Round two of record breakers

Jul 13, 2012

Last week we prayed for rain and it seemed to work pretty well here in Colorado with a couple inches of the golden material hitting the ground. It also was a godsend for the fires in the area. So far this has to be the most destructive fire season we’ve ever seen in Colorado. I know that many other areas of the west have had their share of fires also. I suppose we better continue to pray for more rain and still more feed.

Irrigated corn is looking pretty darn good, but the dry land stuff is really suffering and most of that is in the Corn Belt where they have been having moisture issues, too. It appears that feed is going to be in short supply again this year. But that really doesn’t seem to have that much effect on the price of feeder cattle. Yes, the price is down, but it is still in very good trading territory for cow/calf producers.

The midyear cattle inventory report is going to be released soon and some of the market analysts have started publishing their guess for the year. The folks at the Livestock Marketing Information Center (LMIC) have pegged overall cattle inventory down 1.5 percent from a year ago. They are expecting beef cow inventory to be down 2.4 percent for the year; however, they are anticipating beef replacement heifers to be up 2.4 percent for the year.

If the feed situation was in better condition, I might go along with their heifer estimate but I just don’t see that portion of the industry expanding. They must all be in some grow lot in the back 40. The lack of feed in the southwest last year put the brakes on herd expansion pretty fast last year. No feed, no cattle—it’s pretty simple.

There were a couple big crop reports that came out last week and most of them paint a fairly pessimistic picture of agriculture going forward and most of it evolves around the feed situation. National Ag Statistics Service (NASS) spent a lot of time talking about crop yields and reductions due to a wider spread drought. The report talks about record high acreage planted for nearly all crops but mostly corn, which, according to reports, we planted 6 percent more of this year. Prices have surged since the report came out.

Over the past two weeks, a heat wave has swept through the country setting many new record high temperatures for many areas. The heat and lack of moisture has had a dramatic impact on the corn crop.

Most organizations that watch crop progress have lowered their yield projections into the low 150-bushel range and some have forecast a corn crop yield into the 140-bushel range. Those yield reductions have come in just the past two weeks. With the higher yield levels, many analysts were looking for corn to drop into the $4 level but are now starting to look at the $5 range for corn prices.

Hay also got a little attention after the report.

U.S. NASS was expecting to see an additional 2 million acres of hay harvested, 3.7 percent more than last year. Total hay acres were expected to be 6.7 percent more than a year ago. Alfalfa acres were expected to be 2 percent lower than last year.

LMIC has reduced its expected national average yield for hay. Total hay production in 2012 may be 134 million tons, a 2 percent increase from the year before but a full 8 percent lower than the 2010-11 crop year. Hay prices in most regions are still expected to be below a year ago, even in alfalfa , largely because of the pull back in demand by the livestock industries, especially dairies and cattle feeders, alike, who struggled with high prices last year and have not recuperated from costs. A second year of record high feedstuffs will be increasingly difficult to deal with financially for many dairy, cattle and sheep operations.

Cattle feeders were hoping that lower feedstuff prices would keep the wolves away and help profits, but this has become more problematic than expected. The result of this current drought is lower calf prices and higher yearling prices. Calves have seen more pressure than heavy weight yearlings but both classes of cattle will be under pressure with this dry weather. It will be tough for livestock producers to deal with sub-par pastures and the price of feedstuffs.

If you have irrigation, feel blessed. The dry land operations will have some big challenges to deal with this year, unless we get some rain—soon. So I’m going to say a few more prayers for rain because it worked last week. — PETE CROW