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 * Intro
 * The land
 * The ranchers
 * The packers
 * California
 * The communities
 * What’s next?
 * 

 
 * Intro
 * The land
 * The ranchers
 * The packers
 * California
 * The communities
 * What’s next?
 * * 
   * 
     
   * 
   * 


ROUND
‘EM UP



Prolonged droughts in the Southern Plains and California are wrangling the
cattle industry to the northern Great Plains and closer to water and feed.
Meatpackers best follow the herd, or risk being run right out to pasture. By Tom
Johnston, managing editor

Even the ifs are big in Texas.

Sure, the record-high-priced cattle market is a siren song for ranchers in the
Lone Star State, encouraging them to rebuild the nation's largest beef herd and
cash in. But that’s if they’re still in business. If they have pasture to feed
their animals. If they get rain — a whole heck of a lot of it.

A drought that forced a massive herd reduction in 2011 is in its fourth year,
and even if the economics and weather were to combine just so, enough to bring
relief in the second half of 2014, the “ifs” would remain in the unsettling form
of facts: the climate is warming, growing populations are competing with
producers for land and water, a key source of cattle — Mexico — has been
significantly hampered due to the controversial federal Country of Origin
Labeling law, and packing plants are shutting down.



The closures of Cargill's massive Plainview, Texas, slaughterhouse and National
Beef Packing Co.’s Brawley, Calif., plant alone reduced the nation's fed-cattle
slaughter capacity by 6 percent in a little more than a year. The idling of the
two plants also accelerated a trend: The industry’s geographic perimeter is
narrowing around the Northern Plains (the Dakotas, Kansas and Nebraska) and
North Central (Iowa and Missouri) regions.

The cattle are moving. Packers will have to follow, as there is at least 10
percent more slaughter capacity than the industry needs. More than just a matter
of geography, the prospect demands a shift in strategy for raising livestock,
sourcing reliable supplies and marketing new products.


ON THE MOVE
SOURCE: DATA PROVIDED BY JOHN NALIVKA, STERLING MARKETING, AND GLYNN TONSOR,
KANSAS STATE UNIVERSITY

 * 1994: Prolonged droughts in the Southern Plains and California since 2011
   have accelerated a long-term shift of the cattle and cattle slaughter
   industry toward the Midwest. (Based on slaughter volumes of 47 fed cattle
   plants.) — Click on buttons to activate the shift.

   

 * 2014: Cargill idled its plant in Plainview, Texas, in January 2013. National
   Beef Packing Co. in Brawley, Calif., followed suit in May 2014. Meanwhile,
   Iowa Premium Beef plans to process 1,100 head per day when it opens in Tama,
   Iowa, in October 2014, with production capacity potentially reaching 2,200
   per day. (Based on slaughter volumes of 37 fed cattle plants, including Iowa
   Premium Beef.) — Click on buttons to activate the shift.

1994 2014

“Even after [National Beef’s Brawley plant closes] there’ll be another plant, if
not two, that in all likelihood will close before this ordeal is over,” says Don
Close, a livestock economist with Rabobank. That, he says, will cause another
major ripple in the concentration of the industry.

It’s anyone’s guess as to when this ordeal will be over, but the 3 to 6 inches
of rain that fell on West Texas over the Memorial Day weekend and subsequent
rains for sure won’t end it.

We don’t need just a normal year (of precipitation) or just a single rainfall.
We need an unusually wet year to get back to normal conditions.

“We’re on our fourth year of drought,” says Katherine Hayhoe, associate
professor and director of the climate science center at Texas Tech University in
Lubbock. “In order to replenish depleted reservoirs and soil moisture, we don’t
need just a normal year (of precipitation) or just a single rainfall. We need an
unusually wet year to get back to normal conditions.”

In an area that gets just about 20 inches of rain in a normal year — compared
with about 36 inches of precipitation across Iowa, on average — an “unusually
wet year” in West Texas wouldn’t seem to take that much of a shift in weather
patterns. But until the Memorial Day rains, the Lubbock area had seen less than
an inch of rain since the beginning of the year. Conditions are better than in
2011, the hottest and driest year on record in Texas, but that’s cold comfort at
this point.

“We’re not that much better off here right now [than in 2011],” says John
Perrin, owner of Perrin Farm & Ranch in Deaf Smith Co., Texas, a stretch
southwest of the Amarillo area of the Panhandle. The region accounts for nearly
93 percent of the state’s fed beef production and close to half of its total
livestock production.

Texas cattlemen will tell you they never thought they’d live to see a drought as
damaging as that one, which cost the state’s livestock industry $3.2 billion in
2011 alone. Some were left with no choice but to move their animals north, to
water and grass in Nebraska.

Their counterparts in California also have been selling off their herds as their
state suffers what some climatologists are calling its worst drought (well into
year three) in 500 years.

Then again, these same horrendous conditions have pushed prices to historic
highs. The optimistic, opportunistic blood inherited over the generations means
these cowboys are chomping at the bit, eyeballing the margins and wanting to
invest in more animals. But their respect for nature’s wrath perhaps has never
been greater, especially as more evidence emerges about the effect of climate
change on agriculture. Any rebuilding plans will have to be measured against
that and other serious challenges.

EVERYTHING’S BIGGER

In measuring the drought’s impact, heads have turned to Texas in particular due
to its huge role in the nation’s beef production. To put it in perspective,
consider that the entire U.S. beef cow herd decreased by 5 percent, from January
2011 to 2013; 65 percent of that decrease was due to reductions in Texas alone.

Climatologists say droughts are just one example of a trend of increasing
weather extremes. Extreme rains are a part of it too. Photo credit: Shutterstock

Texas’s share of the national number of cattle on feed accordingly has trended
down. Some of the decrease in recent years may be solely drought-related, and
perhaps temporary. But some portion of the herd’s relocation is more likely
permanent.

“My guess is that when animal numbers rebuild, that Southern Plains feedlot
production will not rebuild as much, resulting in a smaller share long-term,”
says Derrell Peel, a livestock economist at Oklahoma State University. “There
may a be a structural change where cattle feeding shifts somewhat back to the
Midwest.”

Glynn Tonsor, a livestock economist at Kansas State University, believes a
structural shift has been in the works for at least a decade, and that the
drought is merely an accelerant. USDA data he’s compiled show a decline in the
Southern Plains’ share of beef cows that have calved since 2005, particularly
accelerating with a 4 percent drop in the last four years. The Great Plains,
meanwhile, saw its share of this subset of the herd rise by almost 3 percent in
the same period.

Moreover, while nationally, producers are holding more heifers back to replace
aging beef cows — a clear signal of intent to rebuild the herd — Texas’s share
dipped about 5 percent in the last year. The Great Plains has seen its share
rise nearly 5 percent in the same period.

The national herd is at its lowest count since the ‘50s, and it didn’t get that
way in just the last four years. Since 1995, the Southern Plains’ beef cow
inventory has fallen the most dramatically, by nearly 2.2 million head, compared
with the Southeast (1.7 million) and the Great Plains (549,000).

“In total head [count], the Great Plains followed the national trend of
downsizing over the 1995-2010 period, yet its relative role as home to beef cows
and heifers being retained was growing prior to the drought and remains higher
than in 2010,” Tonsor wrote in a report earlier this year for the Livestock
Marketing Information Center. “This suggests the Great Plains is a growth area
in terms of its role in the national industry.”

“The migration of cattle back north no doubt is going on,” Rabobank’s Close
says. Furthermore, as Mexico invests in growing its own meat processing
infrastructure, “it will curtail the number of feeding cattle [being imported]
into the [United States] and South Plains, and I find that troubling for the
South Plains industry.”

Significant herd expansion anywhere is at least two years away. Even then — as
our story will cover in the ensuing chapters — producers and processors face an
uphill battle against climate change, rising feed grain prices, and competition
for rangeland and water.

In the first chapter, we address the conflict beef producers have with fellow
man and nature.   The Land



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