After an exhausting three weeks of work, the Smokehouse Creek fire, which swept over a million acres in the Texas Panhandle, has been completely contained. The fire, which started on February 26 in Hutchinson County, is among the most noble among this year’s wildfire season in the U.S. The fire caused two fatalities, hundreds of homes’ destruction, and a significant loss of livestock in an area well-known as Texas cattle ranching territory. What effect will this have on beef prices, then?

As we know, Texas produces more cattle than any other state. The Lone Star State boasts 12 million cattle, or 13.77% of all cattle in the U.S. Its gigantic region and long ranching history make it the nation’s leading cattle powerhouse.

With 4.3 million cows, Texas led all 50 states in the number of beef cows in 2023. That’s partly because Texas has large pasture areas with excellent grazing conditions. In 2022, the state was home to 4,425,000 more beef cows than in 2023. Texas is important in American beef production. 

But did you know Texas houses nearly 14% of the nation’s total inventory of beef cows?

With the recent tragedy, consumers should buckle up for increased meat and cattle prices in the coming weeks and months.

Fire in Smokehouse Creek

The Texas A&M Forest Service confirmed on March 13 morning that about 1,058,482 acres of the Smokehouse Creek fire and Windy Deuce fire, spanning 144,045 acres, were both wholly contained. Power lines were identified to be the origins of both fires. Xcel Energy stated its facilities were the likely cause of the Smokehouse Creek fire but not the Windy Deuce fire.

Hundreds of firefighters and first responders worked for weeks to contain the blazes, with 45 local and 14 state agencies involved during its height. Texas Division of Emergency Management Chief Nim Kidd and Governor Greg Abbott visited Borger to determine immediate need and plan future fire safety and response actions. This could have a big impact on beef prices.

The wildfire in Texas, causing thousands of acres of cattle loss, was brutal on ranchers. These fires severely affected Panhandle, called Cattle Country, was home to over 85% of Texas’ cattle herd. Earlier, I mentioned that the Texas A&M Forest Service reported that the Windy Deuce Fire scorched about 144,000 acres and the Smokehouse Creek Fire scorched 1,058,482 acres. They were controlled and contained 94% and 89%, respectively.

The National Weather Service’s Amarillo station said that “arid” grass conditions, possible 45 mph wind gusts, and low relative 10 to 15% humidity increased the risk of wildfires. Weather advisories have been given out for outdoor activities that could cause fires, with the southern Texas Panhandle most at risk.

Although the humidity levels were the same as those of past wildfire outbreaks, forecasters are looking at slower wind gusts of around 20 mph. This could reduce the risk. Still, caution and preventative measures were highly recommended to prevent future wildfire outbreaks.

Effect on Calving Season

Arthur Uhl, president of the Texas and Southwestern Cattle Raisers Association, reported significant losses due to the flames during the crucial calving season. Many losses were of pregnant or calf-bearing cows. Relief efforts are still underway, with the U.S. Small Business Administration opening outreach centers for disaster loans in Borger and Canada. 

Donations exceeding $800,000 and the State Agriculture Relief Fund are intended to support farmers and ranchers. Texas A&M AgriLife’s disaster assessment and recovery director, Monty Dozier, reported the severe fires caused colossal damage, vegetation destruction, wind erosion, and restricted grazing opportunities. 

In several spots, Dozier noticed gradual signs of regrowth. On the drive to Stinett, fence posts were found severely burned at the bases but still upright. Days after the fire started, Roberts County Judge Mitchell Locke noted that assessing livestock losses was difficult due to damaged fences.

Locke, a local rancher, brought attention to the abovementioned difficulty, while other communities helped by caring for orphaned calves. Infrastructures like the barn owned by Canadian Future Farmers of America require ongoing rebuilding, consistent funding, and assistance for long-term recovery. Uhl even highlighted that it’s a drawn-out process that will take years to heal.

Impact on Beef Prices and Supply

The Smokehouse Creek fire claimed the lives of almost 7,000 cows and four more in the area. More are believed to perish from severe injuries. The fires hit the nation hard, with an estimated $219.8 million loss in agricultural production.

A&M livestock economist David Anderson said that while the loss of cows is heartbreaking, it won’t severely dent the market pricing because of Texas’ staggering cattle population. So, the fires won’t likely influence the supply or beef prices much. Anderson noted that customers may pay more for beef this year for unrelated reasons.

Anderson said the recent fires hold little to no weight on the upcoming beef price hikes. He clarified that a diminishing cow herd, partly brought on by drought, is why the U.S. has been producing less beef. With 4.1 million beef cattle, Texas has the smallest herd since 2014. Nationwide, the herd shrank by 2% last year, the lowest since 1961. This year, a 6% decrease in beef production is expected, causing higher prices.

Beef Prices Were Already High Before Texas Fire

The cattle market experienced significant expansion in 2014, with all categories going through record prices. CattleFax, a meat industry expert, predicted these patterns would last the entire year, presenting their results at Florida’s National Cattle Convention. They suggested that restocking cow herds to meet beef demand could keep the positive trend up for three to four years.

CattleFax predicted an average price increase of $9 for fed steers (mature, process-ready cattle) per head in 2024. Meanwhile, eight hundred-pound feeder steers headed for feedlots are predicted to cost an average of $240 per cwt, a $20 increase from the previous year.

Steer calves, weighing 550 pounds on average, are predicted to average $290/cwt, an increase of $28. Utility cows, used for hamburger meat production, are expected to be $115/cwt, a $16 increase.

The market got hit hard by declining cattle numbers because of prolonged drought in the Plains states. While some areas have seen relief, others face challenges, slowing producers’ expansion. The USDA livestock inventory data shows a 2% dip in cattle, indicating continuous liquidation. CatleFax CEO Randy Blach predicts peak cow prices in 2026.

Strong consumer demand for beef is causing sustained high prices, reflected in $7.90 per pound record retail prices across all meat classes last year.

Bottom Line

The U.S. beef industry is going through a two-year decline in production, affecting consumers and producers. This decline is looking to raise retail meat prices and present hurdles for the profitability of beef processors. Because fewer cattle are available, love cattle prices will rise for cattle feeders, making things more expensive for meat packers.

It’s estimated 89.274 million fewer cattle were raised in 2023, marking a 3% decrease, plus 1.5 million fewer cattle expected in 2025. Rebuilding the herd should take a few years, with 2025 put out as the target date by most industry experts. So, consumers should buckle up for higher beef prices, at least in the near-term.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.