Restocking Comes Before Rebuilding for Cattle Herds

March 10, 2014 02:24 AM
Restocking Comes Before Rebuilding for Cattle Herds

By: Kay Ledbetter, Texas A&M AgriLife Extension Service

Restocking of cattle ranches must take place before the nation can rebuild its cattle herd. But restocking in a period of drought takes careful management, according to a Texas A&M AgriLife Extension Service economist.

"You have and will continue to hear about the glorious market incentives that will cause you to rebuild the national cow herd," said Stan Bevers, AgriLife Extension economist from Vernon, who spoke at the recent Panhandle Ranch Management workshop in Amarillo. "But many people don’t understand there is a difference between rebuilding and restocking a cow herd.

"Everyone’s ready to rebuild the cow herd. We’d all love to do it. Just tell me when my water is ready, and tell me when my grass is ready."

Rebuilding starts with restocking on the individual ranch level, Bevers said.

"The unique thing about a cow-calf operation compared to other components of the beef industry is it is a totally different business model," he said. "We are talking about an asset management business where we have to pay attention to the fixed assets and fixed costs within that operation."

Bevers explained that the only way from a micro-economic theory standpoint to decrease a fixed cost is to increase the number of cows.

"So anytime we get into a drought situation, the example I use is property taxes: somebody that has owned land out there may be paying $10,000 in property taxes. The tax appraisal district doesn’t care if you have five or 500 cows on that land, the fact is you still have to pay $10,000 in taxes."

His definition of restocking is: The process of placing beef cows back onto your property in order to efficiently utilize the property as an income generating investment.

Rebuilding, on the other hand, is increasing the national beef cow herd over and beyond inventory numbers once restocking after drought has already taken place. This is a macro-level issue commonly referred to as expansion.

To rebuild, someone has to move out of their comfort zone, Bevers said.

"And when I’m talking about a comfort zone, I’m talking about where our production on a ranch is maximized, where our expenses are minimized and where our resources are protected," he said.

"At the cusp of those three things, that is where I get my maximum efficiency and that is my comfort zone and where I want to be," Bevers said.

But a drought forces a reduction in numbers and the first thing that happens is productivity goes down, expenses rise and the natural resources are endangered, he said.

"Because of the fixed cost nature of cow-calf operations, anytime we destock like that, if we don’t kill some of our fixed expenses, then our fixed costs go up. So it is a cusp there and a balancing act to get back to a restocking where I’m most comfortable and most efficient as an operation."

When this happens, then the industry can look at rebuilding from the current 29 million cows in this country back to the 31-31.5 million that existed before the drought, Bevers said.

"We have to restock before we rebuild, and the first thing is making sure the rancher gets the numbers he needs."

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