Cattle prices jump as ranchers begin rebuilding

[May 09, 2012]  FRANKSTON, Texas (AP) -- A cow runs circles in a small pen, her baby close by her side. Ranchers, their brows wrinkled, scribble in a glossy catalog while high on a podium the auctioneer slams his gavel, taking bids as the price of the pair rises rapidly.

The high-profile auction at the Neches River Ranch gave cattlemen a good indication of how long it might take to rebuild after Texas' devastating drought and what it might cost them.

A quality cow that sold last year for no more than $1,800 now fetches about $3,000. The average price for a bull is up $500. And a cow with a 300- pound to 400-pound calf by her side is selling for about $2,800, sometimes more than $3,000 -- almost double the $1,700 they commanded two years ago.

"Since we've gotten rain and everything, the price has really jumped up," said John Dixon, a rancher near Elkhart, who with a slight nod of his head bought a $7,000 cow. "They sold at a pretty good level all the way through."

Last year's historic drought forced ranchers to cut their herds because they had no grass and couldn't afford high hay prices. Hundreds of thousands of cattle were slaughtered or sent out of the state, leaving Texas, the largest livestock producer in the nation, with its smallest herd since the 1950s.

Then, after a year of record-breaking heat and an almost complete lack of rain, winter rains broke records. Ponds filled. The grass turned green. Ranchers began looking for cattle, and many -- along with analysts, feedlots and livestock dealers -- kept a close eye on the GeneTrust auction held in the rolling hills of East Texas on a ranch owned by the Cavenders, a family more often known for selling boots and hats in western stores than cattle genetics.

"The big question looming in everybody's mind now is: Are we going to have another summer like we had last summer?" explained Doak Lambert, the auctioneer. "If I go and invest all this money and buy these cattle and pay a premium for them, and then we end up in a drought situation again this summer and I have to liquidate them, where do I sit financially? So there's a lot of risk involved right now."

Yet "the mood is good," Lambert added. "The American cattleman is, I guess, the biggest risk-taker I know, and he's also the biggest optimist I know."

Jason Cleere, a rancher and beef cattle specialist with Texas AgriLife Extension at Texas A&M University, believes that while ranchers are restocking, they remain cautious. The rains have slowed significantly in the past month, and many ranchers are heeding climatologists' warnings that the next decade in Texas will be relatively dry. They're keeping herds small so they're better prepared for the next, inevitable, dry spell.

"Ranchers in general have been a little bit more conservative on going out and rebuilding because they want to see what happens as we move into the summer," Cleere said. "Ranchers went through a lot of cash reserves last summer, and they can't do that again this year."

With cattle prices high, cash reserves low, the weather uncertain and calves taking nine months to be born and several years to be ready for slaughter, many estimate the beef industry may need five years to fully recover.

It's a layered business. There are those who raise cattle for breeding. They sell to ranchers who raise cattle for beef and breed their herds to restock. Livestock dealers buy cattle from those ranchers and sell the animals to feedlots, where they are fattened up before heading to slaughterhouses.

The drought affects each differently.

Mary Lou Bradley raises bulls in the Texas Panhandle town of Memphis to sell to ranchers for breeding. She spent more than $100,000 on hay to keep her animals fed during the drought, which is still gripping her area, and now she's looking for new markets. Her Bradley 3 Ranch sold a number of bulls this year in Florida, Colorado and Missouri, but because Texas has relatively few cows left, there was little need there for males for breeding.

Bradley has been keeping an eye on bull sales and hoping for a turnaround. Some saw record prices. At other auctions, barely anyone showed up. Some were cancelled because ranchers feared they would not have buyers, she said.

"People are not buying back yet," Bradley said, noting that sales in Nebraska, Montana and other states that have had good rain have been better than in Texas. Even in western Oklahoma, which has largely recovered from the drought, ranchers remain nervous.

Many who are buying animals now are putting out money with the hope that they'll make it back in a few years if beef prices remain high.

Dealers are doing better. Jim Schwertner, president of Capitol Land and Livestock, had a 25 percent increase in business last year as ranchers sold off animals at the height of the drought. He's still buying now, about 3,000 head of cattle a day that he turns around in 24 hours. With solid demand for meat and a relatively low supply of cattle, beef prices are up, and he expects them to stay that way.

"You'll see a three-year process before we can normalize the supply," Schwertner said. "It's three years from the time you buy a cow and a bull before you get that steak on your table."

And it will certainly be more expensive.

[Associated Press; By RAMIT PLUSHNICK-MASTI]

Plushnick-Masti can be followed on Twitter at https://twitter.com//RamitMastiAP.

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