by Victoria G. Myers, Progressive Farmer Senior Editor
This is a season cattle producers will be telling their grandchildren about one day. It's an open window to what could be historic profit margins and a time to grow back a beef industry that's had more shrink than muscle in recent years.
At Alabama's Dee River Ranch, Mike Dee has this season of opportunity firmly in his sights. The family started laying groundwork last year to expand their Aliceville cattle operation, he said. This year, they're holding onto heifers and backgrounding calves. Mostly, everyone's thanking God for the green grass and praying it lasts. The Dee family is not alone.
Calf prices are at record highs. In a 2014 price outlook, CattleFax senior analyst Kevin Good said 750-pound steers would be up 13{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} to an average of $167.50 per cwt. Smaller, 500-pound steers are projected to be up 13{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} to an average of $193 per cwt. Bred heifers are expected to bring 25{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} more this year, especially where pasture conditions encourage expansion. That would take the average price for a bred female to $1,750.
Rounding out this perfect, blue-sky season are corn prices almost a third below where they were last year, hay prices at an average of $102 per ton (Midwest/Grade 1) and a drought that has eased across much of the country.
HERD STILL DOWN
While greener pastures have sprouted rumors of expansion, most analysts agree the cattle industry is going to have to endure one more year of declining cattle numbers.
This January, the U.S. beef cow herd stood at 29 million head. The total inventory of cattle and calves was 87.7 million head — the lowest since 1951. Good said he expects to see a near 1{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} drop in beef cow numbers again this year. He believes it will be 2015 before the turnaround begins, with projections for a modest 1{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} increase in cow numbers.
In their hearts, however, many cattlemen are already in full expansion mode.
“Last year, we started moving toward expansion,” Dee said. They brought about 170 more acres into permanent pasture and have been crossfencing to get the most out of forages and increase carrying capacity across their 3,000 acres. The commercial operation has been carrying about 1,000 head of Brahman/Angus cross cattle — 750 cows, 60 bulls and the rest heifers.
“We're holding onto heifers and raising our own replacements,” Dee said. “We'd like to add 100 heifers a year. But this season, we'll probably lose 60 mature cows that don't get bred.”
When he says “lose,” he doesn't mean monetarily. Prices are so strong it's a little easier to load up a good cow these days.
Dee has a 75- to 90-day controlled breeding season, and cows that don't breed during that time are sold. Normally, they would end up on the cull line headed to a stockyard, but this year, Dee is putting the bull on the best cows and will sell them bred to cattlemen looking to expand. He estimates in his area bred cows will bring $2,000 and bred heifers around $1,500.
Dee is also holding onto a bigger piece of profits by backgrounding calves on the family's home pastures. He sells truckload lots of these calves directly from the farm as feeders at 750 to 850 pounds.
“We calve in November and December and I can wean them in August. We still have grass then, so I can put weight on them here. That's a little piece we can keep for ourselves.”
COMING BACK IN TEXAS
Once considered the Shangri-la of the cattle business, Texas was hit hard during the recent years of catastrophic drought. Cattle and calves in the state were estimated at 13.3 million head in 2011. By 2014, that number was down to 10.9 million head.
Today, even while many areas of the state are still classified by USDA as “abnormally dry,” ranchers have begun the process of building back what they lost.
King Ranch Vice President and General Manager of Livestock and Wildlife Operations Dave DeLaney said the ranch began this year in much better shape than it has been in for several seasons.
They are restocking based on evaluations by the ranch's natural resources manager. Some native range pastures are being restocked at a capacity as high as 80{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e}, but the focus remains on continued pasture recovery.
No stockers are being brought in this year, allowing the ranch to keep heifers from the commercial fall and spring calving herds and to avoid culling cows. The ranch's cow/calf operation runs the “Santa Cruz,” a hardy composite of Santa Gertrudis and Red Angus well-suited to the area.
King Ranch came through the drought with about 65{0a3336b3da8cf935de4f3eb78fe29508c4b8b5ebd27d01af2d815614325d533e} of their mature cow herd intact. The ranch is rated at 30,000 animal units, DeLaney said. For now, they are working to build their breeding herd back to around 22,000 head.
“We are guardedly optimistic that we will be able to start building back our herd with anywhere-near-average rainfall conditions,” DeLaney added.
Along with the cow herd, he said they are intently focused on wildlife recovery.
“We are stocking cattle in a way to help us continue to build quail and deer populations. We implemented a very conservative harvest rate during the drought, and our wildlife is in an excellent place for recovery,” he said.
The importance of wildlife to the state's economy is key. DeLaney said the return on wildlife is about equal to that of cattle for many operations. A survey by the U.S. Fish and Wildlife Service shows “wildlife-associated recreation” (hunting, fishing, watching) adds more than $5.5 billion to the state's economy.
DeLaney sees profit and growth opportunity for cattle operations across the state.
“Current prices will allow many producers to enjoy a profitable season,” he said. “At normal stocking rates, current cow/calf prices will allow many cattle operations to see historic profits.”
However, many operations completely liquidated their cattle herds and won't be back, DeLaney said. Some of that is due to demographics, such as age of the operator; some is due to the high cost of restocking.
MORE CATTLE OPERATIONS
In this season of opportunity, Alabama's Dee hopes new producers come into America's beef family. He's concerned that cattlemen who have been lost and ground that's been converted to other uses may never come back.
“If you are ever going to get in, now is the time. We've never seen values before like this,” he said. “The cattle business takes an infrastructure to make it work. Here in Alabama, we need a certain volume, and we need producers. Hopefully this market will bring them in.”
It is also a prime time for existing producers to upgrade herd quality, he added.
“When you can sell an open cow for $1,000 or calves for $800, you can afford to invest in better genetics and upgrade your whole herd,” Dee said. “Even if you have a one-bull herd, you can have a phenomenal herd in terms of quality. A lot of folks find the cattle business is fun. It becomes a passion for them.”
Dee added he's optimistic the good times aren't a one- or two-year phenomenon.
“The business cycle for cattle is a long one. It's not like you just go out and find a million more cows one day, it takes time to rebuild,” he explained.
“I believe we've all got a decent year ahead of us, an opportunity to grow and improve. You don't get many of those in a lifetime. You just need to make the most of it when it rolls around.”
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