I wonder what the smallest cattle herd in 60 years means for beef prices over the next two years? The U.S. population was 158 million in 1952. Today it is 317 million. That’s a lot less beef to satisfy a lot more people. The BLS will ignore beef inflation because they will assume you switched to Alpo.
Ranchers Send Cows to Slaughter as Drought Sears Pasture
The grass in Melvin Korte’s 280 acres of pasture in northern Missouri is dead, burnt away in the worst drought in the Corn Belt in more than a half-century. Now he’s doing all he can to keep his herd of 63 cattle alive.
He’s using up winter hay and buying feed at prices more than a third higher than three months ago. Later this year, he may bale the dead corn stalks from his neighbors’ fields for feed. “There’s not much nutrition in it,” the 65-year-old farmer says. “But it gets something in the animals’ stomachs.”
Feed-rationing may help Korte save two-thirds of his herd as he and other cattle farmers struggle to feed animals grazing on the brown and barren fields. Otherwise, “liquidation” is the alternative. Without the government-backed insurance available to corn and soybean farmers, cattle-producers may be suffering the most under the drought, responding to higher costs by sending cattle for slaughter early, with some eventually selling their herds entirely.
“You tough it out,” said Korte, whose farm near Curryville is about 70 miles northwest of St. Louis. “People will be deciding how much they need to sell based on whether it rains or not or if they can make it through the winter.”
Worst Pasture
Missouri, the sixth-biggest U.S. cattle producer, has the nation’s worst-quality pasture, with 99 percent in poor condition or worse as of Aug. 5, according to the U.S. Department of Agriculture. The drought may further thin a national herd that at the start of the year was the smallest since 1952, even as meatpackers including Tyson Foods Inc. (TSN) and Cargill Inc. boost short-term slaughter, adding to the beef supply, said Bill Lapp, a former chief economist for ConAgra Foods Inc. (CAG)
Cattle prices gained about 8 percent since mid-June through yesterday on the Chicago Mercantile Exchange, as the drought tightened its grip on the central U.S. Corn, the main ingredient in livestock feed, surged 63 percent in the same period. Today, the grain surged to a record $8.49 after the USDA cut its estimate for the U.S. crop to a six-year low.
The Corn Belt just went through the third-driest June-July period on record, according to the government.
As ranchers try to avoid the higher feed costs, they are pushing younger cattle through the food chain faster. At the Callaway Livestock Center in Kingdom City, about 100 miles west of St. Louis, animals normally sold at 700 pounds are coming to market 100 pounds lighter, and up to twice as many are being sold each week, said rancher Claude Niemeyer.
Feedlot Sales
Many of the cattle are going to feedlots that typically buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, called feeders. They are fattened on corn for about four to five months until they weigh about 1,200 pounds, when they are sold to meatpackers.
Ranchers haven’t had much help from the heavens lately. In July, the St. Louis area got only about 0.72 inches of rain, less than a fifth of the normal amount, while the mean temperature was 88.1 degrees Fahrenheit, about 10 percent higher than the average, according to National Weather Service data.
The drought doesn’t just kill the grass heifers rely on to grow, he said. The heat makes it difficult for cows to gain weight, meaning producers need to supply more nutrition at the same time their herds have lost their natural forage.
With everything brown but the weeds and rain the only hope for rejuvenation, most area ranchers are hesitant to feed animals any more grass, for fear that overgrazing will leave them with nothing to grow back next year, Korte said.
Saving Hay
“If it rains, I can save hay for the winter, use the grass for now and save all my cows,” Korte said. “If it doesn’t rain, then I use my hay, and when winter comes, then what? I need to sell more cows, and it can take a long time to build back a herd.”
In the short term, what’s bad for ranchers may be good for consumers. The increased sales of animals to slaughterhouses will boost beef supplies and slow price increases at the supermarket, Lapp said. The USDA last month lowered its forecast for beef-price inflation for 2012 half a percentage point to 3.5 percent to 4.5 percent. For 2013, the expectation is a gain of as much as 5 percent.
“Near term, there is an adequate supply of meat from all species,” Michael Martin, a spokesman for Minneapolis-based Cargill, said in an e-mail. “As we move into 2013, the supply of beef, in particular, could be constrained by the U.S. herd being the smallest in 60 years.”
More Hamburger
More heifers and steers means more hamburger on shelves, Lapp said. Still, when cows that could be bred instead are sold for slaughter, the livestock herd contracts, contributing to a long-term decline in numbers partly caused by consumers buying less beef. The quality of meat shouldn’t be affected, he said.
“When you liquidate a cow, that’s the future of livestock,” Lapp said. “How many cows end up sold for breeding or sent for slaughter will be a key question.”
While many growers of corn and soybeans in the region will be indemnified for their drought losses by government crop insurance, livestock producers have no such recourse. Congress left Washington for vacation last week without acting on a drought-relief measure for ranchers.
Livestock Assistance
A livestock-assistance program in the current five-year farm bill expired last year. The U.S. Senate and the House Agriculture Committee have approved bills to replace the current law which contain livestock relief provisions. House Republican leaders have not set a vote on their legislation. Last week, the House approved a $383 million stopgap measure to reinstate the livestock aid, while the Senate took no action. The current farm bill was passed in 2008 and expires in September.
President Barack Obama said Aug. 7 the administration will provide $30 million to aid farmers and ranchers affected by the drought.
“We are very limited in what we can do” because of the congressional impasse, Agriculture Secretary Tom Vilsack said today in an interview to be televised Aug. 12 on C-SPAN’s“Newsmakers” program.
“The key issue for livestock is access to hay and grazing opportunities,” he said, adding that the USDA is focusing its response on opening conservation lands to grazing and helping move water to parched herds.
Arthur Meyer, who raises Angus cattle and grows corn and soybeans on his farm outside Bowling Green, Missouri, said federal aid to help defray higher feed costs would be helpful. Still, he said he doesn’t expect Congress to do anything.
He’s planning to sell his calves in September, three months early, as he runs out of the hay he normally feeds in winter months and which is costing him twice as much as it did three months ago.
“You can’t let them sit out there and not feed them anything,” the 77-year-old farmer said. “They lose weight, and now you’re going backward.”
Without rain, “I’m just going to have to bite the bullet, cut my costs, and sell,” he said.
Maddie's Mom says:
They’re shooting people in Oklahoma over bales of hay. Two bales to be exact.
Seriously.
http://www.newson6.com/story/19247448/wagoner-man-chrged
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11th August 2012 at 8:55 pm
Maddie's Mom says:
“President Barack Obama said Aug. 7 the administration will provide $30 million to aid farmers and ranchers affected by the drought.”
Hurry, Barry, before someone gets killed.
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11th August 2012 at 8:56 pm
Hay Zeus says:
Good link MM
Oddly there is hay for sale in neighboring texas.
I wonder by what they mean a third party owned hayfield.
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11th August 2012 at 9:02 pm
Maddie's Mom says:
Owned by someone other than those 2 yayhoos?!
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11th August 2012 at 11:04 pm
Yojimbo says:
IRONY ALERT
The irony here is that the US cattle herd is the smallest in 60 years, but the human cattle herd is the largest in history…
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11th August 2012 at 6:51 am
flash says:
Cattlemen are selling of their herds in anticipating of rising feed costs which means a glut of beef on the market initially , but shortages thereafter with breeding heifers bringing a premium.
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11th August 2012 at 8:03 am
CavTanker says:
Why does it seem like every time any business has a problem the “solution” is for big gov to ride in with another bailout? Farming is a business. Like any other it has good and bad years. The good businessmen manage and prepare for the bad times. The bad managers go out of business. Government needs to quit wasting OUR money on bad businesses.
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11th August 2012 at 8:25 am
underfire says:
There’s another side to this, the age of farmers and ranchers. Note one farmer quoted is 65, the other is 77. I’m 60, a rancher, getting more aches and pains, and have watched the exodus of the last generation or so of country kids leave for the city. Those that are left will find themselves handling a lot larger operations than those of the past, and will be financially astute, in direct contrast to the last generation of farmers who were characterized by strong work ethics but weak financially.
Supposedly there is an eleven year cycle to the beef cattle inventory, following the highs and lows of the market, but over the last decade or so this cycle has been broken, with the beef cattle herd in decline. The amount of beef produced for the consumer has held steady because of feeding cattle to heavier weights, with higher usage of corn and other feed grain.
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11th August 2012 at 10:33 am
IndenturedServant says:
Buy a side or two of beef from a local, small rancher and put it in your freezer while you can still afford it. There are still lots of kids out there earning money by raising cattle for 4H or Future Farmers of America. In my area I can get a fresh side of beef cut and wrapped for just $2.87/lb. No steroids, no hormones or any other crap and my money stays local.
I_S
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11th August 2012 at 10:56 am
FBD says:
Big fucking deal. This means we’ll be eating less meat … hormone injected frankenmeat … and that is a GOOD thing!!
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11th August 2012 at 11:47 am
ThePessimisticChemist says:
@IS – Bingo. 4H meat is the only way to go.
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11th August 2012 at 1:07 pm
DaveL says:
“flash says:
Cattlemen are selling of their herds in anticipating of rising feed costs which means a glut of beef on the market initially”
She was only the cattleman’s daughter, but all the horse manure.
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11th August 2012 at 6:57 pm
Buddabull says:
Let them eat cake. I tell people what is going on and they look at me as if I were a clown. I will be eating steak and they will be eating peanut butter.
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11th August 2012 at 9:22 pm
TeresaE says:
Buddabull,
Here’s the point, no you won’t.
Barry is going to “guarantee” farming. Which means little farms are out.
So, where you going to be buying that steak once the government nationalizes the cows?
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11th August 2012 at 9:49 am
ThePessimisticChemist says:
@TeresaE – I’ll shoot deer, and when he tried to nationalize those I’ll pull out my green tights (don’t hate, I look hot) and poach to my heart’s content.
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11th August 2012 at 9:55 am