"A severe drought in the southern Great Plains is fueling a massive cattle drive north that is pushing beef prices higher and threatening to alter the country's production of red meat.
Surrounded by parched prairies and dry watering holes, ranchers in Texas and Oklahoma have deeply culled their herds and helped cut the national cattle population to the lowest level in decades. They have found greener pastures in states such as Iowa and Nebraska, but land there is more valuable for corn than cattle, and some owners are hesitant to take on more livestock.
The question now is whether the move northward is permanent or will reverse once the drought—by most measures the worst since the 1930s Dust Bowl—finally ends. One fear in the beef industry is that cattle supplies will struggle to rebound across the Great Plains, from Texas to the Dakotas, when the rains return, as many ranchers may have exited from the business for good.
Others say ranching is too deeply ingrained in Texas culture and will rebound, as it has after previous droughts.
The combination of a drought that began nearly two years ago and surging demand for red meat world-wide has pushed front-month cattle futures at the Chicago Mercantile Exchange to a series of records over the past year, including an all-time intraday high of $1.26375 in January. Friday, the contract settled at $1.2395. Meatpackers are struggling to turn a profit after spending months competing for scarce supplies, and retail prices for beef hover near records. The U.S. Department of Agriculture expects cattle prices will rise 9% this year after surging more than 20% in 2011.
Running low on water for his cattle, Carl Johnson of Tatum, N.M., just shipped by truck the last of a herd that once numbered more than 1,000 head, effectively closing down a family business started by his father. Rainfall in his part of New Mexico last year was about 60% below average.
The 65-year-old Mr. Johnson isn't optimistic about southern ranches rebounding. "This is going to be a game-changing deal because guys my age aren't coming back," he said.
Indeed, economists and analysts worry that many ranchers in the southern Plains who liquidated their herds have exited from the industry for good. "You find yourself with an ever-shrinking factory," said Jim Sartwelle, director of public policy for the Texas Farm Bureau.
Federal data released in January show the number of cattle in the U.S. stands at its lowest level in six decades. More telling is a sharp drop in the number of breeding cows, which are the start of the supply chain for beef. Texas saw its breeding herd decline by 660,000 head, or 13%, last year, the largest decline since 1935. That compares with sharp gains in Iowa and Nebraska, which added a combined 167,000 cows last year—but far short of the number lost in the cull.
The shortage is being felt at meatpacking plants and large feedlots, where industry giants such as Cargill Inc. fatten cattle before slaughter.
Still, ranchers to the north aren't sure about whether to take on greater numbers of cattle. Not only is planting corn typically more profitable, but ranchers are wary of permanently adding cows from the southern Plains to their herds since the animals are bred for a warmer climate and tend to be smaller than those typically raised in the Midwest.
Tim Johnson, who raises cattle in Carpenter, Iowa, near the Minnesota border, bought two dozen pregnant cows from Texas last August in hopes of making $300 to $400 apiece by selling off the calves and their mothers.
But recent prices for southern cattle at nearby auction houses have been underwhelming, and northern ranchers have become skilled at picking out the interlopers. "We don't have these big old floppy ears up here," Mr. Johnson said.
He now expects he will have to hold the new animals for 12 to 18 months and hope for higher prices.
To rebuild, ranchers will either have to bring their cows back from states like South Dakota or buy new animals for breeding. But there may be few willing to wait. The Texas and Southwestern Cattle Raisers Association estimates the average age of a rancher in the southern Plains is 58 years old.
Young female breeding cattle traded hands for as little as $500 earlier this year as ranchers rushed to sell stressed animals. Those same young females are expected to fetch as much as $2,000 when ranches start to restock.
"There's a big financial hurdle to buying back in," said David Anderson, an agriculture economist at Texas A&M University in College Station who has studied the effects of the drought.
The issue of water demand also looms large, even if drought conditions ease. In the southwestern corner of Texas, ranchers can earn more money by selling water to city dwellers than by raising cattle, said Char Miller, a professor of environmental analysis at Pomona College in Claremont, Calif.
The challenges to the south are fueling bets by some that a move to the north is under way. Northern Beef Packers LP is nearly finished building a $53 million slaughterhouse in Aberdeen, S.D., to take advantage of increasing cattle supplies in and around the state. The plant will be the first major slaughterhouse in the Dakotas and Montana.
Northern Beef Chief Executive David Palmer said cattle producers within 200 miles of the new plant ship one million young cattle a year, or half their new calves, to the south for fattening and processing. "There's a big surplus of beef calves in northern areas where the climate is good and pastures are rich," he said.
The trend could hurt packers to the south, with analysts saying plant closures are possible. Deutsche Bank analysts warned last month that packing plants in south Texas are most vulnerable."
It all comes down to a forecasted global drying and 100-year drought predicted back in 2010...and it's really happening. Pretty soon, Americans will start to follow the cows northward, and eventually, we'll probably all end up in Canada just to survive (ha! Screw Obamacare, 'cuz then we'll have the Canadian health plan Obama always wanted for us, only America won't have to pay for it). The drought article contains graphics you have simply GOT to see if you want to know the progression of this thing over the next century--then you'll know the importance of food security (for both you and animals) and water-efficient ways to go about it. If cows are being droughted out now, guess who or what's next--vegetation, maybe? Surely other livestock animals are!
The hippies of the 70's were right--they were just early. The global warming screamers are wrong about the source--it's THE SUN, not people! We've been going through a global cooling cycle for centuries, and now the sun is ramping up again. All the solar panels, windmills, electric cars, hybrids, and hydrogen power in the world won't do anything against the sun. Instead of erecting windmills, we should be digging caves for homes our kids and grandkids can grow up in.
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