Ernie Morales looks out his office window at Morales Feedlots and thinks of plans that could have been. Plans that unrelenting drought put on hold.
Morales believes the current respite in feed costs is just that – a respite. In light of that belief, he had planned to step up his pasture program this year in an effort to put more pounds on cattle at lower cost before their trip to the feedlot. “But without normal rainfall, that takes that out of the equation,” he says.
Morales is owner of the feedlot and ranching operation near Devine, TX. “We haven’t had significant rain since last summer,” he says, which makes it difficult for ranchers to do much of anything except try to hang on. “You can’t expand if you don’t have any pasture for cattle.”
Some ranchers in the area are liquidating, he says, rather than continuing to try to feed their way out of the drought with high-priced hay, or irrigate their way to green pastures with valuable and high-priced water.
“That’s what we’ve done,” he says of the liquidation. In normal years, he’ll try to have roughly 30% of his feedyard capacity turned out on pasture. That’s 3,000-4,000 stockers on pasture year-round, giving him a steady inventory of cattle ready to go on feed. “But it’s just not there anymore. We’re probably lucky to have 10%.”
At the feedyard, they’re just trying to get more efficient day by day and hang on to as much equity as possible while they ride out the effects of high-priced inputs from 2008. But he sees better times in 2009.
“Obviously, (the industry has) to get through our inventory of higher-priced cattle that consume higher-priced feed from corn that was contracted.” Once that happens, he says, given the forecast for both corn and feeder cattle to trade below last year’s levels for at least the immediate future, “I think it’s very possible we could see some profitability.”