Severe and extreme drought continued throughout much of America’s major cattle-producing states during September, and the
effects will linger well into next year.

Fall grazing prospects are bleak in most areas, and wheat pasture on the High Plains is not likely to develop except for irrigated fields. The lack of fall grazing can create a major impact on production trends for the next several months. Stocker operators who bought cattle in anticipation of fall grazing, will be forced to find alternative feed or liquidate their cattle. Those who haven’t purchased, may stay on the sidelines until rain changes the outlook.

One major impact could be earlier placements of cattle on feed. Such a trend could delay the long anticipated reduction in total on-feed numbers that have been a burden on the market this year. Longer-term, early placements could mean that when beef production declines next year, due to smaller on-feed numbers, the decline could be even more dramatic.

That scenario looks good on paper, but historical data suggest that most marketing holes tend to fill up when they’re anticipated for several months. Still, the displacement of stocker cattle that normally graze fall pastures is likely to have an impact on next year’s fed cattle market.

Many stocker operators may shift to backgrounding their cattle on grain this fall. Corn and other feedgrains are at attractively low levels, which seems to be the only silver lining found during this year’s drought. Cow-calf producers may also utilize relatively cheap grains to winter some of their cows and maintain their herds, rather than liquidating.

Even with low grain prices, winter feed and forage will be in short supply. The drought will also delay any significant shift toward expansion. Strong calf prices at this stage of the cycle typically encourages cow-calf producers to begin rebuilding their herds, but ranchers in many areas are more likely to contemplate which cows to cull rather than how many heifers to retain. And many producers will cull deeply just to be sure of adequate grazing next spring without damaging pastures.

Despite the drought, most cow-calf producers should expect to see good profits this year. Calf prices probably won’t trend much higher, but they should trade in the $105 to $110 range for 550-weight steers this fall. Analysts believe cow-calf operators will be highly profitable for the next 3 to 4 years, and possibly longer if beef demand growth continues. Calf producers should maximize profits by keeping costs under control and production high during this period—drought permitting.