Rick Machen, who has been part of Texas AgriLife Extension's "Rebuilding the Texas Cow Herd Initiative" across the state, delivered that message to livestock producers in Bastrop and San Antonio, where he said the mood among ranchers is "cautiously optimistic" after more than 700,000 beef cows have left the state in the last two years. That's the bad news. The good news is that beef prices are higher than they have ever been.
"Record high cattle prices and rain around most of the state make for better times," Machen said. "The difference is that we now have global marketplace and a rising middle class in both India and China. There is an ever-increasing need for food, all of which puts additional pressure on the U.S. meat industries."
Along with a decrease in cattle numbers has a come a decrease in the number of community banks, the ones that typically make loans to farmers and ranchers. Machen's numbers show that the number of community banks has declined from more than 14,000 in 1980 to less than 9,000 in 2012. He noted that some banks no longer provide FSA (Farm Service Agency) Guaranteed Loans or FSA Direct Loans. Equity and reporting requirements have also changed and so, in many cases, have the bankers. Today's lenders may understand forward contracting and hedge positions, but they don't always understand the cattle business.
"As banks become increasingly consolidated, the credit needs of small businesses and agriculture could go unmet," Machen said.
Most beef producers that Machen has talked to are taking a "wait and see" attitude toward rebuilding their herds. Mainly, they want to see what happens to their pastures this summer, which means they are waiting to see when and how much it rains this year.
"I don't see the U.S. beef cow herd rebuilding to the all-time high of 41-42 million," Machen said. "The expansion of the Texas herd will be greatly influenced by rainfall. If we remain in the 'drier than normal' pattern predicted by climatologists, I don't expect the cow herd to expand much. If, however, we return to rainfall patterns like we saw from 1960 1990, I would expect to see some expansion."
That's to say that the cow herd won't recover until the forages that feed it recover. "The good natural resource stewards understand it will take the warm season perennial grasses some time to get back on their roots," Machen said. "Forage recovery must be a priority and must stay ahead of demand by livestock and in some cases wildlife."
Machen, who is based in Uvalde, noted that ranchers in far West Texas, the Panhandle and parts of the Rolling Plains didn't enjoy the winter rains that much of the state had and their pastures are a long way from recovery. The high cost of replacement females and bulls will also serve as a deterrent for some people looking to get back in the business.
Will prices remain high enough to justify buying back in? Machen thinks they will
"Barring some unforeseen negative influence, all indicators point to relatively high cattle prices for at least the near future," he said. "But negative influences are potentially only as far away as the next low hanging piece of fruit. LFTB (lean finely textured beef) is a great example. The industry was doing the right thing in a safe, wholesome manner and yet the media turned lean beef into 'pink slime.'"
Despite some bad press and some really terrible weather, Machen believes the changing times will eventually work to the livestock producer's benefit.
"The future has seldom been brighter for beef production in Texas or in the U.S., for that matter," he said. "Is the future without challenges? Absolutely not. Because we now live in a global economy and marketplace, we will see even more market volatility. Consequently, risk management-both financial and production - will be more important for beef producers than in it ever has been."
One thing that is not new or different is this: a lot of what happens or doesn't happen will depend on the weather. Machen believes it will take time for pastures to regain their vigor and for water reservoirs to be replenished but it will happen.
"Mother Nature is very resilient," he said. "She recovered from the drought of the 50s and will recover from 2011."
