|
 Rackley's worries over a lack of rain are typical of many U.S.
beef cattle producers trying to restock after a years long drought,
which peaked in 2011, decimated ranches built up over generations
and shrank the nation's herd to its smallest in more than 60 years.
Now a combination of record-high cattle prices and cheap grain has
prompted ranchers to start adding back cattle earlier than expected.
But the rebuilding will still be long and slow.
Producers like Rackley worry the drought will return, shriveling
scant pasture and sending grain costs soaring again. At the same
time, there is no guarantee Americans will continue to consume beef
at the current rate, given high prices.
"Every time we think we're coming out of the drought, we get hit
again,' said Rackley, a former high school football coach in Texas,
where the sport and beef are state passions.
Rackley's 49 chocolate brown and black cattle, including 25 cows
used for breeding, have yellow numbered tags clipped to their ears
for identification. He surveys a landscape of flat pasture and
points out which animal (#55) will be the next to go to slaughter at
the end of the month.
Feeder cattle futures trading about 20 percent higher than a year
ago at 199.45 cents a pound, and corn futures trading 13 percent
lower near $3.85 a bushel, are providing obvious incentives for
ranchers to rebuild their herds.
Still, the decision to expand is proving complicated for many, with
the price for buying new cattle at nearly $3,000 a head and pasture
still patchy in places. The topic was a focus at a cattle conference
in San Antonio, Texas, last week.
The nation's herd edged up one percent to 89.8 million head by Jan.
1, according to the U.S. Department of Agriculture (USDA), stunning
analysts who had predicted a decline and prompting some to bring
forward to late 2016 from 2017 their expectations of when beef
supplies will increase.
The cattle population was larger than in 2013 and 2014, but still
the third smallest since 1952, said University of Missouri livestock
economist Ron Plain.
"Herd rebuilding is on the way, but putting a calf into the herd
today will take at least a year and a half before you get anything
out of it," said Jack Salzsieder, owner of Iowa-based brokerage firm
JRS Consulting, referring to the time required to bring a calf to
maturity to be processed.
DROUGHT DILEMMA
In Oklahoma, Joe Smith wants to rebuild his cattle herd after
selling three-fourths of his animals in 2011.
Smith said he was being "very cautious" in his attempt to expand
production, holding back 10 cows of his 100-head herd to breed,
instead of sending them to slaughter. His ranch in Duncan, Oklahoma,
still needs more rain to grow grazing grass.
[to top of second column] |
About 33 percent of the southern United States, including the big
cattle states of Texas and Oklahoma, was in some form of drought as
of Feb. 5, down from about 37 percent a year earlier, according to
the U.S. Drought Monitor.
However, 8.7 percent of Texas was considered to be in extreme or
exceptional drought, the two worst categories, up three percentage
points from a year ago.
It may be 2018 or 2019 before increased supplies start to
significantly push down beef prices, said Derrell Peel, an
agricultural economist at Oklahoma State University, adding there
are "a lot of places that are vulnerable to go backward in a hurry"
if conditions turn dry.
In the meantime, beef prices are likely to stay high, squeezing
consumers in grocery stores and restaurants and prompting some
Americans to eat less beef.
Per capita consumption fell to an estimated 54.3 lbs (24.6 kg) in
2014 from 56.3 lbs (25.5 kg) a year earlier and is forecast to slip
to 52.7 lbs (23.9 kg) in 2015, according to the USDA, even though
overall consumption still outstrips domestic production.
Beef processors like Cargill Inc [CARG.UL] and National Beef Packing
Co [NBEEF.UL] are desperate to see production rise. They have
shuttered beef-processing plants in recent years and may still need
to close more facilities, said Pete Anderson, director of research
for cattle nutrition company Midwest PMS.
One of the few processors investing in expansion is JBS USA LLC
[JBS.UL], which is sinking $75 million into a Utah beef plant. But
the company is looking to include dairy cows to raise its output
there.
Meanwhile, in drought-hit California, rancher Kevin Kester plans to
reduce his 300-head herd further after cutting it from as many as
500 head he had back in 2010.
"Everybody wants to expand," he said. "We're looking for Mother
Nature to cooperate."
(Additional reporting by Theopolis Waters; Editing by Jo
Winterbottom and Frances Kerry)
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