Livestock producers gauge impact of Midwest floods


Issue Date: June 12, 2019
By Ching Lee

Historic delays in crop plantings across the Midwest have left California dairy farmers and livestock producers feeling more vulnerable about the prospect of rising feed costs.

Millions of acres of farmland intended for corn and soybeans remain unsown due to record precipitation and saturated fields, with many farmers in the central U.S. contemplating whether to try planting a late crop and risk lower yields or file insurance claims for prevented planting.

In more typical years, corn plantings are nearly finished by early June and soybeans almost two-thirds complete, according to the U.S. Department of Agriculture. However, in a crop-progress report USDA released late last month, the department reported that U.S. farmers had planted only 58% of their intended acres for corn and 29% of their soybean acres. This translates to nearly 39 million acres of corn still waiting to be planted and 60 million acres of soybeans that have not been planted, said Michael Nepveux, an economist with the American Farm Bureau Federation.

The number of unplanted acres is "astronomical," he said, "especially at this point in the year."

"Some states are certainly hit worse than others, with South Dakota, Illinois, Indiana and Ohio being hit particularly hard by planting delays," Nepveux added.

San Joaquin County dairy farmer Hank Van Exel said he's been monitoring the situation with concern. Having visited the Midwest recently and seen firsthand "a lot of beautiful farm ground that was flooded," he said he decided to lock in the price of about 60% of his feed through the end of the year.

At a time when dairy farmers are beginning to see milk prices recover, the prospect of paying higher feed costs is a setback, he said, as many producers continue to struggle with profitability.

"Finally, we're starting to see a little bit of light at the end of the tunnel after four hard years. We thought the one thing we might have is lower feed costs," Van Exel said.

Though modern planting equipment can seed a lot of acres quickly, he said, time is running out for those whose fields remain underwater or too muddy to work. Another concern, he said, is that much of the "good ground," which typically lies close to river bottoms and remains waterlogged, won't get planted. This could reduce not only the amount of feed crops planted but the quality of the crop, he added. In the long run, lower-quality feed could temper milk production, and that could help lift milk prices, he said.

"I'm trying to be positive in a negative way," Van Exel said, adding that milk production has already been retreating, with the "spring flush" weaker than normal this year and higher temperatures in the state also slowing milk production.

Considering U.S. corn and soybean crops are being planted "at the slowest pace ever" this year, Joel Karlin, a market analyst for Western Milling in Goshen, said he expects feed prices will go up "substantially." Those who buy feed, such as dairy farmers, should "definitely get some percentage of their feed use covered," he advised.

"We're looking at perhaps the most-dire growing season since the 2012 drought," he said.

Typically, large amounts of some feed products such as canola meal and almond hulls have already been traded by this time of year, he noted. But others such as corn are "pretty well open and very subject to the rigors of Mother Nature and will continue to be," he said.

Karlin noted that up until about a month ago, feed markets were "very depressed" because of ongoing trade wars and resulting retaliatory tariffs that have crushed export demand. But now, "weather seems to have trumped these tariffs," becoming a "prime consideration" in feed markets.

"You have two big unknowns: How much acreage is planted, and on the acreage that was seeded, what will yields be," he said. "You're already behind the eight ball because late plantings normally result in lower yields, and extremely late plantings like we have this year result in a significant drop in yields."

If there is a short crop and prices move high enough, Karlin said, it will ration demand. How much prices will rise is uncertain, he said, "but if we do not have a growing season that's 100% perfect from here on out, the upside could be significant."

Imperial County rancher Bill Brandenberg, who raises feeder cattle, said weather disasters that disrupt production of feed commodities usually have long-term ramifications for his operation, because his calves are on feed for 11 to 12 months, much longer than those who feed yearlings or other livestock such as hogs and poultry. In recent weeks, he's seen the price of corn climb about 20%. To reduce his risk, he usually buys at least a third to a half of the corn he needs. Currently, his feed supply is covered through the end of fall.

If feed prices soar, he said, he will need to reduce his production costs by either feeding fewer animals or buying them at a lower price. Reducing cow and heifer numbers means there won't be as many calves two to three years down the road, but higher feed costs likely won't affect the cattle already in the system, he said, because "somebody is going to feed them someplace."

As an egg producer, Frank Hilliker, who operates in San Diego County, estimates about 50% of his production cost is in feed. Though he's worried about increasing feed costs, he said there's not much he can do about it because he can buy only three loads at a time every two weeks.

"We're at the mercy of the market," he said.

Likewise, San Joaquin County egg producer Richard Jenkins said he buys feed on the spot market every week because he doesn't have storage capacity to keep more than he needs. Though he could try to lock in a price, it costs money to do that, he said, "and we don't have any money to spend right now."

Usually when feed cost surges, it gets reflected in the egg market, which changes daily, he said. As feed gets tighter and more expensive, producers will begin to reduce their bird numbers, lowering egg production, he noted.

"That's a normal occurrence," he said. "If feed gets high, the egg price gets high."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.