Beef prices are high but Texas ranchers deserve a break

“So, you want to be a cow man?” This was the question posed to me by LC Young, prominent rancher and large stocker operator. At the tender age of 17, I had been nervously sitting in a small chair across from a seasoned loan officer (in a taller chair) requesting money for my first cattle loan. I had experience in procuring and showing individual animals for livestock shows, but this was my first commercial venture.

The loan officer had corralled Young, who was there taking care of banking business, to provide me with some sage advice before I partnered with the bank in the risky world of cattle buying. This was 1973 in my hometown of Graham. My inaugural purchase of 20 steers was meager by Texas standards, but the biggest investment of my early life.

Young’s advice: Ranching isn’t for the faint of heart.

Even in a business known for unpredictability, 1973 was extreme. Due to high prices, a national meat boycott was staged in early April. President Richard Nixon even toyed with price controls. It was not long before the market over-adjusted, prices spun downward and some ranchers went broke. My initial investment lost money, but nothing like that experienced by those with large numbers of cattle.

Beef, unlike other major protein industries (pork, poultry, milk) is still dependent on vast amounts of rangeland, most of it unsuitable for industrial-scale farming. Even cattle finished on grain in feedlots spend 65% to 85% of their lives grazing. Beef is not fully integrated like poultry and pork for one simple reason: Land is too expensive for corporate agriculture to own.

Increasing land costs — along with insurance premiums, property taxes, ever more expensive machinery, feed prices and labor costs – keep margins slim. Labor shortages have never been more acute, and that is largely due to immigration policies.

Most beef cattle producers have second jobs that allow them to continue enjoying the life they love, despite consistently low profitability. Of over 800,000 cattle operations in the U.S., about 90% have herds smaller than 100 cows. Less than 0.5% of cow/calf producers own more than 500 cows. Leading ag economists have suggested it takes over 500 cows to support a family most years, even with non-ranch income. In the worst years, affected by drought, wildfires and low markets, there is no profit regardless of herd size.

Since that meeting with LC Young, I have been active in the cattle business for almost 50 years. In 2014 and early 2015, I sold bred heifers at an all-time high, making more money from cattle than I ever had. My profits were soon returned, however, following a crash in the market in late 2015 where I lost as much money as I made the previous year.