Last week the annual Beef Short Course was hosted by Texas Agrilife Extension and Texas A&M's Animal Science Department on the College Station campus, and this time last year the beef industry was hoping that lower prices in past years would be overcome by a stabilization of demand and a short supply of beef that would lead to higher prices for producers.
"One of the key variables we follow is the percentage of cattle placed on feed that are heifers. We're still at a level indicating contraction. We're not even stable yet. We're still placing enough heifers on feed to say we're not keeping enough heifers to stabilize. We're still declining the cow herd."
Brett Stuart is an analyst for a cattle marketing company and says it's not just a Texas drought problem. Heifers aren't being retained as replacement females even in areas with plentiful rainfall and forage.
"When you look at the cost structure, look at feed, look at fertilizer, look at diesel. Look at all these cost structures going in. Have we really gained as much ground as we thought, and maybe that helps explain the lack of expansion."
Even with these historical high prices there are some cattlemen in Texas that will probably still lose money.
"High prices don't drive expansion, high margins drive expansion, and so margins may not be as excessive as we think when we look at prices. Now down in this country where you're in this kind of drought, of course margins are strained, and I don't know what the future holds the next six months. We may see some significant contraction continue. "
Stuart says another key factor to think about with herd expansion is perception.
"A lot of it's perception, and is the perception we had a big run up in prices in 2004. We saw those really high calf prices, and the perception was, I think, anyway, that the perception was this isn't going to last, and so my heifer calves are worth a dollar thirty a hundred weight. I'm not going to retain them because this isn't going to last.
I'm going to sell them. I'll rebuild when this is over. I think if guys look and say, hey, the new base line is going to be calf prices from $1.40 to $1.70 for the next ten years, then I think guys go, hey this is for real, I need to build a cow herd. I don't know if we're there yet."
I'm Ashley Batey, tracing the journey our food makes from the ranch to our tables, From The Ground Up.
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