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Texas Ranchers and Land Investors Look North

The Chicago Tribune reports the worst drought in a century, increased input costs and oil money have combined to drive the increased demand for grasslands in Nebraska’s Sandhills and points north.

Drought forces Texas cattle north

Limited grazing space, competition, infections creating tensions

By P.J. Huffstutter and Theopolis Waters, Reuters

February 3, 2012

For more than a century, through a dozen dry spells when lakes disappeared and the land died, thousands of cows from the Swenson Land & Cattle Co. have roamed the fields of Texas.

Yet the drought ravaging the southern Plains has done what the Dust Bowl could not: chased them off this land and driven them more than 600 miles north to Nebraska.

Now, as the worst drought in a century stretches into its second year, these ranchers and many of their peers are herding their animals in record numbers to the Cornhusker State and other points north, in search of grazing land that is not parched — a shift that is fueling a dramatic economic and cultural reshaping of the U.S. livestock industry.

“If we’re going to survive, we have to go north,” says Dennis Braden, general manager of Swenson in Stamford, Texas, about 170 miles west of Dallas. “We have to go.”

Though some Texas ranchers hang on, selling off their stock at an unprecedented pace that has reduced America’s cattle herd to the smallest in 60 years, many are carving new homesteads out of some of the richest grassland in North America, a bid for survival that falls somewhere between surrender and hope.

In cattle-car convoys that wind along routes cowboys used in the 1800s, this migration is also a stark illustration of the myriad threats facing the world’s future food supply: intense competition for land; increasing demands on limited water resources; and the growing threat of volatile weather.

The size and speed of the shrinkage in the U.S. cattle herd has left the industry reeling. As the national cattle and calf inventory fell 2 percent from a year ago to its smallest since 1952, the herd in Texas dropped 11 percent, or 1.4 million head — the biggest decline in nearly 150 years of recorded data.

But Nebraska’s herd increased 4 percent, or 250,000 head, in the year to Jan. 1 — the most of any state — placing it ahead of Kansas as the country’s second-largest cattle producer, according to the Department of Agriculture’s biannual survey released in January.

Today, 7.1 percent of the country’s cattle is in Nebraska — the state’s largest share of the national herd since the federal government began collecting data in 1867. At 13 percent, Texas now has the smallest share since 1986.

The shrinking supply has extended a two-year rally in Chicago futures prices, raising costs for companies like Tyson Foods Inc. and McDonald’s Corp. Retail prices are up 20 percent since 2009, with choice beef topping $5 per pound for the first time ever in November, USDA data show. But slack demand and soaring feed costs have kept margins tight.

It seems set to get worse before it gets better.

Though Nebraska offered solace for a first wave of bovine refugees, space is running out, forcing some even further north or west to less hospitable climes; virulent diseases could, if left unchecked, devastate local stock — a threat that has prompted officials to quarantine dozens of herds.

Local tensions already are apparent. Some worry about the potential strain on the environment. Others fret over old rivalries being revived with crop farmers — as well as land-hungry Southern cattlemen and investors — that would further drive up record-high farmland values at rural auctions.

“People worry we’re going to see a lot of big Texas cattle and oil money up here,” said Gary Phipps, a fifth-generation rancher who took in several hundred Texas cattle on his family’s spread in Cherry County, Neb. Land prices already are going up, Phipps said. “Is it going to get worse?”

Texas star dims

This great northern migration is troubling, too, for ranchers and packers in Texas, long the nation’s leading cattle producer. But the need for the cattle to leave, even if only temporarily for some, is inescapable.

The drought has been keenly felt across a wide swath of the South, as five consecutively dry seasons were exacerbated by weeks of triple-digit temperatures and raging wildfires. On land where cattle once ate their fill of native grasses, ranchers fed their heifers cotton gin trash — an agricultural byproduct — hamburger buns and day-old bread as feed supplies disappeared.

Even before the Texas state climatologist warned in September that these dry conditions could last until 2020, a group of managers from a dozen large Texas cattle operations met to talk about how to deal with the drought.

Swenson Land & Cattle’s Braden and Joe Leathers, general manager of the Four Sixes Ranch, agreed to travel north.

“We had a couple names and a lot of hope, and that was about it,” said Leathers, who is based in Guthrie, Texas, a ranching community about 200 miles west of Dallas.

After two weeks, and driving thousands of miles of country roads and dirt lanes, the men pieced together enough land in Nebraska and four other states — a patchwork of leases, ranging from a year to five years — for more than 11,000 cows.

This January, both men returned to Nebraska on their own, hunting for more land.

“If we can find enough land, and the right leases, we’ll stay there for generations,” said Leathers.

Leathers doesn’t want to leave, nor do the 75 employees he oversees — families with two and three generations working side by side. But they must adapt to the changes in weather patterns across the U.S. and worldwide, he said. The solution: multiple locations to allow trucking the herd to better climes.

There is much to be said for Nebraska’s rangeland, and its share of the U.S. herd has risen over the last decade.

Weather patterns have shifted in recent years, allowing the sandy soil of Nebraska’s Sandhills to enjoy more rainfall.

In Cherry County, Neb., where some ranchers are sitting on a three-year stockpile of hay and wild grass, the annual precipitation has averaged 30.44 inches in the last three years — up nearly 300 percent from the state’s drought of 2002, said Al Dutcher, state climatologist with the University of Nebraska at Lincoln.

Though ranchers are being steadily driven out of places like Iowa, where cattle and crops battle for the same fertile ground, Nebraska’s richest cattle-grazing country — the Sandhills — makes for relatively poor soil for corn, limiting competition from farmers, say agricultural economists and agrarians.

Above all the area boasts abundant hay, which has been in such short supply that the price has quadrupled.

So why not, reasoned Leathers, spend the money moving the cattle to the feed and water — rather than moving the resources to the cattle?

Sanctuary lost?

The desperate drive north is only the latest blow for an industry that has been in distress for much of the last decade.

Producers nationwide have been squeezed by the surge in corn prices as ethanol makers buy up more than 40 percent of the crop. The decline in beef demand has deepened after the economic meltdown of 2008 and the first case of mad cow disease in 2003, pulling per-capita consumption down 25 percent since 1980.

Record export sales and the shrinking herd have helped drive benchmark Chicago live cattle prices up 45 percent over the last two years, but that’s cold comfort for feed lot owners looking at the 80 percent rise in corn prices.

The migration risks piling on costs for ranchers too.

Though the Nebraska winter has been relatively mild so far, the temperatures out in the fields are still lower than they are in much of Texas. The typically colder weather means cattle need more feed to keep on their weight through the winter.

And competition for land, along with prices, is expected to grow as more out-of-state ranchers and investors vie for grazing land, say rural real estate agents.

Rangeland sale prices in central and western Nebraska, a state that saw a more than 40 percent jump in the third quarter last year, have edged up another 25 percent since last summer, said Lee Vermeer, vice president of real estate operations for Farmers National Co., based in Omaha, Neb. Land rents, too, have grown by as much as 30 percent in recent months.

Some animals have suffered on the up to 1,000-mile journey.

Phipps, the Nebraska rancher, said he agreed last summer to lease part of his land and care for 316 animals owned by a Montana investor whose cattle were in Texas.

When the delivery trucks arrived, there were 450 animals — many of the extras young calves too weak to move. A few of the cows had given birth in the trucks while they were being transported. “Those calves, they didn’t make it,” Phipps said.

The animals, thin from lack of feed, wouldn’t gain weight. Though the paperwork Phipps received from the owner showed the animals were clear of any diseases, he soon realized many of them had worms.

Nebraska agriculture officials, concerned about the spread of bovine diseases that can cause infertility and abortions in cows and heifers, have quarantined more than 70 herds from the south whose owners failed to send the proper health certificates and animal identification data.

The U.S. Department of Agriculture said it has launched an inquiry into the matter. State officials have forced some of the cows to be sent to slaughter, for fear of the unknown.

But perhaps the most immediate threat is, simply, that prime grazing land is running out.

“I got three calls this morning. I told them, ‘I don’t know where I’d put one more head right now,'” said Galen Sherman, a rancher who is leasing space to a Texas rancher for 400 cows.

Even the Sandhills Cattle Association, which acts as a kind of broker to match ranchers with extra grass or feed with those in need, can’t help, manager Ronna Morse said.

“We have 46 requests for pasture for summer grazing 2012, and no listings of pasture available,” Morse said.

Copyright © 2012, Reuters

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