Cattle Dealer Sees Hope in Exports

5/17/2014 7:00 AM
By Philip Gruber Staff Writer

EPHRATA, Pa. — While many people have been looking for ways to meet the demand for beef cattle in the United States, Howard Scarff sees the appeal of U.S. cattle abroad.

Scarff, an Ephrata cattle dealer, helped broker the largest U.S. cattle export in history, a $12 million deal that sent about 5,600 heifers to Russia in 2011.

In the years since the record-setting deal, Scarff has continued to emphasize exports.

“You got known for it,” Scarff said. “Word just gets around.”

In the fall, Scarff sent two shipments of cattle to Russia out of Wilmington, Del.

He works with several agents but still travels a lot. He went to Russia for the first time in March, visiting a customer who is planning his third 72-cow-carousel dairy.

The Ukrainian crisis broke while Scarff was in Russia, putting the deal on hold, he said.

Still, “if I was a young guy, boy, Russia would be a place” to consider raising cattle, he said.

The country does not have the overproduction that depresses some commodity prices in the United States, he said.

His firm, Scarff Brothers Inc., also was the first in decades to ship cattle out of Galveston, Texas, instead of Houston a few years ago.

Scarff started out on his father and grandfather’s beef farm in Harford County, Md., and was trading cattle by age 14.

As development encroached and Chesapeake Bay regulations loomed, Scarff decided to move to Lancaster County, Pa., where he was trading all the time anyway.

The Harford farm is rented to a grain farmer now, he said.

At first, the exporting business came to Scarff.

A man from a large-scale Dutch dairy business that was expanding in the U.S. noticed Scarff while both were doing business with the Amish in Indiana. The man contacted Scarff and came to Ephrata for discussions.

Scarff largely ships pregnant heifers to other countries looking to build their beef and dairy herds.

“There’s some good genetics here in that Holstein breed,” he said.

Many of the cattle are quarantined before export at CRI Feeders, a 42,000-head feedlot in the Oklahoma Panhandle, where Scarff is a partner.

The receiving country sends a state veterinarian to the isolation area to oversee testing and inspect the facility.

While most foreign governments require a quarantine of at least 21 to 30 days, Scarff prefers a minimum of 60 days to get the cattle used to each other and on the same program of vaccines and nutrition.

The process usually takes more like 90 days, as it takes about a month to gather 2,000 cattle for a shipment, he said.

“You have to condition that heifer properly before she makes that trip,” which often lasts three weeks, he said.

He likes the cattle to add about 75 pounds of flesh in quarantine and be about 1,000 pounds for shipment. The heifers fare best at 3 to 5 months pregnant, he said.

“It just seems like they’re stronger and they ship a little better,” he said. “I like to have my cattle bulletproof when I load them.”

Proper conditioning can also help prevent abortions, he said.

Scarff sees opportunity for increasing beef consumption in developing markets like China, where lower-income people are starting to able to afford more meat.

He remembers watching an interview with a Chinese peasant who could finally afford a little gas for his moped and one piece of chicken and pork per week.

“You imagine if he got a hold of some rib eye,” Scarff said.

To be sure, the United States has competition exporting cattle. Australia has quality Angus, which is often cheaper than U.S. Angus cattle.

South American meat is cheaper than the U.S.’s, but “everyone’s afraid of them because they’re not clear of foot and mouth disease,” Scarff said.

Argentina and most parts of Brazil can ship only pre-cooked meat to the U.S., according to Food Safety News.

Scarff said he has never been too busy to take on another deal, though the business has been a little slow since the fall.

“I’m just not crazy about these high-priced feeders,” he said.

The company’s inventory is low right now, but he may add more cattle as he works on more deals, he said.

“We’re just going to watch everything and pick our spots,” he said.

Over the years, Scarff has also gotten more selective about what deals he makes.

At first, he would be disappointed when he saw a truck pass with 10 cattle he did not handle. Now seeing 10 trailers would not bother him.

“Everyone’s going to get some business,” Scarff said.

As for the regional market, “I don’t like what I’m seeing in the marketing of cattle,” Scarff said.

As the market has consolidated, he is seeing more formula contracts. Under these arrangements, a packer might give a farmer $1 over the live market price, but in turn the packer gets a captive supply and does not have to compete on the open market.

“They’ve taken the trade out of the fat cattle market,” Scarff said.

There are not as many good cattle, or cattle in general, in Pennsylvania as there used to be, Scarff said.

When he was young, New Holland might have 15 buyers. They might buy 20 head but bid on 200. There are fewer buyers now, which hurts prices, he said.

Regulations, while needed, are hard on the smaller outfits. Besides the Muslim slaughterhouses, few new buyers have appeared, he said.

“There’s nothing else here that looks attractive to us” besides exporting, he said.

Once a farmer fills his barns with equipment and other things, it is hard to get cattle back in them, he said.

The carcasses are bigger now, but it is still hard when the national herd is at a 63-year low. The drought in the Southwest is not helping producers either, he said.

Byproduct feeds, such as snack food leftovers , grocery stores’ stale bakery products, or unsold vegetables and fruits, can be a way to save money. Scarff used to use a Hershey’s chocolate byproduct.

The dairy heifer trade should be good the next two years, though, Scarff believes.

Dairy has cycled out of overproduction and high feed costs for now. Even cull cows are bringing $1,500, he said.

Though beef prices are already at record highs, Scarff thinks prices for fat cattle could peak in the fall.

Markets could be volatile into the future too. “Today’s cattle prices two to three years from now could look cheap,” he said.

While many prognosticators are looking for cattle numbers to rebound, Scarff is doubtful because the cow herd is so small.

“I think it’s going to be a tough act” in the near future, he said.

Still, the beef farmers who have persisted —without the government subsidies that grain and dairy farmers have gotten — have Scarff’s respect.

“They are a resilient bunch. They really are,” he said.

Does milk have a lot of untapped potential in today’s competitive beverage market?

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