‘Not
dead’

Texas beef makers will admit that the drought and its lingering impacts have taught some lessons about managing through it, but they’re a proud and resilient bunch that’s not about to pack it in. Sure, some packing plants and feed yards will close, but an ample infrastructure will remain. After all, even if it’s lost some bite, the state remains top dog in beef cow production, and it will never run short on pride.

“Texas’ (beef) industry is not dead, not by a long shot,” says Trevor Caviness, of Caviness Beef Packers.

The company, with slaughterhouses in Amarillo and nearby Hereford, Texas, runs 90 percent cows and bulls and the remainder fed cattle. Although the dairies are holding on to cows longer to enjoy a strong market, he’s not sweating the pinch in supply. The third-generation packer knows that the inventory rises and falls about every seven to eight years, and believes that producers will not only rebuild beginning this year but also that the market incentives will prompt a sharper jump than in past rebuilding phases.

“We believe in the resiliency of the farmer, rancher and dairyman,” he says. “There are strong market signals today to grow whatever herd you have as long as there’s pasture to accommodate that.”

Ross Wilson, CEO of the Amarillo-based Texas Cattle Feeders Association, whose constituents in Texas, Oklahoma and New Mexico market between 25 and 30 percent of the nation’s grain-fed cattle each year, doesn’t deny that Texas has taken a hit and concedes there’s “no question” that drought has reduced feeder cattle availability, which prompted a slight shift of feeding to the North.

“The question is, ‘Does that continue?’” he says, noting that raw numbers don’t show a huge shift yet. “There are lots of mitigating circumstances.”

Iowa, for example, always has had a corn price advantage, but higher feed efficiencies and warmer winter weather, among other factors, in the Southern Plains has partially offset that advantage, Wilson contends. Though Cargill’s Plainview plant has idled, he wouldn’t say the packing industry in his neck of the plains has shifted per sé, given the remaining capacity in the Panhandle of packing giants Tyson (Amarillo), Cargill (Friona) and JBS (Dumas). He notes difficulties that slaughterhouses have had in sourcing cattle across the nation, including in South Dakota where Northern Beef Packers failed and in Iowa where the on-and-off-again Tama plant has struggled for years (this fall it will reopen). And although Texas will see increased populations due to a growing economy, most of that growth is in the east; western Texas is still sparsely populated and doesn’t yet have the conflict between urban and rural interests that states like Iowa do.

Wilson says percentage changes and raw numbers are different things. Go back to March 2000, Iowa had about 1 million cattle on feed and this year in March 1.4 million cattle on feed, which is a whopping 40 percent increase for that state. That compares with Texas, which in 2000 had 3.3 million cattle on feed and today has about 2.8 million, a 15 percent decrease. Right at the beginning of the drought, Texas had 3.2 million cattle on feed, so he senses that the drought has had an immediate impact.

“Until there’s a major structural shift in feed yards and packing capacity, the industry is not leaving the Southern Plains from our perspective,” Wilson says.

Brad Stout, manager of cattle procurement at Friona Industries’ feed yard division in Amarillo, says despite some shift of the business from Texas, he’s comfortable with the current supply-and-demand dynamic, noting the continuing packing presence and the high prices it’s paying for fed cattle. But then, he’s sitting in the offices of the nation’s third-largest cattle feeding company (in terms of fed-cattle marketings) in downtown Amarillo, whose modest skyline is dominated by banks.

“We’ve got a good history of relationships with banks in this area,” he says. “The banking industry is really solid in this part of United States and heavily weighted toward agriculture. The banks know and understand our business, and have the means to be able to take care of our volume."

Volume will be the name of the game of survival going forward, at every point along the supply chain.

“Really where we’re seeing growth in cattle operations are these large operations. All the biggest cattle operations out here are expanding their herds,” says John Nalivka, a livestock economist and principal of Sterling Marketing in Vale, Ore. “All I hear is that small operations are selling their herds because it’s so dry out here and they don’t have any feed.”

Stout says he hates to see other companies go out of business because competition is good for the industry. Still, with the extent of the damage done by the drought, particularly to ranchers who ceased operations and see staggering re-entry costs and competing uses for land, there might not be the incentive to rebuild the Texas herd to what it has been. And the consolidation might be needed for the long-term health of the overall industry, he says.

Rabobank livestock analyst Don Close puts it this way:

“One of my old econ professors at West Texas A&M always made the comment that in all the years he’d been in the Panhandle there’ve been three or four different occasions when supposedly the native or regional supply of feed grains changed permanently, and every time this industry will find an alternative means of feeding. He’s absolutely right. It’s a popular avenue to take now that the Southern Plains is never going to be what it used to be. I can’t disagree, but to mark it off as a lost cause, I’m not ready to do that.”