Old MacDonald's evolving farm
Alternative livestock markets still small and volatile, but appear to be growing.
Published January 1, 2007 | January 2007 issue
Looks like it might be time for Old MacDonald to add a few new animals to his farm—you know, just to keep up with the times.
Unusual breeds might not be obvious yet in the pasture, but livestock farming is becoming more than just cattle, pigs and sheep. Though most alternative or niche livestock haven't hit commercial scale yet, some are poised to, and most of these herds are growing.
In fact, for the first time, alternative livestock—in the Ninth District, the biggies are goats, bison, ostrich, emu, llama, alpaca and elk—were included in the U.S. Department of Agriculture's 2002 agricultural census, which is taken every five years. District states are key players in many of these niches. For example, in 1993 there were about 1,300 llama breeders nationwide. By 2005, there were that many in Wisconsin alone.
It is common for ranchers and hobby farmers to cite an affinity for the animal as their motivation to work in the industry. It's easy to believe them, given that alternative livestock markets are growing, but still volatile, and offer relatively few ranchers even full-time employment, much less riches. Ostrich, llama and bison producers have all suffered through major depressions in the price of breeding stock and product markets. Even nonmeat products are unpredictable. The elk industry is driven by antler velvet, which has seen price fluctuations of 1,000 percent over the past decade.
Still, some animals—particularly goats—show economic promise, and the district has capitalized on some of this potential.
So, what's in the barn?
Nearly all of the animals noted here have seen growing numbers in the district, though current data are sketchy, and the next agricultural census is not until 2007. Some producer groups monitor animal numbers, so we know, for example, that the registered alpaca population has seen 667 percent growth in the past decade. Still, compared to traditional livestock, the number of niche livestock raised and slaughtered in the United States is minuscule. More cattle are slaughtered in a day than bison in an entire year.
Goats have seen the strongest growth. Angora goats, raised for mohair, used to dominate this market. In recent years, however, the industry has seen a transition away from Angora goats to meat and dairy goats, according to a February 2006 report by the University of California Small Farm Center. As recently as 1997, there were more than 830,000 Angora goats in the United States; today that number is two-thirds lower. During the same period, the number of meat goats increased from 1.2 million to 2.3 million—stemming mostly from the introduction of the much-larger South African Boer goat—while dairy goats saw a 50 percent increase to about 290,000.
The push behind this transition is pretty straightforward: Goat meat is the most commonly consumed meat in the world, and growing numbers of ethnic groups in the United States—particularly Hispanics, but also Asians and Africans—prefer goat meat, milk and cheese.
Texas is home to better than 45 percent of all U.S. goats. But district states, particularly Wisconsin, are showing up in this market. Wisconsin is tied with Texas for second place in dairy goat numbers with 30,000 and is just a shade behind leader California. Since 2002, Wisconsin's total goat herd has grown by about 20 percent, and topped 41,000 goats this year. District states generally followed the national trend, with meat and dairy goat numbers rising from 1997 to 2002, while the number of Angora goats fell. In that five-year period, the number of dairy goats was up in South Dakota and more than doubled in Minnesota (though still small at 7,700).
Despite the fact that the number of slaughtered goats doubled from 1995 to 2003, the industry cannot yet ensure a steady meat supply that large supermarket chains can rely on. A cyclical nature causes gluts and scarcity each year largely due to the combination of farmers locked in traditional breeding patterns and demand spikes in the fall during Hindu and Islamic holidays. As a result, the volume of imported goat meat rose about 150 percent during this same period, according to USDA figures.
Import quantities have risen more slowly of late—just 1 percent last year—but people are spending more just the same. The value of goat meat imports rose fourfold from 1999 to 2005, reaching $33.6 million. Domestically, average prices went from 75 cents per pound in 1996 to $1.36 in 2005, an 81 percent increase.
Oh, give them a home
Buffalo are also growing in popularity. Since 1993, total herd size has increased about 150 percent to 232,000 head. The number slaughtered last year hit 35,000, 17 percent higher than in 2004 and over twice the number processed in 2000.
The district has an outsized presence in this market, and for good reason. The beast is native to much of the district, and its famed hardiness is ideal for the extreme weather conditions of the Dakotas. Though district states are in the same ballpark in terms of the number of bison farms (all between 190 and 270), average herd sizes are much larger in western states. Wisconsin has just 8,300 head, while South Dakota boasts over 40,000 animals, and North Dakota, 31,000. North Dakota also processes one-third of all buffalo meat in the United States, and in August a proposal was announced for a new plant in Fargo that would process an additional 10,000 bison a year at start-up and almost double that many in five years.
The opposite is true for other niche livestock: Most are larger and growing faster in Minnesota and Wisconsin than in Montana and the Dakotas. Ten percent of the nation's registered llamas are in the district, and half (about 7,000) are in Wisconsin. Wisconsin also has more than its share (4 percent) of U.S. alpaca breeders with 216. Minnesota is home to over 100 emu farms and about 950 emus, according to the 2002 ag census; Wisconsin had nearly 1,300 emus.
Of the 100,000 elk on U.S. ranches, the district holds 40,000, and three-quarters of those elk are in Minnesota and Wisconsin. Elk farming used to have a stronger presence in Montana, but controversies have reduced the industry to half its former size. Wildlife foundations protested elk hunting on ranches and managed to get an initiative passed in 2000 disallowing new licensing. Montana elk ranchers also pay much higher fees for state regulatory oversight. At $23.80 per elk, that's more than 15 times the fee levied on cattle and 40 times that levied on hogs.
Some of the elk market might end up with Montana's eastern neighbor. The North Dakota Elk Growers association counts 86 members, and 103 facilities are approved to hold elk in the state this year, a level that has been relatively stable, according to the state Board of Animal Health. Unlike Montana, North Dakota levies no per capita fees on elk. Sally Dvirnak of Kings Elk Ranch in Killdeer, N.D., offered her perspective on the Montana ban on enclosed big-game hunting, which she sees as a property rights issue.
"We live in America, where we have this awesome thing of property rights—we can work on that land how we want to," said Dvirnak "Our neighbors have been really supportive; they're happy to see someone make it on the farm." Since breeders can fetch up to $13,000 for an outstanding trophy bull, the incentive to maintain these rights, and access to that market, is strong.
More than a good steak
But raising alternative livestock is not just about competing with traditional fare such as beef, poultry or pork. Nonmeat products are the market drivers for emu, ostrich and elk ranchers. Emu oil is more profitable than the meat of the animal, and one pound of elk velvet—the soft antler harvested before it calcifies and hardens—is worth many times that of a pound of meat.
Eric Engstrom, an emu rancher in Shafer, Minn., said that he and his wife entered emu production as a hobby—both have day jobs at the local hospital. Each emu renders five or more liters of fat for oil, which is used in products like lotion and shampoo. Engstrom says sales have nearly doubled, but the Engstroms keep their oil and meat prices down to stay competitive. Nationwide, an ounce of oil brings in around $8, and the meat sells for about the same as beef. There used to be a strong market for breeders, but no longer, said Engstrom. "It's livestock or oil—it's not a breeder's market now. There were about six of us in a co-op, and about half of them are gone."
Llama and alpaca, on the other hand, are raised exclusively for nonmeat purposes. Llamas can be used as pack, guard or breeding animals, but the largest market for both animals is their wool. Alpaca wool is stronger than sheep's wool, as soft as cashmere and nearly waterproof. Fiber can go for $2 to $5 an ounce, and each animal produces between three and 10 pounds of fiber per year. But with retail prices at anywhere from $200 to $400 for a pure alpaca wool sweater, the current market is limited. Not enough fiber is in U.S. commercial-scale use, so much of it is sent to South America, where it gets mixed with lower-quality alpaca wool and typically comes back to the United States as lower-quality, but more affordable, products.
As with most emerging markets, alternative livestock have faced spotty, fickle markets at times over the past decade or more, and elk velvet is a perfect example. The velvet has been used for thousands of years in Asian countries for everything from impotence to vitality, but research is just beginning in the United States to address its use for joint and bone ailments, particularly arthritis. A mature male elk can produce 20 to 30 pounds of velvet per year, which might be priced at anywhere from $35 to $110 dollars per pound.
Price fluctuations occurred in the early 1990s as the breakup of the Soviet Union meant Korea could replace U.S. imports with cheaper velvet from other Asian nations, then again in 2001 when Korea banned imports over concerns about chronic wasting disease (CWD, which is similar to mad cow disease) and prices plummeted to $10 per pound. The industry is frantically working to establish a North American market, particularly in pet neutraceuticals, so that velvet prices are not so much at the mercy of international events. The 20-year average value of a pound of velvet is $35, but was recently running between $20 and $30, according to a publication of the Wisconsin Commercial Deer & Elk Farmers Association.
Or take the ostrich. In the early 1990s, breeding ostriches was downright trendy, and prices for proven breeding stock ranged from $50,000 to $75,000 a pair. But the entire industry was based on breeding stock. Breeders were making new animals, but the live bird was worth much more than skin, meat or feathers, so few animals were slaughtered.
Looking back, the industry was accused of not making any effort to develop domestic markets for ostrich meat and other products, leading to oversupply of animals. By the late 1990s, breeding pair prices plummeted to only a few thousand dollars. Since that time, meat markets have grown and consumption has spread considerably. The restaurant chain Fuddrucker's alone claims to sell 4,000 ostrich burgers per week. Now, ironically, it appears that domestic ranchers can't meet demand: In 2003, the United States imported nearly 620,000 pounds of ostrich meat and exported none, according to the U.S. Department of Fish and Wildlife.
Similarly, bison meat saw expanding popularity throughout the 1990s, but later the industry suffered what the National Bison Association referred to as an "economic meltdown." Both oversupply and lower demand pulled meat prices down, while drought forced some producers to sell off their herds, slashing live buffalo prices in the process. Karen Conley of the Dakota Territory Buffalo Association remembers that it "was not pretty" in 2001, when marketing meat even to Canada was difficult because of similar overproduction there. Breeding stock prices are still recovering, though slaughter saw a strong increase last year. Conley said that when the cattle industry slows again, bison will pick up further as cattle ranchers look to new products and markets.
Much of the price volatility in alternative livestock comes from the fact that there are not a lot of buyers and sellers at any one time, in part because product markets are not well developed or commercialized. For example, alpaca farmers meet at auctions, at festivals or over the Internet. Animal sales are made sight-unseen from registry information, pictures and samples of fleece sent through the mail.
In this scenario, other farmers are not competition, but instead represent the buyer's market. Fleece is sold to cooperatives or to other spinners in the community, and animals are sold to other breeders. Many in the alpaca industry were shocked when Royal Fawn, an Accoyo male alpaca, sold for $600,000. What made him worth that much? "He sold for that much because someone wanted to pay that much," said James Rudd of Alpacas of Montana.
Coming to a farm near you?
With the World Trade Organization pressuring the United States to reduce agricultural subsidies, producers of traditional livestock may start looking at niche markets for profit opportunities. As recent history has demonstrated, that could be both blessing and curse: It could bring commercial scale and new markets for some alternative livestock. But it could also upset the delicate balance of growing demand while keeping the reins on supply.
Among the animals discussed here, goats and buffalo have—by far—the most developed markets, and both are seeing good demand right now. But popularity appears to be growing for all alternative livestock meat, possibly due to its reputation as being relatively wholesome. Alternative livestock are typically raised without antibiotics or growth hormones and are leaner than traditional meats (see table).
With a big presence in the district, is buffalo ready to compete head to head with beef, pork and poultry at the grocery store? Karen Conley's answer: not for a long time. "We cannot go and knock on McDonald's door. We'd just never make it." She believes that if demand got too high too quickly, a replay of the 2001 supply saga would result. Bison supply simply cannot respond that quickly, in part because a bison cow doesn't produce offspring until she's three years old (compared to 18-24 months for a beef cow). Bison also are not as manageable—and therefore predictable in terms of reproduction and replacement—as beef cows.
The fate of others, like elk, is even less predictable. Venison consumption has doubled since 1992, and research on velvet is opening new product opportunities, which could bring further growth in elk production. But uncertainties like CWD hang over this industry.
On the other hand, llama prices have held steady even as the number of producers in the district has grown, indicating increased demand. Alpaca producers are protecting their market by closing registration to new imports. Only U.S.-bred alpacas are entered into the national registry, thereby protecting the bloodline, quality and prices of breeding stock and wool. Registration is taken very seriously—with a blood sample provided by the owner, each animal is genotyped and microchipped.
While some ranchers appear to enter alternative livestock markets looking to capitalize on the explosive nature of these markets, most believe a slow and steady growth approach will bring the highest possible returns. Budd, the Montana alpaca rancher, sees the market stabilizing in 25 to 30 years—a virtual lifetime in the agricultural sector—but he's not alone among those analyzing the alpaca industry.
Ray Spaulding knew he wanted to start a farm after retiring and took 14 months to research alpaca before he and his wife founded R & S Hillside Alpacas in Dodge Center, Minn. Though he knew that the market may not be as predictable as the one for traditional livestock, he sees planning as a pathway to success.
"This is more than a hobby—I plan and look ahead at what I'll do with these animals. Soon, two animals are going to be born. I can let people know through Web site and word of mouth that these two newborns will be available." Such forward thinking, combined with their passion for the animal, may go a long way in allowing niche livestock farmers to persevere, and possibly even thrive.
Editor Ronald A. Wirtz contributed to this article.