Drought is forcing livestock producers to thin herds
October 8, 2012
When many people think of those affected by drought, cattle and dairy producers are not the first people who come to mind. However, drought affects cattle producers in many ways, and unlike crops, which may have insurance, cattle must either be fed or be sold.
That is the point where many Colorado and Wyoming ranchers and dairy farmers are currently. The drought has dried up pastures, and forage is expensive and difficult to find. In times of drought, a producer must make hard decisions in order to stay in the business.
Jon Slutsky, owner of La Luna Dairy in Wellington, Colo., has had to change his management practices in order to keep the dairy running.
"These hard times are great educational tools for a producer if you can survive. We get more efficient, and we try to eliminate waste. We try to have our staff work more efficiently and get more done with the same number of people. We have not eliminated any jobs, because our employees take care of our animals. Our assets are alive, and we have to keep taking care of our animals or sell," he said.
“These hard times are great educational tools for a producer if you can survive. We get more efficient, and we try to eliminate waste.”
~ Jon Slutsky,
La Luna Dairy in Wellington, Colo.
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La Luna Dairy milks 1,330 cows three times a day. One of the biggest issues the dairy is dealing with is lowered production, due to the heat. "Heat stress can be a big problem in dairies. We mitigate that the best we can. We have shade and freestalls, and we also sprinkle with water and they have fans. They are cooled fairly well, but it's still hot and so they don't want to eat. When they don't eat, production suffers. The summer has been tough on the girls," he said.
The price of feed is another struggle dairies are dealing with, and their prices have doubled since last year. "We purchase all of our feed. The impacts to us are passed on to us from our growers. If our growers have smaller yields, we could suffer quality problems and higher prices," Slutsky said.
He continued, "That is a little bit true for alfalfa now, due to the crop being smaller. Our feed prices are much higher than last year. We use a lot of alfalfa year, so it has a big impact."
In difficult times, both dairy and cattle producers tend to cull harder in their herds, and only keep the best quality, highest producing animals. "We are culling heavily because the margins are so small. An animal that was profitable in years past is no longer profitable. Animals are leaving the herd at a different level of production. Animals that are producing well are still profitable," he said.
The animals that leave the herd then flood the market, lowering the price. "There is more culling everywhere, so there is an abundance of cull cows, and that has lowered the price. Just thinking logically, that should turn around. The beef herd was already small, and it's just getting smaller," stated Slutsky.
He added, "Our price of calves has also plummeted in the last couple of weeks. It's gone from pretty terrific to pretty bad. It's about half today that it was three weeks ago. Calf sales are not our bread and butter, but it's still disappointing. The price of grain is also affecting the market because people don't want to put expensive grain in expensive cattle."
Dealing with lowered prices for the cattle and milk, as well as higher feed costs, have forced many dairies into the negative. "Our price of milk is not anywhere near what it takes us to produce that milk. Our feed costs have gotten out of control," he said.
The Monthly Cattle on Feed and Mid-Year Cattle Report were both released on July 20, and both gave critical industry information. "Those reports showed that drought and feedstuff prices are re-shaping the U.S. cattle sector," said James Robb, director of the Livestock Marketing Information Center.
The cattle reported showed that all cattle and calves in the U.S., as of July 1, 2012, totaled 97.8 million head. This is a 2.2 percent decrease from last year at this time, when the count was 100 million.
"Overall, the Cattle report showed more drought-induced whittling away of U.S. cattle numbers had occurred prior to the July 1 than expected," said Robb.
This number is indicative of a negative trend the last few years. "This is the lowest cattle and calves inventory for July 1 since the series began in 1973. Beef cows, at 30.5 million, were down three percent from last year and this was the sixth straight year of decline. Given the drought situation, and with beef replacement heifers unchanged from last year at 4.2 million head; the beef cow herd will likely be lower again in 2013," said Tim Petry, Livestock Economist for North Dakota State University Extension Service, in the weekly In the Cattle Markets report by LMIC.
The drought in the South last year forced many operators to liquidate their herds, and that led to a decreased calf crop this year. "The feeder cattle supply at 35.7 million head was down 3.2 percent from last year, reflecting both a smaller calf crop and increased feedlot placements due to the drought," said Petry.
The Cattle on Feed Report showed an overall increase in the number of cattle placed on feed in the past month. "Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on July 1, 2012. The inventory was three percent above July 1, 2011. The inventory included 6.74 million steers and steer calves, up four percent from the previous year. This group accounted for 63 percent of the total inventory. Heifers and heifer calves accounted for 3.92 million head, up one percent from 2011," the report read.
The country-wide drought this year is affecting placements differently than the regional drought last year. "During June, placements this year were 24 percent above a year ago in Nebraska, even with last year in Kansas, and dropped 16 percent in Texas," Robb said.
Higher placements in Nebraska show that the grass and pastureland is not as available, and cattlemen are weaning early and culling hard in order to make it through the drought.
The placement categories showed what producers are doing to cope with the drought. "The more widespread drought this year affected placements. The under 600 lb. placement category showed the same placements as last year's historically high level. And the 800 lb. and over category recorded a 13.6 percent increase, likely showing increased movement of feeder cattle off from drought inflicted pastures," according to Petry.
This increase in lightweight and heavyweight calves reflects the problems the state it having. Recently, feeder cattle and calf prices have dropped for several reasons. The first is there is a higher number of cattle being marketed right now. The second is the price that feeders are willing to pay, due to their increased costs.
"Feeder cattle and calf prices are currently being negatively affected by sharply higher, drought impacted feed prices; but the smaller numbers of cattle in the Cattle Report will likely be supportive to feeder cattle and calf prices for the next several years," said Petry.
While the drought is ongoing, so is the debate on the farm bill. Colorado U.S. Senator Michael Bennet spoke on the Senate floor on July 26 regarding the severe drought conditions in Colorado, and to urge the House of Representatives to pass a full five-year reauthorization of the Farm Bill.
He said, "A five-year Farm Bill will provide producers with a set of tools for managing this drought and planning for the future. The one-year bill being discussed over in the House by the leadership doesn't recognize the agricultural community's need to do long term planning. Among many other important provisions, the Senate Farm Bill contains revamped risk management programs like crop insurance, which is what I heard is needed by farmers, and improvements farmers requested to help manage a severe drought exactly like the one we're going through right now." ❖