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Drought-Ravaged Producers Don’t Plan to Quit Business

Drought-Ravaged Producers Don’t Plan to Quit Business
Ranchers are a resilient group; we don't give up easily. An exclusive BEEF magazine reader survey shows expansion in the North, and hope and faith for better times in the South.

"Worst drought in history.”

“Acquired more grass.”

Those cryptic answers – the first to a question on why respondents retained fewer heifers than normal, and the second to a question on why respondents retained more heifers than normal – are perhaps the best characterizations of a year in which cattlemen saw both the worst and the best that Mother Nature can throw at them.

Those questions and more in regard to the drought that’s been described as “a game changer” were part of BEEF magazine’s latest quarterly email survey of readers. In early December, BEEF emailed readers in selected states about their actions in fall 2011 regarding management of their calves, heifers and cows.

Surveyed were readers identifying themselves as cow-calf producers operating in the states of Arizona, New Mexico, Oklahoma and Texas in the South; and Montana, North Dakota, South Dakota and Nebraska in the North. The survey’s intent was to obtain a representative sample of responses from producers in the drought-devastated South to contrast with responses from producers in the ample-moisture area of the North.

A total of 6,600 surveys were sent, which produced a total of 264 useable completed surveys, for an effective response rate of 3.9%.

Of total respondents (Figure 1), 70.1% reported experiencing drought conditions in 2011, while 29.9% escaped the scourge of short moisture. Of southern respondents, 98.9% dealt with dry weather in 2011, while a lucky 1.1% escaped the effects of drought. But that dry weather extended north, with 6.2% of respondents in the “wet” states indicating they dealt with drought in 2011.

Heifer retention

The results tell a tale of two extremes. The majority of respondents said they typically retain between 6% and 20% of their heifers, with 24% indicating they keep 26% or more (Figure 2).

However, 53.4% of respondents in the drought-affected area of the survey indicated they retained fewer heifers than normal in 2011. Showing the resilience and optimism that runs deep in cattle country, 13.5% of respondents from the drought states said they kept more heifers than usual, while 33.1% reported keeping the same number as in a normal year.

On the spectrum’s other end, 21% of respondents in the North indicated they kept more heifers than normal, and 66.7% said they toed the line on replacements. Only 12.3% indicated they cut back on heifer retention (Figure 3).

Of those retaining fewer heifers, 94.7% of southern respondents cited the shortage of feed as the main reason. Only 15.8% did so because of historically high prices for calves, and 10.5% had other motivations (Figure 4).

In the North, however, only 10% listed a shortage of feed as the reason to sell more heifers than usual. A full 50% said favorable prices were behind their decision, and another 50% had other reasons. Among those reasons was one respondent who cited: “We are getting older and are reducing our cow-calf numbers.”

On the other hand, those who kept more heifers than usual were looking ahead at a market that’s signaling it’s time to expand. Of respondents in the drought states who kept more heifers than usual, 45.8% said they were optimistic about future prices, while another 45.8% said they’re trying to reduce the average age of their cowherd. Only 4.2% indicated they had ample feed.

Meanwhile, in the North, 64.7% said they are optimistic about future prices, while 41.2% are reducing the average age of their cowherd, and 35.3% indicated they had ample feed to support expansion.

Cow-culling trends

Even more telling in the tale of the two extremes is cull-cow numbers (Figures 5 & Figure 6). When ranchers in the drought states were asked if they liquidated cows due to drought, 66.9% answered yes, while 33.1% said no. When asked how many they sold, ranchers indicated they culled deeply. The biggest percentage (27.2%) came in the 11-20% range. And, nearly 20% said they culled 50% or more of their cows this year due to drought (Figure 7).

Moreover, it appears most of those culls went to slaughter. Of the southern ranchers culling cows due to drought, 86% said they neither retained ownership nor relocated their cows. Only 14% said they tried to hold their genetics intact by finding greener grass behind somebody else’s fence. Of those who indicated they relocated some cows, more than 20% said they relocated half or more of their cows, while 29.2% reported relocating 21-30% of their cows to new pastures.

On the other hand, ranchers surveyed in the North indicated that herd expansion is underway in the region. Nearly 34% of respondents reported expanding their cowherd, while 66.2% said they didn’t. Of those expanding, 32% grew their herd by 6-10%; while another 28% expanded by 5% or less (Figure 8).

Interestingly, only 4% indicated their herd expansion included cows from the drought-stricken areas of the country (Figure 9) and only 1.4% indicated they are managing cows for others forced by drought to relocate cattle.

Change in plans

What’s more, proving it’s a game-changer in many respects, the 2011 drought forced changes to many ranchers’ marketing plans. The majority of respondents from the drought-stricken South (68.2%) indicated they marketed their calves earlier than usual in 2011, while 31.8% maintained their customary marketing schedule. In the North, 91.3% held to their customary marketing schedule, while only 8.8% sold early.

When asked why, 97.5% of drought-stricken producers who sold calves early cited a lack of feed as the main reason. “Severe drought, ran out of water and grass,” said one respondent (Figure 10).

Interestingly, 28.6% of northern ranchers also indicated lack of available feed as a reason they sold calves early, while 28.6% took advantage of locking in a favorable price, and 42.9% had other reasons. “I was afraid the market would break if I sold later,” one respondent reported.

Despite the drought, however, ranchers are still striving to produce calves that earn market premiums. Nearly half (47.1%) of all respondents said they marketed calves with value-added attributes in 2011 (Figure 11). The most popular of those attributes was preconditioning (79.3%), followed by source verified (63.3%) and age verified at 61.2% (Figure 12). As a general rule, ranchers in the North are slightly more inclined to seek market premiums through value-added attributes than ranchers in the South.

Hanging tough

Zero. Zilch. Nada. That’s precisely how many respondents who liquidated cows in 2011 due to drought said they plan to pocket the cash and exit the business. Testament to the resilience and fortitude of cattlemen, a full 52.2% say they will restock with cows when conditions improve. However, 36.5% indicated they aren’t sure just yet what the future holds. Another 7% said they intend to restock but change production models, such as buying stockers rather than cows. Another 5.2% play to reinvest the cash in another non-livestock ag enterprise (Figure 13).

Indeed, the drought of 2011 has been a game-changer. As we break the ice on a new year, pasture and range conditions in the drought-stricken states of Texas and Oklahoma, the epicenter of last year’s dry disaster, are improving slowly. And so, with a hopeful eye cast skyward and prayerful words in their hearts, cattlemen in the drought-stricken states prepare for whatever 2012 may bring.

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