Drought Re-shaping the Cattle Map

Drought is reshaping the beef map and raising the price of steak. Ranchers are moving herds from California to Colorado and from Texas to Nebraska seeking refuge from dry weather. And cattle producers in the Midwest are making the most of it.

The U.S. may be on the front end of a significant geographic shakeout of the beef industry. Herd numbers have been sliding nationwide for more than a decade. Now, as drought grips major beef and dairy producing areas, a cattle migration is emerging and it’s altering where cattle are raised, fed, and slaughtered.

Drought devastating cattle herds

Prime cattle producing areas can’t hold the same number of animals without adequate supplies of feed and water. Oklahoma State University livestock marketing specialist Derrell Peel says ponds and pastures are drying up across large parts of Oklahoma and Texas.

“Western Oklahoma -- the panhandle, the panhandle of Texas, and, in fact, much of West Texas and much of western New Mexico are still in extremely severe drought,” Peel said. “There’s been very little relief really since the fall of 2010.”

Texas, the country’s leading beef state, lost 24 percent of its total beef herd from 2010 to 2014. Oklahoma saw a 13 percent cut. As a result of shrinking herds, some feedlots and even a meat-packing plant have closed.

A packing plant also closed in Southern California earlier this year, where more than 80 percent the state is currently experiencing extreme drought (as of August 7). Hay and alfalfa are expensive and in short supply for feeding cattle. For the time being, dairy producers appear to be absorbing the increased costs, but beef ranchers are having a harder time managing the expense.

Many ranchers have cut beef herds in half in the northern Sierra foothills where Jeremy James is director of a University of California agriculture and natural resources research center.

“But if you go farther south in San Luis Obispo County, Santa Barbara, ranchers have culled basically their entire herd or 80 to 90 percent of their herd,” James said. “They’ve received some of the lowest rainfall over the last three years of almost anywhere on the coastal range of California.”

Smallest herd in decades

“The drought the last three years has been the last straw,” said Oklahoma State’s Derrell Peel. The U.S. beef herd has fallen by 1.8 million head, or 6 percent, since 2011. But it comes after years of overall decline in cattle numbers.

“The U.S. beef cow herd has been downsizing for 16 of the last 18 years,” Peel said.

In fact, national herd numbers are the smallest they’ve been since the 1950s. That’s why shoppers are paying more than ever for beef at the grocery store. Beef prices are up 10 percent in the last 12 months.

But not all beef states are experiencing equal declines. Northern states like Montana, Nebraska, Iowa, and the Dakotas have held steady or have even seen some growth in their cattle herds, even though many pastures have been plowed up to raise corn.

Following the feed

Many of those cattle have moved to Midwestern feedlots. This year, for the first time, Nebraska passed Texas as the top cattle-feeding state in the country. That is, Nebraska houses the most cattle in feedlots, which are generally the final step before they head to the slaughterhouse.

The main reason is a difference in feed prices. Feed costs are up in Texas, stoked by drought. But they’re relatively low in the Midwest, thanks to a byproduct of the region’s large ethanol industry -- distillers’ grains.

Distillers’ grains are the leftovers of corn ethanol production. Nebraska is second in the country in ethanol production, behind Iowa. When the starch is removed from the corn kernel to be fermented into fuel, the protein-rich fiber is left behind. But it can be used as an inexpensive ingredient in livestock feed.

Cattle feeder Terry Van Housen calls Nebraska the “garden spot for raising cattle.” At his feedlot near the small town of Stromsburg, 8,000 animals line up along two miles of concrete bunks to pile on the pounds. He has replaced 30 percent of his regular feed ration with distillers’ grains, the corn ethanol byproduct.

Van Housen gets the moist, yellow, sweet-smelling stuff fresh from an ethanol plant just 18 miles away. He says the cheap source of feed gives Midwestern feeders an edge over southern competitors.

“So that’s a big deal,” Van Housen says. “A lot of this stuff, if you fed in Texas, it would have to come from here.”

And as Van Housen says, it’s cheaper to haul the cattle to the feed than haul the feed to the cattle.

Waiting for rain

Rebuilding herds in the areas of cattle country hit hardest by drought could take years, and that’s only once the grass is green again. For now, ranchers in Texas and California are watching and waiting for rain. Jeremy James of the University of California says producers want to see what will happen this fall.

“That will tip the scale in either a good or bad trajectory,” James said. “If we had a fourth year of drought here, it would probably tax most of these ag systems beyond any sort of reasonable capacity.”

When rain does come, cattle will return to the areas where they were forced out by drought. The question is how many? Those ranchers will be competing with areas that have gained from their climatic misfortune. And wherever those cattle start, when it’s time for them to bulk up before slaughter, states like Nebraska, with easy access to cheap feed, are likely to attract a larger share of the market.