Texas cattle producers are seeing fewer dollars in their pockets as sale prices drop and the Texas beef herd hits an eight-year high of 4.65 million head.
Beef cattle and calves are the state’s top agricultural commodity and generate sales of more than $10 billion annually in Texas.
Prices for Texas feeder steers averaged $145 per hundredweight, depending on weight and quality, according to the latest data from the U.S. Department of Agriculture. That is about $5 per hundredweight lower than the same time last year and about $33 per hundredweight lower than the five-year average. Prices dipped even further in mid-May and mid-August this year.
Reasons for decline
David Anderson, a Texas A&M AgriLife Extension Service economist in College Station, said multiple factors have caused prices to decline over the past few years while others have caused prices to fluctuate this year.
A fire at a meatpacking plant in Kansas in mid-August is one factor that contributed to lower cattle prices over the past month. The plant had handled 6% of the nation’s fed cattle capacity.
The fire occurred at a time many producers take fall calves to market adding to the bottleneck and oversupply of beef cattle headed to processing, he said.
“We did see an impact on fed-cattle prices and even calf prices,” Anderson said. “That trickles down into wholesale beef prices. I don’t like to use the word panic, but there was some concern about what the loss of that plant would mean, and the market reacted. In my opinion, it overreacted.”
The plant is expected to reopen in early 2020.
Drought is another factor that contributed to prices trending downward. Producers were cutting herds earlier and thinner than usual, and some were shipping calves sooner.
Establishment of wheat pastures could create demand for stockers. But Anderson said cattle prices probably won’t rise to levels experienced in 2014-2015 because the Texas and national cattle herds have recovered since the last major drought.
“We have peaked out when it comes to the U.S. herd, so the price incentive to grow it further isn’t there,” he said. “After the drought of 2011, growth of the herd was a reaction to high prices, but eventually growth lends to lower prices and contraction.”
There is good demand for beef, and feed prices are favorable, however.
Exports continue to be good, but the strength of the dollar has made U.S. beef less competitive compared to other beef-producing nations like Brazil and Australia.
The ongoing trade war with China has had little effect on beef, but Anderson said exports to that nation have been growing.
Consumer niche markets in the U.S. such as plant-based “alternative proteins” have not made a measurable impact on the demand for beef, Anderson said.
Plant-based alternatives have been around for years, and while they provide options for consumers, they make up a very small percentage of the market.
“There is a growing demand for beef and other proteins, whether we’re talking domestic or export markets,” he said. “I think if a producer’s calves are in good shape, and they have good grass and hay stocks, they might hang on to them to see if they catch an uptick in prices. But the days of $230-$300 per hundredweight are over because the herd has been replenished.”