The cost of drought for beef

Consumers focus on the cost of food, but beef finishers will pay

While mainstream media sources tend to focus on retail increases in the cost of food, and especially meat, livestock producers are looking at grim situations for inputs on their farms. The Kansas City Federal Reserve rounded up estimates of the situation for a recent special report. According to the Fed report released in August, 70 percent of all beef cows are in states with pasture conditions rated as poor to very poor.

“With two-thirds of U.S. hay production areas experiencing drought, alfalfa prices have jumped 15 percent since May. In an attempt to limit losses, ranchers weaned calves earlier than usual and increased the placement of feeder cattle into feedlots. Combined with the increased shipments of feeder cattle from Mexico, the influx of cattle into feedlots contributed to a 12-percent decline in feeder cattle prices since mid-June.”

Numbers from the Livestock Marketing Information Center show cow/calf returns have dropped by more than $100 per cow since May.

Meanwhile, break-even prices spiral up like so much hot air. According to the Fed, feedlots are under financial stress from feed costs as soybean meal, corn gluten and dried distillers grains jumped more than 25 percent from May to late July. During the same period, cattle prices fell more than 15 percent as seasonal price declines weighed on the market. The Fed report predicted trouble in feedlots for the foreseeable future:

“Combined with escalating feed costs, USDA expects feedlot operations to lose more than $200 per head this fall.”