One Portland business with close ties to the beef and dairy industries is benefiting from the harsh environmental conditions faced by cattle ranchers out West.

ImmuCell Corp., which develops products to prevent and treat diseases among dairy and beef cattle, recently completed its most profitable quarter in 12 years. Its sales jumped so significantly – to more than $3 million – in the first quarter that purchase orders outstripped the company’s production capacity – a problem it is working to resolve through equipment upgrades and expansion.

ImmuCell’s situation illustrates the complex relationship among climate, herd sizes, the value of a cow and the prices consumers pay for beef and milk.

Over the past five years, cattle-producing states, including Texas, Kansas, Nebraska and California, have been ravaged by persistent drought. The Plains States have recovered significantly since 2013, but Texas has experienced only mild relief, and drought conditions remain severe in California.

Beef cattle graze in open pastures, and when the quantity of fresh grass in those pastures is diminished by drought, the herd must be reduced accordingly, said Bobbi Jo Brockmann, ImmuCell’s vice president of sales and marketing.

“It wouldn’t be ethical to leave your cattle out starving in the pasture,” she said.

As a result, in 2012 cattle ranchers flooded the market with beef, causing the price to plummet. Now the industry is rebuilding, but herd sizes are far lower and the price of beef is way up.

The drought-related cycle has affected the dairy industry, too. It has driven up the price of feed and water, a problem that has been particularly severe in California, where more than one-fifth of the U.S. milk supply comes from.

Dairy farmers generally bring the feed to their cows, rather than having them graze out in the open, but it becomes prohibitively expensive to truck in bulky hay from faraway locations if not enough is being grown nearby, said David Marcinkowski, a dairy expert and associate professor at the University of Maine.

As a result, the price of milk hit a record high in mid-2014 before dropping back down because of overproduction, he said.

‘ANYTHING WITH FOUR LEGS AND A “MOO” ‘

There have been other, less direct effects. The value of a dairy bull calf, which is usually less than $100 because it can’t produce milk, has risen as high as $500, Marcinkowski said.

The reason? With such a shortage of beef cattle in the market, dairy bull calves, which produce inferior meat because they are not bred for beef, suddenly became valuable, he said.

“Anything with four legs and a ‘moo,’ they’re trying to get it into their feedlots,” Marcinkowski said.

ImmuCell’s primary product, First Defense, contains antibody-rich colostrum – milk produced in late pregnancy – in capsule form. It can be fed to newborn calves to help prevent scours, which causes diarrhea and dehydration. First Defense, which costs $6 for a one-time dose, is a natural product made from cow’s milk that is approved for organic farming.

For a dairy farmer, the decision to spend $6 on preventive medicine changes significantly when the calf suddenly becomes more valuable, said Michael Brigham, ImmuCell’s president and CEO.

“Before, they wouldn’t bother to invest the six bucks – now they will,” he said.

ImmuCell’s sales increased 49 percent from the first quarter of 2014 to $3.1 million in the first quarter of this year. Brigham said sales would have been up more than 100 percent if the company had been able to fulfill all of the orders it received.

COMPETITOR DROPPED OUT OF THE MARKET

Sales of First Defense totaled $3 million in the first quarter, a 62 percent increase compared with the same period a year earlier. That figure does not include a backlog of $1.3 million worth of orders ImmuCell was unable to ship by the end of the quarter because it had reached its production capacity, Brigham said.

In the beef and dairy industries combined, the price of a calf increased 40 percent from 2012 to 2014, according to the U.S. Department of Agriculture. Now that herds are expanding again in some states, prices should begin to normalize. However, Marcinkowski said it is a long process that could take four or five years.

Brigham noted that drought-related price increases were not the only reason for ImmuCell’s early-year sales boost. A major competitor dropped out of the market, and the company has stepped up its sales and marketing efforts recently, he said.

The company is hoping for even bigger sales in the future. It is in the final stages of developing another all-natural product that will help prevent and treat mastitis – an inflammatory disease of the breast that affects lactating cows.

Still, ImmuCell’s recent success shows how far-reaching the impact of drought can be on cattle farming.

“Those cutbacks in the herd are still reverberating through the industry,” Brockmann said.