Drought impacts ripple across the cattle business

Issue Date: July 25, 2012
By Ching Lee

Despite a nationwide shortage of cattle that has strengthened prices, California ranchers agree drought across the Midwest and surging corn prices now cast a dark cloud on the future of the market.

Scorching heat and lack of rain have deteriorated much of the nation's rangeland, forcing many ranchers to sell their cattle. Outlook for the U.S. corn crop also has eroded, driving up already-high prices and the cost to feed the cattle.

"Right now, we're going to see the price to the producer kind of beat up a little bit. Feedlots just aren't going to pay what they've been paying for these cattle, because there's not going to be corn," said Tony Toso, a rancher in Mariposa County.

California ranchers had their own drought problems. Skimpy rainfall this winter did not do much for grass growth, and while late spring rains brought some relief, the pastures never fully recovered, said Josh Davy, a University of California Cooperative Extension farm advisor for Tehama, Glenn and Colusa counties.

"It turned out to be less forage produced this year than I was expecting," he said. "I thought (the late rains) would help it a lot more, but production was just so far behind that it didn't catch up to what it would've been in a more normal year."

David Roberti, a Plumas County rancher whose cattle spend the summer in the Sierra mountains, said his pastures will produce only about half of the forage he needs, and that means he will have to trim back his herd.

Typically, his summer pastures can provide enough feed through the middle of October, when he begins supplemental feeding to stretch into November, about the time he begins to move his cattle back to the valley for their winter feed. But this year, he expects to lose 30 to 60 days of feed on his summer range.

Even though he also grows hay, Roberti said with hay prices rising and the cattle market softening, he would be losing too much income if he maintained his current herd size and had to feed expensive hay. He noted that before the drought, market signals were encouraging ranchers to expand their herds because the nation's low cattle inventory, worsened by last year's drought in Texas and Oklahoma, has kept cattle prices robust.

"But with feed costs so high, and in a lot of cases unavailable even, you just can't make it," he said. "It would just add too much expense."

Toso said he missed the current price drop in the cattle market because he sold his in May, but is now concerned about his prospects for next year. The long-term impact of the drought will create more demand for cattle, he said. Once the feedlots go through this current inventory cycle, the national herd numbers will drop even more and "there could be a bright spot for some price rebound," he added. But that's only if weather cooperates—not just for California but for the rest of the nation, he noted. Farm advisor Davy agreed.

"It's a national market because our cattle go east to get fed, so factors that affect the market nationally will still affect us," Davy said. "We may have a good feed year next fall and it'll help our weight gain, but it won't necessarily help our market on how much the cattle are worth."

Kevin Kester, who runs cattle in Monterey, Fresno and San Luis Obispo counties, said another concern with the nation's shrinking beef herd is that there will not be enough inventory to keep feedlots and packinghouses operational. He noted the United States is already importing more meat to make up the shortfall and support these facilities.

He added that he would have increased his own herd more this year but did not have enough grass to carry the cattle, and said the dry winter held back other ranchers from keeping their heifers.

"We should be in a rebuilding phase, but with these droughts still continuing, that's not going to happen," he said. "In the meantime, with fewer cow numbers, feedlots and packing plants that have been fighting to keep their doors open—we're going to lose some of them. If we lose that infrastructure, it's really hard to get it back."

Glenn County cattle rancher Larry Massa said he does not plan to make any changes to his cattle numbers because he's restricted by the amount of pastureland that's available for grazing. On his winter range, what little rain it received this year did not leave much grass for his cattle to return to in the fall, but he said if Mother Nature brings some early storms, "we might not even notice the drought anymore."

In spite of the drought, he said his cattle "did all right" and "weighed as much as they normally do" when he sold them, although that came with a cost because he had to buy supplemental feed and culled some cows.

Davy said while cattle prices have dropped recently, the market may not receive as much of a flood as some would anticipate. He noted big cattle states such as Texas have not built up their herds from last year's drought, and that would limit the amount of cattle that could be marketed this year.

(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.