Natural disasters just sap the optimism out of everyone they touch. But drought can be especially cruel. It lingers for months, sometimes years. And recovery can take even longer.
America’s heartland has become a rain-free zone through much of the summer of 2012, with triple-digit temperatures baking the green out of anything a cow might eat. The National Drought Monitor for the week of July 26 showed the largest one-week jump in extreme drought growth during the report’s 12-year history.
Nationally, drought conditions increased for 10 consecutive weeks, with more than 63 percent of the contiguous United States considered in moderate to exceptional drought. Specifically, 1,369 counties across 31 states have been declared drought-disaster areas.
In a statement, Brian Fuchs, author of the Drought Monitor, said, “We’ve seen tremendous intensification of drought through Illinois, Iowa, Missouri, Indiana, Arkansas, Kansas and Nebraska, and into part of Wyoming and South Dakota in the past week.”
That’s a pretty big swath through corn country, but those states also held about 10.6 million beef cows on Jan. 1 of this year, or about one-third of the nation’s total beef cow herd.
Meteorologists at The Weather Channel also noted that the growth of extreme drought in the United States expanded during the fourth week of July by 219,000 miles, an area slightly larger than the states of California and New York combined.
The enormity and severity of this year’s drought is a devastating blow to America’s beef industry. We began the year with the lowest inventory since 1952 at 90.8 million head, and the calf crop over the past year has been the lowest since 1950.
The year began with prices for calves and feeder cattle surging higher and ranchers optimistically planning to expand their herds. That just can’t happen now, and that concerns players in all segments of our industry.
For instance, the July Cattle on Feed report indicated that occupancy rates have dropped to about 64 percent. That means 36 percent of the feedyard pens are empty. The drought is expected to force more cattle into feedyards, but our total herd will be even smaller when those cattle go to market.
Analysts agree such a scenario will set up a scramble for available feeder cattle. Good for prices? Maybe, depending on how high the drought drives corn prices. And how much risk cattle feeders are willing to take following a summer in which per-head losses have exceeded $250.
Packers are also watching this drought with more than just a passing interest. It’s no secret they’ve got more slaughter capacity than cattle coming through the pipeline. Just like feedyards, packers can’t turn a profit on low numbers or shuttered plants.
Retailers? They’re probably fine since our friends in the pork and poultry industries will gladly increase production to fill any meat cases beef producers can’t. And when beef loses that market share, can it ever be regained?
Tough questions for an industry facing a horrific natural disaster that seems far from over.
Of course, it will rain again. And beef producers will be able to gradually build their herds again, though such plans may now be a few years down the road.
Drought has limited the options for ranchers, which calls for a re-examination of your business plan. Were you prepared for a drought? Will you be better prepared for the next one?
Maybe this drought has forced you to take some actions you were delaying because cattle prices were so good. Has your herd culling been deep enough in the past? Will your herd’s genetics be improved when you’re finally able to restock?
I know, it’s hard to make lemonade out of the lemon we’ve been dealt this year.
Here’s wishing you a three-day rain.