Thursday, February 6, 1997

Texas drought certainly cut cattle numbers

By J.T. SMITH / Farm Editor

The '96 drought was kind of a two-edged sword.

By liquidating cattle numbers, it was at least one factor that brought about the current strong recovery in cattle prices a bit earlier than projected.

Of course that's sure a tough way to do it.

The Texas cattle numbers have dropped from 15 million head in January 1996 to 14.1 million this January.

Texas Agriculture Commissioner Rick Perry notes that the drought conditions forced many ranchers to liquidate their herds.

"These numbers reflect the seriousness of the drought to our livestock industry, which was hit by a triple whammy during the spring and early summer," Perry says. "Poor pastures, short hay supplies, and high feed costs forced many producers to being selling parts of their herds."

Figures from the Texas A&M Agricultural Extension Service show the drought added $589 million to producers' feed bills last year.

Heavy herd liquidations also drove cattle prices down during the spring and summer at Texas auction markets.

Both the Texas and U.S. cattle inventories had been in the building phase during the past seven years.

But the Jan. 1 Texas inventory is the lowest cattle inventory since 1993.

Meanwhile, the U.S. cattle inventory totaled 101.2 million head, down 2 percent from last year.

The Texas calf crop during 1996 totaled almost 5.3 million head - down 5 percent from 1995 and was the smallest calf crop since 1993.

Meanwhile, the inventory of cattle in the United States totaled 101.2 million head as of January, down 2 percent from last year.

The Texas calf crop during 1996 totaled almost 5.3 million head, down 5 percent from 1995, and the smallest calf crop since 1992.

So that's a big part of why you are seeing the dramatic recovery in cattle prices we have been reflecting in our market reports since this new year began.

<B>Tax ruling favors farmers and ranchers<B>

Good news ... from the IRS?

In a what's seen as a victory for farmers and ranchers, the IRS says it won't demand farmers and cattle producers change the way they report their income for the 1996 tax year to comply with the controversial "alternative minimum tax" or ATM.

Also, the IRS said it will change its rules for the 1997 tax year if Congress doesn't move first.

Before the ruling, the IRS forced farmers and ranchers using cash accounting to include the total value of a <I>deferred<I> sales contract as income in computing the alternative minimum tax.

This is important because some producers have used only the income they actually <I>received<I> in a tax year in computing their taxes.

<B>USDA grants credit to Mexico<B>

It's worth noting that the USDA has activated $300 million previously allocated export credit guarantees.

This latest action increases Mexico's operational credit line to $800 million.

Mexico's allocation for fiscal 1997 is just over $1 billion.

The credits can be used for for the purchase of many U.S. ag commodities - including frozen or chilled meats, feedgrains, hides, and leather.