Severe drought testing Texas cattle industry’s survival instincts

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Texas cattle rancher Bill Hyman characterizes people in his industry as “survivalists and optimists.” But the state’s worst drought in 44 years is testing both sides of that assessment.

Hyman said he cut his cow herd by more than a third over the winter, to about 80 animals, because persistent dryness has left him with little pasture for grazing. Gonzalez County, where Hyman is located, once had the most cattle of any county in Texas, he said. Now it’s closer to No. 7, he said, because drought has forced so many ranchers to sell cows and bulls.

“I just don’t have the carrying capacity and the hay to feed them,” Hyman, 61, said in a March 30 phone interview. He is executive director of the Austin-based Independent Cattlemen’s Association of Texas. “If it doesn’t rain the next 30 days, I’m going to have to go back into the herd and cull more.”

Hyman and other ranchers are farmers across Texas, the top U.S. beef producer, are grappling with a severe drought that threatens to further pinch the state’s $10.5 billion cattle industry and is also hurting growth of wheat and other crops. Ranchers are trimming herds as incomes suffer, contributing to a longer-term contraction of the U.S. herd that’s led to record cattle and beef prices and helped stoke food inflation.

“This is a bad drought situation shaping up and its impact will only get larger if it doesn’t rain soon,” said David Anderson, an agricultural economist at Texas A&M University in College Station. The full economic effect of the drought won’t be known for some time, he said.

Texas rainfall totals lowest since 1966-67

With limited pasture availability, ranchers have had to buy more hay and other feeds over the winter, raising their costs, Anderson said in an e-mail. Drought can also hamper animals’ weight and overall condition, he said.

The drought is connected to a La Nina effect that over the past year pushed the jet stream farther north than usual, resulting in lower than normal rain in the Southern U.S. Plains, Texas state climatologist John Nielsen-Gammon said.

From October through March, Texas received about 5 inches of rain on average, the smallest total since 1966-67, Nielsen-Gammon said. Normally, the state gets about 11 inches of rain during that period.

If drought continues for the next few months, “it will have a severe impact” on Texas agriculture, Nielsen-Gammon said.” There’s not a lot of subsoil moisture throughout the state. The amount of rain we get from here on out is going to be critical.”

For the week ended March 27, Texas’ range and pasture was rated in 59 percent poor or very condition, according to the state’s agriculture department. The state’s wheat crop was rated 62 percent poor or very poor.

Texas is the No. 2 U.S. wheat grower with 5.65 million acres seeded last year, behind only Kansas’ 8.8 million acres.

More government disaster assistance likely

Drought conditions have affected parts of Texas for much of the past five years, with the federal government declaring several counties disaster areas in 2008, 2009, and 2010.

In 2011, the prospect that most Texas counties will be declared disaster areas because of drought “is looking more and more viable,” said Juan M. Garcia, executive director for Texas’ Farm Service Agency, which is part of the U.S. Department of Agriculture.

Texas has paid about $300 million in disaster assistance to farmers and ranchers for losses incurred in crop years 2008 and 2009 due to drought, Garcia said.

The drought is compounding an industry liquidation phase that’s sent prices for young cattle, known as feeders, to unprecedented levels, livestock broker Justin Gleghorn said. With cattle prices so high, it makes more sense for producers to sell cows and calves now rather than hold on to them and risk the drought continues, he said.

“The anticipation we are going to run low on feeder numbers has fueled this market,” said Gleghorn, who’s with Brock Thompson Trading, LLC, in Amarillo, Tex. “It’s definitely a supply and demand issue, with supply driving it.”

Near the close of trading April 1, feeder cattle futures for April delivery traded on CME Group in Chicago rose 0.325 cent to $1.38125 a pound. Earlier, April touched $1.38525, a record high for a contract closest to expiration. CME feeder cattle futures are up about 25 percent over the past 12 months.

April live cattle futures, which reflect slaughter-ready animals, rose 0.325 cent to $1.21875 cents a pound, after reaching a record $1.22125.

“Drought will continue to cause cattle liquidation at these prices,” Gleghorn said.

Tomorrow better than today?

Texas is still the biggest U.S. cattle state, with total inventory of 13.3 million head, more than twice as many as No. 2 Kansas.

But parts of the state’s beef industry have shrunk. According to the USDA, the number of beef cows that have calved in Texas was 5.03 million as of Jan. 1, down 2.1 percent from a year earlier. Beef cow replacements totaled 630,000, down 17 percent.

Nationwide, the total cattle herd fell to a 53-year low at the beginning of 2011, according to USDA data.

Hyman, the head of the cattlemen’s group, said the drought has led to a stepped-up attrition rate for his industry as older producers retire in greater numbers. Some have had trouble generating a profit for the past decade, he said

Still, the Texas cattle industry has made it through bad droughts before, and Hyman is hopeful it will again.

“We’re survivalists and optimists,” Hyman said. “We always think tomorrow’s going to be better than today.”

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