Cattlemen learn to thrive in the midst of drought
Even in the depths of lingering drought, cattle producers have persevered. Hard choices have been made. Cows have been culled or relocated, and feed costs have skyrocketed. But the tide is turning—the drought has eased in some areas, the herd has been whittled down to the top genetics, and consumers are steadily demanding beef at the table.
"The beef herd is smaller now than it would be cyclically because of feed prices and drought," explains Derrell Peel, beef cattle economist at Oklahoma State University. "If Mother Nature cooperates, we’re ready to see an extended rebuilding period."
Be patient; it will take time. "Because of the limited number of animals in the herd and limited supplies of heifers for retaining, it will take the rest of this decade to get back to a level where we can think about expansion," he says. "It will be 2017 before we recover the liquidation from the last two years of drought. Beyond that, I suspect the beef cow herd needs 2 million to 4 million head, in addition to the numbers we have today."
The upside to drought. With every challenge comes an opportunity, even for those blessed with moisture this year.
"There a few sideline opportunities that come with a drought. It causes customers to cut back on their total numbers, and supply and demand kicks in. The market has been very generous to the cow-calf producer in the last two years," says Steven Lastovica, co-owner of Milano Livestock Exchange in Milano, Texas, and owner of a purebred Angus operation.
"The higher prices are helping manage the additional feed costs we’ve incurred. Several of our customers have cut back on their stocking rate, but in terms of the total dollars they receive, it’s as much or more than what they got prior to the drought of 2011," Lastovica says.
"As we think about the steps to recovery, first is evaluating carrying capacity and pasture health," he adds. "The hardest thing is to look at your grasses and determine how much damage has been done. You may not even know how much damage you have until spring. Our native grasses survived the drought the best."
Once again, Mother Nature is key to that assessment. "Our weather has been anything but normal this year," he says. "Once you go through a drought, the thought is still in the back of your mind—are we setting up for another drought? You lose confidence in seasonal weather patterns. It’s hard to decide what to do—fertilize pastures or wait for a rain? We ask these questions in agriculture all the time, but your entire operation is on the line.
"We have to make an assessment of where we are with grass and how much capacity we can carry comfortably without hurting the forage long term," Lastovica says.
Good management must also continue. While producers may be tempted to save money on weed control costs, killing weeds gave the remaining grass a competitive advantage when water and nutrients did arrive, he says.
Right ways to restock. Culling poor performing cows and selling heifers gave many producers a cash flow boost just when they needed to purchase more feed.
Moving forward, cow-calf producers should look to take their herd to the next level. "When you look at the drought and all the difficulty it has placed on this industry, it does give us an opportunity to repopulate with better genetics," adds Tom Brink, president of J&F Oklahoma Holdings Inc., which is the cattle ownership arm of JBS Five Rivers Cattle Feeding.
"That’s something that everybody benefits from," Brink says. "From the feeding and packing side of the industry, we want to encourage producers to think hard about making an investment in good genetics."
At the Beef Improvement Federation meeting in June, Brink shared that the top 10% to 15% of cattle performers added an additional $85 grid value through higher average daily gains. With more than 70% of packer profitability coming from the value-added side of their business, cattle that grade select are not likely to turn much profit.
"There not much margin in a commodity business, and average cattle are a commodity business. The better cattle, the ones that have strong gains and conversions in the feedlot and grid well, have the potential to make everybody happy," he says. "The drought, while it’s been hard on everybody, does give us a chance to refuel our genetics."
"We encourage producers to have a breeding plan and have the discipline to stay with it. It takes time," he says.
Producers who have extra income from cull cow sales and a smaller herd to feed this fall should consider buying better bulls. "That’s a practice that I would strongly encourage," Brink says. "Invest in the best bull genetics that you can find because that is definitely going to pay dividends for a long time."
Despite the obstacles, stand tall in days ahead. Protect your core investments and be ready grab ahold of opportunities as they come.
What It Means To Me
- Every cattle producer is a grass producer first—determine your stocking rate, control weeds and manage other pasture inputs accordingly.
- Cull cows that will not meet your long-term breeding objectives.
- Feeders and packers are more willing to purchase high-quality, uniform cattle than a group of commodity calves.
- Take advantage of high cattle prices to invest in better genetics for the future.
Maximize the Herd
The Maximize the Herd Series equips cattle producers with the specific information they need to steer their herds to the next level of profitability. Here’s what is in store:
1. Opportunity with Drought
2. Buy Bulls for the Long Term
3. Raise Heifers to Be Better Cows
4. The Best Forages for Your Cattle
5. Handle the Herd with Care
- September 2013