The big squeeze

Rancher Dan Gralian conducted the

annual sale of calves at his Elko Land and

Livestock operation near Battle Mountain a

few weeks ago.

Calves sold for 88 cents a pound. The

problem: Gralian had invested 95 cents a

pound in raising them. A year ago, Gralian

says, calves that cost 52 cents a pound to

raise sold for $1.04 a pound.

"We're in the middle of one of the biggest

squeezes we've faced since the 1980s," says

Gralian, who also serves as president of the

Nevada Cattlemen's Association.

Fuel costs a big piece of the puzzle for

most farming and ranching operations

continue to be relatively high at the same

time that prices for hay and cattle are beginning

to soften.

The laws of economics aside, the biggest

question for 2009 as always can be

answered only by Mother Nature.

"The real key is always going to be water

and whether we have the resources available

for production," says Doug Busselman, executive

vice president of the Nevada Farm

Bureau.

Cattle producers, who account for about

60 percent of the income generated by

Nevada's agricultural sector, face a particularly

difficult year, says Ron Torell, an Elkobased

livestock specialist with the University

of Nevada Cooperative Extension Service.

"The rough economy, energy from

ethanol, high feed costs, weak dollar these

factors are all contributing to the beef industry's

bleak 2009 outlook," Torell says.

Cattle prices soften when the national

economy goes in the tank. Financially

pinched consumers go out to eat less often or

turn to less-expensive meats for the dining

room table.

At the same time, the weak dollar makes

U.S. exports

including beef

more expensive in

foreign markets.

The demand from

ethanol producers,

meanwhile, continues

to put

upward pressure

on the prices of

corn and other

crops that are fed

to feedlot cattle.

That, in turn,

reduces demand

for calves and

yearlings produced

by Nevada's ranches

to supply feedlots.

But the biggest economic worry of ranchers

and farmers in 2009 continues to be the

price of oil, which affects the cost of everything

from diesel fuel to fertilizers.

Despite a sharp decline from last summer's

prices in August, a gallon of diesel

ran about $4.30 prices have trended

steadily upward for the past couple of years,

says Kynda Curtis, a marketing specialist

with the University of Nevada Cooperative

Extension Service.

The recent price of about $2.30 a gallon at

northern Nevada

diesel pumps

compares with

$1.31 in 2002.

A study by

Curtis and Carol

Bishop, an agricultural

researcher at the

University of

Nevada, Reno,

finds that farmers

take a big hit

when diesel

prices rise.

A farmer with

750 acres of alfalfa

in Pershing

County, for

instance, would

see his annual profits drop from $36,555 to

$11,553 at this summer's sky-high prices.

While the effects of higher fuel prices are

felt by all farmers and ranchers, they tend to

hit hardest at smaller operators and farmers

who rely heavily on mechanized machinery.

Says the Farm Bureau's Busselman: "The

fuel inputs are significant for agricultural

production."

Higher oil prices show up, too, in higher

costs for nitrogen-based fertilizers and in the

expense of pumping irrigation water.

But some see the sprouting of new growth

for the state's agricultural producers even

during the cold and dark days of 2009.

For starters, Gralian says recent declines

in prices for diesel fuel provide some help to

hard-pressed ranchers.

Torell, meanwhile, notes that ranchers

and feedlot operators across the country are

cutting the size of their herds in response to

higher costs and lower profitability.

"This reduced supply of cattle, if met with

increased demand for our product, is our way

back to black ink," he says.

And Busselman notes that ranchers and

farmers in Nevada appear to have escaped

the worst of the credit crunch.

"For the most part, Nevada agriculture is

not as dependent on credit as some other

segments of agriculture around the country,"

the Farm Bureau executive says.