Record Drought in Texas Could Mean Lower Beef Prices

"Pray for rain."

Wherever you go in the Lone Star State, people ask you to seek help from a Higher Power. Mother Nature has been messin' with Texas.

BERLIN - JULY 31: Cuts of beef and pork lie in a display counter at a supermarket July 30, 2007 in Berlin, Germany. According to media reports July 31, 2007 Gerd Sonnleitner, head of the German Farmers' Association, has called for a nationwide rise in prices of meat, especially beef and pork, and is predicting an overall rise in the price of groceries in Germany. Milk and dairy products prices in Germany have already risen in recent days by as much as 50 percent. (Photo by Sean Gallup/Getty Imag
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That could be good news for meat-eating consumers.

"Texans are facing the worst single year of drought on record, the worst cash losses on record, and we're facing the worst wildfire season in the history of the Lone Star State," says Texas Agriculture Commissioner Todd Staples. Agriculture losses top $5 billion, with livestock getting hurt the worst.

With the grass withered away, ranchers are paying top dollar to truck in hay from other states. In some cases, they determine it's not worth it, so they're sending cows to the slaughterhouse early—mostly females which are turned into hamburger. Even as hamburger prices have risen at the grocery store 13 percent in the last year, the USDA said Friday: "Retail beef prices could decline into fall and winter...especially in light of the potential for increasing supplies of beef."

Phil Sadler runs a cattle operation in Wood County, about 75 miles east of Dallas. Last spring he had 650 head. Now he's down to 400, and he may get rid of even more cows. Sadler's being paid less for his cattle, while it's costing more to feed them. "This time last year, our feed costs were probably half of what we're having to pay now," he said.

Even though a glut of beef coming to the market could help consumer prices now, the concern is that next year hamburger prices may rise after so many cows are taken out of the system.

However, Derrell Peel of Oklahoma State University says the thinning of the herd in Texas is being made up in part by expanding herds in other regions. Drovers CattleNetwork reports Peel saying that, in fact, some of the cows leaving Texas are not being slaughtered, but sold to ranchers in other states. "The availability of heifers and breeding cows from drought-ravaged areas may help accelerate the herd expansion already in place in northern regions of the United States."

This could mean the price swings at the grocery store will be more muted. Wyoming cattle rancher Brett Crosby says USDA data show less than half of what consumers pay for beef at the grocery store—46 percent—is based on the rancher's cost. Not only that, Americans spend only 6.4 percent of household expenditures on food, much less than anyone else (the U.K. is second at 9.7 percent). "Of all the things to be worried about in America, food should be close to the bottom of the list," Crosby says.

It may be at the bottom of the list for most Americans, but surviving the worst drought on record is at the top of rancher Sadler's list. He does not have insurance to cover his losses this year. Walking on rangeland so dry it sounds like crackers, Sadler says, "The East Coast has gotten more rain than they can say grace over. We'd be tickled to death if we were to get a rain once in a while."

Scattered rain did finally fall across parts of Texas by the end of the week, but the damage is done. Some forecasters believe the drought could stretch into 2012. "Hay is a scarce commodity in Texas right now," says Commissioner Staples. "If you have some, I'd keep it under lock and key and keep your shotgun ready."