June 8, 2015
Is Texas Poised to Rebuild Cow Herd?
By David Widmar
In the past several weeks, bleak and persistently dry conditions across the Southern Plains lifted as much needed rain fell. The most recent U.S. Drought Monitor shows only small pockets of abnormally dry conditions across the region; significant improvements from just a month or two ago.
The vastly improved drought conditions have many implications. Recently media attention has focused on the prospects of cattle producers, especially in Texas, rebuilding their herds after the drought’s onset in 2010 forced many to scale back due to limited forage availability. In this post we looked at U.S. cow herd trends and see if Texas producers are poised to rebuild their cow herd?
Cow Herd Trends
The U.S. cow herd has been on a declining trend. In figure 1, the size of the U.S. cow herd is shown declining from 33.6 million in 2000 to a low-point of 29.1 million in 2014. In the most recent data from January 2015, an uptick to 29.7 million was observed.
Since 2010 a sharp decline in the size of the U.S. herd occurred. Overall, a 5.6% reduction in the U.S. was experienced; a contraction of more than 1.7 million head. The size of the national herd has been an important driver of recently strong profitability for cow-calf producers.
Figure 1. U.S. cow herd, millions of head (January 1). 2000-2015. Source: USDA NASS.
Why is Texas Important?
Diving into state-level data, the decline of the U.S. cow herd from 2010 to 2015 takes on an interesting characteristic. Of the more than 1.7 million head decline, the reductions in Texas alone were 960,000 head. This is equivalent to 55.0% of the net U.S. decline. And while Texas has the largest share of the total U.S. herd, 14.1% (2015), the reduction in U.S. herd size came disproportionally from Texas.
Texas Cow Herd and the Drought
To understand how the decline in the cattle herd in Texas relates to drought conditions, figure 2 illustrates the share of the state that was in D2-D4 drought levels (Severe Drought to Exceptional Drought condition) in blue (left axis). In the final months of 2010, the share of the state experiencing strong drought conditions began to quickly intensify. By August 2011, more than 99% of the state was impacted. The scope of the drought in Texas ebbed and flowed but, until recently, kept a tight grip on the state.
The number of cows in Texas is also shown in figure 2 (in orange, right axis). The number of cows in Texas began declining in 2011 and only increased in 2015, as the scope of the drought began to shrink.
Figure 2. Texas cow herd, millions of head (January 1). 2000-2015. Source: USDA NASS. Share of Texas impacted by D2-D4 drought conditions (2000-2015). Source: U.S. Drought Monitor.
Wrapping it up
The trend of a decreasing cow herd in the U.S. has been at work for years. Recently the trend accelerated and has certainly contributed to a period of strong profitability for cow-calf producers. A critical driver for the sector’s profitably in the future will be the size of the cow herd.
An interesting element of the recent decline in the U.S. cow herd has been the disproportionate decline in the Texas herd size. The majority of the U.S. herd decline from 2010 to 2015 came from Texas. The decline in the Texas herd has corresponded with a persistent drought. In 2014, as drought conditions were less severe, an increase in the cow herd size occurred (as measured in January 2015). Texas alone accounted for 44.4% of the net U.S. herd increase from 2014-2015.
Most recently, the drought conditions in Texas have subsided. This sets the stage for a potential rebound in the Texas herd size, as several media stories have pointed out. Should the Texas herd rebound to 2010 levels, the increase would be equal to a 3.2% increase in the entire U.S. herd. When thinking about the profitability of cow-calf producers moving forward, a careful eye on the size of the Texas herd and how they rebuild will be critical.
Photo Source: Flickr/Nicholas A. Tonelli