March 11 (Bloomberg) -- Keith Kisling normally has 1,500 head of cattle on his land near the Oklahoma-Kansas border. Last year’s U.S. drought changed all that. For the first time in four decades as a farmer and rancher, he has none.
"We didn’t have wheat pasture this year," leaving no cheap forage for the young animals to eat before they are sold to feedlots, Kisling, 65, said by telephone from Burlington, Oklahoma. "The ponds and creeks are dry."
Even after storms dumped 22 inches (56 centimeters) of snow over four days in February, water shortages and dirt-dry pastures across the Great Plains are shrinking herds. Cattle grazing in Kansas, Oklahoma and Texas on Jan. 1 fell 16 percent from a year earlier to 1.34 million head, the fewest since the government began collecting the data in 2002. Retail-beef prices jumped to a record in January, the same month a shortage of cattle forced Cargill Inc. to shut a Texas processing plant.
"The water problem has been catastrophic" for ranchers who can’t be profitable without pastures or dormant wheat crops for cheap feed, said Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City, who has been a commodity broker for more than two decades and co-owns a 400-acre wheat farm. "When you have such dry weather, you get no grass."
Cattle in the U.S. are raised from birth on pastures for about a year, when they weigh 500 pounds (227 kilograms) to 800 pounds, and then are sold to feedlots. There, the animals consume mostly corn until they are 1,200 pounds to 1,350 pounds and are sold to slaughtering plants.
Last year’s drought, the worst since the 1930s, cut corn production by 13 percent and sent prices surging to a record in August. Higher feed costs discouraged herd expansion, with calf births dropping last year to 34.3 million head, the lowest since 1949, government data show. The feedlot herd on Feb. 1 totaled 11.073 million, down 6.2 percent from a year earlier. Cattle futures reached $1.35175 a pound in Chicago on Jan. 11, the highest ever for a most-active contract.
In Kansas, the largest U.S. cattle producer behind Texas and Nebraska, 15 percent of rivers and streams were at record- low levels on average in December, the most since June 2006, U.S. Geological Survey data show. By February, the rate of record lows was 13 percent.
About 82 percent of pastures in the state were rated poor or very poor as of March 3, compared with 52 percent a year earlier, the worst conditions since the U.S. Department of Agriculture began keeping the record in 2002. In Oklahoma, 77 percent had the worst ratings, up from 68 percent in 2012.
Every county in the two states was in some phase of a drought as of March 5, according to the U.S. Drought Monitor. Western Kansas and the Oklahoma panhandle had an "exceptional drought" rating, reflecting long-term crop losses and low-water emergencies. About 26 percent of the High Plains was in that category, compared almost none a year earlier.
The snowfall in the southern Great Plains improved prospects for winter-wheat crops that ranchers use as forage when the plants are dormant. About 24 percent of the wheat in Kansas, the biggest U.S. grower of winter varieties, was rated good or excellent as of March 3, up from 23 percent a week earlier, according to the USDA. In Oklahoma, 16 percent received top ratings, compared with 9 percent a week earlier.
"Oklahoma and Kansas wheat have shown some improvement," Brian Hoops, the president of Midwest Market Solutions in Springfield, Missouri, said by telephone. "As we get into the dormancy-breaking stage," people are becoming more optimistic because of the snow storms, he said.
The improvement in wheat conditions won’t help expand the number of cattle grazing in Kansas and Oklahoma wheat fields because ranchers would normally be taking the animals out of fields to allow the crop to grow, said Bill Bullard, the chief executive at R-CALF USA, or Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, which represents farmers who raise cattle. The lack of water also will discourage ranchers from bringing animals to their farms, he said.
"When you’ve had prolonged droughts as we have, and water sources dry up, forage is useless," Bullard said by telephone from Billings, Montana. "It’s extremely costly to pipe in water in this situation, so it’s still a serious problem across the region where the drought hit."
To rebuild water levels in ponds and streams and to improve wheat prospects, sustained rains will be needed from now until the harvest begins in May, said Mary Knapp, the state climatologist in Manhattan, Kansas. Storms in February did little for water levels, she said.
Improvement may not occur because the dry spell probably will persist through the Great Plains from Nebraska to Texas, according to a seasonal outlook from the U.S. Climate Prediction Center in College Park, Maryland.
The snowstorms during the last week of February are a "starting point" for some spring growth and will help produce forage and wheat crops, said Derrell Peel, an agricultural economist at Oklahoma State University in Stillwater. The next three months is "absolutely critical" for cattlemen, he said. Without water, they may have to further reduce their herds.
"We have the potential to have some producers that are growing forage, but still may have to make other arrangements for animals because they don’t have any water available," Peel said. "In a lot of cases, that would mean they’d be forced to sell those animals."
Kisling, the Oklahoma farmer and rancher, said he normally buys animals before November so they can eat pasture grass and the leaves off his wheat plants until March 1, shortly before he sells them to feedlots.
When only two-thirds of his wheat emerged after planting in September and October, and most was too sparse to be eaten, Kisling decided against buying any cattle this year. He estimates he would have lost as much as $130 per animal, or $195,000.
"We depend on the cattle to be our profit center, whereas the wheat usually breaks even," said Kisling, who declined to say how many acres he has. "The cattle grazing the wheat is pure income because we don’t have to pay for hay. If we have wheat pasture by Nov. 1, we’ll have cattle again."
--With assistance from Elizabeth Campbell in Chicago. Editors: Steve Stroth, Millie Munshi
To contact the reporter on this story: Tony C. Dreibus in Chicago at email@example.com.