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Author: 
 
 Security Trust & Savings 
 Bank 
 
 Title: 
 
 The cattle-raising industry 
 of the Southwest 
 
 Place: 
 
 Los Angeles 
 
 Date: 
 
 1921 
 
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 The Cattle-Raising Industry 
 of the Southwest 
 
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 JJsSJ^Jj: 
 
 LOS ANGELES 
 

 The Cattle-Raising Industry 
 of the Southwest 
 
 V 
 
 Department of Research and Service 
 
 Security Trust & Savings Bank . L^^ n ^^ 
 
 Prepared by 
 
 C. C. LINCOLN 
 
 LotAngelm 
 1921 
 
7) 3^ 5 . / 
 
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 e 
 
 in 
 
 ay 
 
 The Cattle Industry in the Southwest 
 
 THE importance of Los Angeles as a live stock center of the great South- 
 west needs no argument. Surrounded by the vast ranges of Nevada, 
 Arizona and Southern California, and with adequate rail service link- 
 ing tliese sources of production with the abundant alfalfa pastures and beet 
 fields of the southern coast, Los Angeles has become conscious of her strategic 
 situation. Growers of the neighboring citrus belt bid for the nitrogenous 
 refuse of feed lots, modernly equipped packing plants are at hand for the re- 
 duction of animals to food, a million people within immediate reach assure 
 an unfailing market for beef and by-products, and the regular service of re- 
 frigerator ships and railway cars to the high price beef markets of the East 
 would guarantee an outlet for any possible surplus. 
 
 Cattle raising is directly and indirectly a source of great wealth to the 
 City of Los Angeles and environs. Any danger to this essential industry, such 
 as is threatened by the recent decline of cattle prices to below cost of produc- 
 tion, must be met. This can only be accomplished by proper financial sup- 
 port, and by the intelligent co-operation of the general public. 
 
 In view of these facts, and in keeping with the purpose of the Security 
 Trust & Savings Bank carefully to gather data and to publish from time to 
 time unbiased information upon agricultural and industrial conditions, and 
 other subjects of business import, the following report of conditions now 
 existing in the cattle raising industry of the Southwest has been prepared. 
 
 Sources of Information 
 
 Investigation of the industry has in- 
 cluded conferences with cattle raisers, offi- 
 cers of packing houses, cattle loan associa- 
 tions, feed yard owners, butchers and cat- 
 tle buyers. From a review of the opinions 
 thus collected there is presented what is 
 thought to be a fairly accurate picture of 
 the present situation as it appears to va- 
 rious interests involved. 
 
 To determine actual statistical facts, 
 census reports have been examined and 
 compared to ascertain the number of cat- 
 tle in various regions, with particular ref- 
 erence to their increase or decrease. Price 
 trends have been established by examina- 
 tion of records kept by stockmen, packers 
 and retail meat buyers, and from current 
 market reports. Recourse has been had 
 
 to publications of the United States De- 
 partment of Agriculture and of Federal 
 Reserve Banks for information concern- 
 ing crop and weather conditions in dif- 
 ferent sections of the Southwest. Com- 
 parative periodical receipts of beef cattle 
 at slaughtering centers, and shipments of 
 stocker and feeder cattle back to the ranges 
 have been determined from similar official 
 sources. To discover the volume of cattle 
 paper dealt in by cattle loan associations 
 and by banks rediscounting through the 
 Federal Reserve Banks, access has been 
 had to books of loan associations at Los 
 Angeles, and records of live stock paper 
 kept by the Federal Reserve Bank at San 
 Francisco. Data concerning present con- 
 ditions existing in cattle regions, such as 
 
 rs 
 
f 
 
 t 
 
 shortage of feeders and abnormal slaughter 
 of female stock, have been furnished 
 through the co-operation of such organiza- 
 tions as the California Cattlemen's Asso- 
 ciation, the American National Live Stock 
 Association, and the Institute of American 
 Meat Packers. 
 
 Financial Difficulties 
 
 Beef cattle producers are undergoing a 
 period of deflation and of liquidation at 
 prices under cost of production not un- 
 like that being experienced by farmers, 
 and indeed by most other producers in the 
 country. The suffering among cattle rais- 
 ers, however, is apparently more acute 
 and relief more difficult to obtain. Their 
 products have been probably the first to 
 drop to a pre-war price, and the usual 
 sources of financial aid have become more 
 and more inaccessible. Stockmen now 
 find themselves with cattle on hand raised 
 during the period of highest production 
 costs, with feed, interest, labor and rail- 
 road rates from 50% to 90% above nor- 
 mal, and a present market for their stock 
 which has reached a point below normal 
 after a precipitate drop of 50% in eight 
 months. In short, cattle which were pro- 
 duced at a cost of 8c per pound and 
 which were selling at 12c per pound last 
 year cannot be disposed of now for more 
 than 6c on the hoof. Stock raisers are 
 confronted with this situation at a time 
 when they are in urgent need of funds for 
 the purchase of bulls and new stock to re- 
 habilitate their herds, and for the pay- 
 ment of ordinary running expenses this 
 fall and winter, and they find money al- 
 most unobtainable. Few banks are dis- 
 posed to purchase cattle paper, and those 
 cattle loan associations which are willing 
 to make new loans, are demanding a pro- 
 hibitive rate of interest. Moreover, these 
 same loan associations are calling in ma- 
 tured loans as rapidly as possible, forcing 
 cattle raisers to sell off their cattle at any 
 price obtainable, further depressing a 
 badly demoralized market. Under such 
 circumstances the stockmen have two al- 
 ternatives: to obtain money to enable them 
 to hold over for better prices, or to sell off 
 everything at any price. Money cannot 
 be obtained, therefore the latter course is 
 being resorted to by many. Evervthing is 
 
 4] 
 
 being sold that the packer will buy, lean 
 steers, breeding cows, heifers and calves. 
 
 Decline of Prices 
 
 The present low level in cattle prices 
 is the logical economic result of inflated 
 values and over-production during the 
 war and the period immediately following. 
 Cattle prices reached bottom before prices 
 of most other commodities, partly because 
 of unsound credit expansion permitted by 
 cattle loan associations and by some of 
 the banks during the war, and partly be- 
 cause of the unprecedented decline of 
 by-products values, a decline which in the 
 case of hides amounted to 75%. Another 
 cause has been a marked falling off in the 
 per capita consumption of beef, thought to 
 be due in part to the failure of butchers 
 to reduce retail prices in consonance with 
 cattle and wholesale meat prices. 
 
 Average prices of cattle received by 
 producers of the United States are given 
 by the United States Department of Agri- 
 culture as $6.01 (per 100 lbs.) for the 
 year 1912; $10.84 for 1919, and $5.65 for 
 June 15, 1921, showing a rise of 80% 
 from 1912 to 1919, and a drop of 48% 
 from the peak to a present price of 6% 
 under that of 1912. California prices 
 were $6.75 in 1912, $12.00 in 1918 and 
 $6.00 in August, 1921, indicating a rise 
 of 75% from normal to the peak, and a 
 later drop of 50% to a point 12% below 
 the pre-war figure. Meanwhile hides rose 
 from $15.00 (per 100 lbs.) before the 
 war, to $30.50 in 1919. and declined to 
 $5.20 in March of this year. 
 
 Average retail meat prices in Los An- 
 geles increased from 20c per pound in 
 1914 to 421/2 in 1920, and have fallen to 
 261/^0 in August, 1921, representing a 
 rise of 113% to the highest point, and a 
 subsequent decline of approximately 37% 
 to a point 32% above normal. 
 
 Production Costs 
 
 Costs of production are still above nor- 
 mal. The principal factors are feed, in- 
 terest on money, and labor. Range pas- 
 ture which could be leased at 75c per acre 
 before the war and at $1.25 during the 
 war, can now be had at $1.00. Feed yard 
 charges which were 25c per animal per 
 
 day before the war, and 60c in 1919, have 
 been reduced to 40c. Interest rates on 
 cattle paper which advanced from 8% to 
 10-12% in 1920, are still at 10%. Alfalfa 
 hay in the stack now costs about $6.(X) per 
 ton. This is practically the only cost 
 factor which has been reduced to a pre- 
 war price. 
 
 The decline in labor costs has been 
 about 35%. Cowboys who were paid 
 $30.00 per month before the war and 
 $90.00 in 1919-20, can now be hired for 
 $55.00. It is not probable that there will 
 be a further considerable decline in wages, 
 but the labor item in cattle raising is com- 
 paratively of little weight. 
 
 By a process of giving to each cost 
 factor its proportionate weight in the total 
 cost of production, it may be calculated 
 that the weighted average cost of raising 
 cattle is still 50^^ above normal. 
 
 Conditions in Different Sections of 
 the Southwest 
 
 Live stock producers in California, Ari- 
 zona and Nevada have suffered less from 
 the price decline than those of other cat- 
 tle states. The fact that western cattle 
 are mostly "range fattened" has made it 
 possible for raisers in this region to hold 
 their animals for better prices without in- 
 curring heavy expenses for feed. Com- 
 paratively few substantial stockmen in the 
 West have been forced into liquidation, 
 though all are seeing hard times. Failures 
 have occurred for the most part among 
 speculators operating with very little cap- 
 ital of their own, but with funds bor- 
 rowed at excessive interest rates. The 
 elimination of such individuals will have 
 a health-restoring effect on the industry 
 as a whole. 
 
 Arizona has been hard hit by the drouth 
 this spring and cattle raisers in the south 
 have lost as high as 25% of their stock. 
 Rains have come at last, however, and 
 pasturage conditions are now said to be 
 excellent. Agents of the United States 
 Department of Agriculture report pastur- 
 age conditions in Nevada at normal, and 
 in California at about 85% of normal. 
 
 Possibility of Cattle Shortage 
 
 The much talked of shortage of cattle is 
 more apparent than real. It is true that 
 the per capita number of cattle now on 
 the ranges is considerably less than that 
 of last year and slightly under the pre- 
 war normal, the per capita decrease since 
 1910 having been 15% for California, 
 23% for Arizona, and 5% for the United 
 States as a whole, while an actual increase 
 of 23% is shown for Nevada. Meanwhile 
 annual per capita consumption of beef in 
 this country has fallen from 78 pounds to 
 561^ pounds, a decline of about 27%, and 
 exports of beef products have declined 
 75% since the spring of 1920. The al- 
 leged shortage of production is therefore 
 entirely a numerical one, and does not 
 take into consideration the relative de- 
 crease in demand for beef and beef prod- 
 ucts. 
 
 Price Outlook 
 
 The price outlook for the future is 
 hopeful. Exports of beef during August 
 showed an increase over those of July. 
 The recently imposed 30% ad valorem 
 duty on imported beef cattle will restrict 
 any increase in supply from Canada and 
 Mexico. Surplus stock has been largely 
 disposed of, and prices at Chicago have 
 already taken an upward turn. 
 
 Necessity for Improved Methods of 
 Finance 
 
 One of the most important needs of the 
 cattle industry is for a permanent and 
 adequate system of financing. Longer 
 term loans, on a sound basis of valuation, 
 reasonable interest rates, and a more fluid 
 discount market for cattle paper are the 
 essentials. Present interest rates are too 
 high to permit of a safe margin of profit 
 for the producer, and terms not long 
 enough to allow him to bring his cattle to 
 a selling value over cost of production. 
 Cattle loans must be made on a sounder 
 basis of valuation than has often been the 
 practice heretofore, so that cattle paper, 
 enjoying easy liquidity, may bear a lower 
 rate of interest. 
 
 The $50,000,000 cattle loan pool formed 
 at Chicago on June 15 to be contributed 
 
 [5 
 
r 
 
 ii 
 
 to by banks all over the country and ad- 
 ministered by the Bankers Live Stock Loan 
 Corporation, can only be considered a step 
 in the right direction. The amount sub- 
 scribed is of course inadequate for the 
 financing of an industry of such magni- 
 tude as that of live stock raising. It is sup- 
 posed, however, that the initial subscrip- 
 tion is to serve merely as a nucleus for the 
 development of a more ample fund if the 
 wisdom of the undertaking is demon- 
 strated. Participation in the pool by large 
 banks all over the country will stimulate 
 new interest in the cattle industry, and in- 
 vestigation of loan methods now under 
 way should do much to reveal and elimi- 
 nate unsound practices. It is to be ex- 
 pected that an industry such as cattle rais- 
 ing, which is so closely allied with an in- 
 dustrial activity representing a greater an- 
 nual production in value than any other 
 one business in the United States — that of 
 meat packing — will gain the confidence of 
 bankers and come to enjoy the same finan- 
 cial support that is afforded other essential 
 industries. 
 
 Relative Importance of Cattle to the 
 
 Southwest 
 
 Although California is primarily an 
 agricultural state, it ranks fifth in number 
 of head and fourth in valuation of cattle 
 among the beef producing states of the 
 Union, being outranked in number only 
 by Texas, Iowa, Nebraska and Kansas. 
 "Die number of cattle (other than milk 
 cows) in California this year is esti- 
 mated by the United States Department 
 of Agriculture to be 1,683,000, or 3.9% 
 of all beef cattle in the country. The 
 value is estimated at S74,052,006. Ari- 
 zona has approximately 1.000,000, and Ne- 
 vada 540,000 head, representing 2.6% and 
 1.3%, respectively, of the total in the 
 United States. Together the three states, 
 California, Arizona and Nevada, there- 
 fore produce 7.8% of the country's beef. 
 Among farm products of the state of 
 California, the 1920 census indicates that 
 beef cattle rank fifth in value, being pre- 
 ceded only by hay, orchard fruits, citrus 
 fruits, and grapes, in the order given. 
 
 Future of the Industry 
 
 The margin of profit to be realized 
 from cattle raising in California has be- 
 come narrow. Competition of agricul- 
 tural and horticultural products has stead- 
 ily forced live stock raisers to the less fer- 
 tile areas, and the cost of leasing land, or 
 of interest on purchase money, has risen 
 to the point of bringing cost of produc- 
 tion too near to possible selling price. 
 Cattle interests must work toward a classi- 
 fication of ranges, whereby stock will be 
 bred and raised through the first two 
 years on cheap ranges or possibly on free 
 grazing districts or forest reserves, leaving 
 the more expensive finishing off or fat- 
 tening process for producers of alfalfa 
 hay and sugar beet and cotton growers, 
 who have a steady supply of inexpensive 
 feed as by-products of their respective en- 
 terprises. In other words, the part to be 
 played by this state in the cattle raising 
 industry must be largely that of a feeding 
 ground for fattening grown animals. Ari- 
 zona and Nevada, with their vast areas of 
 cheap grazing land and contiguous govern- 
 ment ranges, are better adapted for breed- 
 ing grounds, where calves may be pro- 
 duced and raised until ready for market 
 fattening, when they may be shipped down 
 to the alfalfa districts of Southern Califor- 
 nia and the sugar beet fields of the coast. 
 Another necessity to the cattle industry of 
 this state is the development of well-bred 
 stock. As the margin of profit becomes 
 narrower, the amount of beef produced per 
 dollar expended must be increased, which 
 can be accomplished only by raising cattle 
 capable of taking on weight readily. 
 
 Los Angeles is apparently destined to 
 become the center of the meat packing in- 
 dustry on the Pacific Slope; first, because 
 it is becoming more and more surrounded 
 by cotton fields, alfalfa pastures, and sugar 
 beet plantations, which may be counted 
 upon to furnish a steady supply of inex- 
 pensive and good feed; and, secondly, be- 
 cause it is the nearest common shipping 
 point accessible to the large cattle and 
 sheep ranges of the Southwest. 
 
 Principal Factors in the Cattle Industry 
 
 Distribution of the Cattle Supply 
 
 Cattle are raised in every corner of the 
 world, but only a few countries are im- 
 portant sources of international meat sup- 
 ply. India, for example, with 130,000,000 
 cattle, has more than any other two coun- 
 tries combined, with practically no beef 
 exports. Most of the Indian cattle are 
 
 • •• • • 
 
 8«B Tta&olsoo 
 
 next to India in the number of cattle 
 raised, followed by Russia, Brazil, Argen- 
 tina, Germany, France, Australia and Can- 
 ada, in the order named. 
 
 According to the Bureau of Crop Esti- 
 mates, there are 42,870,000 head of cattle 
 (other than milk cows), valued at $1,346,- 
 665,000, in the United States this year. 
 Texas, with 4,547,000 head (11% of all in 
 the country) has nearly as many as any 
 other two states together, followed by 
 Iowa, with 2,969,000 head, Nebraska with 
 2,650,000, Kansas with 2,075,000, and 
 California ranking next. Arizona ranks 
 fourteenth on the list of forty-eight states. 
 Other cattle raising states, in order 
 of their importance, are; Minnesota, 
 Missouri, Wisconsin, New Mexico, South 
 Dakota, Illinois, Colorado, Oklahoma, 
 Ohio, Montana, Florida, New York, Ala- 
 bama, Georgia, Michigan, Louisiana and 
 Wyoming. It is interesting to note that 
 New York, with 882,000 head, 
 has more cattle (other than milk 
 cows) than Wyoming, one of the 
 so-called cowboy states, which 
 has only 720,000 head. 
 
 In California beef cattle 
 raising is found 
 
 in nearly 
 every county, in 
 many cases so 
 
 CALIFORNIA 
 
 Distribution of Beef 
 Cattle, Based on Censoa 
 
 of 1920 
 
 1 dot3=1000 head of Cattle 
 
 used as draft animals, all arc of poor 
 breed, and native superstition forbids their 
 use for meat. Consequently many die of 
 old age, furnishing only hides and tallow 
 to the market. The United States ranks 
 
/T 
 
 u 
 
 closely allied with dairy farms that sep- for the entire state, though many cat* 
 arate figures for meat and dairy animals tie are shipped r^ularly to Los Angeles 
 are difficult to determine accurately. Ac- for slaughter. 
 
 cording to the government census survey 
 of 1920, the industry is most intense in 
 the San Joaquin Valley counties of Kern, 
 Merced, Tulare and Fresno, and the coast 
 counties of San Luis Obispo, Monterey 
 and San Diego. The accompanying map 
 shows more completely the general distri- 
 bution over the state. 
 
 The cattle of Arizona are more or less 
 concentrated about the Salt River Valley 
 and other smaller tributaries of the Gila 
 River. The general aridity of the state 
 makes it necessary to seek the localities 
 which have the 
 best water sup- 
 ply. There are 
 very few cattle 
 in the large 
 desert counties of 
 Mohave and 
 Yuma. Of the 
 entire number in 
 the state, 18% 
 are in Yavapai 
 County, around 
 Prescott, at the 
 headwaters of 
 the Hassayampa 
 River. Other 
 important dis- 
 tricts are in the 
 southeast, in Co- 
 chise and Gra- 
 ham counties, on ^ 
 the Mexican and 
 New Mexican 
 borders. Flag- 
 staff is the center 
 of the northern 
 region, which is 
 important on ac- 
 count of large 
 government 
 ranges. Cattle in 
 the north, how- 
 ever, have been 
 largely displaced 
 by sheep. Phoe- 
 nix, on the Salt 
 River, is the beef 
 marketing and 
 packing center 
 
 8] 
 
 In Nevada the cattle region most dense- 
 ly stocked is Elko County, at the north- 
 eastern corner of the state, between the 
 headwaters of the Humboldt River and 
 close to the Idaho and Utah boundaries. 
 Another important region is in Humboldt 
 County, in the northwest, on the Oregon 
 line. The counties immediately bordering 
 on California are relatively unimportant, 
 although the irrigated district around Car- 
 son City is a feeding center of some 
 importance 
 
 ARIZONA 
 
 Distribution of B««f Cattle, Census of 1920 
 1 dot=1000 head of Cattle 
 
 
 
 re- 
 and 
 
 Methods of Raising Beef 
 
 In the process of raising and fattening 
 beef cattle, there are three types of feed- 
 ing. These are employed in rotation, each 
 at its appropriate season of the year. The 
 first is mountain range feeding, beginning 
 with the summer months, after the snow 
 has melted and green grass has come up. 
 The mountain range is the primary breed- 
 ing ground of the cattle and the place 
 where the beef crop is begun. Wild grass 
 is of course the least expensive kind of 
 feed, but not always the most economical 
 for the production of high-grade beef, un- 
 less supplemented by other kinds of fat- 
 producing feed. Mountain ranges are 
 found extensively in the northern part of 
 California, as well as along the eastern 
 boundary of the state toward Nevada and 
 Arizona, and in the Coast and San Ber- 
 nardino Ranges. There are 
 also large ranges in the 
 gion between San Diego 
 the Imperial Valley. 
 
 The second type of feeding 
 is known as valley grass for- 
 age. As the winter approaches 
 the herds are driven down 
 from the mountain ranges 
 into the valleys, where they 
 are fed on grass freshened 
 by summer rains. It is the 
 policy of stockmen to keep 
 their cattle off of these val- 
 ley grass pastures during the 
 summer so that the feed may 
 be preserved for winter. In 
 times of stress like the pres- 
 ent, however, winter reserves 
 are apt to be used up during 
 summer. Stockmen, holding 
 their cattle for higher prices, 
 try to feed more animals than 
 their ranges will support 
 When the summer pasture has 
 been exhausted, the tempta- 
 tion is to turn the herds into 
 the pastures which should be 
 kept for winter use. Such 
 practices may bring disastrous 
 results later in the season. 
 As the winter approaches, the 
 owners must either buy grain 
 or other dry feed on the mar- 
 ket, at high winter prices, or 
 
 sell off surplus stock for beef regardless 
 of their condition and market value. Such 
 a situation may have to be faced this win- 
 ter in Southern Arizona, where failure of 
 pasture on account of the spring drouth 
 forced cattle raisers to draw heavily upon 
 their winter reserves. 
 
 "Dry-lot feeding" is the final process in 
 bringing into market condition those cattle 
 which it has been impossible to fatten on 
 grass. This type of feeding is usually en- 
 gaged in by intermediaries called "feed- 
 ers," who are usually independent of the 
 stockmen and the packers. The stock rais- 
 ers, running their herds in the mountains 
 in summer and fattening them in the val- 
 leys in fall and winter, usually select 
 those ready for market as they come into 
 condition and sell them for beef, retaining 
 a certain percentage for reproductive pur- 
 poses, so that the herds may be perpetu- 
 
 NEVADA 
 
 Distribution of Beef 
 Cattle, Census of 1920 
 
 1 dot=1000 head of Cattle 
 
 IT 
 
!l 
 
 I 
 
 '1 
 
 ated. Older cows and steers not fat 
 enough for market, are culled out and sold 
 to feeders. These {inimals of course do 
 not bring as much per pound to the raisers 
 as do fat cattle, but it is often more eco- 
 nomical to pass them on to persons en- 
 gaged in "priming" than to put them 
 through another season of fattening on the 
 range. In the Middle West "feeder-cattle" 
 are primed on corn, but in California and 
 Arizona alfalfa hay, sugar beet tops and 
 pulp, and cotton-seed meal are used. These 
 feeds produce a grade of beef not far in- 
 ferior to that produced by com. Naturally 
 many feed-lots are found in the sugar beet 
 districts, as along the coast near Los An- 
 geles, where sugar producers engage in 
 feeding as a means of utilizing surplus 
 beet tops and pulp. Other feeding centers 
 are in the San Joaquin and Imperial Val- 
 leys in California and the Salt River Val- 
 ley in Arizona, in proximity to the large 
 alfalfa and cotton fields. The Salt River 
 and Imperial Valleys are doubly im- 
 portant as feeding districts, for the reason 
 that they have both valley grass pastures 
 and dry feeding lots, where cotton hulls, 
 cotton-seed meal and alfalfa hay are used. 
 
 Grass Range States 
 
 California, Arizona and Nevada are pri- 
 marily "grass-range" states, as distin- 
 guished from the corn-feeding states of the 
 great Middle West, such as Iowa, Kansas, 
 Missouri and Nebraska. In these moun- 
 tain states of the West where cattle are fed 
 largely on natural pasture, many arc 
 sold directly from the range to the packer. 
 This means less expensive feeding in the 
 long run, but a poorer grade of beef on 
 the whole, and a longer period of turn- 
 over. The corn feeder buys grown ani- 
 mals, fattens them in a few months, and 
 gets his money. The ranger raises his 
 beef from calves, runs them out over the 
 mountains while growing, and sells at the 
 end of from 3 to 5 years. 
 
 The range method of raising stock in- 
 volves the uncertainty of climatic condi- 
 tions. In extremely severe winters, for 
 instance, cattle on the open range will die 
 in large numbers, and in summer drouths 
 the death rate will be equally high from 
 lack of feed and water. The winter of 
 1920 saw an average for the United States 
 10] 
 
 of 18.4 deaths from exposure per 1000 
 cattle. For the comparatively mild winter 
 of 1921 the average dropped to 9.3 deaths 
 per 1000 head for the entire country. 
 Arizona, however, reported more losses 
 from exposure in 1921 than for any of the 
 past 10 years, the estimate being 70 per 
 1000, compared with 10 per 1000 in Cal- 
 ifornia and 16 per 1000 for Nevada. 
 
 A comparison of figures for the different 
 cattle raising states indicates that Arizona 
 is particularly unfortunate in losses from 
 disease and exposure, while California and 
 Nevada are at about the average. The 
 most fortunate states are those of the Mid- 
 dle West, which provide shelter for their 
 animals and which do not have to depend 
 upon the local weather conditions for 
 feed. Arizona also suffers heavily from 
 drouth, as it has done this year. Pasturage 
 on July 1, 1921, was reported by the 
 United States Department of Agriculture 
 to be only 50% normal in that state, as 
 compared with 86% in California and 
 101 7o in Nevada. 
 
 Though the western ranges are of low 
 carrying capacity, requiring from 15 to 40 
 acres of pasture per animal, depending up- 
 on the degree of rainfall, the much great- 
 er area of land available for use at low 
 cost makes up for the small production 
 per acre. California, Arizona and Nevada 
 are fortunate in possessing large tracts of 
 national forest reserve pastures, upon 
 which stockmen are permitted by the gov- 
 ernment to graze their cattle at a compara- 
 tively small rental, usually a little over 
 SI. 00 per head a year. The acreage in Na- 
 tional Forest Reserve in these states, with 
 estimated grazing capacity and charges per 
 head of cattle, is shown by the following 
 table for 1919: 
 
 Yearly 
 
 Charg* 
 P«T hMd 
 
 $1.00 
 1.30 
 1.20 
 
 AcTM ia Number of 
 
 SUU Foremt RcMinre Cattle Cntc4 
 
 Arizona 11,154,923 343,425 
 
 California 18,814,659 230,350 
 
 Nevada 4.971335 87,735 
 
 Total 34,940,917 661^10 
 
 Cost of Production 
 
 The cost of raising beef cattle varies 
 with the cost of feed, interest rates on cat- 
 tle paper, and the price of labor. The 
 percentage of total cost represented by 
 each one of these factors is approximately 
 
 ■ 
 
 as follows, under typical conditions in the 
 Southwest : 
 
 Feed 55-70% 
 
 Interest 25-15% 
 
 Labor 10- 5% 
 
 The feed factor is subject to the widest 
 variations, due both to the continual fluc- 
 tuation of prices of hay and pasture, and 
 the varying climatic conditions which 
 make the amount of feed an uncertain ele- 
 ment. The cost of feed is therefore not 
 only the largest factor in production cost, 
 but it is a variable which never can be de- 
 termined by the stockmen beforehand. 
 Consequently he must take long chances. 
 In years of heavy rainfall and favorable 
 climatic conditions, he may be able to fat- 
 ten his cattle on comparatively cheap 
 range grass, and make huge profits. In a 
 season of drouth or severe blizzards he 
 may lose 10% of his animals, and be put 
 to the necessity of buying expensive hay 
 to fatten or save those remaining. In 
 such a case he would have to sell at a 
 price below cost of production and his 
 losses would be great. 
 
 In the days of the vast areas of free 
 ranges good profit could be realized on 
 cattle. The only uncertain factors were 
 the weather and the selling price of beef. 
 The comparatively steady demand for 
 meat insured a fairly stable price for cat- 
 tle, and the large profits in good years 
 more than covered losses during a bad win- 
 ter. 
 
 Free pasture has rapidly become scarce, 
 however, with the reclamation of govern- 
 ment land for agricultural purposes, and 
 with the ever-increasing competition of 
 sheep raising, as an additional difficulty to 
 be met. True, there are large areas of gov- 
 ernment forest reserves in the West upon 
 which cattle may be grazed at low cost, 
 but the figures given above indicate that of 
 1,229,000 cattle in the state of California 
 in 1919 only 230,000, or 18.7%, were 
 given grazing permits for that year. 
 
 Other ordinary expenses of the cattle 
 raiser have increased more rapidly than 
 the selling price of beef. He must now 
 pay higher rent, build fences, cultivate 
 some of his land for the raising of hay, 
 and pay more for his foremen and cow- 
 boys. The problem of making a profit on 
 beef under modern conditions hinges 
 
 largely on the cost of hay or other feed, 
 as has been stated. This is even more 
 true in the Northwest, where hay must be 
 fed during the months when snow is on 
 the ground. Fortunately large irrigation 
 projects have made possible the raising of 
 large quantities of alfalfa hay in the val- 
 leys of the Southwest. Alfalfa is a high- 
 grade feed for fattening cattle and cheaper 
 than corn. But even hay in the stack costs 
 something (usually about $6.00 per ton), 
 and the price soars with the same causes 
 which force the stockmen to buy feed, 
 namely, failure of rains. It has been esti- 
 mated that in parts of the Southwest 30 
 acres of pasture and one ton of hay are re- 
 quired to keep one animal one year. Ob- 
 viously, with cattle selling on the hoof at 
 6c per pound and alfalfa hay at $6.00 per 
 ton, each animal must increase in weight 
 100 pounds a year to cover the cost of the 
 hay alone. To cover the rental or interest 
 on 30 acres of summer pasture, pro-rata of 
 operating expenses, and original cost of 
 the animal as a calf, it must put on an- 
 other 100 or 150 pounds, making a total 
 gain in weight of 200 to 250 pounds per 
 year, which stock of good breed will just 
 about do in this part of the country. In 
 most parts of Southern California stock- 
 men attempt to bring their cattle into beef 
 condition without the use of hay except as 
 a last resort. This requires unusually good 
 pasture, supporting on an average one ani- 
 mal for every nine or ten acres, and favor- 
 able weather conditions. Ranges of such 
 capacity are valued at about $20.00 per 
 acre, and bring from $0.75 to $1.25 per 
 acre rental. 
 
 Methods of Computing Cost 
 
 Conditions utider which cattle are raised 
 in the Southwest are of course different in 
 different localities. Arizona, for example, 
 is largely a breeding ground, of large in- 
 expensive ranges. Southern California, on 
 the other hand, is primarily a fattening 
 district of small individual herds, the own- 
 ers preferring to purchase calves from 
 Arizona and Nevada rather than to pro- 
 duce them from their own stock. Plenty 
 of good grass, alfalfa hay and available 
 beet and cotton fields make this possible. 
 
 Although it is impossible to give exact 
 figures showing cost of cattle production, 
 
 [11 
 
r 
 
 the following represent to a fair degree the 
 average of expenses involved in a normal 
 year in Southern California, with the pos- 
 sible profit: 
 
 The stockman leases a range of 9,000 
 acres at 75c per acre, having a grazing 
 capacity of 9 acres per animal. He stocks 
 this with 1000 "weaners" brought in from 
 Northern California, Arizona or Nevada 
 at $20.00 per head. The annual loss of 
 calves, due to disease and exposure is as- 
 sumed to be 2%, a fair estimate for this 
 region. 
 
 HRST YEAR: 
 
 1000 calves @ $20.00 $20,000.00 
 
 Annual loss of calves due to exposure 
 
 and disease 2% 400.00 
 
 Interest @ 8% on $20,000 1,600.00 
 
 Rent of 9000 acres @ 75c 6,750.00 
 
 Labor and salt, $1 per animal 1,000.00 
 
 Cost of raising 1000 calves to yearlings. .$29,750.00 
 
 Cost each $29.75 
 
 Probable selling price of yearling 30.00 
 
 Margin, exclusive of owner's salary and 
 equipment .25 
 
 Obviously, the cost of running the calves 
 on such a range for the first year is too 
 high to allow of a profit. To make his 
 cattle pay out the stock raiser must hold 
 them another year or two, uptil increase 
 in weight, and higher quality of beef, due 
 to the addition of fat, will bring a higher 
 price per pound than can be realized from 
 yearlings. If he runs them through a 
 second and third year, the expense and 
 possible profit, under the same normal 
 conditions, would be approximately as 
 follows: 
 
 SECOND YEAR: 
 
 Cost of 1000 yearlings to date $29,750.00 
 
 Annual loss due to exposure and 
 
 disease, 2% 595.00 
 
 Interest @ 8% on $29,750.00 2,380.00 
 
 Rent of 9000 acres at ;5c 6,750.00 
 
 Labor and salt, $1.00 per animal 1,000.00 
 
 Cost of raising 1000 cattle at end of 
 
 second year $40,475.00 
 
 Cost each 40.48 
 
 Probable selling price, 800 lbs. 
 @ 6c 48.00 
 
 Margin (18%) $7.52 
 
 121 
 
 THIRD YEAR: 
 
 Cost of 1000 cattle to date $40,475.00 
 
 Annual loss due to exposure and 
 
 disease, 2% 809.50 
 
 Interest @ 8% on $40,475.00 3,238.00 
 
 Rent, 9000 acres @ 75c 6,750.00 
 
 Labor and salt $1.00 per animal 1,000.00 
 
 Cost of raising 1000 cattle at end of 
 
 third year $52,272.50 
 
 Cost each 52.27 
 
 Probable selling price, 1050 lbs. 
 @ 6c 63.00 
 
 Margin (20%) $ 10.73 
 
 If the owner is forced to hold the cat- 
 tle a fourth year, as many are doing now, 
 in the hope of higher prices, the margin 
 of profit recedes rapidly, provided, of 
 course, that there is no advance in the price 
 of beef. This is because the animals do 
 not take on sufficient additional weight dur- 
 ing the fourth year to compensate for the 
 increased cost. On the same basis and un- 
 der the same conditions as assumed for the 
 first three years, the figures at the end of 
 the fourth year would show a cost of 
 $65.25 per animal, against a probable sell- 
 ing price of $66.00. Accordingly the 
 margin of profit on "four-year-olds" un- 
 der these conditions would be only 1%. 
 
 Cattle are rarely held a fifth year, ex- 
 cept for breeding purposes. From the 
 figures above the reason is obvious: the 
 cumulative cost of maintaining a beef 
 steer over five years will in all probability 
 be higher than the price he will bring at 
 the end of that time. 
 
 Varying Conditions 
 
 The above figures showing cost of pro- 
 duction should not be taken too literally. 
 Conditions vary so widely in different lo- 
 calities and in different years, that only 
 sample sets of conditions can be offered. 
 In the hypothetical case taken above the 
 stock raiser did not own, but leased his 
 land, and paid for every acre of it. In- 
 terest at 8^( was allowed on the full value 
 of his cattle. In few cases would a breeder 
 actually be paying interest on full value, 
 for the reason that he could not borrow 
 to that extent. But if he borrows to the 
 extent of only 75% on the value of his 
 stock, the remaining 25% represents his 
 own investment, and the above figures as- 
 sume that he is to be allowed usual inter- 
 est on personal funds involved. In some 
 cases the stockman owns a few hundred 
 acres, leases auxiliary pasture during a 
 
 1 
 I 
 
 I 
 
 • • 
 
 part of the year, and perhaps feeds hay or 
 beet tops at another time. In Arizona 
 and parts of California where ranges are 
 contiguous to government forest reserves 
 and the owner controls the water supply 
 of his neighborhood, he is allowed graz- 
 ing privileges in the forest range at a very 
 low charge. As a second typical set of 
 conditions in such a region, say in the vi- 
 cinity of Flagstaff, Arizona, we might take 
 a man who owns a range worth $5,000, 
 utilizes a neighboring forest reserve dur- 
 ing six months of the year at 50c per head, 
 and feeds half a ton of hay per head in 
 the winter. He stocks his range with 1000 
 cows at $45.00 and 40 bulls at $100 per 
 head, the bulls depreciating one-half of 
 their value over a period of three years. 
 His calf crop would be on the average 
 70%, and his annual loss by disease and 
 exposure 3%. It may be assumed that he 
 could borrow one-half the value of his 
 cows, $22,500.00, for stocking and inci- 
 dental expenses. If the computation is 
 carried out, it may be seen that the owner's 
 actual cost per calf will be $12.50. If he 
 can ship these cattle to California buyers 
 at $15.00 per head net, obviously he can 
 realize a profit of 25%. 
 
 Feeders 
 
 In the neighborhood of Los Angeles 
 and in the Imperial and parts of the San 
 Joaquin Valley, there are many so-called 
 "feeders," who make a practice of buying 
 full grown but unfattened steers and cows 
 and finishing them off on hay, beet tops, 
 or cottonseed before they are sold to the 
 packer. The feeder, of course, gambles 
 on the cost of feeding being less than the 
 increase in price of cattle fed. He ex- 
 pects not only to produce more weight, 
 but so to fatten each animal that the qual- 
 ity of meat will bring a higher price per 
 pound, usually about 3c, than that paid 
 for the cattle on the range. 
 
 Whether or not the "feeder" makes 
 money is dependent primarily on the cost 
 of feed. Some animals are naturally poor 
 and will eat 40 pounds of expensive hay 
 per day and gain very little; other better 
 breeds will put on up to 2 pounds a day 
 with the same amount of feed. In recent 
 years the cost of hay has been so great 
 around Los Angeles that this type of feed- 
 ing has given way to fattening on sugar 
 
 beet tops, and cottonseed meal. Sugar 
 beet growers and sugar mills engage in 
 feeding principally as an outlet for other- 
 wise valueless by-products, and, of course, 
 make good profit. The business of feed- 
 ing, however, unless connected with some 
 such source of cheap supplies, is a highly 
 speculative one. 
 
 Importance of Breeds 
 
 It has been shown that the profit to be 
 made on cattle depends much upon the 
 amount of weight that can be added to 
 a steer by the expenditure of a given 
 amount of time and money. In this con- 
 nection the matter of breeds plays an im- 
 portant part. It will be remembered 
 that in the early days of cattle raising in 
 the Far West, when land was free and 
 other expenses comparatively low, most of 
 the cattle of this region were "longhorns," 
 which had migrated into Texas from Mex- 
 ico. As the margin of profit between cost 
 and selling price became narrower, it was 
 realized that the longhorn ate too much 
 for the amount of fat produced. Too large 
 a percentage of the animal was horn, skin 
 and bones. Since that time stock raisers 
 of the country have given more and more 
 attention to stocking their ranges with 
 breeds of cattle which would take on fat 
 readily and dress out a larger percentage 
 of beef. Nowadays the stockman expects 
 his cattle to dress from 55 to 60% good 
 meat, whereas 45% was a high average 
 with the old longhorns. In the Middle 
 West, and even in the Northwest, results 
 in breeding and cross-breeding have been 
 carried to a degree of perfection which 
 probably cannot be hoped for in the 
 Southwest for many years, if ever. Much 
 attention is being given to the matter, 
 however, and among the cattle of Arizona 
 and Southern California a large percent- 
 age of Herefords and Durhams is already 
 found, though the nearer the Mexican line 
 is approached, the poorer, as a rule, the 
 quality of stock becomes. The California 
 Cattlemen's Association foresees that the 
 success of the cattle industry in this state 
 depends greatly upon the matter of devel- 
 oping good breeds, and is bending every 
 effort to that end. There is some disagree- 
 ment as to breeds best suited to this part 
 of the country, but the concensus of opin- 
 ion among experienced stockmen is that 
 
 [13 
 
■ ! 
 
 tl 
 
 In 
 
 ^; 
 
 Durham cattle ("Shorthorns") fatten into 
 beef more quickly than others and are the 
 best stock for valley ranges, while the 
 hardier Herefords are better rustlers and 
 will maintain themselves more satisfac- 
 torily on mountain ranges. 
 
 Abnormal Production Costs 
 
 That the market price of beef cattle is 
 now (August, 1921) far below the cost 
 of production can be proved. On previous 
 pages of this report, figures are given 
 showing that under normal conditions, 
 with the factors of expense at a certain 
 level and with cattle selling f.o.b. ranch 
 at 7c per pound, a fair margin of profit 
 to the cattle raiser was possible, say 10%. 
 The important factors were seen to be 
 feed, labor and interest on cattle paper. 
 The following figures will illustrate the 
 degree to which these factors increased in 
 cost from the pre-war period to the years 
 1919 and 1920. It should be borne in 
 mind that it was during these latter two 
 years that cattle now ready for market 
 were raised. p„^^„, 
 
 Pra.war of 
 
 „ . lerel WW-JO laereaM 
 
 Feed, alfalfa hay $6.00 $12.00 100 
 
 Crass pasture grazing 
 
 fee per acre 75 1.25 66.6 
 
 Feed-lot charges per 
 
 day, beet sugar tops, 
 
 per ton basis 15 .60 300 
 
 cottonseed and hulls, 
 
 per day 30 .55 83.3 
 
 Labor, wages of herders 30.00 90.00 200 
 
 Interest on cattle paper 8% 10% 25 
 
 A method was given above, with quali- 
 fications, for estimating the cost of carry- 
 ing cattle through the second and third 
 years of their raising, under normal con- 
 ditions. Using the same process, and 
 raising the expense items to the percentage 
 of increase just shown, the cost of raising 
 the three-year-old cattle now on the mar- 
 ket would seem to have been approximate- 
 ly $86.66 per head. The present market 
 price for such animals is $63.00 (1050 
 pounds at 6c per pound). Obviously the 
 producer is now facing a loss of $23.66 
 per head (27.3%). 
 
 Before cattle can be produced at a profit 
 again in this part of the country, one and 
 probably both of the following changes 
 must come about: (1) A decrease in the 
 cost of production; and (2) A rise in 
 the market price of beef. 
 
 Some cost factors are already falling. 
 Range rental has declined about 25%, feed 
 141 
 
 yard charges 30%, and labor 35%. 
 Alfalfa hay is back almost to normal. 
 But interest rates still remain high, with 
 money even harder to obtain. 
 
 When the beef market will recover is a 
 problem that all cattlemen are trying to 
 solve. They believe that the low level just 
 reached is unwarranted and cannot be 
 maintained long. Consequently the ad- 
 vices going out from the California Cattle- 
 men's Association and other friends of the 
 stockmen are to hold for better prices. 
 Most of them are in need of funds for 
 common living expenses, however, and 
 must sell at any price. 
 
 Market Hindrances 
 
 Apparently the packers are selling 
 dressed beef at only a legitimate profit 
 above cost. The ratio between prices paid 
 by them for cattle on the hoof and prices 
 at which they sell dressed beef to the 
 butchers, is only slightly higher than be- 
 fore the war, and the difference may be 
 accounted for by the enormous decline in 
 the price of by-products, a source from 
 which the packer ordinarily expects to 
 cover overhead expenses. 
 
 Producers and packers agree in the be- 
 lief that retail butchers are doing much to 
 delay recovery of the beef raising indus- 
 try by exhorbitant charges for meat over 
 the counter. Good meat is made to re- 
 main an expensive luxury, and the masses 
 will not buy it. Demand and consumption 
 decrease and the market lags. 
 
 A beef when slaughtered dresses out 
 at about 50%. Therefore a 1000-pound 
 steer would furnish 500 pounds of beef, 
 for which the butcher would have to pay 
 $67.50 at the present price (13Voc lb.). 
 
 From the following table the maximum 
 
 gross profit which may be realized from 
 
 the sale of a beef carcass at present 
 
 prices may be calculated: 
 
 COST, 1 beef car- 
 cass, 500 lbs. (^ 
 
 13%c 167.50 
 
 SELLINC PRICE: 
 Porterhouse and 
 
 club steaks 35 lbs. (n} 55c $19.25 
 
 Sirloin steaks 40 " (fi] 43c 17.20 
 
 Rib roasts 45 " @ 40c 18.00 
 
 Round and chuck 
 
 steaks and rump 
 
 roasts 175 " @ 35c 61.25 
 
 Boiling meat and 
 
 miscel 205 " @ 8c 16.40 
 
 Total 500 lbs. $132.10 
 
 Gross profit (95.7*7r ) on cost price 64.60 
 
 The retail prices given were obtained 
 by personal inquiry of six representative 
 butcher shops in various parts of Los 
 Angeles. The scale of proportionate 
 weights is that recognized by packers and 
 published in Swift & Company's year book 
 for 1920. 
 
 It would appear from these figures that 
 at current prices butchers in this vicinity 
 can, with efficient cutting, make about 
 $64.60 gross on each carcass. To arrive 
 at net profits it is, of course, necessary 
 to subtract operating expenses. For this 
 purpose we may take the shop which sells 
 one carcass per day. 
 
 Investigation indicates that cutters are 
 paid about $6.50 per day. One cutter can 
 handle one carcass per day. Rent, ice and 
 delivery expenses may run as high as 
 $11.00 per day. If all of these expenses 
 are charged to beef sales alone (beef con- 
 stitutes about 38% of all meat sold) there 
 would be a total of $17.50 per day to be 
 deducted from the gross profit of $64.60. 
 
 50^ ^y* '}^ ^'^7 'y '^|> J f 
 
 For the shop handling one carcass per day, 
 therefore, the net profit would be $47.10 
 per day or per carcass, which is 35.7% 
 net if figured on the selling price of the 
 carcass, or 68.7% if calculated on cost 
 price. Average retail meat shops handle 
 from four to five carcasses per week. 
 Large dealers handle up to five and ten 
 per day. 
 
 While these profits seem unjustifiably 
 high, retail meat dealers contend that in 
 actual practice their net profits on all 
 meat sales are considerably less than they 
 appear in theory. It is said that at pres- 
 ent pork sales often show a net loss, which 
 must be counterbalanced by additional 
 profits on beef. Butchers claim also that 
 due to the insistence of housewives on 
 small, choice cuts, considerable waste is 
 experienced in trimming. They assert that 
 they experience considerable loss from 
 shrinkage due to the necessity of keeping 
 meal in storage because there is not a uni- 
 form demand for all cuts from a given 
 J A^ SO NDJ PMAMJ J 1 
 
 SvpartiMat of Rassarcb A Sanric* Sacurit/ Tnict ft Sarii^t Bank 
 
 CHART No. I 
 Comparative Trends of Retail Meat Prices, Wholesale Meat Prices and Range Cattle Prices, 1914-1921 
 
 (Scale is arranged logarithmically to reflect relative changes) 
 
 [15 
 
 I 
 
m 
 
 I 
 
 i 
 
 V\ 
 
 carcass. It is also contended that few 
 cutters are sufficiently skillful to cut out 
 of a carcass the percentage of good meat 
 shown to be possible by Swift & Com- 
 pany's scale, indicated above. 
 
 Whatever the facts, examination of the 
 records of R. G. Dun & Co. reveals that 
 there have been no failures among Los 
 Angeles meat dealers in the past year. 
 
 Marketing and Packing 
 
 The marketing of beef in the Southwest 
 is done either by local butchers, or 
 through packing-houses at the main cen- 
 ters of population. In California con- 
 sumption of beef so nearly equals pro- 
 duction that the packer's task is largely 
 one of local distribution. 
 
 Although there are stockyards for the 
 assembling and distribution of cattle at 
 Denver, Colo., and at Portland and 
 Seattle in the Northwest, they are un- 
 known in the Southwest. Cattle ap- 
 parently ready for market are shipped 
 to the meat centers and sold directly 
 to packers for slaughtering, or if not 
 in killing condition on arrival, are sold 
 to dry-lot feeders in the vicinity, who 
 fatten the animals on alfalfa hay or beet 
 tops for a few months, and then turn them 
 over to the packers. 
 
 It is claimed by many that the mar- 
 keting of beef in this region is handi- 
 capped by the absence of a union stock- 
 yards with improved packing and canning 
 equipment, at some such center as Los An- 
 geles. There is no central point at pres- 
 ent to which cattle may be shipped for 
 segregation into "feeders" and "market 
 fat." Consequently it is contended that 
 stockmen are much at the mercy of the 
 buyers, who are usually agents of the 
 packers. In the absence of a central cat- 
 tle market, these men go out to the ranges 
 and drive their bargains with the individ- 
 ual raisers, who are often ignorant of 
 prices and general market conditions. The 
 buyers will select the best of the herd and 
 leave the ranger with a poor grade of cat- 
 tle on hand. Many of these rejected ani- 
 mals will be shipped down to feed-lots 
 in the valleys and at the packing centers. 
 Among them will be old cows and runty 
 steers which could not be fattened by 
 even the most expensive dry- lot feeding. 
 If there existed stockyards for proper seg- 
 161 
 
 regation, with well-equipped packing es- 
 tablishments close at hand, these poorer 
 animals could be culled out and slaughtered 
 inunediately as "canners." This would 
 prevent the waste of much good feed. 
 
 It is thought by some that a union 
 stockyards would do much to break the 
 power of large buyers who are now able 
 to "bear" prices to a certain extent through 
 the inability of shippers to find a competi- 
 tive market for their offerings. 
 
 On the other hand some of the largest 
 cattlemen do not favor the establishment 
 of stockyards, claiming that through them 
 the packers would secure even a stronger 
 hold on the market. One of our largest 
 producers in the South, Mr. Fred Bixby of 
 Long Beach, is at present opposing a plan 
 of the Los Angeles Chamber of Commerce 
 to have a union stockyards established at 
 this center. Mr. Bixby, an ex-president 
 of the California Cattlemen's Association, 
 contends that such stockyards would fall 
 into the control of the large packers and 
 become a means of dictating prices to the 
 producer. With the beef crop of the state 
 regularly gathered into stockyards, Mr. 
 Bixby declares, the supply would be deter- 
 mined easily at the beginning of each 
 market day, and whenever a surplus be- 
 came apparent, interleagued packers could 
 force owners to accept whatever they 
 pleased to offer. Freight charges would 
 make impossible the shipment of stock to 
 other markets and high feed charges at the 
 stockyards would make it unprofitable to 
 hold for better prices. Mr. Bixby also 
 contends that there is no market for Cal- 
 ifornia beef other than for local consump- 
 tion, and therefore no need of concentrat- 
 ing cattle for shipment out of the state. 
 
 Though cattle are slaughtered and sold 
 by butchers in even the smallest towns, the 
 chief beef marketing centers of this region, 
 south of San Francisco and Ogden, and 
 west of Denver, are Los Angeles and 
 Phoenix. Los Angeles handles about five 
 times as many cattle annually as Phoenix, 
 and slightly outranks her nearest rival in 
 the West, San Francisco. The demands of 
 the San Francisco market are augmented 
 by the regular purchases of the naval 
 supply base at Mare Island, amounting to 
 some 20,000 head per annum. There are 
 other minor packing centers in the San 
 
 Joaquin Valley and along the coast of 
 Soutfiern California, but these are rela- 
 tively unimportant except for supplying 
 local demands. 
 
 The following figures, most of them 
 obtained from reliable sources, are be- 
 lieved to be fairly accurate estimates of 
 cattle slaughtered in cities of the Southwest, 
 with a comparative figure for San Fran- 
 cisco: 
 
 Skufhter of Cattle 
 and CaWet 
 1920 
 
 Lo8 Angeles, including Vernon 154,056 head 
 
 Phoenix, Ariz. 30,318 
 
 Pomona 6,705 
 
 San Diego 10,000 
 
 Anaheim 6,800 
 
 Santa Barbara 3,000 
 
 Fresno 1,950 
 
 212,829 
 San Francisco 126,321 
 
 The slaughter for the state of California 
 during 1920 was 495,167 cattle and 
 86,044 calves, or a total of 581,211 head. 
 
 Packing at Los Angeles is largely in the 
 hands of six large concerns, two of which 
 (Cudahy & Company and Wilson & Com- 
 pany) are local establishments of members 
 of the so-called "Big Five" at Chicago. 
 The large independent companies are the 
 Hauser Packing Company, the California 
 Dressed Beef Company, the Standard 
 Packing Company and the New Market 
 Company. 
 
 The packing-houses of Los Angeles 
 draw cattle from the entire southern part 
 of the state, as well as from the coast 
 ranges as far north as Monterey County, 
 and from the San Joaquin Valley south of 
 Stockton. In the more northerly districts 
 Los Angeles buyers come into competition 
 with buyers from San Francisco, either 
 overbidding or underbidding each other 
 according to price quotations at their re- 
 spective bases. Because of the slight sur- 
 plus shipped East every year (averaging 
 about 25,000 head), Los Angeles buyers, 
 with the shorter rail distance to the Middle 
 West packing centers of St. Joseph, Kansas 
 City and St. Louis, ordinarily have the ad- 
 vantage. 
 
 Besides the slaughter of cattle produced 
 in the southern part of California, the 
 packers of Los Angeles kill large supplies 
 drawn from Arizona, Utah, Idaho, Texas 
 and Nevada. Of 94,665 head shipped to 
 
 California abattoirs from these and other 
 states last winter, Los Angeles took 48,575, 
 or 51%, while 34,754, or 37%, went to 
 San Francisco. It should be stated that 
 the total for last year was considerably 
 above the seasonal average. During Feb- 
 ruary, 1921, there occurred the unusual 
 phenomenon of a higher price for cattle 
 on the Pacific Coast than at Chicago, with 
 resulting heavy importations. 
 
 Prices 
 
 The outbreak of the war in 1914 saw 
 the almost immediate rise in beef prices 
 in this country. The uptrend was at first 
 gradual, but became increasingly steeper. 
 To meet the enormous demand of the 
 European countries for beef, and with the 
 supplies of India, Australia and Russia 
 cut off, the United States, Argentina and 
 Canada were called upon greatly to in- 
 crease production. The producers of 
 America, stimulated by propaganda of 
 the Food Administration, and probably 
 even as much by soaring prices, rose to 
 meet the emergency. Our exports of beef 
 increased tremendously. A shortage was 
 created in this country and prices ad- 
 vanced rapidly, until they reached a peak 
 in July, 1918, of lie per pound, 83% 
 above the pre-war level of 6c. The end 
 of the war saw some hesitation in the 
 market, with prices holding fairly even at 
 10c. But the expected deflation was not 
 yet to come. Export demands continued 
 and during the period of extravagance in 
 the country the public insisted upon plenty 
 of everything, at any cost. 
 
 Prices advanced again until they reached 
 their highest peak of 12c in March, 1920, 
 100% above normal. Such prices were 
 enjoyed by the stockmen only for a short 
 time, however, when the long-feared but 
 unprovided-for deflation began in April. 
 From then until within the past few 
 weeks the curve has been steadilv down- 
 ward, reaching the pre-war level in June, 
 1921, and dropping below it in July. 
 
 At this date, August 1 5th, a slight recov- 
 ery in beef prices is noticeable at Chicago, 
 though the market at Los Angeles is as 
 yet unchanged. 
 
 Various factors have combined to force 
 the rapid decline of beef prices. First 
 came a reaction by the public, consequent 
 
 [17 
 
r 
 
 
 to the era of heedless extravagance in this 
 country. People began to buy smaller cuts 
 of meat and fewer of them. Exports fell 
 away, declining from 6,023,338 pounds of 
 fresh beef exported from the United States 
 in March, 1920, to 508,230 pounds exported 
 in March, 1921. The accumulations of 
 overproduction were thrown upon the 
 market, the speculative element collapsed, 
 and the ever-steadying by-product market 
 disappeared. Cattle loan associations 
 which had advanced large amounts of 
 money to cattlemen demanded liquidation 
 and settlement, and more cattle were 
 thrown on to a badly overflooded market, 
 until the price was forced down to below 
 cost of production. 
 
 Figures showing the relative decrease 
 in farm prices of beef cattle in each of 
 the important cattle states of the country, 
 published by the United States Depart- 
 ment of Agriculture, are of interest in de- 
 termining which of the cattle states have 
 suffered the most radical price recessions. 
 An examination of these figures would 
 show that the greatest declines for the pe- 
 riod ending May were experienced in Illi- 
 nois and Kansas, where the farm value of 
 cattle dropped from about $10.00 to $6.20 
 per 100 pounds, or nearly 40%. The aver- 
 age decline for the country as a whole was 
 33%. In California the recession was a 
 little under the average, 32.3%, while 
 South Dakota and Arizona seem to have 
 been the most fortunate of the states in 
 the matter of prices, suffering declines of 
 only 20.6% and 22.2%, respectively, up 
 to May of this year. 
 
 Dedine of By-Product Prices 
 
 It has been stated that one of the causes 
 of decline in cattle prices has been the 
 drop in by-product values. This has been 
 especially true in the case of hides, and 
 it goes a long way in explaining why the 
 packer was not able to pay more for cat- 
 tle on the hoof this spring, with his sell- 
 ing price of dressed beef at 15%c, than he 
 paid in 1913, with dressed beef at 12%c. 
 It should be understood that the packer 
 ordinarily depends upon the value of by- 
 products to pay more than the cost of 
 dressing. The normal cost of slaughtering 
 and dressing a beef is about 10% of its 
 value. Upon an $80.00 steer it would be 
 181 
 
 therefore about $8.00. Hie usual value 
 of by-products (hides, oflFal and fat) 
 from such an animal is about $15.00. Ac- 
 cordingly in ordinary times when paying 
 S80.00 for a steer, the packer deducts 
 $7.00 as by-product values over and above 
 cost of slaughtering, and reckons $73.00 as 
 his cost price of the beef dressed. At pres- 
 ent, due to the low level of by-products, 
 he is unable to deduct anything, but must 
 add about $2.00 for cost of dressing, over 
 and above the amount he can realize from 
 the sale of by-products. 
 
 Hides, which are the most valuable by- 
 products from cattle, brought about 15c 
 per pound before the war. At the end of 
 1919 the price went up to over 30c per 
 pound (green hides, California steers), 
 and during the spring of 1921 declined to 
 about 5c per pound. Other less im- 
 portant by-products declined in value as 
 well. The price of edible tallow dropped 
 467c, from 1234c per pound in 1920 to 
 6%c in 1921. Oleo stearine declined 
 from 1314c to 934c (25%), fertilizer 
 (dried blood) from $8.20 to $2.55 (89%) 
 per unit, and tankage from $7.12^^ to 
 $2,371/2 (67%), during the same period. 
 
 Obviously, with the decline of by-prod- 
 uct values, the spread between packers* 
 buying prices and selling prices became 
 greater. Through the courtesy of two of 
 the largest packing establishments in Los 
 Angeles, it has been possible to gather 
 figures showing the changing relation be- 
 tween the cost of steers to the packer and 
 his selling price, during the past nine 
 years. The following selections from the 
 table are typical: 
 
 Packers 
 
 Baring 
 
 Price 
 
 Packer* 
 
 SelUac 
 Price 
 
 i2y4c 
 
 14 
 
 17% 
 15% 
 
 Prieeef 
 Ridee oa 
 Spread Same Date 
 
 15c 
 20 
 31 
 8 
 
 70% 
 65 
 51 
 110 
 
 Date 
 
 1913 7%c 
 
 1917 8H 
 
 1919 (Sept.) 11% 
 1921 (May) 7% 
 
 It will be seen that in 1913 when pack- 
 ers were paying 7l^c per pound for cat- 
 tle delivered, and hides were at 15c, they 
 were selling dressed beef at 12%c. This 
 allowed a margin of 70% to cover wastage 
 and profit. At the end of 1919, when 
 hides reached their highest point, beef 
 which cost the packer ll%c on the hoof, 
 was sold at 17%c when dressed, a mar- 
 gin of only 51%. Examining the figures 
 for recent months, it appears that in May, 
 
 1921, when the cost of cattle to the packer 
 was 7^c per pound (the same as in 1913), 
 and hides were below 8c, the selling price 
 of dressed beef for the same date was 
 15%c. The margin in this case was 110%, 
 compared with one of 70% in 1913. 
 Plainly the price of hides at any given time 
 has a direct effect upon the relation be- 
 tween cattle and dressed meat prices. 
 
 That the difference between packers' 
 buying and selling prices varies inversely 
 with the price of hides, is clearly shown 
 by the accompanying Chart No. II. As 
 the price of hides gradually declined from 
 1919, the trend of difference between cost 
 and selling price was upward. Soon after 
 the hide market reached its lowest point 
 in 1921, that difference reached its peak. 
 Despite the influence of receding by- 
 product values, the trend of wholesale 
 beef prices has followed closely the price 
 of cattle on the hoof. Wholesale beef 
 prices went up with cattle prices in 1918, 
 
 and every decline in cattle prices since has 
 been reflected promptly in wholesale quo- 
 tations. The fact that the percentage of 
 decline during the last few months has 
 been less is accounted for by the low value 
 of by-products. Chart No. I, which is 
 sympathy which has existed between range 
 presented on Page 15, illustrates the 
 caltle prices and packers' selling prices, 
 respectively, and seems to corroborate the 
 contention of packers that they are not re- 
 sponsible for the present high prices of 
 meat. 
 
 Butchers in Los Angeles make the as- 
 sertion that certain cuts of beef can be 
 had at their shops more cheaply today 
 than they could be purchased before the 
 war. This is true of the cheaper cuts, such 
 as boiling meat. An examination of pe- 
 riodical price quotations advertised by the 
 butchers during the war period and down 
 to date, reveals the fact that whenever the 
 good cuts of beef went up in price, the 
 
 
 
 1919 
 
 
 
 JAN FEB UAR APR UAT JOKE JUL AUG SEP OCT NOT DEC JAN rE3 MAI 
 
 ! APR MAT JUN 
 
 JUL AUG 
 
 
 120 
 
 
 
 
 
 
 
 
 
 
 1910 
 
 
 
 
 
 ^ 
 
 
 
 19 
 
 2 1 
 
 
 / 
 
 X 
 
 >v^ 
 
 
 110 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 J 
 
 / 
 
 \ 
 
 
 
 / 
 
 
 y 
 
 
 
 
 
 TBS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ,^ 
 
 / 
 
 
 
 
 \ 
 
 / 
 
 
 
 
 
 
 
 56 
 
 
 
 
 
 
 
 
 
 
 / 
 
 \ 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ib 
 
 
 
 
 
 
 
 
 
 > 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 }t 
 
 
 
 
 ,..-'' 
 
 \ 
 
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 s.. 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 60 
 
 
 /'■" 
 
 *^ 
 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 "W 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 30* 
 
 
 
 B 
 
 *^, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 '""i 
 
 V. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 «5 
 
 
 
 
 
 
 
 N 
 
 ^"^ 
 
 ^ 
 
 V 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 20 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 -^ 
 
 S 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 IC 
 
 
 
 
 
 
 
 
 
 
 
 
 L 
 
 
 
 
 
 
 
 
 
 
 
 
 
 *5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 V 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Ifl 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 ^ 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 V 
 
 ■^ 
 
 
 
 
 / 
 
 ""^ 
 
 
 
 5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ^if^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Departaant of Reaaarch * SerTic* 
 
 
 
 
 CBA 
 
 RT K. 
 
 >. II 
 
 
 
 
 
 .Security Truat k 
 
 S«TlBsa Bftak. 
 
 CHART No. II 
 (A) Percentage of Difference Between Cattle Prices and Wholesale Beef Prices 
 (B) Value of Hides During the Same Period 
 
 [19 
 
cheaper cuts went down. The two curves 
 representing the respective price trends 
 form a somewhat symmetrical figure. The 
 high points in the curve representing 
 steaks and roasts are opposite the low 
 points in the curves depicting pot roast 
 and boiling meat prices. The reason is 
 obvious: people developed extravagant 
 teistes during the war and the aftermath 
 period, and many still demand the choice 
 cuts. The modern housewife does not find 
 time to cook roasts and boiled meats, 
 though these in fact have a higher food 
 value than do steaks and chops. Seventy- 
 five per cent of a beef carcass, however, 
 is of these cheaper cuts of meat. They 
 must be disposed of in some manner, and 
 the butcher reduces their selling price in 
 proportion to the rise in demand (and 
 price) of the more popular cuts. The re- 
 sult is that at present boiling meat and 
 pot roasts can be had at from 5 to 10c 
 per pound, while porterhouse and club 
 steaks average about 65c. 
 
 On the whole, retail prices are still 32% 
 above normal, though they have declined 
 some 37% since the peak of July, 1920. 
 
 Meanwhile range cattle prices declined 
 50%, to a point below normal, and whole- 
 sale prices declined 34%, to a point only 
 6% above that of 1914, in spite of the low 
 value of by-products. Clearly retail meat 
 prices have not been keeping pace with cat- 
 tle and wholesale prices in the long-awaited 
 recession. It is true, however, that retail 
 prices reached their highest point two to 
 three months later than cattlemen began 
 to receive their top prices, and this may 
 be the basis of a hopeful prediction that 
 retail prices are merely delaying the drop 
 accordingly. 
 
 Financing the Cattle Industry 
 
 The cattle industry is financed both by 
 banks, which make loans directly to stock 
 raisers, and by privately-operated loan as- 
 sociations, which purchase and endorse 
 cattle paper for rediscount through the 
 banks. A cattle loan is secured by the 
 promissory note of the borrower, together 
 with a chattel mortgage on his livestock 
 and equipment, and sometimes by a mort- 
 gage on his real estate. 
 
 10^ 
 9 
 8 
 
 n 
 
 7 
 
 JAN ICT MAB APR MAY JUNE JULY AUG SEPT OCT NOV DEC 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 __*« 
 
 ^^'^ 
 
 "--'2 
 
 >' 
 
 -V 
 
 
 
 
 
 
 
 B 
 
 — -• <■ 
 
 i^^r 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 N 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 X, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 X 
 
 \ 
 
 V 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 \ 
 
 \ 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 \ 
 
 
 
 
 
 
 ^ 
 
 1911 
 
 •1920 
 
 \ 
 
 
 
 
 > 
 
 V 
 
 
 
 
 ^^0^ 
 
 
 
 
 
 
 
 **^^ 
 
 
 
 
 A 
 
 ^^^ 
 
 
 
 
 
 
 
 
 
 
 ^^^^_ 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Depart) 
 
 ment o 
 
 f Resei 
 
 arch & 
 
 Servl 
 
 ca 
 
 
 Secu 
 
 rliy T 
 
 rust ft 
 
 Savlr 
 
 igt Baa 
 
 Ic 
 
 20] 
 
 CHART No. Ill 
 Showing (A) Seasonal Price Variations in Cattle Prices for the Ten-Year Average, 1911-1920 
 
 (B) Price Variations for the Year 1920 
 
 . 
 
 In the stock raising regions of the 
 Middle West, financing through loan asso- 
 ciations is undertaken extensively by large 
 packing companies, who are interested in 
 keeping the industry in a heallhy condition 
 to the end that there may be a steady 
 flow of livestock to the packing-houses. In 
 Southern California and Western Arizona 
 cattle loan associations have only recently 
 appeared. Cattlemen have heretofore re- 
 lied almost entirely upon bank loans and 
 upon money advanced by private individ- 
 uals. In the southeast region of Arizona, 
 where cattle raising is most intense in that 
 state, stockmen have been financed by loan 
 associations operating from the Middle 
 West packing centers. Most of these com- 
 panies are controlled by packing interests. 
 
 In the past few years a comparatively 
 small number of cattle loan associations 
 have begun business in Southern Califor- 
 nia, with offices at Los Angeles. Most of 
 them are closely allied with packing inter- 
 ests. Only one of the number has thus 
 far handled a considerable volume of busi- 
 ness. 
 
 These cattle loan associations have come 
 into existence mainly on account of the 
 difficulties experienced by cattlemen in se- 
 curing bank loans. Banks have been 
 proverbially cautious in accepting cattle 
 paper. Livestock security is necessarily of 
 changing value, inspection is difficult and 
 expensive, renewals are usually requested, 
 and enterprises too often of a speculative 
 nature. 
 
 Interest of Packers in Loan 
 Associations 
 
 Meat-packing companies, however, are 
 vitally interested in the maintenance of 
 steady production of cattle on the ranges 
 and the fattening of beef by feed yard op- 
 erators. They have, therefore, encouraged 
 and assisted the incorporation of cattle 
 loan associations in stock raising centers, 
 for the better financing of the industry. 
 These associations on the whole develop 
 highly efficient organizations. The officers 
 ordinarily include practical cattlemen and 
 experienced livestock buyers, who are 
 familiar with every angle of die industry. 
 Stockmen actively engaged in raising cat- 
 tle are made managing directors, inspectors 
 are appointed in the range districts, and 
 
 accurate records of pasturage and weather 
 conditions, quality of breeds, and preva- 
 lence of disease are collected, with other in- 
 formation of interest to the business. 
 Through such organizations cattle loan as- 
 sociations are equipped to render valuable 
 service both to cattlemen and to the com- 
 munity which is interested in the sound 
 development of the livestock industry. 
 
 One danger in extensive financing by 
 cattle loan associations, however, lies in 
 the tendency on the part of some of these 
 institutions to advance money too liberally, 
 sometimes on full value of cattle security, 
 in order to "boost" the business. Such 
 practices result in disaster to borrowers 
 and cause instability in the market when 
 risky loans are called in before stock can 
 be profitably disposed of. Unhappy re- 
 sults of this kind are being experienced at 
 present, because cattlemen are forced to 
 liquidate in a depressed market heavy bor- 
 rowings made during the period of in- 
 flated values. Another element of danger 
 in loan association finance is said to exist 
 in the opportunity which is aff"orded the 
 packers, through their control of such com- 
 panies, to keep borrowing stockmen in 
 their power. The cattle industry is ordi- 
 narily operated on a large scale. The 
 cattleman must make heavy borrowings 
 for the purchase of stock and the payment 
 of running expenses. If banks are pre- 
 vented by legal restrictions or by cautious 
 boards of directors from advancing the re- 
 quired funds, the stock raiser is dependent 
 upon the loan associations, and conse- 
 quently upon the packers who financially 
 underwrite these associations. If he bor- 
 rows funds for the purchase of stock or 
 feed, and is caught at maturity of the 
 loan with a dull market, it is to his interest 
 to hold for higher prices. The market 
 may be below his cost of production, in 
 which case liquidation would mean an 
 actual loss. In such a case the packer 
 controlling the association which advanced 
 the loan, could demand immediate pay- 
 ment, and perhaps foreclose on the mort- 
 gage, either bidding in the cattle at a low 
 price or forcing their sale on a depressed 
 market. 
 
 It is believed, however, that such prac- 
 tices on the part of packers are exceed- 
 ingly rare. Accusations come mostly from 
 disgruntled breeders or feeders who, 
 
 [21 
 
through mismanagement or speculation, 
 have not been able either to meet their ob- 
 ligations within a reasonable length of 
 lime or to show prospects of ever paying 
 out. Packers are more interested in main- 
 taining a constant and stable market than 
 in realizing occasional profits by forced 
 sales, and it is to be doubted that they 
 often use their financial control over stock- 
 men to force down cattle prices. 
 
 How Loans are Made 
 
 The method of making loans to cattle- 
 men by banks and loan associations is 
 J , fairly uniform. The prospective borrower 
 ^ files a written application, accompanied 
 by a sworn statement of his financial con- 
 dition. The statement includes a descrip- 
 tion of the stock which he proposes to of- 
 fer as collateral, his facilities for taking 
 care of them, real estate owned or leased, 
 and outstanding mortgages or obligations. 
 The bank or loan association checks up on 
 this statement by private inquiries, and 
 county records are examined to determine 
 whether the applicant's statements are cor- 
 rect as to outstanding obligations. A 
 cattle inspector is then sent out to count 
 and examine the borrower's stock. He re- 
 ports as to quality of breeds, condition 
 of pastures, facilities for taking care of the 
 stock, and the general reputation and 
 ability of the applicant. If, upon receipt 
 of the inspector's report, the loan is 
 granted, the borrower is required to sign a 
 promissory note for the amount advanced, 
 and to execute a chattel mortgage on the 
 stock and its increase, feed on hand, and 
 sometimes on equipment and real estate. 
 Although banks and the more conservative 
 loan associations refuse to loan more than 
 from 50% to 75% of the value of stock 
 given as collateral, less careful associa- 
 tions consider that an ample margin of 
 safety lies in the probable increase of the 
 herds, i.e., in birth of calves and increase 
 in weight of steers. 
 
 I Cattle loans run ordinarily for six 
 /months. This term is adequate for the 
 I "feeder," who buys full-grown steers from 
 the range and fattens them for beef in 
 three or four months. His period of turn- 
 over is short. The stock breeder, however, 
 usually requires a longer period for liqui- 
 dation, and consequently must secure re- 
 22] 
 
 / 
 
 newals, (wherein lies the chief defect in 
 the present system of financing). Renew- 
 als require new paper and new inspection 
 of stock, adding further expense to the 
 negotiation, and the semi-annual payment 
 of interest keeps the stock raiser in a con- 
 stant state of unrest, making it difficult 
 for him to delay the sale of stock until 
 the best prices are obtainable. Yet it is 
 through the short-term feature of cattle pa- 
 per that banks and cattle loan associations 
 are given their best means of protection. 
 They may refuse to renew loans, after six 
 months, to borrowers who do not show evi- 
 dence of being able to meet their obliga- 
 tions. As a matter of practice, however, it 
 is usually understood that stock breeders 
 may secure a reasonable number of renew- 
 als of their notes, since it is, of course, to 
 the interest of the lender to carry them un- 
 til a time when their cattle may be dis- 
 posed of at a profit and all obligations met 
 in full. Such renewals should be granted 
 with caution, however, and only after 
 careful inspection has been made of cattle 
 securing the loan, condition of the pasture, 
 and a forecast of beef prices. Failure to 
 check up on borrowers in this way, and a 
 loo liberal policy in accepting cattle paper 
 by some of the banks and loan associations 
 last year, has placed them in such a po- 
 sition that they must either repeatedly re- 
 new inadequately secured loans, until cat- 
 tle prices shall have recovered, or foreclose 
 and take heavy losses. 
 
 The gross profits derived by cattle loan 
 companies is measured by the difference 
 between the interest collected from bor- 
 rowers and the discount rate of the bank 
 through which the paper is liquidated. 
 The average cost of making cattle loans, 
 including inspection, is estimated at 1% 
 of the amount of the loan. The prevailing 
 interest rate imposed by cattle loan asso- 
 ciations at the present time is 10%, some- 
 times with additional charges amounting 
 to from 1%) to 2%, "to cover cost of in- 
 spection." The rates at which banks are 
 now discounting cattle paper range from 
 7y2% to 814%. The cattle loan asso- 
 ciations therefore have a possibility of 
 making a gross profit of from 1%% to 
 414% on each loan. The usual profit is 
 said to be 2%. 
 
 Cattle paper is self-liquidating. It is 
 short-term paper and when endorsed by re* 
 
 I 
 
 1 
 
 liable cattle loan associations becomes 
 good "two-name" paper. It should there- 
 fore enjoy a high degree of liquidity. 
 Loan associations dealing in cattle paper 
 may handle large amounts, running into 
 the millions of dollars annually, with 
 comparatively small working capital. 
 When these associations grant loans which 
 are too large for discount through any 
 one bank, such loans are parcelled out 
 among several banks, much after the man- 
 ner of the Lloyd insurance risks. Banks 
 accepting parts of individual loans, how- 
 ever, must do so with extraordinary care, 
 since the division of the cattleman's note 
 and mortgage into parts affords opportu- 
 nity for sharp practices. 
 
 When Money is Needed 
 
 The peaks of activity in cattle loan dis- 
 counts are reached in the spring and fall 
 seasons of the year. Cattlemen usually 
 need money for the purchase of new 
 stock for the ranches in April and May. 
 Holders of leased ranges ordinarily pay 
 their rent in the fall. This is also the 
 usual time for settlement of ordinary bills 
 for groceries, feed and supplies. 
 
 Figures showing the volume of cattle 
 paper dealt in monthly during 1920 and 
 1921 by loan associations in this region 
 indicate that last year such associations 
 advanced to cattlemen approximately 
 $5,000,000, the largest advances having 
 been made in May and November. For 
 the first eight months of 1921, loans from 
 the same sources have amounted to about 
 $2,000,000, the largest aggregate amount 
 for any one month occurring in April. 
 The value of cattle paper now outstand- 
 ing on the books of local cattle loan asso- 
 ciations is thought to be less than 
 $2,000,000. 
 
 Reports from the Federal Reserve Bank 
 of the Twelfth District indicate that 
 the volume of live stock paper redis- 
 counted through banks so far this year has 
 been about $24,000,000, ranging between 
 $3,500,000 and $4,500,000 per month. The 
 largest advances were made in April and 
 June. The total value of live stock paper 
 held by the Federal Reserve Bank on the 
 last day of June, 1921 (the latest date 
 for which figures are available) was 
 $14,633,000. The figures published by the 
 Federal Reserve Banks include all classes 
 
 of livestock paper. Separate records of 
 cattle paper are not kept, but cattle loans 
 undoubtedly constitute the larger part of 
 the sum of all livestock loans in this dis- 
 trict. 
 
 Shortage of Cattle 
 
 Much has been said recently of the 
 shortage of beef cattle in this country, and 
 official surveys indicate that there are in 
 fact less cattle per capita now than there 
 were in 1920, though the shortage is less 
 marked in California and Nevada than in 
 other stales. The actual shortage in num- 
 bers for individual districts is estimated 
 by livestock associations approximately as 
 
 fo^OWS: c.ttto Shoruge. 1921 
 
 •• Compared with 1920 
 
 Northern States 0% 
 
 Southern States 50% 
 
 Central States 25% 
 
 California 10% 
 
 Nevada 0% 
 
 Census figures for California show the 
 number of beef cattle in the state to have 
 been 1,229,086 in January, 1920. Unfor- 
 tunately it is difficult to compare these fig- 
 ures with those of the 1910 census, since 
 the count for the latter year was taken 
 as of April 15, three and one-half months 
 later in the year than that for 1920. The 
 1910 count, therefore, included a large 
 number of spring calves which would not 
 have been taken in the 1920 census. On 
 the other hand, the figures for 1910 were, 
 of course, reduced by the number of cattle 
 slaughtered between January 1 and April 
 15. 
 
 Probably the best comparable records 
 available are those of the Bureau of Crop 
 Estimates, United Stales Department of 
 Agriculture, which publishes cattle census 
 figures periodically. A study of these 
 records indicates that while there is an 
 actual shortage of cattle in the United 
 States as a whole, it is not as great as live- 
 stock publications make it out to be. 
 
 Perhaps the best way of determining 
 whether or not the cattle supply is below 
 normal, is on a per capita basis. Figures 
 for Arizona, Nevada, and the average for 
 the United States as a whole may be com- 
 puted on this basis as follows: 
 
 De- 
 
 Per 1000 Per lOOO crease 
 
 Cattle Inhabl- Cattle Inhabi- or In- 
 
 ^ ... 191* tants 1920 tanu crease 
 
 Califotnia 1,339,000 563 1.634,000 477 —15% 
 
 Arizona 796.000 389 1.000,000 299 —23% 
 
 N'-vaHa 432,000 527 535.000 691 +S1% 
 
 United State*.. 41.178.434 446 44,75O,O0Q 433 -5.2% 
 
 [23 
 
( 
 
 
 More significant than the slight per cap- 
 ita decrease in the total number of beef 
 cattle in the country, however, is the com- 
 paratively large decrease in the number 
 of cows, i.e., reproductive stock. The 
 census shows that there were 100,000 less 
 cows in California in 1920 than in 1910, 
 a decrease of 33%, when there should 
 have been an increase of 44%, to keep 
 pace with the population. The reason for 
 this is found in the fact that stockmen, 
 hard pressed for money, and unable to 
 secure loans to carry them through, have 
 been selling cows as well as steers for 
 beef. The California Cattlemen's Associa- 
 tion estimates that in California the nor- 
 mal ratio of cows to cattle slaughtered is 
 25%, while this year it has been 38%, 
 and predicts a further shortage of breed- 
 ing stock next year. 
 
 Consumption of beef in this state is ap- 
 proximately 500,000 head per year. At 
 the time of the census (January, 1920), 
 there were 441,000 cows of calf-bearing 
 age (2 years and over) available. On the 
 basis of a 70% calf production, about 
 normal for the state, these would yield 
 308,000 calves per year, about 25% of 
 which should be kept for breeding pur- 
 poses, leaving 231,000 calves to grow up 
 for beef. Of the 441,000 breeding cows 
 now on farms and ranges, one-fifth, or 
 88,000, would be available for slaughter 
 each year, since a cow is not kept for calf 
 bearing after it is 5 years of age. There 
 are also about 800,000 dairy cattle in the 
 state. These will supply about 10% of 
 our beef, or 200,000 head, this year. 
 
 From the three sources of supply, 
 therefore, we would obtain 231,000, 
 88,000 and 200,000 head, respectively, or 
 a total of 519,000, against a consumption 
 of 500,000. The apparent margin of 
 19,000 is just about sufficient to cover the 
 regular annual 4% loss from disease and 
 
 24] 
 
 exposure. Obviously, therefore, if there 
 is any considerable decrease in the number 
 of breeding cows which were available 
 last year, the coming supply of beef in this 
 slate will be less than that of previous 
 years. 
 
 Consumption Below Production 
 
 Compensating for the decreased pro- 
 duction of beef cattle in the country dur- 
 ing the past year, and probably a cause 
 of any such shortage, is the decreased con- 
 sumption of beef. The per capita con- 
 sumption of beef in 1919 was 60 pounds. 
 In 1920 it had dropped to 56.4 pounds, a 
 decline in one year of 6%. More startling 
 than these are the figures for the period 
 from 1910 to 1920. During this time 
 beef consumption per person in the United 
 States decreased from 78 pounds to 56.4 
 pounds, a decline of 27%. Decrease in 
 consumption has been, therefore, much 
 greater than decrease in production, and 
 this without taking into consideration the 
 almost complete cessation of beef exports. 
 
 From these facts it would appear that 
 although there is a slight numerical short- 
 age of cattle this year, with prospects of 
 an even smaller number on the ranges 
 next year as a result of present slaughter- 
 ing of breeding stock, the situation cannot 
 be regarded as alarming from a food stand- 
 point. There is no danger of a meat 
 famine. When the supply of beef be- 
 comes scarce, relative prices will cause 
 people to eat less beef and more pork 
 and mutton, or even substitutes for meat. 
 As measured by demand there is no short- 
 age of supply at the present time. Either 
 demand must be brought back to normal 
 by an adjustment of retail meat prices to 
 popular buying power, or the supply even 
 further reduced, before the economic law 
 can operate to raise cattle prices. 
 
 ^ I « 
 
 
 -^ 
 
 An Offer of Service 
 
 The Department of Research and Service of the Security 
 Trust & Savings Bank is prepared to furnish complete and 
 accurate information regarding any line of business, whether 
 commercial, agricultural or industrial, of Los Angeles and 
 Southern California. 
 
 The services of this Department are offered, free of 
 charge, to anyone desiring such information, and the Depart- 
 ment will make detailed surveys and reports for the benefit 
 of those interested. 
 
 The work of the Department is carried on by men 
 specially trained in research, and familiar with the business 
 and financial conditions of this section. 
 
 A well-equipped library is maintained by the Department 
 to facilitate its services. 
 

 ■4.-^>-^i^i*^'-.jS 
 
 INTENTIONAL SECOND EXPOSURE 
 
 r' 
 
 
 ii 
 
 
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 iTi 
 
 More significant than the slight per cap- 
 ita decrease in the total number of beef 
 cattle in the country, however, is the com- 
 paratively large decrease in the number 
 of cows, i.e., reproductive stock. The 
 census shows that there were 100,000 less 
 cows in California in 1920 than in 1910, 
 a decrease of 33%, when there should 
 have been an increase of 44%, to keep 
 pace with the population. The reason for 
 this is found in the fact that stockmen, 
 hard pressed for money, and unable to 
 secure loans to carry them through, have 
 been selling cows as well as steers for 
 beef. The California Cattlemen's Associa- 
 tion estimates that in California the nor- 
 mal ratio of cows to cattle slaughtered is 
 25%, while this year it has been 38%, 
 and predicts a further shortage of breed- 
 ing stock next year. 
 
 Consumption of beef in this state is ap- 
 proximately 500,000 head per year. At 
 the time of the census (January, 1920), 
 there were 441,000 cows of calf-bearing 
 age (2 years and over) available. On the 
 basis of a 70% calf production, about 
 normal for the state, these would yield 
 308,000 calves per year, about 25 9? of 
 which should be kept for breeding pur- 
 poses, leaving 231,000 calves to grow up 
 for beef. Of the 441,000 breeding cows 
 now on farms and ranges, one-fifth, or 
 88,000, would be available for slaughter 
 each year, since a cow is not kept for calf 
 bearing after it is 5 years of age. There 
 are also about 800.000 dairy cattle in the 
 state. These will supply about lO^V of 
 our beef, or 200,000 head, this year. 
 
 From the three sources of supply, 
 therefore, we would obtain 231,000, 
 88,000 and 200,000 head, respectively, or 
 a total of 519,000, against a consumption 
 of 500,000. The apparent margin of 
 19,000 is just about sufficient to cover the 
 regular annual 4% loss from disease and 
 
 exposure. Obviously, therefore, if there 
 is any considerable decrease in the number 
 of breeding cows which were available 
 last year, the coming supply of beef in this 
 stale will be less than that of previous 
 years. 
 
 Consumption Below Production 
 
 Compensating for the decreased pro- 
 duction of beef cattle in the country dur- 
 ing the past year, and probably a cause 
 of any such shortage, is the decreased con- 
 sumption of beef. The per capita con- 
 sumption of beef in 1919 was 60 pounds. 
 In 1920 it had dropped to 56.4 pounds, a 
 decline in one year of 6%. More startling 
 than these are the figures for the period 
 from 1910 to 1920. During this time 
 beef consumption per person in the United 
 States decreased from 78 pounds to 56.4 
 pounds, a decline of 27%. Decrease in 
 consumption has been, therefore, much 
 greater than decrease in production, and 
 this without taking into consideration the 
 almost complete cessation of beef exports. 
 
 From these facts it would appear that 
 although there is a slight numerical short- 
 age of cattle this year, with prospects of 
 an even smaller number on the ranges 
 next year as a result of present slaughter- 
 ing of breeding stock, the situation cannot 
 be regarded as alarming from a food stand- 
 point. There is no danger of a meat 
 famiiie. When the supply of beef be- 
 comes scarce, relative prices will cause 
 people to eat less beef and more pork 
 and mutton, or even substitutes for meat. 
 As measured by demand there is no short- 
 age of supply at the present time. Either 
 demand must be brought back to normal 
 by an adjustment of retail meat prices to 
 popular buying power, or the supply even 
 further reduced, before the economic law 
 can operate to raise cattle prices. 
 
 An Offer of Service 
 
 The Department of Research and Service of the Security 
 Trust & Savings Bank is prepared to furnish complete and 
 accurate information regarding any line of business, whether 
 conunercial, agricultural or industrial, of Los Angeles and 
 Southern California. 
 
 The services of this Department are offered, free of 
 charge, to anyone desiring such information, and the Depart- 
 ment will make detailed surveys and reports for the benefit 
 of those interested. 
 
 The work of the Department is carried on by men 
 specially trained in research, and familiar with the business 
 and financial conditions of this section. 
 
 A well-equipped library is maintained by the Department 
 to facilitate its services. 
 
 24] 
 
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 COLlMhIA I'NIVIRSITV LIBRARITS 
 
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 cxpirati.-n of a dctiiuic ixiu.J .itttr tlic a.itt ..t bi.rn.win.c, .is 
 
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 the I.ihr.iri.m in ih.ii.i;L. 
 
 DATE BORROWED 
 
 DATE DUE 
 
 DATE BORROWED 
 
 DATE DUE 
 
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 5'ockfoo. Co/if.* 
 
 /Ojrtflir<?k 
 
 COLUIVIBIA UNIVERSITY LIBRARIES 
 
 0041420969 
 
 N0V21«94 
 
 J302.1 
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 S936 
 
 Security Trust 5: Saviiv;s 
 Ban]:, Los .-.ix^elec. Dept. 
 of ..eaearch and Service. 
 
 The cattle-raisinr; in- 
 dustry'- of the oouthv/est. 
 
 E»OUNO 
 FEB . 1S57 
 
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END OF 
 TITLE