic battles during the worst economic downturn ever seen in dairying.

Some calf ranches went out of business, while others were able to keep their heads above the financial flood waters.

Some producers feeling the economic squeeze, brought their calves home to the dairy in an effort to curtail expenses. Others saw the economics differently and – for the first time – made the decision to use the services of a calf ranch for the same reason.

Following are several personal stories told by those calf and heifer ranch operators caught in this economic tsunami.

Nicholas Calf Ranch

Rochelle and Peter Koch, owners of Nicholas Calf Ranch, Winton, Calif., started raising bull calves in Oregon in 1990. Three years later they moved their operation to Central California where they “didn’t have to fight the constant mud and the rain.”

They converted their bull calf operation to raising dairy heifers only – from day-old to 120 days.

Rochelle said they survived the 2009 downturn that has devastated many operators in the dairy industry.

“We had one dairy out of the dozens we serve, take their calves home to raise on their own,” said Rochelle. “Two other dairy clients went bankrupt and are no longer in business.

“Actually, we’ve filled those vacancies with dairies that had never used calf ranches before. When their bankers and financial consultants came to evaluate their operations they recommended using a calf ranch to raise their calves because when all is said and done, it was more economical to have us raise them.”

Rochelle indicated that when the hard times started, they sent a letter to their dairy clients asking if the producers wanted them to reduce the extent of their services to cut costs.

“I believe we can’t cut what we feed because it would only result in sick calves,” she said. “The lower quality ration would mean we would have a higher medicine cost and result in a poor quality heifer. We asked if they wanted us to stop pulling blood samples daily. Overwhelmingly, they wanted us to protect the health and well being of their animals. The calf is their future.”

So, Nicholas Calf Ranch continues to keep a veterinarian and nutritionist on staff, while maintaining the calf ration at a high quality level.

“Since we purchase all our feed from outside farms, we try to buy for next year. Although the futures market can be frustrating at times, whenever feed costs go down we can save our dairymen some money and drop our prices,” she said. “We had two price cuts in the past two years. Every little bit helps if we can make it more economical for our clients.”

Not all stories, however,  are as encouraging and positive as that of Rochelle and Peter Koch in California.

Amber Hills Ranch

Bart Hanson is owner/operator of Amber Hills Ranch in Rupert, Idaho. “We’ve raised dairy heifers for about 17 years. Currently we are raising only dairy beef calves. Before we cut back, our heifers were contract raised to six months and dairy beef to three months. All of our beef calves are age and source verified with electronic ID because of marketplace demand,” Hanson stated.

“Over the last few months, we’ve seen all our dairy heifer clients make the decision to take their animals home. From now on, the dairy producers will raise their own calves. Thus, we no longer raise any dairy heifer calves. That’s why we only raise dairy beef steers,” he explained.

“Right now the market is so bad and the margins so small, we are barely hanging on. It is hand-to-mouth. I’m concerned if we can’t make it until April. There is very little margin for profit in anything. Dairy is not the business to be in right now, until things change and demand improves considerably. I think come April, we will be finished as far as serving the dairy industry goes.

“I hope to pay off what debts I’ve accumulated,” he said.

Hanson is not without options. He has a university degree in clinical lab science/chemistry and worked in the medical field for nine years before going into the calf and heifer raising business.

“Health care is a big topic on everyone’s mind these days and I can possibly go back to working in that industry,” he said. “However, like 10% of the rest of America, I’ll be looking for a job soon.”

Hanson and his wife, Shelly have three sons and one daughter. “The family is concerned about our future, but hanging in there. We are hopeful,” he declared.

Cameiro Heifer Ranch

Cameiro Heifer Ranch in Brawly, Calif., raises heifers from 120 days to six to eight weeks prior to calving, explained general manager Diana Lujano-Gonzales.

She has had to make considerable adjustments in their operation as they struggle to survive the last year and a half of upside down dairy industry economics.

“We’ve gone from a ranch population of 18,000 heifers to around 10,000 heifers,” she said. “The economic downturn has required significant changes in our business. I’ve seen more bank appraisers and accountants in the last 18 months than in the last 15 years. These bankers and accountants are asking for more cost information than ever before, and dairymen are getting a lot of pressure from banks to take their calves and heifers home.”

Lujano-Gonzales said they have seen a combination of scenarios impacting a group of nine producers who were their customers. “Two of our producer customers went out on the CWT program. One was forced out of business because of the economic downturn, and six others of the group decided to raise their animals at home based on advice from their bankers.”

Lujano-Gonzales saw her workforce shrink from 45 employees at the peak of their operation to only 24 currently.

“About all I can say is that we are surviving. We are certainly not making money at this time,” she said.

Lujano-Gonzales estimated dairymen can raise their own heifers for between $1.25 and $1.50 per heifer per day, depending on the cost of what they feed and rent they may have to pay for additional land. Cameiro costs are $1.86 per heifer per day.

“Dairymen may not get the same quality bred heifer that we would deliver, but they aren’t looking for long-term solutions. They are looking for the immediate cost control and savings,” she said.

“When heifers leave our ranch after 17 or 18 months, the dairyman knows the animal was bred on time using the sires they wanted; vaccinated and boosters given to protect against disease; and precise records kept,” Lujano-Gonzales said. “In addition, all our heifers are well fed to develop good rumen capacity and they should mature into good milkers.”

Lujano-Gonzales said one of the biggest elements of the dairy industry downturn is the trickle down effect of those joining the ranks of the unemployed. Many small communities are adversely affected when a dairy or calf and heifer ranch must make serious cutbacks.

M & M Feedlots

Darin Mann of M & M Feedlots in Parma, Idaho is the third generation of his family in the operation. His grandfather started the business in the early 1940s. His father began raising dairy heifers in early 1970s.

They custom feed approximately 11,000 heifers on a margin for local dairy producers.

“As a whole, we’ve not seen a huge difference in our operation to this point. That could change in the near future, however. We lost one dairyman because the bank cut his line of credit and he went out of business. We replaced him with a new dairy customer.”

According to Mann, the most interesting development through these tough economic times has been his feeling less like a heifer grower and more like a commodity trader or feed buyer.

“In this economy, I must pay closer attention to feed markets. Our feed is so tied to energy that a decision by OPEC is going to trickle down and affect my hay price,” Mann stated. “If OPEC cuts back oil production, fuel prices go up. Ethanol becomes more valuable and more corn will go for fuel not feed.”

Distillers grain is cheaper because China has been buying soybeans from Brazil while backing off DDG purchases from the U.S. “If I still want to make 10 cents per cow per day, I have to watch my feed costs,” Mann said. M&M Feedlots get six-month-old heifers at about 400 pounds. They are raised and bred at 12 to 13 months weighing around 800 pounds and then we send them back to the dairyuman at about 225 days, carrying a calf and tipping the scale at around 1,300 pounds.”

Mann said they’ve maintained the same feed quality throughout this downturn. “Something you can’t start cutting is your ration,” he declared. “You might as well close shop if you start cutting there. You’d adversely affect the lifetime poroduction of those cows. That’s something we won’t compromise on.”

According to Mann, he has cut his margin through these rough times. “I have all my feed bought for the year, so I know what my costs are. So I lowered my price to pass on some savings to the dairymen,” he said. “If dairymen don’t survive, neither will I. By helping them out, we build trust and loyalty. We’re in this together and it all starts with the milk check.”

Mann said he thinks the dairy economy will get worse before it gets better. With all the heifers coming online, milk production still needs to be cut. Right now you can go buy a springer heifer cheaper than you can raise one.

“Im wondering how my business model will change in the future. Like dairymen, banks are just holding on,” he said.

FYI:

■  To contact Rochelle and Peter Koch at Nicholas Calf Ranch in Winton, Calif., call 209-725-8253 or e-mail them at, calfman1@aol.com

■  To contact Bart Hanson at Amber Hills Ranch in Rupert, Idaho, call 208-436-1690, or e-mail, ahrcows@pmt.org.

■  To contact Diana Lujano-Gonzales at Cameiro Heifer Ranch in Brawley, Calif., call 208-436-1690, or e-mail, fd2milk@gmail.com.

■  To contact Darin Mann at M&M Feedlots in Parma, Idaho, call 208-722-9039 or e-mail him at mmfeedlot@hotmail.com.

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