January 31

U.S. cattle herd shrinking, pushing up price of beef

Extreme drought leads to scarce food for the animals, so farmers are selling them.

Elizabeth Campbell And Alan Bjerga
Bloomberg News

CHICAGO — Three years after the worst dry spell on record for Texas, fourth-generation rancher Stayton Weldon still doesn’t have enough water for his 300 cattle near Cuero, about 89 miles southeast of San Antonio. Dry grass on his 2,600 acres has no nutrition. He has lost 22 cows and two bulls in the past year.

click image to enlarge

A calf is presented at an auction this month at the 101 Livestock Market in Aromas, Calif. California’s worsening drought is forcing many ranchers to sell their livestock because their pastures are too dry to feed them and it’s getting too expensive to buy hay and other supplemental feed.

The Associated Press

“We need rain – bad,” the 75-year-old Weldon said, looking at animals scraping at patchy grass on land that his family has been on since 1856. “We’ve got tremendous drought problems. It cuts your herd size down because people have to sell off to provide for the cattle that are left.”

The cattle herd in the United States, the world’s largest beef producer, fell to the smallest in 63 years, according to U.S. Department of Agriculture data released Friday. More than 80 percent of Texas, the biggest producing state, is still abnormally dry, and ranchers such as Weldon are struggling to recover. Fewer cattle will mean production in the $85 billion beef industry drops to a 20-year low in 2014, the U.S. Department of Agriculture said. Retail costs for the meat are at an all-time high, government data show.

Cattle futures rose 4.4 percent this month and touched $1.432 a pound on Jan. 22, the highest since trading began on the Chicago Mercantile Exchange in 1964. The Standard & Poor’s GSCI gauge of 24 raw materials dropped 1.3 percent in 2014, and the MSCI All-Country World Index of equities declined 3.9 percent. The Bloomberg Dollar Index, a gauge against 10 major trading partners, climbed 1.2 percent, while the Bloomberg Treasury Bond Index rose 1.6 percent.

U.S. ranchers held 87.99 million head of cattle as of Jan. 1, according to the average estimate of six analysts surveyed by Bloomberg News. That’s the fewest for the date since 1951 and would mark the seventh straight year of contraction.

Beef and dairy farmers held 87.7 million head of cattle as this year began, down 1.8 percent from a year earlier, the U.S. Department of Agriculture said Friday in an annual report. That’s the lowest since 1951, the USDA said.

The report also showed the 2013 calf crop was estimated at 33.9 million, down 1 percent from a year earlier and the smallest since 1949.

Extreme weather around the world is wreaking havoc with farmers and threatening global food production.

The period from October 2010 through September 2011 marked the driest 12 months for Texas in records going back to 1895, according to John Nielsen-Gammon, the state’s climatologist. The dry conditions destroyed pastures and caused $3.23 billion of losses in livestock. It was followed the next year by a surge in feed-grain prices during the worst Midwest dry spell since the 1930s. California had its driest year ever in 2013, threatening the state’s cattle herds and dairy cows.

While slaughter has been the main factor driving herds lower, the rates are now slowing as more ranchers hold back cows to increase breeding. About 31.95 million head of cattle were slaughtered in 2013, down 1.5 percent from 2012, the USDA said in a report Jan. 23. The number of cows slaughtered fell 3 percent from a year earlier, USDA data show.

Beef supplies will keep falling because young heifers aren’t going to the feedlot, said John Nalivka, president of Sterling Marketing Inc., an agricultural economic research and advisory company in Vale, Ore.

“It’s a real ironic situation that most people wouldn’t think about,” Nalivka said. “At the initiation of herd expansion, you actually reduce your production. That means we’re going to have tight beef supplies for the next two to three years.”

(Continued on page 2)

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