The deterioration of the corn crop and pastures in the last 6 weeks is not news at this point. At the same time, drought effects on cow slaughter and cattle feeding have become more apparent. Reports indicate that some drought-impacted corn is being ensiled. To the extent corn is being ensiled, the ensilage could provide an alternative for growing feeder cattle to feedlot-placement weights. Note that some form of feed will be necessary to carry feeder cattle from when they are removed from drought-damaged pastures until the silage has been in silos long enough for the fermentation process to reduce the nitrates in the corn-plant material sufficiently to keep from poisoning the cattle. Hay supplies also are reduced. Emergency grazing and haying of Conservation Reserve Program acreage may offer another option for farmers.

Weekly federally inspected cow slaughter has increased dramatically since early June 2012, with the increase in beef cow slaughter largely in response to the rapidly deteriorating pasture conditions. As a result, weekly average federally inspected 90-percent lean cutter cow dressed prices, which remained within $5-$6 per hundred pounds (cwt) of their late-May highs, have declined $15 per cwt to around $150 per cwt.

…And Puts Cow-Herd Expansion Plans on Hold

USDA, National Agricultural Statistics Service’s (NASS’) July Cattle report indicated that expansion plans have been temporarily suspended as there were no year-over-year changes in beef replacement heifer inventories and dairy replacement heifer inventories declined 2 percent largely as a result of depressed milk prices and increasing feed prices. Further, beef heifer inventories may have declined since the July 1 survey as a result of subsequent drought effects on pastures. To the extent drought has reduced producer heifer-retention plans, it likely understates the full extent to which heifer retention has been put on hold and will likely show up as continuing liquidation in the January 1, 2013 inventory report.

In 2011, drought thwarted Southern U.S. producers’ plans for cow-herd expansion. Farther north in 2011, producers held heifers and cows for herd expansion and, to some extent, possibly kept extra-large inventories in light of the significant herd reductions underway in the Southern United States. In 2012, those northern inventories may have shrunk in response to the Central and Northern Plains and Midwest drought, which, combined with continued liquidation in the South, have exacerbated the inventory situation.

Ironically, based on estimates of the total number of beef heifers entering the herd (see http://www.ers.usda.gov/data-products/livestock-meat-domesticdata. aspx#26182), the national beef-cow herd appears to be getting younger on average. The number of beef cows reported on January 1 has declined every year since 2006. The January 1 inventory of beef heifers intended for replacements has also declined every year since 2006, except for the January 1, 2012 inventory, which was up 1.4 percent. The ratio of total January-June beef-cow disappearance reached 6.7 and 6.6 percent in 2010 and 2011, respectively, while, this year, disappearance was 6.3 percent, near the average for 2001-10. Combining these inventory dynamics, the number of beef heifers entering the beef-cow herd in January-June was almost 2.6 million in 2011 and 2.5 million in 2012, the largest January-June increases since at least 2001. The proportion of beef heifers entering the beef-cow herd for January-June reached 50.5 percent in 2011 and 48.1 percent this year, the two highest proportions in the last 11 years (average of 41.9 percent for 2001-10). As a result, producers appear to be replacing beef cows with younger beef heifers, which are slightly cheaper to maintain, but at the possible expense of pounds of calf for sale due to the heifers’ productive immaturity.