The impact of drought and economic pressures
The cattle market tends to be a bit of a roller coaster these days. And this market is one ride most producers prefer not to be on. Drought conditions and high input prices are affecting cattle prices across the country. “The drought has been impacting states to our west for a number of years. Unfortunately, this year it has finally made its way to us,” Wesley Tucker, agricultural economist with the University of Missouri Extension, said.
Impact of the Drought on Prices: The market in this part of the country has held steady until recently. Tucker states the strong demand for beef this year has helped prices hold up. However, the impact of the drought is now taking a toll. “In recent weeks as larger and larger numbers of cows are finding their way to local sale barns, prices have begun to suffer,” Tucker explained.
Tucker added that as producers face deteriorating forage conditions and high-priced hay; many are having to sell their cows. In addition, calves are being marketed at younger ages and lighter weights.
Flooding the Market Now: The selling of large numbers of cattle now, creates a tighter supply in the months to come. This impacts current market prices and can affect prices this fall.
“As large numbers (of cattle) are marketed sooner than normal, they flood the market and cause prices to drop,” Tucker explained. “However, once those animals make their way through the system, it can cause shortages in the future which can often lead to higher prices.”
Due to the fact the drought has been impacting producers to the west before it reached this part of the country, feedlots have already been dealing with larger inventories, Tucker added.
Far-Reaching Impact on Cow Herds: Whether or not drought conditions ease starting this fall, producers will continue to feel the stress on their operations. Agricultural economists say if enough rain falls, then producers should hopefully be able to make it through this crisis.
However, if the drought persists through fall and into spring – the outlook is bleak. “If we do not have improvement this fall in time to get a flush of fall regrowth, then we are in real trouble,” Tucker said. “With limited hay supplies and high-priced feed, many producers will be forced to sell their herds.”
Fall Market Outlook: Many factors are influencing large numbers of beef cattle to be sent to slaughter. It’s difficult for many producers to find a way to be profitable during a drought and amid ever-increasing input costs. Therefore, rather than grow their herds many producers are cutting back. In addition to an increasing number of slaughter cattle, large numbers of heifers are going to feedlots instead of being kept as replacements. “The nationwide beef herd is contracting at a brisk pace,” Tucker explained. “If this continues, eventually the reduced numbers will lead to improving prices.”
Surviving the Tough Times: Agricultural economists encourage producers to develop a long-term drought management plan in order to be prepared for difficult times in the future. The plan may include reducing the operation’s number of permanent momma cows.
Tucker suggests producers build more flexibility into their operation by adding disposable animals to their farm. “Disposable animals can have wheels put under them when it begins to turn dry,” Tucker said. “Instead of running 50 cows, choose to run 40 cows and background all your calves to heavier weights.” According to agricultural economists, the market has been rewarding producers who raise calves to heavier weights.
