Texas used to be a convenient place to raise beef cattle. But that was before the drought, now in its fourth year; before competing uses for corn (think: ethanol) sent the price of the commodity to historic highs — and most of it has to be shipped in to Texas from the Midwest — and before the water in the aquifers underlying the state began draining at an alarming rate, in part because the animals need so much of it.
Meanwhile, thousands of people add to Texas’ population each year, and they need space and resources, as well.
California, on year three of what some climatologists have called that area’s worst in 500 years, is another study of similar challenges.
The herd still is concentrated in the Southern Plains, but the region’s lead over the rest of the country has been significantly eroded over the last several years. The herd is gradually relocating to the Northern Plains, and the geographic shift is having a ripple effect on the meat processing.
Even the ifs are big in Texas.
Sure, the record-high-priced cattle market is a siren song for ranchers in the Lone Star State, encouraging them to rebuild the nation’s largest beef herd and cash in. But that’s if they’re still in business. If they have pasture to feed their animals. If they get rain — a whole heck of a lot of it.
A drought that forced a massive herd reduction in 2011 is in its fourth year, and even if the economics and weather were to combine just so, enough to bring relief in the second half of 2014, the “ifs” would remain in the unsettling form of facts: the climate is warming, growing populations are competing with producers for land and water, a key source of cattle — Mexico — has been significantly hampered due to the controversial federal Country of Origin Labeling law, and packing plants are shutting down.
The closures of Cargill’s massive Plainview, Texas, slaughterhouse and National Beef Packing Co.’s Brawley, Calif., plant alone reduced the nation’s fed-cattle slaughter capacity by 6 percent in a little more than a year. The idling of the two plants also accelerated a trend: The industry’s geographic perimeter is narrowing around the Northern Plains (the Dakotas, Kansas and Nebraska) and North Central (Iowa and Missouri) regions.
The cattle are moving. Packers will have to follow, as there is at least 10 percent more slaughter capacity than the industry needs. More than just a matter of geography, the prospect demands a shift in strategy for raising livestock, sourcing reliable supplies and marketing new products.
Even after [National Beef’s Brawley plant closes] there’ll be another plant, if not two, that in all likelihood will close before this ordeal is over. That will cause another major ripple in the concentration of the industry.
It’s anyone’s guess as to when this ordeal will be over, but the 3 to 6 inches of rain that fell on West Texas over the Memorial Day weekend and subsequent rains for sure won’t end it.
They don’t need just a normal year (of precipitation) or just a single rainfall. They need an unusually wet year to get back to normal conditions.
They’re on their fourth year of drought. In order to replenish depleted reservoirs and soil moisture, they don’t need just a normal year (of precipitation) or just a single rainfall. They need an unusually wet year to get back to normal conditions.
In an area that gets just about 20 inches of rain in a normal year — compared with about 36 inches of precipitation across Iowa, on average — an “unusually wet year” in West Texas wouldn’t seem to take that much of a shift in weather patterns. But until the Memorial Day rains, the Lubbock area had seen less than an inch of rain since the beginning of the year. Conditions are better than in 2011, the hottest and driest year on record in Texas, but that’s cold comfort at this point.
The region of Deaf Smith County accounts for nearly 93 percent of the state’s fed beef production and close to half of its total livestock production. And they’re not much better off than in 2011.
Texas cattlemen will tell you they never thought they’d live to see a drought as damaging as that one, which cost the state’s livestock industry $3.2 billion in 2011 alone. Some were left with no choice but to move their animals north, to water and grass in Nebraska.
Their counterparts in California also have been selling off their herds as their state suffers what some climatologists are calling its worst drought (well into year three) in 500 years.
Then again, these same horrendous conditions have pushed prices to historic highs. The optimistic, opportunistic blood inherited over the generations means these cowboys are chomping at the bit, eyeballing the margins and wanting to invest in more animals. But their respect for nature’s wrath perhaps has never been greater, especially as more evidence emerges about the effect of climate change on agriculture. Any rebuilding plans will have to be measured against that and other serious challenges.
In measuring the drought’s impact, heads have turned to Texas in particular due to its huge role in the nation’s beef production. To put it in perspective, consider that the entire U.S. beef cow herd decreased by 5 percent, from January 2011 to 2013; 65 percent of that decrease was due to reductions in Texas alone.
Texas’s share of the national number of cattle on feed accordingly has trended down. Some of the decrease in recent years may be solely drought-related, and perhaps temporary. But some portion of the herd’s relocation is more likely permanent.
A livestock economist at Kansas State University, believes a structural shift has been in the works for at least a decade, and that the drought is merely an accelerant. USDA data compiled shows a decline in the Southern Plains’ share of beef cows that have calved since 2005, particularly accelerating with a 4 percent drop in the last four years. The Great Plains, meanwhile, saw its share of this subset of the herd rise by almost 3 percent in the same period.
Moreover, while nationally, producers are holding more heifers back to replace aging beef cows — a clear signal of intent to rebuild the herd — Texas’s share dipped about 5 percent in the last year. The Great Plains has seen its share rise nearly 5 percent in the same period.
The national herd is at its lowest count since the ‘50s, and it didn’t get that way in just the last four years. Since 1995, the Southern Plains’ beef cow inventory has fallen the most dramatically, by nearly 2.2 million head, compared with the Southeast (1.7 million) and the Great Plains (549,000).
“In total head [count], the Great Plains followed the national trend of downsizing over the 1995-2010 period, yet its relative role as home to beef cows and heifers being retained was growing prior to the drought and remains higher than in 2010. This suggests the Great Plains is a growth area in terms of its role in the national industry.
The migration of cattle back north no doubt is going on. Furthermore, as Mexico invests in growing its own meat processing infrastructure, it will curtail the number of feeding cattle [being imported] into the [United States] and South Plains, and this could be troubling for the South Plains industry.
Significant herd expansion anywhere is at least two years away. Even then — as our story will cover in the ensuing chapters — producers and processors face an uphill battle against climate change, rising feed grain prices, and competition for rangeland and water.
Source: meatingplace.com, 8-11-2014