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Drought conditions continue to affect livestock producers

By Jennifer Carrico


LIVESTOCK—Iowa State University Extension Livestock Economist Lee Schulz discussed the livestock markets during the Pro-Ag meeting in Greenfield, Iowa, recently. (Journal photo by Jennifer Carrico.)

Drought conditions plagued a majority of the Midwest, High Plains and Southern Plains during the 2012 growing season. The already pressured cowherd numbers continue to see no sight of growth in the near future. Growth that was originally expected in 2013 and 2014 has now been pushed out to 2015.

With the small cattle numbers, feeder prices have continued to stay at record levels. Oklahoma City feeder cattle prices for mid-November were $143 to $177 per hundredweight for 500- to 550-pound steers, and 600- to 650-pound steers were $140 to $154 per cwt.

Iowa State University Extension Livestock Economist Lee Schulz says record-high feeder cattle and feed prices are beginning to put pressure on the feedlot sector.

Recent closeouts of fed cattle are at historically high losses because of higher than normal input costs, but tightening supplies will continue to keep feeder cattle prices up.

An increase is needed in fed cattle prices in order to see a positive profit margin for feedyards. Fed cattle prices remain steady with slaughter steers selling at $124.94 per cwt. on a live basis, which is up $2.64 per cwt. from the same week a year ago.

Total slaughter cattle numbers for the second week in November totaled 629,000 head, down 2,000 head from last week and down 1.6 percent from a year ago.

Schulz says some fear the higher prices could lead consumers to make other decisions for a protein source and cause a decrease in domestic demand.

Pasture conditions nationally are in poor shape. Widespread drought affected grass growth and may take more than a year to recover.

"Land values are pushing rent costs up also," according to Schulz. "This puts pressure on cattle producers with even more input costs. Hay prices also continue to rise, giving producers little relief."


OUTLOOK—Drought caused poor crop yields, poor pasture conditions and a hay crop that had poor yields as well. All these conditions caused a cutback in cow numbers causing cattle prices to increase even with high grain and input costs. (Photo by Kassidy Bremer.)

On the hog side, producers have been dealing with cash flow and equity challenges.

"Pork producers continue to work on how to keep the breeding herd inventory and still be able to feed the offspring," he said.

With more gilts being fed, the same thing is happening in the hog breeding herd inventory as is the cowherd--a decrease is being seen.

Schulz expects a run-up of hog market prices in the spring since fewer hogs are on feed. The number of pigs per litter continues to increase, but with fewer sows farrowing, fewer hogs are on feed.

"For pork producers the time frame to expand the inventory is a lot shorter than in the cattle industry. If grain prices lower from where they are today, we should see an increase in hog numbers by 2013 or 2014 at the latest," he added.

The hog prices continue to be supported by a strong export market. Hong Kong and China continue to increase their production numbers, however, and analysts are still unsure as to how that will affect the U.S. prices and exports.

With high input costs and low seasonal prices, pork producers have experienced several months of low returns on their investments.

Price projections for hog prices on the Iowa/Southern Minnesota market are $74.50 per cwt. for the remainder of 2012. Prices are expected to improve in 2013, at the $82 per cwt. mark for the first three months of 2013 and up to $93 per cwt. for April through June of next year. Seasonal lows are expected toward the end of the year again, at $80 per cwt.

"Dairy producers are dealing with profitability challenges right now as well, with high production costs and a declining herd size," he said.

Schulz said all livestock producers have been challenged from this year's drought. But the drought isn't the only challenge as consumers start to be more aware of where their food comes from. Moisture continues to be a driving factor for agriculture.

Jennifer Carrico can be reached by phone at 515-833-2120, or by email at jcarrico@hpj.com.

Date: 12/03/2012



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