Herd expansion plans wither away

CHICAGO, Ill. (Reuters) – Texas rancher Kurt Hanna’s plans to expand his herd are going up in smoke, literally.

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 expanding their herds.

Texas is the largest U.S. cattle state, and the shrinking herd there could translate into even higher beef prices.

The national cattle herd has dwindled to 93 million head, which is the smallest in 53 years. The discovery of BSE in 2003, which slashed exports, is partly to blame.

The smaller herd, combined with a surge in domestic and overseas beef demand, has pushed beef prices to record highs in U.S. supermarkets. In Texas, the herd is about 13 million head, down one 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 said from his 17,000 acre ranch in southwestern Texas.

Instead, he and other ranchers in the drought area, which covers most of Texas and Oklahoma as well as parts of southwestern 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, 400 kilometres north of Hanna’s ranch.

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

However, analysts said export demand for U.S. beef is expected to remain strong.

The demandis led by Japan, which 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.

Analysts said the U.S. cattle herd needs to expand to keep pace with exports, which begins with breeding heifers 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 seven percent in Missouri.

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

Nearly every segment of the cattle industry has been profitable since 2009, largely because of 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.

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

However, 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.”

Pastures are terrible in the drought area and stock ponds are drying up. Texas pastures were recently 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.

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

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