The economic impact of this year’s drought on Arkansas cattle farmers was at least $128 million and more losses are likely, according to a study released Thursday by the University of Arkansas Agriculture Division.
The $128 million estimate is conservative, said the study’s authors, Michael Popp, a professor of agricultural economics at the University of Arkansas in Fayetteville; Nathan Kemper, trade adjustment assistanceprogram coordinator for the Southern Risk Management Education Center; and S. Aaron Smith, a doctoral student at the University of Arkansas.
The loss breaks down to $141 per head of cattle.
Herd sizes vary widely in Arkansas, but at the average size of 35 cattle, the loss equals about $5,000 per ranch. The losses include the increase in cost of hay purchased to feed cattle because of the drought, the reduced income from the sale of hay,and decreased revenue in calf sales because lighter-weight calves were sold.
The production of cattle and calves in Arkansas was valued at $485 million in 2011, meaning the estimated losses cited by the report account for about 26 percent of the industry in Arkansas.
The study covers drought conditions from August 2011 to July 2012.
The drought’s effect on cattle ranchers in the state is hard to compare with droughts in previous years, Kemper said in an interview Thursday. But this drought is the worst in the state since 1988 and possibly as far back as the 1950s, he said.
The drought caused Pope County rancher Matt Hoien to sell 50 cattle, or about 20 percent of his herd, this year.
That isn’t uncommon, said Hoien, whose farm is about 5 miles north of Atkins. But this year, he didn’t replace those cattle as he usually does.
“I didn’t replace them this summer, and have no plans to do so, because of how short I am on feed,” said Hoien, 36.
Instead of the cattle grazing on his ranch, Hoien had to give them feed all summer, initially some winter hay and some of his first hay cuttings from this year.
“Now I’m already into my winter supply and I don’t have near enough,” Hoien said, adding that he’s getting discouraged after enduring drought conditions last year, too.
The study said that 3 percent of the state’s cattle ranchers say they plan to sell all their livestock.
It is possible that those cattle producers are quitting the business, Kemper said.
“You would assume that those 3 percent are never coming back,” he said.
It won’t be possible to determine how many cattlemen have quit for another year, he said. The Southern Risk Management Education Center that Kemper works for is operated by the UA Agriculture Division and funded by the U.S. Department ofAgriculture’s National Institute of Food and Agriculture. It coordinates risk-management education programs throughout the South.
Travis Justice, a senior economist with the Arkansas Farm Bureau, said the severity of this year’s drought is multiplied because of a less wide-ranging drought in the state in 2011.
“Some sections of west Arkansas have had a drought two years in a row,” Justice said.
The state had about 3 percent fewer cattle last year than in 2010 because of the 2011 drought, Justice said. The cattle population could decline by 5 percent to 10 percent this year, he said.
The drought began this year in May.
“It was important to help the beef cattle industry quantify its losses,” Popp said in a prepared statement. “Getting a handle on the reasons and the costs is the first step to helping the industry recover.”
The report focused on immediate losses that could be quantified. Those included an almost 60 percent increase in the cost of a 1,000-pound bale of hay to $58.56 and losses attributed to calf sales. The calves were weaned early because of a lower availabilityof forage. Fewer calves were raised because of a lack of feed.
Cattle producers had to buy an additional $65 of hay per cow because of the drought, the report said.
Other costs were not quantifiable, it said.
The drought caused producers to change their herd management, Popp said in a statement. The survey found that 73 percent of cattle ranchers sold calves earlier than normal; 49 percent reduced their herd size by selling more mature cows; 41 percent plan to sell more mature cows this fall; 41 percent sold replacement heifers that would otherwise replace mature cows; and 30 percent plan to sell more replacement heifers this fall.
Losses by cattle producers also carry over to other industries, the report said.
The health and social services industry experienced the most losses because of the drought’s effects on cattle producers, Kemper said in a prepared statement. Those were followed by retail trade, finance and insurance, wholesale trade real estate and rental, Kemper said.
“In rural communities where the cow-calf sector makes up an important part of local economic activity,the impacts to main-street businesses are substantial,” Kemper said.
The study was conducted in August by distributing surveys to cow-calf producers. The results were based on 545 responses from 58 of the state’s 75 counties, with 406 responses that answered every question.
Drought conditions in Arkansas remain virtually the same as a week before, the National Drought Mitigation Center said in its weekly report Thursday.
A section of Northwest and north central Arkansas, or about 8.7 percent of the state, remained in exceptional drought - the highest level.
National Weather Service meteorologist John Lewis of North Little Rock said that even though there was little rainfall in the state last week, drought conditions did not change because vegetation is becoming dormant and does not consume available water like it did in the summer.
“We’re going to see a lot more of the same as we head into fall and winter,” Lewis said.
Information for this article was contributed by Kenneth Heard of the Arkansas Democrat-Gazette.
Front Section, Pages 1 on 09/28/2012