Make drought plans now!

Jun 29, 2012

I’m sure I don’t need to tell most of you about it, because most of you all can feel it, but this dry weather is really becoming a problem. Last year, the dry weather was limited to mostly the south and southwest. We had some hot weather in the Midwest, but it wasn’t the cow-clearing weather we saw in Texas and Oklahoma, which collectively lost a million head of beef cows.

Looking at USDA’s most recent weather map, it appears that everyone is going to get a taste of this dry weather, except for the northern tier of the U.S. Another dry summer isn’t what the cattle business needed and I would have to think that if there was any herd growth coming, it has already vanished.

Typically, if we don’t get some good rains in May or June, you can count out having any summer feed. The hay market is already seeing some high contracted prices. Some of these mountain ranches in Colorado will use 4 tons of hay per cow; a mild winter might let them get by with 3 tons. But producing 4 tons per cow is a tall order at most of these mountain ranches. In the mountain ranches, your entire operation centers around hay; you’re either putting it up, throwing it out, or worried about growing enough.

But hay is just a portion of the feed mix. In February, USDA was forecasting the biggest and best corn crop ever. Lots of farmers got an early start and by the start of June, 75 percent of the corn was in the ground. Ground moisture was looking good and farmers were looking for any square foot to plant corn. USDA was looking at around 14.5 million bushels of corn with a yield of 166 bushels per acre.

Well, it got dry and now it looks like it’s getting a little dryer. Nearly everyone in agriculture needs moisture. Irrigation water looks a little short and we could sure use some good rain now. I’m sure the wheat guys are about ready to start cutting in the south—if they have any. Reports are it’s spotty. Some guys look pretty good, but the further west you go, yields are going to be questionable.

The drought in the Midwest has pushed up corn prices 28 percent since June 15. This year’s weather pattern, which settled into the Great Plains and southwest last year and has spread into the Corn Belt, resembles those of a quarter century ago, said Matthew Rrosencrans, a drought specialist with the National Weather Service. “Sparse rainfall may drive crop costs up, further destroying livestock profits and raising food prices,” added David Anderson, an ag economist with Texas A&M.

Everyone’s worried about this, Anderson said in an interview. “Corn stockpiles are already low and we thought this might be the year we get some relief from that, and that may not happen. We’re going to have highly volatile prices the rest of the summer. On June 12, USDA forecast a 20 percent jump in U.S corn output at 14.9 million bushels; the harvest is only about two months away so we need some moisture in the Corn Belt quickly.”

But there was not a tremendous amount of optimism on this summer’s corn crop market. Analysts have changed their yield projections down to 156 bushels, enough to make the December corn contract go back up to $6.42 when it was $5.50 a month ago. We all know that with these USDA crop reports, we can expect a see-saw ride throughout summer. Two months ago, market analysts were talking about a huge crop, and much lower demand with an old crop carryover of 1.8 million bushels. They were sure we were going to have corn in the $4 zone this next fall, and there would be plenty of feed and cattle feeders were going to have a good shot at finding some profitability.

I’m watching the Superior Livestock Auction’s big Rocky Mountain video sale while I’m writing this column and prices are a full $10 to $15 lower than we were seeing a month ago for fall delivery cattle. The only thing that seems to be making a difference in these prices is what always makes a difference: quality and distance. In addition, the August feeder cattle contract was flying high at $161 while the board has drifted down to $150.15 in less than two weeks.

It’s time to keep your eyes on the market and your feed costs, and use the tools that can help you make it happen. — PETE CROW