Tough times in Texas
August 28, 2009
As the discouraging economic climate continues to wreak havoc throughout the meat complex, conditions seem to be especially vengeful in Texas. In particular, cattle feedlots in the state are enduring, in the words of Don Close, market director for the Texas Cattle Feeder’s Association, "as difficult a period over the past 18 months as they’ve ever had."
Among the approximately 150-200 feedlots operating at any given time in Texas, it’s the mid-tier lots, with 20,000-30,000 head on feed, that seem to be bearing the brunt of the punishment. Smaller lots tend to be operated by family members, noted TCFA, so labor costs aren’t as high, and the largest lots still have an economy of scale working in their favor.
Rumors are beginning to circulate that the cattle business might actually make a little money before the end of the year, however. Feed and other input costs have gone down, and fuel has remained relatively steady. A return to profitability from a period when feeders lost $50-$150 per head would be good news not just for the industry for also for Texas bankers, who have pulled back on financing the cattle industry due to the losses. According to several media reports, as banks have backed away an increasing number of feedlots in the state have gone up for sale – one cattleman estimated that 20% of the lots in Texas are now on the market.
If an improvement in the U.S. and global economy doesn’t spur a turnaround for Texas cattlemen, perhaps a continuing drop in numbers might. This year’s calf crop was the smallest since 1999, and presently there are the fewest cattle on feed in 10 years.
"It has been a cyclical industry since the beginning of time and will continue to be," Close told MEATPOULTRY.com. "That said, there’s excess capacity in feedyards and with the packers right now, and when we come out of this thing there will need to be some reductions in that capacity."