Drought continues to play a big role in factors impacting the beef cattle sector in many states.
Oklahoma State University Extension Livestock Marketing Specialist Dr. Derrell Peel says while drought is better in Texas and Oklahoma, those conditions in other major beef cow states might hinder the rebuilding of the cow herd.
“We have still got drought in Kansas, parts of Missouri, and parts of Nebraska. The question from the broader market is if we have reduced that overall drought picture nationally to a point where drought is not really driving the overall cattle numbers as much, certainly for producers that are caught in that.”
Missouri is facing 81 percent moderate drought or worse, versus 40 percent last year. Kansas is currently facing 82 percent moderate drought or worse, compared to 47 percent last year. Oklahoma is now at 23 percent moderate drought or worse, down from a year ago at 62 percent. In Texas, moderate drought or worse is at 31 percent, down from last year’s 93 percent.
Peel says, for now, it’s important for cattle producers to closely watch the market for signals.
“It looks to me like we are at a point now where the overall, for example, cow culling numbers might not reflect the impact of the drought nationally so much as it has in the past. Now, I say that. We haven’t really seen that yet. Beef cow slaughter, for example, is down this year, about 12 percent, that’s a sharp drop from last year. But, honestly, in terms of stopping liquidation and stabilizing this cow herd, it really needs to drop more than that.”
Depending on the location, Peel adds some producers are going to start thinking about proactively planning to move forward with rebuilding.
“We have seen so many dynamics this year. Obviously, the prices are higher, the markets are beginning to send those signals that we probably are smaller than we need to be, that we need to rebuild some, and so there is that. We have got a lot of strong markets ahead of us, not only for this year but for the next couple of years as we go forward.”
Peel says some producers may be in a position to start planning and being proactive on how to approach the market going forward.
The July round of cattle-focused reports from USDA shows drought is still impacting the number of cattle available for breeding. Bernt Nelson, American Farm Bureau Federation Economist, says the Cattle Inventory Report showed a larger decline than what analysts expected.
“In July the report estimated that all cattle and calves in the U.S. totaled 95.9 million head on July 1. This was down three percent compared to last year’s report. U.S. beef cattle came in at 29.4 million head. Now this was a 52 year low for beef cattle supplies. That’s a significant number when we start talking about beef prices.”
Placements in the Cattle on Feed report remain elevated, a signal that drought is still having an impact on cattle producers.
“This came in three percent above last year. So, this shows that placements have come up a little bit. This tells us that farmers are still putting cattle on feed. So, while our cow slaughter numbers have come down, right around 12 percent from last year, we are still seeing a relatively high number of heifers being placed on feed. This tells us that we have not yet bottomed out in the cattle cycle.”