Cattle growers adapt to record high feed costs
KANSAS CITY – US producers of beef and dairy cattle have been getting creative in what they feed their animals as hay prices have persistently remained at record levels.
Ingredients have been baled, such as corn stalks and corn stover — one of the remains after corn is harvested — and combined with almond and peanut hulls, cottonseed meal and soybean meal to allow herds to graze on something nutritious other than alfalfa, which has jumped in price during the last two years of drought conditions.
“The forage situation is precarious,” said Jim Robb, director of the Livestock Marketing Information Center in Denver. Both hay production and hay ending stocks have suffered as pasture conditions deteriorated sharply during the 2012 growing season. The challenge for beef and dairy cattle producers is to control costs of forage, a necessary component of the cattle raising process, in a climate of rising prices fed by persistent dry weather across much of the United States.
“All feedstuffs have increased cost-wise,” said Katelyn McCullock, dairy and forage economist at the Livestock Marketing Information Center. “It is just finding the best combination at the lowest cost.”
The 20-year average for all hay production in the United States was 150 million short tons, she said. In 2012, the United States only produced 120 million short tons. Ending stocks in December 2012 dipped to 76.5 million tonnes from a 20-year average of 106 million tonnes.
The most significant jump in prices of hay occurred in 2010-11, when a 56 percent increase pushed hay into record territory, McCullock said. Since then, hay prices have accelerated by another 8 percent.
Conditions of pasture and range in the United States are “the worst it’s been with conditions more affected than has been typical in a 10-year span,” McCullock said. “In other years, there have been weeks of dry conditions, but the deterioration didn’t have the persistence that it currently has.”
The US Department of Agriculture, in its Jan. 11 Crop Production report, highlighted the supply issue facing cattle and dairymen.
“All hay stored on farms Dec. 1, 2012, totaled 76.5 million tons, down 16 percent from a year ago,” the USDA said. “This is the lowest Dec. 1 stocks level since 1957.”
The drought, which concentrated in the Southern Plains in 2011 and widened to the High Plains in 2012, is viewed as the overwhelming culprit in reducing hay production and hay stocks.
Highlighting the ongoing issue of less available hay, the USDA announced in mid-January it will open to emergency hay growing and cattle grazing a record 2.8 million acres of land in the Conservation Reserve Program. This move has come on the heels of a number of previous USDA actions to open lands and increase available sources of grazing.
Despite the efforts, prices of a prominent ingredient in hay, alfalfa, continues to rise. In December 2012, alfalfa was priced at $217 a ton, a record, and up from $195 a ton in December 2011, said Bill Brooks, a dairy economist at International F.C. Stone. The US imports small amounts of hay — not even a full percentage point of its total supply — from Canada and Mexico, so it is clear that the domestic market determines prices. Buyers utilize auctions and private contracts to obtain hay; there is no futures market offering price discovery.
“Prices will remain elevated at historic levels and the ability to find hay could be an issue,” Brooks said. He pointed to another current drought-related hindrance to cattle foraging: the relatively poor condition of the current hard red winter wheat crop in the High Plains. Typically, he said, cattle from the Southeast United States are shipped to Texas, Oklahoma and Kansas to graze on the gestating wheat before the animals reach sufficient size to move into feedlots.
“A lot of animals have not been transported this year because of the lack of growth in the wheat crop,” he said.
Still another likely impediment to building the domestic supply of hay, Brooks said, was the pressure on farmers to plant additional acres to corn and soybeans rather than growing hay. Expectations are for a very large corn crop on about 99 million acres in 2013. Forecasts are for a near-record soybean crop as well.
High feed costs have led to herd liquidations in the last two years estimated at between 4 percent and 5 percent of the total number of live cattle, Robb said. The USDA will release its latest Cattle Report on Feb. 1, which will offer current statistics on inventories of animals in different categories. Any drop in herd size is almost sure to be viewed as a sign of unsustainably high feed costs.
On Jan. 21, 2013, Cargill Meat Solutions reported plans to close its Plainview, Texas, slaughter plant with the capacity to slaughter 4,600 head of cattle per day, about 4 percent of US steer/heifer slaughter capacity. Cargill explained its decision as being because of “increased feed costs resulting from the prolonged drought and combined with herd liquidations by cattle ranchers.”