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No Rain, No Rebuilding Of Cattle Herds

published: April 21st 2011
source: Reuters

One of the worst droughts since the 1930s Dust Bowl years has dried pastures, fueled thousands of wildfires across the heart of cattle country and scuttled plans by Texas ranchers to capitalize on record cattle prices by growing their herds.

Because Texas is the largest U.S. cattle state, the shrinking herd there could translate into even higher prices for beef in the United States and export markets.

The cattle herd in the United States, too, has dwindled to the smallest in 53 years at about 93 million head due in part to an outbreak of mad cow disease in 2003 that slashed sales from one of the world's largest beef exporters.

The smaller herd, combined with a surge in demand for beef domestically and overseas has pushed beef prices to record highs in U.S. supermarkets. In Texas, the herd is about 13 million head, down 1 million from four years ago.

"We have been looking at expansion with these livestock prices going up, but unfortunately with the dry conditions and no rain forecast for the future, we are not able to do that," Hanna, 35, said by telephone from his 17,000-acre (6,880-hectare) ranch in southwest Texas.

Instead, Hanna and other ranchers in the drought area, which covers most of Texas and Oklahoma plus parts of southwest Kansas and eastern Colorado, are fighting wildfires while trying to find feed and water for their livestock.

"Even if we get a good rain it will take a while for the grass to come out," said Tommy Womack, who raises cattle, wheat and cotton on his 10,000-acre ranch near the Texas panhandle city of Tulia, some 250 miles north of Hanna's ranch.

BEEF PRICES MAY HEAD HIGHER

With Texas, Oklahoma and Kansas accounting for about 25 percent of the national cattle herd, fewer cattle there could hit consumers where it hurts the most -- their wallets.

Already forking out more of their incomes on rising gasoline prices -- which have soared past $4 per gallon in six states even before the start of the summer driving season -- consumers face the prospect of paying more for beef.

Either that or eating less of it. Americans, on average, are forecast to eat 58.3 lbs (26.5 kilograms) of beef this year, down from 61.1 lbs two years ago.

Beef prices in supermarkets are at record highs, according to U.S. Agriculture Department data, with the March average at nearly $4.48 per lb, up nearly 9 percent from December.

Analysts said export demand for U.S. beef, however, is expected to remain strong, led by Japan as the country needs meat imports to refill store shelves following the devastation of the March 11 earthquake and tsunami.

Beef exports this year through mid-April are up 40 percent from a year ago and will likely near the record set in 2003. In 2010, nearly 45 percent of U.S. beef exports went to Asia, primarily Japan and South Korea.

To keep pace with exports, analysts say the U.S. cattle herd needs to expand -- a process that begins with placing heifers, or young cows that have not calfed, in breeding, instead of sending them to slaughter as is the case now.

There are signs that ranchers are beginning to keep their heifers for breeding in states that are outside the drought-hit region such as Montana, the Dakotas and Missouri.

Beef cow numbers are up 19 percent in Montana this year, up 12 percent in North Dakota, and up 7 percent in Missouri.

By comparison, there was a 17-percent drop in Texas and a 12-percent decline in Oklahoma.

Since 2009, nearly every segment of the cattle industry has been profitable, due in large part to a global hunger for beef that has kept beef and cattle prices near record highs.

Bill Donald, a Montana rancher and president of the National Cattlemen's Beef Association, said he is responding to market signals by expanding his herd.

TIGHT BEEF SUPPLIES THROUGH 2013

Beef supplies will remain tight at least through 2013 because it takes two to three years to expand cattle herds, with ideal conditions.

In a prolonged drought, it may be 2014 or later before beef production increases, said Jim Robb, agricultural economist with the Livestock Marketing Information Center in Denver.

"The magnitude of this drought bears watching very closely from a cattle and beef industry perspective," Robb said. "It is already terrible, but if it gets bigger geographically then it raises even more problems."

In the drought area, pastures are terrible and stock ponds are drying up. Last week, Texas pastures were rated 69 percent poor to very poor compared with 17 percent a year ago. Those conditions are the worst since before 2003, when the state began keeping such records.

"It is just brittle dry, we are having fires every day," Roy Graham said of the grass on his ranch near Midland, Texas.

Lost agricultural production in Texas is estimated to top $3 billion, which compares with $4 billion in losses in 2006 and $3.6 billion in 2009.

"Those two years have been two of our worst years that we've seen. Now we're getting pretty close to seeing that unless we get some rain. We need it bad," said Brian Black, spokesman for the Texas Department of Agriculture.

Conditions are made worse by constant winds of 25 to 50 miles an hour that scour the soil, fill the air with dust, and sap whatever moisture remains.