While this year’s drought has profoundly affected the cattle outlook, Cattle-Fax analyst Kevin Good presented some signs of hope Friday during the Cattle Industry Summer Conference in Denver.
The drought, of course, spread this year to cover much of the Northern Plains and Corn Belt, after parching the Southern Plains last year. Drought conditions ranging from moderate, or D1 on the U.S. Drought Monitor, to D4 or exceptional drought, now encompass an area containing 70 percent of the U.S. cow herd. Areas under the most severe D3 and D4 categories account for about 28 percent of the cow herd, which Good says is about equal to this time last year when the severe conditions were centered over Texas. The 2011 drought resulted in liquidation of about one million cows from three states.
Since June 1, the drought has caused a $159 increase in the cost of feed for finishing a steer, a price reduction of $168 per head for 550-pound calves, $151 reduction for 750-pound yearlings, $107 per-head reduction for finished cattle and $147 per head reduction for utility cows.
Good says climatologist Art Douglass, who advises Cattle Fax on weather trends, believes the next few months will bring wetter conditions to the southern third of the U.S., while central and northern areas will see some relief but not enough to significantly benefit crops.
Dry conditions will drive yearlings into feedyards earlier than usual this summer, but high corn prices will keep producers looking for alternatives for growing calves, and calf placements likely will be strung out over several months. Good expects overall placements into feedyards to lag behind last year’s for the next few months.
While cattle-on-feed inventories currently are up about 3 percent over a year ago for 1,000-head-plus feedlots, Good points out that inventories in smaller feedlots are well below last year. At the same time, feedlots are keeping cattle longer and feeding them to heavier weights, so actual harvest numbers are likely to drop 3 to 4 percent below year-ago levels over the next few months.
As for corn prices, Cattle Fax expects a range from $6.50 to $8.00 per bushel for the foreseeable future. The recent rise in prices has caused a pull-back in ethanol production, ethanol exports and corn exports, and Cattle Fax expects corn prices to peak early, and potentially drop back somewhat by harvest time. They anticipate a high price in the range of $8.25 to $8.50 per bushel.
Cow slaughter is higher than expected this year, but will fall short of last-year’s high levels by about 300,000 head. Cattle Fax expects cow slaughter to decline another 570,000 head next year and 630,000 head in 2014 when, if weather allows, we could return to an expansion phase.