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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Feedlots find they can't break downward cycle
  • Date: Mon, 24 Aug 2009 12:42:14 -0600


Feedlots find they can't break downward cycle
By BARRY SHLACHTER
FORT WORTH STAR-TELEGRAM
Aug. 23, 2009, 11:05PM
http://www.chron.com/disp/story.mpl/business/6584410.html

Cattle feed yards in the Texas Panhandle and elsewhere have been operating at
a loss for 18 months, and while many would like to sell their sprawling
operations, there are either no buyers or no banks willing to provide
financing, industry observers say.

Easing grain prices have lowered feed costs, but in the recession, consumers
continue to show low interest in beef, punishing the industry, said Don
Close, market director of the Texas Cattle Feeders Association in Amarillo.

Wholesale demand for beef has dropped 9 percent in the last nine months,
compared to the same period the year before, Cattle Fax reported in July.

“We had extremes through the spring of losing $150 on every head,” Close told
the Star-Telegram. “With lower corn costs, the average is now a loss of $50 a
head.”

Remarkably or not, the number of feedlots closing is relatively few — mainly
operators who were too small to efficiently compete, poorly hedged on cattle
futures, or located in fringe areas like New Mexico with higher
transportation costs, said Kevin Good, a market analyst with Cattle Fax, a
news and research service that tracks industry trends.

Good said there are too many feed yards for the number of cattle being
processed by slaughterhouses. He estimated that there may be 20 to 25 percent
overcapacity.

“As a result of losing money, we have people in dire straits,” said Paul
Hicks, a Fort Worth cattleman who works with feeders. “A lot of them are
stuck with a lot of empty pens. A lot of feed yards are for sale —there's a
world of feed yards available right now.”

The major feedlots are under distress, but none has closed, said a regional
broker, who spoke candidly in return for anonymity. He estimated that “easily
20 percent of feed yards are on the market today.”

Feed yards, which mushroomed in the country's grain-producing areas in the
1950s, represent one of the beef industry's three main sectors, along with
packinghouses and cattle raisers, which in turn are broken down into
breeders, cow-calf operators and yearling stocker producers.

Frequently, one of the three is in economic distress, but rarely for this
long, said Jeff Geider, director of Texas Christian University's ranch
management program.

If there is any cause for optimism, TCU's Geider said, it's the belief that
the cyclical nature of the industry means that it will stage a turnaround at
some point — since the country has the lowest calf crop since 1999 and fewest
cattle on feed since 1999.

What cattle producers fear, however, is that the weaker feed yards will be
forced out. While this might create efficiencies, it could also mean greater
consolidation of the industry, which might not work for the rancher's
benefit, he added.





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