Where’s the Beef? Less of It in Texas
A severe drought in the southern Great Plains is fueling a massive cattle drive north that is pushing beef prices higher and threatening to alter the country’s production of red meat.
Surrounded by parched prairies and dry watering holes, ranchers in Texas and Oklahoma have deeply culled their herds and helped cut the national cattle population to the lowest level in decades. They have found greener pastures in states such as Iowa and Nebraska, but land there is more valuable for corn than cattle, and some owners are hesitant to take on more livestock.
Tim Johnson, who raises cattle in Carpenter, Iowa, bought two dozen pregnant cows from Texas last August in hopes of making $300 to $400 a piece by selling off the calves and their mothers. But recent prices for southern cattle have underwhelmed.
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The question now is whether the move northward is permanent or will reverse once the drought—by most measures the worst since the 1930s Dust Bowl—finally ends. One fear in the beef industry is that cattle supplies will struggle to rebound across the Great Plains, from Texas to the Dakotas, when the rains return, as many ranchers may have exited from the business for good.
Others say ranching is too deeply ingrained in Texas culture and will rebound, as it has after previous droughts.
The combination of a drought that began nearly two years ago and surging demand for red meat world-wide has pushed front-month cattle futures at the Chicago Mercantile Exchange to a series of records over the past year, including an all-time intraday high of $1.26375 in January. Friday, the contract settled at $1.2395. Meatpackers are struggling to turn a profit after spending months competing for scarce supplies, and retail prices for beef hover near records. The U.S. Department of Agriculture expects cattle prices will rise 9% this year after surging more than 20% in 2011.
Running low on water for his cattle, Carl Johnson of Tatum, N.M., just shipped by truck the last of a herd that once numbered more than 1,000 head, effectively closing down a family business started by his father. Rainfall in his part of New Mexico last year was about 60% below average.
The 65-year-old Mr. Johnson isn’t optimistic about southern ranches rebounding. “This is going to be a game-changing deal because guys my age aren’t coming back,” he said.