Texas cattle herd hits 8-year high; will prices suffer?

Plenty of Texas stereotypes are overblown, but the prevalence of cattle isn’t one of them.

The state's herd of beef cattle — already the largest in the country — recently surpassed 4.6 million head, the most in eight years, as ranchers have worked to replenish stocks thinned significantly during the historic drought from 2010 through 2014.

The rebound has benefited rural communities across Texas, supporting jobs and pumping money into the pockets of producers who raise cattle and feedlot operators who fatten them up. Beef cattle and calves generate sales of more than $10 billion annually and constitute the state's top agricultural commodity, according to Texas A&M Agrilife Research, easily eclipsing dairy and cotton, which are next in line with slightly more than $2 billion each in annual sales.

But the expansion of the herd has been shadowed lately by another trend — concerns about pricing. Some ranchers and industry experts say the amount of cattle in the state might be near a peak and could level off or start slipping again after five consecutive years of gains.

“We can make money here, but it's not a windfall," said Jay Evans, who manages ranches in the Panhandle and also serves as a board member of the Texas and Southwestern Cattle Raisers Association. "For long-term health (of the industry), it wouldn't hurt if those (cattle) numbers backed up a little bit."

Others view recent uneven market conditions in the industry as merely par for the course.

"It's like the stock market or any kind of market — it has its ups and downs (and) you can sure lose your pants," said Craig Archer, a partner in Martindale-based C&H Cattle Co., which buys and sells cattle for feedlots and ranches.

The price of cows culled from herds — generally older animals no longer able to have calves — has declined significantly, hitting an average of about $47 per 100 pounds in December, the lowest December price in nearly a decade, according to figures from the Oklahoma National Stockyards, a major national cattle exchange and a benchmark for auctions across Texas and the Southern Plains. Prices, which generally rise through the spring, had climbed to an average of $55 per 100 pounds by early last month, but that's still down from $61 in the same week of 2018 and well below a high near $127 in August 2014 amid the waning days of the drought.

Other categories of the livestock, such as calves and young cattle fattened at feedlots, make up much greater portions of revenue for most ranchers than do culled cows and have held up relatively well in terms of pricing, buoyed by strong consumer demand for prime cuts of beef.

But David Anderson, a Texas A&M agricultural economist, said he still considers the size of the state's cattle herd to be at a "tipping point" if overall pricing doesn't improve.

"The prices at these levels (will) get people to start to think about" either trimming their stocks or not adding to them, Anderson said. "Even if the calf market is OK, with really low cow prices it just kind of drags down" an entire ranching operation.

Unfortunately for lovers of steaks and hamburgers, the expanding herd size hasn't translated into recent declines in retail prices for some popular categories of beef. The retail price of ground beef, much of which comes from older cows culled from herds, averaged $3.76 a pound nationwide last month, according to the U.S. Department of Agriculture, while choice sirloin steak averaged $8.53 a pound — with both figures up about 3 percent from a year ago.

“The price of beef at the grocery story or at (restaurants) is not directly related to the price of cows," said Russell Woodward, a senior manager at the Texas Beef Council, a trade group.

Woodward said retail prices fluctuate according to factors such as U.S. and international demand, the popularity of specific cuts and "what the consumer is willing to pay." Overall, consumer demand for beef — and thus retail pricing — has been solid because "people are recognizing that protein is an important part of their diet," he said.

In addition, the size of the Texas herd still remains about 10 percent below its pre-drought level of about 5.15 million animals despite the recent gains. The herd shrunk by nearly a quarter — or by 1.2 million — from 2010 through 2014, according to the Agriculture Department, as the severe, multiyear drought sapped pastures of forage and water, drove up feed costs and prompted ranchers to thin their stocks severely.

Anderson said it will be difficult to regain all of that lost ground. He cited a number of factors unrelated to recent pricing trends, such as encroachment of urban areas upon ranch land, heightened caution among ranchers in the aftermath of the drought and improvements in animal husbandry that enable greater beef production with fewer cattle.

But he also noted that U.S. beef output has been climbing overall and could approach a record this year, potentially capping near-term prices for cattle and stemming what has been the steady growth of the Texas herd in the five years since the drought.

Beef cattle nationwide recently topped 31.7 million head — the most since 2009. Oklahoma, with about 2.15 million, and Missouri, with about 2.06 million, are second and third behind Texas as the top U.S. producers.

"With bigger supplies (of cattle) kind of comes lower prices" for them, Anderson said. "We are getting pretty close to probably a peak in the growth of the herd."

Still, the precise timing of when that peak will be reached is dependent on hundreds of decisions by individual ranchers across the state, who weigh multiple variables annually — including conditions of their pastures, feed costs, weather expectations and, yes, prices — to set the sizes of their herds.

"The biggest decision every year is the stocking rate," said Evans, of the cattle raisers association. "That is determined by range conditions, and then market conditions."

For Ralph Reinhardt, who has about 50 head of cattle near Elroy in southeastern Travis County, such calculations are still pointing to growth, with his pastures in good shape and his weather outlook positive. He's aiming to increase his herd to about 75 over the next few years, after culling it to about 25 during the drought.

As for the market, Reinhardt said he recently sold some male calves and was pleased with the prices. While he hasn't sold any cows, he said he's heard recent pricing for them has been solid as well.

"Some people may say it's not, but I think the pricing is good," Reinhardt said. "It's probably going to hold unless it gets real dry, and I don't foresee that happening."