To graze or not graze – Drought grain and livestock

By: Loretta Sorensen

A  perfect storm has been brewing in the southern  Plains over the past year. It’s centered around nearly give-away wheat prices in 2010, lack of moisture stunting this season’s wheat growth and strong cattle prices strengthening demand for cattle. The combination of factors has driven a significant number of cattle out of Texas in recent months because there are so few acres of wheat to be grazed. Producers who have opened wheat fields for grazing are keeping a close eye on both their struggling crop and the rainless horizon that’s dogged them now for several months.

“Cattle grazing wheat are either being moved now or wheat field owners are thinking about moving them, it’s that dry,” Danny Ownbey in Foard County says. “With last year’s wheat prices, a lot of people held off planting early in the season. With the lack of rain since then, the wheat is stressed. Since the cattle market is fairly high, some ranchers might be able to take animals to a grow yard and still be okay. Might not be a lot of profit in it but they’ll be able to maintain their cow herd.”

Terry McAlister ranches and raises wheat in Wichita and Wilbarger counties in North Texas. He’s running about two-thirds the number of cattle he normally would when moisture was more abundant.

“We’re always working around a drought to some degree,” McAlister says. “We’re grazing our wheat right now. Normally we’d graze till May. We may not make it that far if it doesn’t rain fairly soon. Some areas just south of us received rain recently, but who knows. We’re playing it day by day.”

Professor and Extension Economist at Texas AgriLife Extension Service Stan Bevers says the number wheat fields available for grazing already dropped over the past couple of years due to rising wheat prices.

“When wheat was $3 a bushel, grazing cattle on the crop was okay,” Bevers says. “At $7 a bushel, it was an entirely different issue. Cattle can reduce the crop and overall yield. The income cattle have to make up to compensate for that is fairly significant.”

Ownbey estimates that approximately 20,000 head of cattle graze wheat in Foard County fields in an average year. He believes current cattle numbers there range around 7,000 to 10,000.

“Some of those cattle will move out soon because the wheat is quickly deteriorating,” Ownbey says.

Even though cattle prices are currently strong, wheat producers base grazing decisions on a variety of factors, including crop insurance rates and current availability and cost of calves.

“Insurance rate coverage is at $7.14 this year,” Bevers says. “Calves aren’t that easy to find and they’re going for $65 and $75 per head more than last year. Add an uncertain forecast and it’s a complicated process for deciding whether or not to graze the wheat.”

Since grain prices climbed in recent years, ranchers face costs of .40 to .50 per pound of gain to graze wheat. If conditions in the southern Plains remain dry, cattle prices would likely weaken because a large number of producers would need to sell animals.

“This isn’t going to have a great impact on overall cow numbers,” Bevers says. “But it won’t help declining cattle numbers either.”

Wheat prices could reach record highs at harvest time due to flooding in Australia and dry, cold conditions in China. However, after last year’s price crash, southern Plains wheat farmers are not counting on firm wheat futures.

“I’ve already contracted some wheat for prices lower than the current market because I was concerned about where the wheat market would go,” McAlister says.

Ownbey expects competition for grains and grazing to continue to mount as commodity prices climb.

“We’re all competing for the same acres,” Ownbey says. “If wheat prices rise to predicted levels, we can survive on a 20-bushel per acre crop. Last year we harvested between 40 and 60 bushels per acre. But prices were so low there was no real money in it.”

Bevers says he has no answer for stockers who ask him to gaze into his crystal ball and comment on futures.

“To say that we’re living in interesting times is an understatement,” Bevers says. “There’s a lot of dynamics involved. The industry is not for the faint of heart.”

Posted in

Tagged keywords...