Irvine Co. to Call a Halt to Cattle Raising : Falling Beef Prices, Dry Winters Blamed; Lessees to Carry On
Falling beef prices and back-to-back dry winters have persuaded the Irvine Co. to abruptly dismantle its century-old cattle raising operation on the Irvine Ranch.
Within the past 60 days, the mammoth land development firm has sold off the vast majority of its herd, including 1,200 breeding cows, 1,000 young calves, 1,000 yearlings and about 65 bulls, said Fred Keller, the company’s vice president of agriculture.
Most of the cattle--which had become a familiar pastoral sight for motorists passing through Irvine on the San Diego Freeway--already have been hauled away to feed yards and other pastures, Keller said. The Irvine Co., which intends to be completely out of the cattle business by July 1, said it will continue to employ the manager and two fence men but will lay off three cowboys.
The Irvine Co. plans to lease to three other livestock operators the 38,000 mostly rugged acres it has been using to graze its own cattle. The lessees, in turn, are expected to purchase about 1,000 head of the company’s breeding cows that remain, Keller said.
Keller said that in the 17 years he has been with the Irvine Co., the cattle operation has never been more than marginally profitable. And if the cattle operation’s share of the Irvine Co.'s corporate administrative costs were considered in the calculations, he said, the profit margin would be completely eroded.
Over the years the main benefit of the cattle grazing, he said, was to trim the grassland and reduce a potential fire hazard until the acreage is developed with houses. “It is more of a land management deal,” he said.
In recent years, he said, the economics of cattle raising have become increasingly shaky for the Irvine Co. and the rest of the nation’s cattle industry, due in large part to a change in consumer eating preferences. Shoppers seeking to avoid cholesterol are buying less red meat and more fish and poultry. Slackening consumer demand means that cattle prices have fallen.
The last straw for the Irvine Co., Keller said, was two consecutive winters of low rainfall that parched the rangeland. If the company had decided to stay in the cattle business, he said, it was probable that it would have been forced to buy a large amount of supplemental feed this summer. That would have pushed the cattle operation into the red, Keller said.
More Money Expected
Keller said the company would not disclose the financial figures pertaining to its ranch operation or the money it will raise from leasing the land and selling its breed cows. But he said that, on balance, the company expects to make more money from leasing the land to other livestock operators than from investing in its own cattle. The question, he said, is how long other livestock operators, also hard-pressed by economic changes, will want to keep running cattle on the Irvine Co.'s property.
In any case, the Irvine Co.'s move out of the cattle business marks the end of an era for the county’s historic ranch. Current Irvine Co. officials could not say when cattle first grazed on the property. But “The Irvine Ranch,” a history by Robert Cleland, said that James Irvine raised cattle on the land as early as 1885. At that time the cows were far outnumbered by sheep.
Bill Staiger, executive vice president of the California Cattlemen’s Assn., with headquarters in Sacramento, said he was “not a bit surprised” by the Irvine Co.'s decision to abandon cattle raising. A survey by the association shows that the state’s cattle industry overall has sustained losses during seven of the past 11 years. “This is the longest down cycle the industry has ever had,” he said.
Borrowed Against Equity
Most cattlemen were able to survive the losses before 1982, Staiger said, because California’s soaring real estate values bequeathed equity in ranches that the cattlemen could borrow against to stay in business.
But since about 1982, Staiger added, real estate values in California have declined and ranchers are no longer able to borrow to keep afloat. So more ranchers are selling out, he said. “I suspect we are going to lose 15% to 20% of the ranches by the end of this year,” he said.
Despite the bailouts, Staiger said, he believes that the amount of cattle being grown in the state will not decline. Rather, he said, the ranches will pass from the ownership of ranchers who depend on profits for a livelihood to the hands of investors looking for tax write-offs. Only the passage of tax reform legislation, he said, will result in an actual drop in the number of cattle raised for market.
Keller said the Irvine Co. had hoped the unfavorable economic picture would push other cattlemen out of business sooner, reduce the total supply of beef and boost prices to a level that would have made it possible for the company’s cattle operation to continue; but that never happened. In retrospect, Keller said Monday, “We probably should have made the decision (to stop raising cattle) four years ago.”