Cow Economy Faces a Pinch Regional Businesses From Delaware Port to Iowa Hauler Hit by Export Drop Delaware Port: Pregnant dairy cows are loaded on to a cargo ship at the Port of Wilmington in April. ENLARGE Delaware Port: Pregnant dairy cows are loaded on to a cargo ship at the Port of Wilmington in April. JENNIFER CORBETT/NEWS JOURNAL By SCOTT CALVERT Dec. 15, 2014 8:27 p.m. ET 7 COMMENTS Cattle hauler Preston Newcomer found lucrative work in recent years moving cows from a quarantine center in Pennsylvania to the Port of Wilmington, Del., for export on floating feedlots to countries such as Russia and Turkey. But after a string of banner years, U.S. cattle exports have fallen by a third this year. Wilmington’s port has seen an even sharper drop: It expects to end 2014 having moved 24,000 head of cattle, half the 49,000 it averaged each of the three prior years. Many of the cows originate in states such as Minnesota, Nebraska and Idaho, but the effects of the decrease have reverberated throughout the mid-Atlantic region and the supply chain beyond because Wilmington exports more cattle than any other U.S. seaport, said Jay Truitt, Washington representative of the Livestock Exporters Association. It is followed by Galveston, Texas, he said. Mr. Newcomer, based near Lancaster, Pa., says business for his one-truck operation is down about 20%, or $50,000. “I don’t think I’m going to come out in the red this year,” he said, “but we’re not going to make any money.” Truckers, hay growers, veterinarians and others are feeling the financial pinch. “There’s a lot of ripples back through the system,” Mr. Truitt said. Wilmington got into the livestock trade in 1987, and its unlikely rise to dominance came after Russia and Turkey began making big purchases of so-called breeder cattle several years ago to boost domestic dairy or beef herds. Besides giving shippers a shorter haul to Europe and the Middle East, Wilmington offers convenience: It is near a major USDA-approved quarantine center in Pennsylvania and is less congested than the Philadelphia port. The Delaware port advertises its six open berths and large staging area for loading cattle onto ships. U.S. Department of Agriculture officials think some of the 2014 downturn is because overseas breeder herds have stabilized, but basic economics are at play, too: U.S. cattle prices have been high, and the strong dollar relative to the Russian ruble and other currencies has reduced foreign customers’ buying power. In Russia, geopolitics is a factor. When Russia retaliated in response to U.S. sanctions, its government didn’t ban American livestock. But one U.S.-sanctioned financial institution was a Russian agricultural bank that Mr. Truitt says is used to process cattle sales. He said buyers there have begun finding other ways to finance. The USDA has modest expectations for 2015. It forecasts 125,000 head of cattle will be exported—above this year’s estimated 115,000 but well below recent years in which totals neared 200,000. The agency notes that many Russian importers still have debts from previous purchases. Mr. Truitt said he expects the market to bounce back. Overseas farmers still covet the genetic strength of U.S. cows, he said. And while buying cattle semen and embryos has gained popularity, the quickest route is to import pregnant heifers, giving buyers a 2-for-1 deal. Slight improvement wouldn’t much help Gordon Thornhill, a Virginia cattle exporter who says revenue at his T.K. Exports Inc. is off about 35% this year. He knows firsthand the volatility of the market. After a mad-cow disease scare in the early 2000s slashed American exports to just 15,000 in 2004, he spent several years buying and reselling cattle from Uruguay. Iowa trucking-firm operator Scott Mihm hauls cattle for T.K. from as far west as Idaho, dropping them off for quarantine in Pennsylvania. Mr. Mihm estimates his business is down 15% because he earns less from other cattle-hauling jobs, such as moving cows from one farm to another. “The trucks are still busy, but doing other things that don’t pay as well,” he said. Many cows headed overseas undergo quarantine at a facility run by the Pennsylvania Holstein Association near Harrisburg. Three years ago, 21,000 cows stopped there for stays ranging from a week to a month, depending on the rules of the destination country. This year just 6,000 have, said Ken Raney, the association’s executive director. He declined to say what the facility charges but said the plunge in volume represents significant lost income. That is money his group uses to pay for cattle shows and youth programs. With fewer cow visits, the facility needs less feed, hay and veterinary services. “It slows things down for everybody,” he said. Hosting 1,200 cows for three weeks requires about 250 tons of hay, he said, translating to $37,500 in purchases from local suppliers. Wilmington port officials noted that cattle exports, even at their peak, have made up a small part of the port’s overall business, though they would prefer to see growth. “Everything goes through a business cycle,” said Tom Keefer, the port’s deputy executive director. “This export cattle business is probably going through a cycle itself. It’ll come back, I’m sure.”
Posted on: Tue, 16 Dec 2014 10:41:42 +0000
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