Ranchers cautiously optimistic
about spike in beef prices

By María Eugenia Guerra

"Every once in a while we get lucky," said Hebbronville rancher Robert Fullbright of the Hinnant and Fullbright Plan de Mirando Ranch in northeast Zapata County, speaking of the excellent price that beef cattle command in the market today. "Some incredible factors have come together all at once to make beef cattle prices this strong. Only good things are happening right now. It's so good that it scares me," Fullbright said, adding, "It is our nature to be cautious. You have to be to survive in Zapata County. We live on a desert punctuated by infrequent bursts of rain, and we have been in drought since 1982."
According to Fullbright, a steady decline in the number of mother cows over the last 10 or 15 years has had bearing on cattle prices. "Fewer mother cows, fewer calves in the market. This is attributable to older folks selling out because their kids don't want to ranch like they did. You also had people selling out herds on account of the drought," Fullbright continued.
"The popularity of healthy, high protein diets is also having a very positive effect on the demand for beef cattle. The truth is finally out -- beef is really good for you. It's beneficial and high in iron," he said.
"What it comes down to is supply and demand. The numbers just aren't out there for beef cattle. If I'd been awake and seen the rise in prices coming, I'd have filled every feed lot I could find," Fullbright said, adding, "I do all my cattle feeding at a lot. I maintain ownership of ranch cattle that I raise right up to the packing house doors. That's how we've done it for the last 60 years. Six months ago the prices weren't this good, and we did not dream they could go this high. Futures have been chasing cash, which is not the way it usually is."
The ban on importing Canadian cattle after a May 2003 outbreak of mad cow disease was a minor footnote to the spike in cattle prices, Fullbright asserted.
"Something I keep considering while I enjoy this good price, wonderful range conditions, and all the other pluses is that the value of a dollar is relative to what it can buy today," Fullbright said, adding, "I remind myself that back in the 50s when the price was good, I could buy a no-frills ranch pickup for just under $1,500. That same no-frills pickup is going to cost me $20,000 today. Corn is selling for less than it did in 1950, but everything else has gone up. What a dollar would buy then, it won't buy now."
He said he is cautiously optimistic that the price will hold. "That would be a blessing especially for those who have been in such marginal shape through this drought. There are many farmers and ranchers in need of some good years to pay off debt and to be able to hold onto their ranches," Fullbright said.
Zapata International Bank of Commerce president Renato Ramirez, a rancher himself, concurs that the price will likely hold. "Prices will probably stay high until the next recession, hopefully more than four years away. There is prosperity in our economy. All economic indicators appear to show that the economy is in gear and will have the normal 36 to 45 month economic boom which characterized the economy cycle since the 1907 recession," Ramirez said.
According to Ramirez, rain and the ensuing growth of pasture grasses have been major factors in the rise of cattle prices. "The past 18 months have been the wettest months of any period in my recollection. Places such as Encinal have received as much as 12 feet of water, over 120 inches, when the annual average is closer to 18 inches."
Ramirez said that the trend to convert ranches to recreational use has also had an impact on prices. "The cattle business has been so bad and recreational use of land has been so profitable in the past few years that many ranchers have abandoned the cattle business. I can count 100,000 acres in this area on which not one head of cattle graze. The cattle business is so labor intensive and profit margins so thin that reserving the land for wildlife can be far more profitable. As an example, deer hunting in a 4,000-acre tract will generate $50,000 in rental while quail and dove may generate another $20,000. That same tract will carry 150 head of cattle which will make $25,000 or grazing rental of $20,000. And while cattle and wildlife can co-exist, the carrying numbers diminish if both are present.
"That said," Ramirez continued, "Current cattle prices are extremely good. When you combine the abundance of grass and low cost feed to very high prices, ranchers -- like the Walkers, the Rathmells, Dodiers, Leonel Gonzalez, and Benjamin Alexander -- who have stuck it out, they are turning profits. While in the past, they used to sell calves for as low as $60 per head, those same calves are currently selling for $550 to $600 per head. Even small operators are making healthy profits," Ramirez said.
It is those small operators who are the backbone of the cattle industry, according to USDA Extension Agent George Gonzalez. "Over 80 percent of the cattle in the state of Texas are owned by small ranchers who manage herds of 50 mother cows or less; 10 to 15 percent of the cattle in the state are owned by large landowners," Gonzalez said.
"The shift to wildlife management versus cattle, limited surface water supplies, drought, increased beef consumption -- beef is what's for breakfast now -- and the statewide trend that shows we have been lowering cattle numbers -- 5,600 head per year in Webb County -- all drive the market. Our economists in the extension service are predicting the trend will hold well into next spring," Gonzalez said.
"In my lifetime I've seen two of these periods where cattle prices were this good," said rancher Gene Walker. "There was one other time in the 50s when it was good like this," he recalled. Walker ranches in Webb and Zapata counties and also in Culberson, Jeff Davis, and Presidio counties in West Texas as well as in the state of Chihuahua in Northern Mexico.
It is the Walkers' Barrel Springs Ranch in West Texas that is seeing activity as a result of a strong market. "Our cattle are bought by feed lot operators, people we've done business with over the years, people who know the quality of our stock. They are buying more and we are selling everything that's sellable. We are raising very few. We'll restock later when they get cheap again. And that will happen. You can count on it," Walker said.
"The rain certainly has something to do with the excellent prices we are seeing," Walker said, adding, "The demand shot up as soon as there was something to eat. Cattle are scarce just now because during the severe drought, which we have been in for the last few years, many ranchers sold their herds, and in the case of the weekend ranchers, a lot of them lost their herds or stopped producing. That made a big hole in the market," he said.
"This is a fair price because it's been so bad so long," Walker said, noting cautiously, "We ranchers have everything going for us at this time. That corn and grain are relatively cheap, we stand a chance for profitability," he said.
Walker said he is letting Wild Horse Ranch, his other West Texas operation, "take a rest" in preparation for buying more cattle. "We are needing to buy. We are dealing a lot in steers, hundreds and thousands. We are buying Mexican cattle all over northern Chihuahua and Sinaloa. This is a big boom," he acknowledged.
Just as Walker has given Wild Horse Ranch a pause, Ramirez has let his Zapata County ranch lie fallow. "I will probably get back in the cattle business in the Spring 2004 when I have re-claimed my land and have a good stand of grass," Ramirez said, adding, "My operation has gone into a period of re-stocking grasses. One has to be a good grass farmer before he is a cattle rancher. If current prices persist, one can still make a decent profit with adequate rain."
Ramirez said that small operators should be careful not to overstock. "A drought can wipe out the gains made from the current run of high prices. Run a herd that the number of acres can sustain for the long run and you will make abnormally high profits," he said.
Fullbright said, "The replacement cycle has already started. People are keeping more and more heifers to put back into their herds. Those who are judicious in their stocking rates will be able to reap some benefits."
Asked if the rise in cattle prices had affected his ranch supply business, rancher David Martinez of Laredo Implement Co. said, "I can tell you they are not buying feed. They are spending it on fences and on keeping their herds healthy."
Jorge Mendoza of Laredo Ranch Supply said, "They are investing in the health of their herds by buying vaccine and de-worming medications. They are buying equipment and they are investing in their hunting operations."
Encinal rancher George C. Krueger considers pasture conditions "better than they have ever been" over the 27 years he has run cattle on the Krueger Ranch. "I was fortunate to be way understocked, so I have benefited far more than I would have from the rains," he said of the late summer and fall storms that poured 37 inches of moisture on the iron-rich red earth of his land.
Krueger said that the drought that continues in other parts of the country, coupled with ranchlands going the way of recreational lands, continues to put pressure on the beef cattle market. "Mix in the need created by people wanting to eat a high protein Atkins diet, and you've got demand," he said.
Krueger raises Braunvieh cattle. "Prices are relatively high, but only relative to what they have been, which is a way of saying how miserable they have been in the past," Krueger said. "I make no apologies for making a decent price today which only begins to compensate for all the years in this business that have been marginal at best," Krueger continued, adding, "Predictions are favorable for the next several years.
"Over decades the cost of everything -- insurance, utilities, fuel -- has gone up, except the price of what we sell," Krueger said. "I can't really say we are getting ahead. We are where we should have been years ago."