Feedlots find they can't break downward cycle

Cattle feed yards in the Texas Panhandle and elsewhere have been operating at a loss for 18 months, and while many would like to sell their sprawling operations, there are either no buyers or no banks willing to provide financing, industry observers say. Easing grain prices have lowered feed costs, but in the recession, consumers continue to show low interest in beef, punishing the industry, said Don Close, market director of the Texas Cattle Feeders Association in Amarillo. Wholesale demand for beef has dropped 9 percent in the last nine months, compared to the same period the year before, Cattle Fax reported in July. “We had extremes through the spring of losing $150 on every head,” Close told the Star-Telegram. “With lower corn costs, the average is now a loss of $50 a head.” Remarkably or not, the number of feedlots closing is relatively few — mainly operators who were too small to efficiently compete, poorly hedged on cattle futures, or located in fringe areas like New Mexico with higher transportation costs, said Kevin Good, a market analyst with Cattle Fax, a news and research service that tracks industry trends. Good said there are too many feed yards for the number of cattle being processed by slaughterhouses. He estimated that there may be 20 to 25 percent overcapacity. “As a result of losing money, we have people in dire straits,” said Paul Hicks, a Fort Worth cattleman who works with feeders. “A lot of them are stuck with a lot of empty pens. A lot of feed yards are for sale —there's a world of feed yards available right now.” The major feedlots are under distress, but none has closed, said a regional broker, who spoke candidly in return for anonymity. He estimated that “easily 20 percent of feed yards are on the market today.”...FtWorthStarTelegram