Drought Affects Prices and Herd Expansion

US - Drought-motivated increases in cow slaughter and feeder cattle movements have adversely affected all cattle/ beef prices as well as plans to increase the national cow herd, according to the USDA Livestock, Dairy and Poultry Outlook.

20 August 2012

2 minute read

North America

The deterioration of the corn crop and pastures in the last six weeks is no longer news. At the same time, drought effects on cow slaughter and cattle feeding have become more apparent. Reports indicate that some drought-impacted corn is being ensiled. To the extent corn is being ensiled, the ensilage could provide an alternative for growing feeder cattle to feedlot-placement weights. Although some form of feed will be necessary to carry feeder cattle from when they are removed from drought-damaged pastures until the silage has been in silos long enough for the fermentation process to reduce the nitrates in the corn-plant material sufficiently to keep from poisoning the cattle. Hay supplies also are reduced. Emergency grazing and haying of Conservation Reserve Program acreage may offer another option for farmers.

Weekly federally inspected cow slaughter has increased dramatically since early June 2012, with the increase in beef cow slaughter largely in response to the rapidly deteriorating pasture conditions. As a result, weekly average federally inspected 90-per cent lean cutter cow dressed prices, which remained within $5-$6 per hundred pounds (cwt) of their late-May highs, have declined $15 per cwt to around $150 per cwt.

USDA, National Agricultural Statistics Service’s (NASS’) July Cattle report indicated that expansion plans have been temporarily suspended as there were no year-over-year changes in beef replacement heifer inventories.

Beef heifer inventories may have declined since the July 1 survey as a result of subsequent drought effects on pastures. To the extent drought has reduced producer heifer-retention plans, it likely understates the full extent to which heifer retention has been put on hold and will likely show up as continuing liquidation in the January 1, 2013 inventory report.

In 2011, drought thwarted Southern US producers’ plans for cow-herd expansion. Farther north in 2011, producers held heifers and cows for herd expansion and, to some extent, possibly kept extra-large inventories in light of the significant herd reductions underway in the Southern United States. In 2012, those northern inventories may have shrunk in response to the Central and Northern Plains and Midwest drought, which, combined with continued liquidation in the South, have exacerbated the inventory situation.