Dakota Cattle Selloff Continues Amid Drought

June 23, 2017 10:20 AM
 
reduced forage due to drought in North Dakota

It’s so hot and dry in northern parts of the U.S. that cattle ranchers are frantically selling off animals to trim their herds as hay crops and pasturelands wither.

There were so many cows, calves and pairs of the animals available for sale at a recent livestock auction in Aberdeen, South Dakota that bidding lasted 15 hours, said Steve Hellwig, the co-owner of Hub City Livestock Auction who chanted the rhythmic repetition of prices until 1:30 a.m. Sales for the day reached a record 2,480 lots, or more than three times the normal weekly total.

Drought conditions have swept the northern reaches of the Great Plains this year, parching grazing pastures and grain fields while demonstrating how quickly severe weather can upend commodity markets. Prices for spring wheat, grown in the area, have soared 16 percent this month as volatility jumped. While the rush of cattle to auctions probably won’t have an immediate impact on U.S. meat supplies, some of the ranchers who are being forced to sell their animals early or pay more for feed may see their incomes suffer.

“Probably more than 70 percent of the cows that sold would have ended up as hamburger later this year -- the drought sped up the liquidation,” Hellwig said. 

Emergency Grazing

The dry conditions spurred the National Farmers Union along with groups from Montana, North Dakota, South Dakota and Minnesota to send a letter to U.S. Agriculture Secretary Sonny Perdue this week requesting that land in a federal conservation program be released for emergency grazing or haying. As some ranchers trim herds, others are driving hundred of miles to find hay, the letter said. At the start of the year, the four states held about 10.7 million cattle, or 11 percent of the national cattle and dairy herd, government data show.

About half of South Dakota, two-thirds of North Dakota and a quarter of Montana are in moderate drought or worse, according to U.S. Drought Monitor data as of June 20. While some recent showers have eased parched conditions in North Dakota, there’s little rain expected in the next few weeks for most of the northern regions, said Brad Rippey, a meteorologist with the U.S. Department of Agriculture in Washington.

Some cattle have been sold to ranches in Wyoming and Nebraska, where grazing conditions were more favorable, said Tim Petry, a livestock marketing economist at North Dakota State University. Better pastures in the rest of the U.S. will also limit the impact of increased cattle auctions on meat supplies and prices, he said.

Limited Consumer Impact

“Other parts of the country have very excellent conditions, so it’s likely they have been selling fewer cows because there’s herd rebuilding,” Petry said. “So far, it really hasn’t increased beef production to affect the consumer at all.”

The  USDA’s monthly cattle-on-feed report on Friday may give the market a first indication of the number of animals being sold. Some calves sold from northern states may head to feedlots earlier than usual, where the animals are fattened on grain until ready for slaughter, said David Anderson, livestock economist at Texas A&M University.

Analysts surveyed by Bloomberg, on average, expect that 2.08 million cattle were placed in feedlots in May, up 10 percent from a year ago.

The USDA figures won’t yet account for June placements, which could post an even bigger jump if auction sales are any guide.

In eastern Montana, more than double the amount of cattle were sold at auctions at Sidney Livestock Market Center when compared with a typical June, according to Tim Larson, the manager. Most farmers in the area have enough grass for the summer, while persistent dryness could cause a shortage of the hay supply that animals rely on in the winter months.

“Come October or November, that’s where we’re going to see substantial numbers and things change,” Larson said.

--With assistance from Brian K. Sullivan

To contact the reporters on this story: Megan Durisin in Chicago at mdurisin1@bloomberg.net, Jeff Wilson in Chicago at jwilson29@bloomberg.net, Sydney Maki in Chicago at smaki8@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Patrick McKiernan

©2017 Bloomberg L.P.

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