The market, as well as cattlemen, are waiting for the drought to break.
How extensively and how aggressively cattlemen in the drought areas of the country will restock after it starts raining is the (insert your own dollar figure here) question. For the sake of discussion, let’s use $200,000 – that’s 100 bred replacement heifers at $2,000 a pop.
For those considering a replacement heifer enterprise as part of their management mix, those are numbers worth contemplating.
According to Jim Robb, director of the Livestock Marketing Information Center in Denver, it’s clear that some outfits, particularly in South Texas, won’t come back with cattle after it rains. Other land uses, particularly hunting, have already overtaken livestock production as the principal and more profitable use of the land in that region. Robb expects that trend to speed up as a result of the drought, which he calls a game-changer. “This drought is unprecedented,” he says. “This drought sets into motion a whole new set of circumstances.”
Among those new circumstances is the thought that when producers do restock after it rains, they may initially come back with stockers instead of cows, to give them more agility in their pasture-management options. “We’re going to chase stocker animals and that’s going to change the stocker price dynamic.”
And, some ranches will come back with females. “It’s a heck of an opportunity to build genetic quality, and it’s a heck of an opportunity to have fall- and spring-calving herds as part of your operation.”
It’s a tremendous opportunity for cattlemen positioned with the right genetics and management to develop a replacement-heifer enterprise to supply those who are looking to restock. (See “Ten Reasons To Consider A Bred Heifer Enterprise”.)
And the market will react to the upsurge in demand for females. “I think we could have unbred 550-lb. heifer calf prices, as soon as it starts raining, at the same price as 550-lb. steers,” Robb says, “and maybe a slight premium.”
He’s not saying it’s a copper-riveted cinch, but he thinks there’s a 50:50 chance we could see no rollback on a heifer calf vs. a steer when it starts to rain.
And then, he says, remember what else is happening with land use in much of the drought regions of Texas and Oklahoma. Oil and natural gas. “People are sitting on these leases,” he says. “So the capital requirements in that part of the country to come back overnight and pay $500 more/cow than they sold them for, they won’t have to go to the banker.”
Robb says that idea hasn’t been talked about very much, “but I think it’s part of the dynamic. It’s part of the reason I think that Oklahoma and that part of the picture will repopulate their cows much quicker than people anticipate and push the stocker market much more than people anticipate.”
Interestingly, BEEF magazine conducted an online poll recently at beefmagazine.com that asked: “If you had to liquidate cattle this year because of flooding or drought, what do you plan to do with the proceeds? Of more than 100 responses, 47% said they planned to restock with cows when conditions improve, while 9% said they planned to restock, but change production models (e.g., buy stockers rather than cows). Another 26% said they planned to keep the cash and leave the business, while 5% planned to reinvest the cash in another non-livestock ag enterprise. The final 11% didn’t know.
And, in another online poll conducted on beefmagazine.com, we asked: “If the drought were to end in six months, how long will it take Texas’ cattle industry to fully recover from the drought?” Of more than 100 responses, 47% said “five years or more, while 39% said less than five years, and 13% believe that most of the cattle lost due to drought won't come back.
For more survey results, click here.