December 19, 2011


Texas drought likely to increase beef prices


Texas' drought has led in the decline of the leading cattle-state's cow herd which likely could increase beef prices as the number of animals decline and demand remains strong.


Since January 1, the number of cows in Texas has dropped by about 600,000, a 12% decline from the roughly five million cows the state had at the beginning of the year, said David Anderson, who monitors beef markets for the Texas AgriLife Extension Service. That's likely the largest drop in the number of cows any state has ever seen, though Texas had a larger percentage decline from 1934-35, when ranchers were reeling from the Great Depression and Dust Bowl, Anderson said.


Anderson said many cows were moved "somewhere there's grass," but lots of others were slaughtered. He said that in Texas, Oklahoma, New Mexico, Louisiana and Arkansas, about 200,000 more cattle were slaughtered this year, a 20% increase over last year.


That extra supply could help meet increased demand from China and other countries, but the loss of cows likely will mean fewer cattle in future years.


"Consumers are going to pay more because we're going to have less beef, fewer cows, calves, less beef production and increasing exports." Anderson said.


The USDA estimates that beef prices will increase up to 5.5 in 2012, in part because the number of cattle has declined. That follows a 9% increase in beef prices in the past year.


Oklahoma, the nation's second-largest cattle producer, also saw about a 12% drop in cows, Oklahoma State University agriculture economist Derrell Peel said.


Anderson said beef production nationally will be down 4% next year.


In Texas, the problem is primarily due to the worst single-year drought in the state's history. From January-November the state got just 46% of its normal rainfall of about 26 inches.


The drought was the result of a La Nina weather pattern, which brings drier than normal conditions to the south western states. Forecasters have said La Nina is back, meaning another dry year for Texas, Oklahoma and other nearby states.


The lack of rain coupled with blistering summer heat caused pastures to wither, leaving rancher with the choice of buying feed for the cattle or selling them.


About 200 miles north in Sulphur Springs, Texas, part-time rancher Dwyatt Bell said producers in his part of the state sold off up to half their herds. Bell said high prices for cattle have helped offset increases expenses, but many ranchers still are struggling to stay afloat.


"It's been a rough year," he said.


Across Texas, the drought has caused an estimated US$5.2 billion in losses to farmers and livestock producers, and that figure is expected to rise


Nationally, the number of cows has dropped by an estimated 617,000 this year, a 2% decline from the 30.9 million animals on January 1. That number would be larger, but states in northern plains such as North Dakota, South Dakota and Nebraska, increased their cow herd.


Anderson said it's unclear whether high beef prices would hurt US sales or limit exports. The US is the world third largest consumer of beef per capita at 85.5 pounds per year. Uruguay is first at 137 pounds per capita.


"Exports have been the strongest part of beef demand all year and they're expected to remain so but higher prices should constrain their growth," he said.

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