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August 2011 Archive for Out to Pasture

RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Buried Fences

Aug 24, 2011

droughtfence3As we contemplate the potential impact of this historic drought in the Southwest, it might be well to recall what earlier droughts were like. Our place is in Hall County, Texas, one of the sites that provided some of the Farm Security Administration's iconic photos of the Dust Bowl era.

My father told me that among his jobs as a displaced Okie during those years was building new fences on top of old fences than had drifted under dust dunes. The way this works, for those of you in friendlier climes, is that the weeds blow and grow in a fence. Then the ground starts blowing and the wind stops it, and, before long, you have a drift.

This would seem to be a picture of such a fence. On one side is an old cotton field now in CRP which is being grazed under the drought program this year. There are heifers and heifer bulls on that field. On the other side of the fence are real bulls. They like to stand by the fence and paw and trash-talk each other.

The other day, the top of fence posts were beginning to show up, and yesterday an old rusty wire that must have been the top wire on a long-buried fence, which, judging by the height of the dune, may not even be the original fence. It looks like there is room for another one under it.




Drier than Dry

Aug 22, 2011

It was dry in the Southwest last time we talked about it, and it hasn’t rained yet. So it is now drier than dry. The wind has let up some, so our fires aren’t as rapacious, but the temperatures continue to set new records for being too darned hot. "Too-darned" translating to a hundred and this, a hundred and that, day after day.

I need to revisit the topic not because I am consumed by it, but because most of my last post on the matter lost itself in my computer’s nether and I had to rewrite the thing just before deadline. From memory of conversations that took place over several days.

I left some stuff out.

One was a conversation with Tommy Horndt at Schwertner Livestock. I had called Tommy because if you took a map of his business area and overlaid it on that drought map, the worst of the drought would cover the very areas where the Schwertner outfit buys and sells cattle. I am quite concerned about what this thing is doing to cow numbers and I figured Tommy, with his network of buyers and sellers, would have a pretty good feeling.

Tommy has been watching you cowfolk do business nearly as long as I, and at a different level. People talk to reporters differently than they do cattle buyers. Not to argue they’re more honest with one than the other, but different.

Folks tend, when a reporter calls, to emphasize the negative. And reporters, including the one I shave daily, tend to hear the most interesting—read: scariest—stuff. So that’s what we report. But when you’re talking with a cow buyer, you don’t start off saying "this is the awfulest thing I’ve ever seen and I’ve got to sell cattle no matter the price."

Tommy’s emphasis was that cow people will find a way to hold more of those cows than it sounds like they can.

I didn’t get that into the last piece, but it’s a crucial point and one missing from all the coverage on this drought. This is a nasty situation in Texas, Oklahoma and New Mexico, but we don’t yet look like the Mad Max landscape. (In most places, anyhow.) Most of my neighbors culled early and deep, but there are still cows around here. I figured I should mention it because Mark Hargrave over at the Tulia Livestock Auction tells me he’s been getting calls from folks up north who presume they can buy young pregnant cows at packer prices. Not so much, he says, at least in his region. His sales volume last week was still running about even with last year. What cows he has seen came from areas farther south.

You get down into the country south of here—big cow country in Central Texas, especially—and cow liquidation has indeed been extensive, though it seems to be slowing down. In much of that country, drought impacts not only the forage supply, but the availability of stock water. As their ponds dried up, they had no choice but to haul their cattle to town. Ponds (and the lakes that supply municipal and rural water systems, for that matter) are drying up on the High Plains, too, but producers here typically rely less on surface water and more on wells. So forage is the limiting factor there.

I caught Dr. Ted McCollum, the Extension beef cattle specialist at Amarillo, driving through West Texas. His part of the world not only includes a third of the country’s feedyard capacity, it is typically home to about a million wheat pasture calves each winter. He says people are working hard to hold their cows if they can, but he says the outlook for wheat pasture—and fall demand for those million head of calves shipped in mostly from the Southeastern states—is probably not too great.

A lot of the calves are already in the feedlots, of course (witness the Cattle on Feed report), but most of them are still on their mamas in places like Florida and Georgia. There will be some demand for them to go to irrigated wheat, of course, but as McCollum points out, a lot of irrigation farmers are saying they’ll hold off and plant late to reduce the need to further tax their already-stressed wells. The later wheat is planted, the less grazing it needs. As to dryland wheat producers, McCollum says many of them say they don’t plan to risk their seed until it rains, knowing that without subsoil moisture dry-planted wheat sown in time for grazing runs a high risk of getting a shower to sprout it and then dying for lack of further moisture.

For one thing, the long-term weather forecasters are calling for more of this dratted La Niña stuff, meaning below-normal moisture over the very area so drastically impacted by this dry spell. (This has become, by the way, officially the driest 10-month spell on record. We are so far behind that it seems fair to presume that record will grow even if we do get some times of normal rainfall. It will take a LOT of rain to get our running average back to normal.)

But everybody is hoping for wheat pasture in Texas and Oklahoma and rains farther south to bring on the oat pasture that undergirds a lot of the central Texas ranch economy... McCollum notes that there are quite a few cows in the Panhandle’s feedlots and says it might make economic sense for ranchers to put them there rather than sell them. What scares people so much is what it will cost to buy back cows next spring—and McCollum says a lot of them say they probably just won’t.

"They say they’ll probably never get back in," he says.

Spending $2 and up per day to keep cows in good shape sounds awful high in an area where you can typically get pasture for $20 a pair-month or less, but for those figuring they might have to pay $500 or $800 more for cows next spring, it might make sense. At the least, it might get them past the glut in regional slaughter cow supplies. And if it rains, and the grass grows and cow prices go up, you’d probably be glad you did that.

But, not to sound all pessimistic and all, what if it doesn’t rain? And by that, I mean a lot.

The drought of the '50s in these parts was never this dry this long, but it lasted longer than this one has so far. I talked to some pasture grass folks last week and I think they’re not sure what a whole summer with ZERO rain will do to grass, but they’re thinking even the native grasses will have to come back from seed. That will take years of reduced stocking and tender management.

As I said last time, this drought is covering an area that had something like a third of the country’s beef cows on Jan. 1, 2011. We don’t know yet how many cows it will have next January, but it will probably be hundreds of thousands fewer. McCollum says a lot of producers tell him that if they have to sell out this year, they’ll probably stay out. It is, to be gentle, late in life for the typical Texas, Oklahoma and New Mexico rancher to be making long-term genetic improvement plans. And, even for the optimists, there are tree ring histories showing that the Southwest is prone to droughts that are more severe and longer-lasting than anything we’ve been around to measure. Could this be the start of one of those? Could it be another '50s style, seven-year spell? Or what if it really is an early harbinger of Global Warming, which the climatologists say will make this sort of thing more common?

We don’t know yet, do we? But we do know that this drought is fundamentally changing the cattle outlook. Just how long it stays dry and how dry it stays will determine how much.

When next we visit, maybe it will have rained and I will be all cheery. If not, I guess we’ll have to call it "drier than drier than dry."

Better Markets Mean More Risk

Aug 08, 2011

It sounds like The U.S. Senate might finally move forward with the Korean Free Trade Agreement when they return to work next month. That should give beef exports a boost, and another boost will be more of a good thing.

Yes, yes. There are those out there who think exports don’t matter, who think we should shut the borders to imports and accept any trade retaliation happily. But those are wrong folks. We’ve got beef priced about as high as U.S. citizens are willing to pay already, and we’re going to need more in the future. Until U.S. demand picks back up, we’ve got to count on the export markets—the vast export markets—to justify even our shrunken cattle herd.

We are, again, exporting more beef than we import. It was a long, slow, climb back from the BSE cow that slaughtered export demand in 1993. But between—the weak dollar; increased worldwide protein demand; ongoing (if seemingly moslassassy slow) efforts by our trade negotiators; lower production by some export competitors; and the world’s increased awareness of just how over-done the BSE scare was—exports have grown every year.

They were up 27% over year ago levels at the end of May and a Cattle-Fax analyst told a attendees at the Texas A&M Beef Cattle Short Course in Texas last week that they should run between 21 and 25% higher than 2010.

They will set a new record this year. Joe Schuele at the U.S. Meat Export Federation says there are a lot of ways to calculate the value of those exports, but using the simplest—just dividing the value of exports into the number of fed cattle—indicates $209 per head.

That is a bunch of help and much—most, if you follow (usually negative) cattle feeding returns—of that $200 goes into the pockets of cow-calf producers. (Well, them and their bankers.) With the U.S. economy teetering on the brink of another recession, those growing markets in the developing world are more important.              

Exports are great. They allow a larger market than we would have. They let packers sell parts of your cows that most Americans won’t buy. But the more we export, the more dependent we become on those markets. You do recall, don’t you, how bad things were after the BSE cow, when the industry lost 10% of its market overnight? We’re going to see a larger and larger share of U.S. beef going to foreign markets. And those can be fickle.

There’s the risk of another health scare providing importers and their inhouse farm lobbies with an excuse to say “no.” But there is also in the back of my mind a fear about what happened to Argentina four or five years ago—when they stopped exporting beef because it was getting too expensive for their domestic consumers.

Maybe that’s just my worry bone working overtime.  But those of us who remember President Nixon’s price freeze and what it did to cattle prices and President Carter’s Russian grain embargo and what it did to grain prices can’t help but borrow trouble from the future, you know?

I’ve seen no sign of any unrest in this country over beef prices. In fact, it’s all the vogue among the New York Times crowd to think they’re too cheap. But it’s something besides the drought to worry about if you ask me and I hope the Issues Management folks at NCBA are watching carefully for any repeat of that housewife boycott that got the Nixon mess started. I know how easy it is to forget history and let it repeat on you.

Next year is an election year. And we do have a president who wants to help. And we do have an incredibly short fuse on public attitude. It would be much easier to get those hamburger-hungry housewives marching in today’s twitter world than it was 40 years ago.

So exports are going to be necessary to keep us profitable in the inflated cost/weak beef demand future we face. Fortunately, it looks like export demand will grow faster in the future and take an ever larger share of production. That’s all great. But it means we’ll have ever more eggs in that one basket.

That amounts to more risk. The future looks bright for cow-calf producers (those of you who get rain, anyhow) but it would serve everybody well to remember the cliffs over which we fell in years past.

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