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News 648 views last update:14 Jan 2016

Drought challenges in US offers opportunities

With drought conditions across much of the US, there are many challenges for cattle producers in the country. Grain and feed prices have skyrocketed, hay is in short supply, pasture conditions are predominantly poor, and cattle prices have dropped significantly in the last 60 days.

Some farms have received rain, many were under-stocked from last year’s drought, and several produced some hay this spring. Since most producers are grass-based and the cost of gains in the feed yards is ranging from $115 per hundredweight to $125 per hundredweight, the market is creating a situation where cattle weight gain on grass is very valuable.

The prices for calves weaned and sold in the next 60 days will likely continue to be under pressure with the lack of forage and high feed prices. However, if those 500 pound calves can be bought nearer today’s prices in the low to mid $140 per hundredweight range and marketed then at $140 feeder cattle market, then the value of that additional gain is close to $140 per hundredweight.

If the weight can be gained with grass (e.g. small grains pasture), then the margins could be significant for that operation. Even if the calves are fed on-farm instead of grazed, there are margins for the producer if the cost of the feed doesn’t go any higher than today and gains of the cattle are good.

Each producer should analyse his or her individual ranch situation when making a marketing or purchasing decision this autumn. Analyse an opportunity before selling weaned calves for the cow-calf producer or buying weaned calves for the stocker producer because there will be opportunities in this market.

Sunita Sahota

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