Thursday, July 24, 1997

Cattle ranchers restocking effort could lower beef prices

HOUSTON (AP) - Now that meadows are lush again after wet weather broke the 1996 drought, cattle ranchers are restocking their herds, the Texas Journal of the Wall Street Journal reported Wednesday.

As a result, beef prices are skyrocketing. Beef calves are selling for some $40 more per hundredweight than they were a year ago.

Economists say if the rebuilt herds cause a meat glut, that could bring a collapse in beef prices.

"If we don't have a liquidation (of cattle), we'll have tremendous increases in prices in 1997, and in 1998 the first half will be good," said Ernest Davis, a livestock economist at Texas A&M University. "But then those prices will really collapse in the last half of 1998" because of oversupply.

Davis estimated the size of the nation's beef herd this year will total 34.3 million head, 1.8 million more than what is needed to support currently strong prices.

The state ended 1996 with 5.46 million beef cows, down nearly 8 percent from 1995, and some experts fear that anxious ranchers will more than replace what they rid themselves of last year.

During last year's drought, rancher Jamie Donnell of Fowlerton sold 70 percent of his 1,500-head breeding herd and nearly all of his 4,000 stock cattle. Now, he is planning to restore his herd to 2,200 head as feed prices stay low and beef prices stay high.

"I'm not sure if it's the right thing to do," he said. "But people have been making some money here lately."

Rancher Johnny Wales of Mertzon sold a third of his 700-head herd during the drought. Now, he is scouting for 100 new cows.

"We don't pay a whole lot of attention to the market," he says. "We pay attention to the grass, and when we've got it we try and turn it into pounds of beef."

Some farm lenders are turning cautious. South Plains Financial Inc. in Lubbock has granted loans to about 15 ranchers this year, fewer than usual, said chief executive Mike Liner. Most of the loans that were approved were for equipment, not livestock, he said.

"I think our ranch borrowers don't have as big a picture of the industry as the economists have," he says. Ranchers "are just trying to put something back onto that land to make them some money."

No crisis looms because ranchers outside Texas are cutting their herds or holding them steady, said Jim Rob, director of the Livestock Marketing Information Center in Denver.

"It takes several years for things to fundamentally turn," Mr. Rob says.