October 28, 2012

Drought takes toll on Kansas cattle industry

The drought may have damaged the state’s corn and soybean crops most directly, but the bigger blow to the state economy comes against the much larger cattle industry.

The drought may have damaged the state’s corn and soybean crops most directly, but the bigger blow to the state economy comes against the much larger cattle industry.

Last week the U.S. Department of Agriculture reported that the number of cattle headed to feedlots in Kansas in September was down 25 percent from September 2011, the lowest for that month on record.

The USDA also reported that the number of cattle sold by feedlots to packers in Kansas was down 17 percent from a year ago, and tied for the worst month ever.

That’s the cliff in beef production that those in the industry have been expecting for months.

Drought and high temperatures burned up pastures and farm ponds in southern Kansas in 2011 and, after a wet spring, returned to afflict the whole state in 2012.

At the same time pastures grew parched, the cost of buying forage and grain shot up.

Livestock farmers reacted by thinning herds to what their pastures and wallets could afford to support.

Ken Grecian, who farms in Graham County, northwest of Hays, said his pastures could have supported 350 cow-calf pairs in a normal year. Unless the heavens open up, he said he’ll be lucky next year if the pasture can support 250 pairs.

As the grass turned brown in July, he sold 85 pairs. By the second week of August, he decided to wean all of his calves and sell them.

“I’ve been at this for 40 years, and this is definitely the worst I’ve seen,” Grecian said.

Frank Harper, president of the Kansas Livestock Association and a cattle farmer in Sedgwick, said it’s a bit of carrot and stick. Farmers faced wilting pasturage and high grain costs on one side, and high prices and big profits for selling their calves on the other side.

“I know guys who have had to liquidate a quarter to a third of their herd,” he said.

It’s no easier for feedlots, which are squeezed by high costs for grain and the high cost of cattle.

Feedlots were swamped in July and August, but once that wave went through, there isn’t that much behind them. The numbers show the supply of calves is dropping substantially.

The recent drops come on top of a longer-term decline in the number of cattle as the amount of beef eaten by U.S. consumers has drifted down.

The result: more feedlot space than cattle.

The Hays Feeders feedlot will close early next year after all the cattle are hauled away, although its owners have said they hope to reopen when the economics improve.

Some of the company’s 16 employees will oversee the closed property, while others will transfer to other feedlots.

The drought is really hurting the feedlots, said Todd Allen, president of Cargill Cattle Feeders, which has five large feedlots across the region.

“It’s going to be very difficult for the feedlots,” Allen said. “We already had overcapacity and a shrinking herd.”

The future depends on when the rain returns.

If rainfall returns to more normal levels next year and pastures green up, cattle farmers will start holding back female calves to develop into future mothers.

What makes the rebuilding a cattle herd difficult is that it takes three to five years to start seeing that rebound. During that time, feeder cattle and beef will be in tight supply.

That means high prices for feedlots, high prices for packers and high prices for consumers for at least a few years, Allen said.

If the drought continues, more calves and heifers will go to market, further shrinking the overall herd. That will ease the short-term shortage, Allen said, and help contain prices for consumers, but it would make the longer-term shortage even more severe.

Either way, it puts pressure on an already very efficient supply chain.

“Like any commodity industry, you have to be one of the most efficient producers to survive,” Allen said. “Unlike with row crop producers, there isn’t any federal crop insurance. Producers have to be in the top 25 percent (low cost) to thrive.”

Related content



Editor's Choice Videos