News Release Distributed 08/21/12

The drought choking the Midwest is hundreds of miles away, but it is having direct effects on the Louisiana cattle market.

Calf prices have dropped significantly since spring because many cattle are being sold off by producers who lack forage and hay and can’t afford the high price of feed, said LSU AgCenter economist Ross Pruitt. “There has been a little bit of a rebound in the past couple of weeks in parts of the U.S.”

Cattle producers in drought-stricken areas are facing the same decisions that producers in the Southern Plains and Louisiana faced last year – purchase high-priced hay and feedstuffs to survive or cull in order to retain part of their herds, Pruitt said.

Meanwhile, feeder cattle imports from Mexico and Canada are up, he said. And the total U.S. hay supply is lower than last year.

“While much of the country enjoyed a mild winter, hay in drought-stricken areas is being used to help get producers through the drought,” Pruitt said.

In May, the national hay supply was off by almost 4 percent from a year ago, Pruitt said. The short supply combined with increased demand from drought-stricken states has caused a jump in hay prices. The national U.S. hay price was $119 a ton in July 2011, and now it’s $143 a ton.

In comparison, many Louisiana cattle producers who received ample rainfall have good forage. “If you’ve got grass, you’re in a good situation compared to the rest of the country,” Pruitt said.

Consumers should expect to pay more for beef, he said, but any current increases are not tied to the drought.

“It’s not worked its way through the system,” Pruitt said of the drought effects. “And it will be the latter part of this year into next year when the drought impacts are reflected in the price of beef.”

Pork and poultry prices also will be higher but will likely be relatively lower than beef prices later this year into the first beginning of next year.

Parched fields of corn and soybeans in the Midwest have caused corn and soybean prices to jump.

“Feed prices are high, and they are likely to stay high for the rest of the year,” said LSU AgCenter economist Kurt Guidry.

Feed grain prices are approaching record levels, Guidry said. “The last time we saw prices this high was in 2007 and 2008.” But he said the 2008 harvest was good while this year’s corn and soybean harvests are expected to be below normal.

The U.S. Department of Agriculture’s projection for the average corn harvest nationwide is at 123 bushels per acre, Guidry said, and that has been lowered by 40 bushels from the prediction made at the start of the summer.

The corn market is expected to remain tight until the 2013 harvest.

The average soybean yield may not decline as much, he said, because the crop still has time to recover with the help of late-summer rain.

But times are not easy for Louisiana cattle producers even if they have adequate pasture and hay, according to Vince Deshotel, LSU AgCenter county agent in St. Landry Parish. “As one producer put it to me last week, his margins are the same now as they were in 1973 because of the cost of feed,” Deshotel said.

Some producers are likely to start relying more on grass-fed cattle, but the increased costs for fuel and fertilizer also add to the cost of maintaining pastures, he said. Hay suppliers in Louisiana have inventory that is ready to sell to drought-stricken areas, but hauling hay will be expensive because of the rising cost of diesel.

“We are developing a stockpile of hay, but it’s not moving yet,” Deshotel said.

Cattle producers will need new breeding stock, and that opens an opportunity for Louisiana cattle operations, he said. “There’s a tremendous demand for replacement heifers.”

“That’s exactly the attitude I have,” said cattle producer Tommy Smith, of Lake Arthur.

Smith said he will keep about 20 heifers because he expects more demand for females. He said he goes to the sale barns weekly and has seen cattle prices starting to increase.

Smith also has made changes because of the high cost of feed. He is relying on forage after planting his pastures in sorghum Sudan grass and is limiting the amount of feed for his herd.

Last year he kept 10 bulls until maturity, but this year he will limit the number to three, Smith said. “Last year at this time, I was feeding those bulls already.”