A third year of drought in Texas, the biggest U.S. cattle producer, is leaving the national herd at a six-decade low and Tyson Foods Inc. (TSN) (TSN) and Cargill Inc. fighting to boost margins amid excess slaughterhouse capacity.
Almost half the pastures in Texas are in poor or very poor shape because of hot, dry weather, according to the Department of Agriculture. With more than three years of rising feed costs, farmers have had less incentive to maintain herd size. The slaughter of commercial cows during the first half may be the largest for that period since 1996, the USDA said June 18.
“In the near term, the situation is still grim,” Nathan Kauffman, an agricultural economist for the Omaha branch of the Federal Reserve Bank of Kansas City, said in an interview on July 2. “There is a lack of grazing pasture land.”
The plight of cattle farmers in the Southwest is in stark contrast to the Midwest grain belt, where heavy rains are helping corn and hog output rebound from a drought last year that was the worst since the 1930s. Cargill closed a Texas beef-processing plant five months ago and there’s a risk another U.S. facility may shut somewhere in the U.S.
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