Analysts and cattle producers are watching the drought situation in the Mountain West region and the Northern Plains and what impact it might have for cattle inventory and markets.
University of Nebraska Extension livestock marketing economist Elliott Dennis, writing in his “In the Cattle Markets” column for the Livestock Marketing Information Center, says the impact of drought varies by region, depending on the stocking rate for areas.
“Areas with lower stocking rates are likely areas that are at more risk to adverse weather conditions since they rely upon either seasonal or harvested feed resources to sustain a beef cow herd,” he says. “Further, in the absence of seasonal forage, there are not large amounts of crop residues or protein concentrates from ethanol plants to supplement the lack of forage.”
Dennis says the U.S. Drought Monitor map and USDA data show the Mountain West and Northern Plains regions are currently most affected by drought conditions.
“The USDA Pasture and Forage Conditions report confirmed these findings last week indicating that nearly 50% of U.S. range and pasture was rated as either poor or very poor,” he says.
Producers facing forage challenges will have to either depopulate, meaning selling cattle, or
destock, meaning moving cattle to newly obtained pasture or hay for the current herd size, Dennis says.
“With the U.S. beef cow herd peaking in 2019 and beginning its liquidation process, increasing drought pressure could only accelerate this liquidation process,” he says.
Dennis says the current “trough” of the cattle price cycle means producers may be more likely to liquidate cattle than purchase more feed. He said ag economist studies back up that decision.
“They find that in the short run, partial liquidation of cattle tended to provide better returns than purchasing feed to overcome constrained forage supplies, and that partial liquidation tended to be less risky and create potentially less financial stress than purchasing feed,” he says. “Further, purchasing additional feed only provided positive returns when prices were stronger overall.”