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Shrinking Cow Numbers

published: January 10th 2011
by: Barry Shlachter
source: Fort Worth Star Telegram

The biggest cattle state is seeing its herd shrink.

Fewer Angus, Brahman and cross-bred calves dot the wide open spaces of Texas.

Since 1995, the state's beef cow inventory has shrunk 12.8 percent, from 5.95 million to 5.1 million -- compared with an 11 percent drop nationally. The decline is attributed to drought; the high cost of feed, fertilizer and fuel; urban sprawl; an aging population of ranchers; tight credit; and the conversion of grazing land to recreational use like deer hunting.

And it won't get better this year, predicted Kevin Good of Cattlefax, a member-owned livestock consultancy.

"We anticipate it will be the smallest beef cow herd since 1963," Good said from Denver.

No one is outwardly panicking, but the gradual decline is particularly painful to feedlot operators concentrated in the Panhandle and High Plains, said John Josserand, president of Hereford-based AzTx Cattle, which has closed two of its operations that fed a combined 80,000 head.

As for his remaining yards, which have a combined capacity of 180,000 head, there's vacant space, Josserand said.

"This time of year, we would be full. We are not this year," he said. "There's a limited number of cattle to buy and at a high cost, then there's the high cost of feed."

Josserand's fear is that the supermarket price of beef will be driven up so high that people will switch to cheaper meats, eventually making a good rib-eye a cut found mainly in higher-end markets, as a New Zealand rack of lamb is today.

"What the trends tell us is that not only in Texas -- the biggest cow-calf producing state -- but around the country, it will cost more to produce the beef that consumers buy," said David Anderson, a livestock economist with the Texas AgriLife Extension Service in College Station. "If it continues, we are going to see higher prices at the grocery store, and people may switch to things like chicken and tilapia."

Stan Bevers, an extension economist in Vernon, said cow-calf operators are increasingly realizing that deer leases can be a better economic gamble than ranching, especially in South Texas. Even in West Texas, a hypothetical 1,000-acre ranch stocked with a cow every 20 acres earned about $1,000 annually in recent years because of drought and high feed costs, while a deer lease might have fetched $10,000, Bevers said.

Some cow-calf operators manage to juggle both activities -- sometimes with the hunting leases providing most, if not all, of the profits, one ag economist said. But the property could be converted into a high-fenced game ranch if the rancher retires and the land changes hands, taking more acreage out of beef production, he added.

"The average age of our ranchers is rising and the cost to become ranchers is practically prohibitive," said Bill Hyman, executive director of the Lockhart-based Independent Cattlemen's Association of Texas.

Market forces faced by cattle raisers around the country are similar. But Texas fared worse than many at the hands of Mother Nature, suffering droughts in three of the last five years, Anderson said. And operations along the Gulf Coast were devastated by hurricanes, he added.

For example, Chuck Kiker, who breeds cattle and grows rice near Beaumont, was battered by hurricanes named Rita, Umberto and Ike.Then his longtime banker, AgriLand, part of the Farm Credit co-op lending organization, decided to call his notes, forcing him to sell heifers that he ordinarily would have retained for breeding.

"I've probably reduced my herd from 400 to 300 head in the last two years," said Kiker, who is among many culling livestock around Texas in recent years.

Kiker's situation would be worse if cattle weren't fetching high prices -- partly a result of limited supplies -- and if he hadn't had a bumper rice crop last year, when the grain also had a good market.

"The price of cattle and rice is going up and will carry me through it," said Kiker, who paid off a $200,000 loan against his livestock last summer. He did some bulldozing work off the farm to get by, and he expects a Federal Emergency Management Agency check to cover fences and a barn lost to the storms.

But the Gulf Coast farmer was helped by suppliers and his aerial sprayer, who cut him slack by voluntarily extending payment terms.

AgriLand's CEO, Roger Brist, said the co-op did adjust its cattle underwriting standards in recent years. But he added that it is committed to serving producers and that its loan rejection rate decreased last year. Still, he said, "good operators" have recognized the need to reduce debt while others have "chosen to seek opportunities outside of farming and ranching."

While Kiker's travails are not unusual across cattle country, some producers have found a way to profit during lean years.

Pete Bonds and his daughter, Missy, say they've expanded their operation by a third during the past year, thanks to long-standing relations with their lenders, who have remained supportive, as well as a conservative approach to pasture use and a willingness to innovate.

"We stock as if drought would occur anyway -- allowing more acres per head." Missy Bonds said from their ranch headquarters in the Saginaw area.

Their ranch has been confronted by urban sprawl, but the family has made the most of it.

They sold off acreage for three housing developments that now neighbor its Tarrant County operation. But they turned around and used the proceeds to acquire pastures between Waco and College Station.

"It was more of a land swap," said Missy Bonds, 32, the assistant ranch manager. The family has land elsewhere in the state and also places calves on other ranchers' pastures, paying for weight gained.

Her father has hedged risk by operating in various sectors of the industry. "We are very diversified," his daughter said. "We're not only involved in a cow-calf operation, we run yearlings and have cattle in other people's feed yards. We also utilize forward contracting and the futures market to protect ourselves."

They've also exploited a new cattle industry niche.

One day her father dropped some industry literature on her desk and said, "Here, do this," she recalled. Missy Bonds, a Texas A&M University graduate, had been given materials on raising nonhormone-treated steers earmarked for the European market, which in recent years had set up barriers against conventionally produced U.S. beef.

"Now two-thirds of our calves qualify, and 100 percent will be age- and source-verified, which helps with the Japanese market as well," she said. "Now, we're getting paid a premium for it. At times, it has been the difference between making money and breaking even."