NALF Report | September 2011

2011 Weather Will be a Game Changer for All of Us

Depending upon which region of the country you live in, you have most likely experienced extremes in weather conditions as we head into the fall of 2011. No doubt, people in the South, primarily through Texas, Oklahoma, Southern Kansas, Southern Colorado and Missouri, are suffering through some of the worst drought conditions in their lifetimes.

Regions farther north started the spring with high snowpack and wet conditions that led to flooding in the northern and eastern regions, which in turn led to slow pasture growth and grass development.

As we all recognize, this will have a major impact on cattle operations throughout the plains states in terms of cattle health, performance, feed costs, and the availability of feed through a big section of the country.

All this comes at a time when the nation’s cowherd continues to decline, causing a shrinking feeder cattle supply. Extreme drought through the southern third of the country has increased beef cow slaughter by 18 percent over a year ago. Heading into the latter part of the year, one can assume 2011 will be counted as another year of liquidation for the beef industry. The supply side of the market will remain friendly over the next several years given the fact the total U.S. cattle inventory is at level that hasn’t been seen since the 1950s.

What are the implications for Limousin breeders given the record high prices for cattle and the continual liquidation of the cowherd? No doubt, production costs are already high given the high cost of fuel, feed and utilities. Operating costs will not get any cheaper given equipment cost and repairs and added labor expenses. Yet, given all of these factors, one must weigh the cost of replacement females when involved in a seedstock operation and the value they have in terms of the established genetics the Limousin breed has improved upon the last several years.

For individuals suffering through extreme drought conditions and experiencing high roughage and forage costs, the decision to maintain their herd will be tough. Some producers in the South that are already devastated by drought conditions flat-out do not have any roughage available unless they can afford to freight hay and other roughage sources in to maintain their herd. Hopefully these folks will get a much needed change in weather conditions to get some relief, but most likely it will be too late for this crop season.

As always in the cattle business, one area’s misfortune represents an opportunity for another segment’s gain. For those operations that can find a way to maintain their herd through extreme weather conditions, demand for bulls and replacement females will most likely increase, driving prices higher due to the tight supply of cattle over the next 12 months. Hopefully, Limousin breeders through the southern part of the U.S. can find a way to maintain their herds and the established genetics that they have built upon.

Despite declining cattle numbers, beef production levels have held up due to large cow and heifer slaughter levels over the last few years, along with increasing slaughter weights. Once weather moderates and conditions return to normal, higher prices will be the economic signal for the cow-calf producer to stop liquidating and start expanding. When this occurs, commercial cow-calf operations will need a quality supply of sires and replacement cattle from seedstock operators.

Limousin cattle have tremendous advantages with new marketing opportunities available to the industry that we have discussed in previous articles, (natural programs, NHTC, etc.). We need to encourage breeders in the Limousin business to hang on and maintain their cow base if at all possible through these tough conditions. There is a bright future for our cattle and the people involved in the business. The cattle market will most likely remain strong over the next several years, yet it will be required to do so for most cattle operations given the rising cost of production whether it is continued high feed costs or fixed costs of production.

Southern states like Texas and Oklahoma represent a large share of the nation’s cow herd. In fact, Texas is home to nearly 16 percent of the total cow herd in the U.S.! Hopefully, current weather conditions won’t persist for our good neighbors to the south. Given the present situation, you can bet beef cow inventories won’t have an opportunity to expand for another year or two.

There is light at the end of the tunnel, yet it sure hurts to look for it given the conditions people are currently battling in the south. In the meantime the rest of us will continue to pray for rain and relief to our friends being affected by conditions out of their control.

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