Poor Pasture Conditions, Drought to Fuel Liquidation
Monday, May 16th, 2011
While farmers and producers along the Mississippi are dealing with the highest floodwaters in 74 years, extreme drought conditions in the Southern Plains are devastating the wheat crop and leading to forced migration or outright liquidation of livestock.
Market participants we have spoken to indicate that many producers are moving some of their livestock to Nebraska and other states up north given the extreme drought and lack of pastures. It is early May and heat is already becoming unbearable, with Kansas reporting the earliest 100 degree day in recorded history. Coming into this year our expectation was that a combination of high feeder cattle prices and excessive liquidation
in previous years would lead to a modest decline in beef cow slaughter and possibly some heifer retention to rebuild the herd.
Those expectations may be dashed, however, given the dire drought situation in the US Southern Plains. Much of Texas and parts of Oklahoma are experiencing exceptional drought conditions. Year to date beef cow slaughter in USDA region 6 is running about 28,700 head or 11.3% above year ago levels.
USDA was able to fix the issues in reporting cow slaughter levels and we note that in the last six reported weeks (through April 23), beef cow slaughter in this region has been running 14% over year ago. Drought conditions also appear to be spreading across the Southern US (region 4) but so far, beef cow slaughter there is running about 4% lower than the comparable period a year ago.
Considering current high cattle prices, producers will try their best to hold on to their animals but much will depend on the availability of feed. This is an aggregate number that provides a weighted average of pasture conditions throughout the country. USDA started reporting on pasture conditions last week and the assessment
for week ending May 8 showed that 48% of pastures and ranges in the US were in good or excellent condition. Last year, 64% of pastures were rated in good/excellent condition in early May while the 10 year average is at 50.5%.
The conditions in Texas are quite dire, with just 6% of pastures rated as good/excellent. Last year, 61% of Texas pastures were rated as being in good or excellent shape. If the drought conditions intensify and spread in the Southern and Eastern US, we could see overall pasture conditions decline further and possibly surpass the dismal situation in 2002. This could spark more beef cow liquidation and mark a shift
of the beef cow herd to Northern states. Indeed, beef cow slaughter in Region 5 is down some 22% for the year.
This in part reflects fewer imports of Canadian cows but also better feed availability given good moisture conditions last winter.
The Daily Livestock Report by Steve Meyer and Len Steiner