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Economy & Business

Drought forces the hand of cattle farmers facing sell-off

This article first appeared in the St. Louis Beacon, Aug. 1, 2012 - About a dozen or more healthy-looking breeder cows skirt the base of a large pasture hill, crowding together in the shade to escape the late-July heat. Their sides bulge with muscle and fat. Most are expected to give birth in early September, and weight is critical as they inch through the summer months.

The cows are the picture of health. The rest of the snapshot, though, is not. Above them the trees are shedding leaves. The pasture underfoot is crisp and cracked, long-since gone dormant in the inhospitable heat and drought so widespread this summer. 

Cattle farmer Bill McLaren says his property — 185 acres about 40 miles southwest of St. Louis — has only seen a little more than two inches of rain since May 5. With high temperatures during that stretch hovering routinely above 90 degrees (and often above 100), conditions have been anything but generous for farmers trying to make a living off the land.

"We've moved into desert conditions," McLaren says. Even the morning dew has long since ceased to provide any moisture. According to a crop progress report released Monday by the National Agricultural Statistics Service, 98 percent of pasture in Missouri is considered to be in either poor or very poor conditions. 

Unlike row farmers who are watching corn and soybean crops wither and burn out, McLaren still has a healthy product— about 100 breeder cows, 25 feeders, and 25 calves with 70 more expected in September. But like thousands of other small beef producers across Missouri, the cost of keeping it that way may be spiraling out of reach.

The escalating prices of feed necessary to get their herds through the drought-ridden summer and dormant winter months will likely put pressure on pocket books already stretched thin. Those who can't afford feed prices face the prospect of selling off large portions of their herds. In either case, the price of beef and the financial well-being of much Missouri's agricultural population hangs in the balance.

The feeding problem

The primary cost incurred in raising cattle is feeding, McLaren explains. Mother cows need lot of food and so do animals being prepped for sale and slaughter. 

From around April through late November, herds graze in pastures of fescue or alfalfa. They water at streams and ponds, and they cost farmers very little to maintain. Cattle typically become expensive during the the other five months, from early December to late March or so, when farmers must actively feed with hay stored for the winter or feed purchased in advance.

Many farmers are able to keep the whole cycle on their property. They grow, bale and store their own hay — a process typically completed early in the summer. Thanks to warm, dry conditions, this year's harvest was early, McLaren says, and yielded a bumper crop of hay. All looked to be going well, he says. Then things changed.

Pastures that do not normally go dormant until late in the autumn are all but finished. The dried stalks of fescue and alfalfa are too coarse for cattle to grind, McLaren says. As a result, farmers have had to dip into their winter feed months ahead of schedule.

"We've got 900 bales of hay — about a 1 million pounds," McLaren says. "That will get us through the end of February. Unfortunately, we've got to get into April before we've got grass again."

In a typical year, about 500 bales can see the herd through the winter, McLaren says. Theoretically, the 2012 harvest should almost cover two years. Instead, McLaren is feeing two and a half bales a day and has already had to purchase feed.

Even so, McLaren is one of the lucky ones, he says, with a large hay crop and feed purchased relatively early before prices could elevate too much. Still, he says, feeding the 150 or so cows in his herd costs about $1,500-$1,700 a day.

Glenn Straatmann, owner of Straatmann Feed & Transfer off Highway 100 south of Washington, Mo., says he has seen feed prices creep up as farmers begin to purchase feed they do not typically need.

"Supplies are tight so you have to pay a lot more to get the product," Straatmann says. "People have to spend more money to feed their animals."

Straatmann knows most farmers for miles around. The feed company has been in his family since 1951, according to its website, and most of the surrounding farmers rely on it for feed.

"You talk to people who are 60 years old and have never seen it like this," Straatmann says.

Should they sell or stay?

Selling off part of a herd provides farmers a quick infusion of cash and an immediate reduction in feeding costs. But with the price of beef at one of the lowest points in recent memory, those who can afford to wait may be better off, McLaren thinks.

"We've sold just a few. There are a lot of people selling right now, but we're chancing that we have enough hay to wait," he says. The hope is that as the market thins out and beef prices rise in the wake of the initial sell-off, farmers can sell fewer cattle at a higher price and better preserve their herds.

The economic effects of drought-induced sell-off with swing in two directions, McLaren says, hitting both farmers and consumers, and varying in effect in the short and long term. What's more, unlike crop farmers who have crop insurance, cattle farmers have no safety-net when profits are threatened.

Much of what has been sold so far this summer (last year's drought in Texas, Oklahoma, and New Mexico was much the same, McLaren says) has been older breeder cows whose meat is primarily sold as ground beef, leading to artificially low ground beef prices, and has yet to place much stress on the consumer.

"The markets have dropped precipitously in the last three weeks," he says. Numbers from Tuesday's cattle auction in Kingdom City, Mo., showed a little more than1,000 head sold this year, almost double the total at the same point last year. 

Those early, relatively easy sell-offs will not last, though, McLaren says, and neither will the benefits. There are only so many mother cows to be sold; and as farmers are forced to turn to younger and more productive cattle to send to slaughter, prices will rise.

"This is not going to be a ripple. This is going to be a wave," McLaren says. Though a continuing weak economy will likely keep the cost of high-quality cuts down, he says ground beef and lower-quality cuts will soar in price. 

The cost for farmers will likely be worse though. Cows are not quick to replace their ranks. A mother cow only has one calf a year, and McLaren estimates it would take roughly five years to return a herd partially liquidated back to normal. As the United States deals with herds already deeply depleted, the affect could be devastating.

For McLaren's herd, the biggest cost would be a genetic one. He has developed what he calls the "Missouri Recipe" — a carefully crafted genetic mix that has taken about 10 years to achieve. A mass sell-off could render all that work pointless.

"We've bred (the herd) to some of the best genetics in the United States. If we have to sell our genetics off, we're in a 10-year process to get it back," McLaren says.

Hoping for the best, preparing for the worst

As it has been since the start, McLaren says, it all depends on the weather. A pattern change now could still stave off the worst and salvage the summer of 2012.

According to Matthew Herring, an agronomist with the University of Missouri Extension for Franklin County, fescue often sees a period of substantial growth in the fall. That means if temperatures cool and rain returns, pastures could recover enough in the fall to mitigate a couple months of feeding costs.

That is the best case scenario, Herring says. Farmers are planning for the worst. Mitigating the risk has kept them afloat so far, according to McLaren.

"Historically these big droughts have been multi-year events. If we get into that situation, we'll have to reduce our cow numbers by half," McLaren says. 

At 57, McLaren has been around cattle his whole life and he does not expect to give it up soon. Though he no longer relies on the herd for his primary income, the cattle are important to him. His family has been raising cows for three generations. In 1936, in the height of another drought, McLaren's grandfather dropped dead pulling water from a well on a Sunday morning. 

"If we go into a drought that's an extended drought, there are people who are going to give up," he adds.

Most likely to do so are Missouri's thousands of older farmers, McLaren postulates (the average age of a cattle producer is just over 57 years old, according to the U.S. Census of Agriculture in 2007). Faced with a long herd recovery time, many, he thinks, will simply give up, sell all their cattle, and retire.

For younger farmers, the best they can do is hope and plan for the future, McLaren says. Straatmann, the feed man, agrees:

"Farmers are very positive-thinking and feel there's always better times ahead," he says. "We'll find a way through it. There's no doubt. It's just got to rain, just need rain."

Nick Fandos is a Beacon intern

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