January 6, 2014

Source: Associated Press

After a dispiriting stretch of years, many Texas ranchers are optimistic as drought, expensive feed and other conditions that decimated their cattle herds start to loosen their grip. But rebuilding their herds will be neither cheap nor a short-term process, even in the nation’s top cattle-producing state.

Texas lost 15 percent of its cattle — or about 2 million animals — between January 2011 and January 2013, as ranchers sold them to out-of-state buyers or sent them to slaughter amid an unrelenting drought. That helped the size of the U.S. herd drop to 89.3 million head, the lowest level since the 1950s.

Many ranchers are now interested in starting to rebuild, eyeing improving beef markets. But they’re relying on several variables, the most important being reliable pastures, said Eldon White, executive vice president of the Texas and Southwestern Cattle Raisers Association.

“It’s going to be a slow, gradual increase as long as we have moisture,” added Shawn Fryrear, who manages about 2,500 cattle on 10 ranches in Central Texas. “I feel like everyone is looking at the glass half full.”

Ranchers also need females — especially pregnant heifers, which are now going for as much as $2,500 each, compared to $1,500 before the drought. Many ranchers sold more of their heifers, females that haven’t had their first calf, and mother cows during the drought to save feed costs.

David Anderson, an agricultural economist with Texas A&M University, said he expects producers will hold on to more of their heifers but noted that ranchers have tough decisions.

“It’s like a tug of war or a seesaw between a future return, from what that female would produce over her life, versus the price I would get today to sell her,” Anderson said. “I think it’s still up in the air how many they’re really going to get to keep.”

Ranchers in the driest areas aren’t as keen to buy costly replacement heifers despite the economic incentives, including Rob Sandidge, whose herd west of San Antonio is about a quarter of the size it was before the 2011 drought.

“Those heifers are worth a lot of money, but that’s what it takes to rebuild,” he said.

But his water sources remain dry, so the 64-year-old plans to hold off building up his herd for now.

“We did grow some grass,” he said last month. “We still don’t have any (full stock) tanks, none of the creeks are running. We’re just kind of holding on right now.”

With the exception of West Texas, where the chances for rain through February are below normal, forecasters are offering equal chances for above, below or near normal precipitation for the rest of the state.

The drought of 2011 was Texas’ most intense one-year drought on record, and its devastation remains fresh. Agriculture in Texas lost $7.6 billion that year, including $3.2 billion in livestock losses, such as selling off cattle or higher costs for feed. Pastures were left cracked and barren by triple-digit heat, far too little rain and windier than normal conditions.

At its worst, 88 percent of the state was in the most severe stage of drought on the U.S. Drought Monitor map.

Now, about 44 percent of Texas is amid drought, and far less land is in the worst dryness categories than in previous years, while 28 percent of the state is considered abnormally dry. There is no drought in East Texas and parts of Southeast Texas, where many of the state’s cattle are produced.

Those with decent conditions are eyeing market positives. All fresh beef in the U.S. averaged $4.92 a pound from January through October 2013, an increase of 5.3 percent compared to the same period in 2012, according to reports from the Livestock Marketing Information Center and the U.S. Meat Federation, a trade association.

Foreign demand also is growing. Total beef exports for last year through October were up 2 percent and valued at $5.1 billion. By the end of 2013, the total was expected to surpass 2012’s record $5.5 billion.

Mexico and Japan each bought 40 percent more beef in October than the same month in 2012, and Hong Kong’s imports skyrocketed 148 percent.

In addition, a good corn crop has prices for the grain down as much as $2.50 a bushel, while hay stocks have increased, said Kevin Good, an analyst at CattleFax, a Colorado-based information group that serves all segments of the cattle business.

Good noted that cow slaughter numbers could be down by 200,000 for the year when the U.S. Department of Agriculture releases its January inventory report. The number needs to drop by at least 500,000 in each of the next two years for an expansion of the overall U.S. herd to have a chance, he said.

“That’s what it takes to go from liquidation to expansion,” Good said.

Austin-based rancher Dan Dierschke didn’t sell any of his animals during the drought — and he’s glad he held onto them.

“To go out and pay what today’s prices are it takes more nerves than I have,” the 74-year-old said. “I’m glad there are people that want to do it because it supports the markets, the prices for those animals that I’m selling.”