Thinner herds bode ill for beef prices

Drought sell-off this summer now creating shortfall

Brook Scates with the Farmers Livestock Auction in Springdale tags cattle Thursday as they are checked in for auction.
Brook Scates with the Farmers Livestock Auction in Springdale tags cattle Thursday as they are checked in for auction.

— Record-high prices are forecast for cattle headed to slaughter in 2013 as a result of prolonged drought conditions in the nation’s midsection.

Cattlemen in Arkansas and other affected regions continue to shrink their herds because of a lack of hay and grass to feed them.

The drought “made us sell a lot of cattle two to three months early,” said Harold Sargent, president of Farmers Livestock Auction in Springdale. Calves that should be selling now, he said, were sold in June and July.

A typical sale this time of year at the auction would be 1,500 to 1,800 head of cattle, Sargent said. Last week, about 1,000 were sold.

A study released last month by the University of Arkansas System Agriculture Division found that drought has cost the Arkansas beef cattle industry $128 million and projected that losses could go higher. Of the ranchers surveyed, 3 percent said they intended to sell all of their livestock.

Authors of the study said the $128 million loss “should be deemed a conservative estimate of the direct impact of the drought on cow-calf producers’ income.” The drought cost to producers was estimated at $141 per head.

Benton, Washington, Carroll and Madison are the top beef-cattle counties in Arkansas. Other leading beef counties are Boone, White, Hempstead, Independence, Logan and Faulkner.

Travis Justice, executive director of the Arkansas Beef Council, said last year’s drought had already led ranchers to reduce cow herds and that this year’s drought triggered an increase in cows sent to slaughter.

“So there’s no doubt we will decrease the herd again this year and next year, resulting in lower beef production,” he said.

The key question, Justice said, is how much of the influx of cattle going to slaugh- ter simply happened early because of the drought, and how much of it represents herds being liquidated and ranchers exiting the business.

“We’ve heard and we’ve seen both,” he said.

Justice noted that the number of cattle sent to feedlots continues to decline, an indication that the calf supply is dropping and that the rising price of corn is putting a damper on the industry. Those conditions point to higher beef prices in stores, he said.

According to the Beef Council, Arkansas ranks 17th among states in production of cattle, with about 1.8 million head raised on 30,000 farms. Average herd size is 29.

The state has about 4.5 million acres of pastureland and an additional 1.3 million acres in hay production.

Robert Seay, the Benton County agriculture extension chairman for the UA System’s Agriculture Division, said that in addition to unfavorable weather conditions, hay and grass producers are still adjusting to a court-ordered moratorium on the use of poultry litter on pasture and hay crops.

The order resulted from a lawsuit filed by Oklahoma over phosphorus and bacteria levels in the Illinois River.

“That was the main cog in the wheel of forage-based livestock production,” Seay said. “The bottom line is, we’re not working at the level of efficiency we once achieved. At one point, Northwest Arkansas could keep more animals per acre than anywhere else in the nation.”

Since then, producers have tried alternative commercial fertilizers, Seay said, adding that the cost has been prohibitive for many, and the results were disappointing during the drought.

“We’re not in a sustainable situation right now. The economics simply will not pencil out to keep the same number of head as they did 10 years ago,” he said. “To me, that’s the big picture of what has changed. It’s going to have a very, very long-term impact on Northwest Arkansas.”

The region has been in a drought pattern since June 2010, Seay said, adding, “we still don’t have any subsoil moisture.”

Many of the cattle that originate in Arkansas and other Southeast states are destined eventually to feedlots on the high plains, where irrigation provides plentiful water for corn and other feed grains and feedlots get the animals up to slaughter weight. Major packing plants also are in the region.

“Cattle are going to the feedlots earlier,” said Scarlett Hagins, a spokesman for the Kansas Livestock Association. “Typically they’re coming from the same sources, and we get quite a few from the Southeast states. Some have had to disperse their herds, especially from the Texas area.”

Hagins noted, however, that the U.S. cattle herd as a whole is the smallest since the 1960s, so there are fewer cattle to place on feed.

“They’ve got a place to put them. Mostly, they’re struggling to find cattle,” she said of feedlots.

Regions to the southwest have suffered even worse drought conditions, Hagins said, and ranchers have thinned their herds significantly.

Kent Reading of I-40 Livestock in Ozark said many ranchers sold their cattle in July and August, knowing then that grain prices were too high and they couldn’t afford to keep them. Now, he said, in a normal year his facility should be handling 1,000 to 1,500 head per week.

“We’ve already sold those cattle,” he said, and recent auctions are drawing 700 to 900 head for the Thursday auctions. He said he intends to continue with once-a-week sales unless he sees “drastic, drastic reduced numbers.”

“A lot of people who sold out may not get back in. And there’s not really the young people getting into the cattle business,” Reading said. “It’ll be spring before people start buying back and build their herds up.”

Business, Pages 73 on 10/28/2012

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