April 6, 2011 The impact of feed availability for cow-calf producers and dairy operators
This over-view of the relationship between feed and cattle expansion is the best I have seen. It is from a recent CME report.
While much of the attention recently has focused on high cattle prices and the prospects of herd rebuilding, it is important to keep in mind that for cow-calf producers, no expansion will take place unless they have enough grass on their pastures to feed an expanding herd and there is enough hay availability to cover their needs over the winter.
The prospective plantings report noted that US farmers plan to harvest 58.973 million acres of hay in 2011, down 900,000 acres or 1.5% from the previous year. This is the smallest number of harvested hay acres since 1994 and, according to USDA, the fourth lowest ever on record. Hay acres hit a peak in 2002 and since then have contracted by about 5%. Part of the reason for the reduction in hay acres has to do with the decline in cow numbers.
The US beef cow inventory as of January 1 was 30.865 million head, 2.3 million head or 6.8% lower than in January 2002. Another reason for the decline in hay acres is the increasing competition from other crops. Demand for more corn production likely has shifted some marginal land into crop production. The thinking is that if out front feeder and live cattle prices increase, producers will respond by holding back heifers and the extra demand for feed will cause hay acres to rise again. So far that has not taken place and cow-calf operators will likely find feed availability more challenging even if they decide to expand. Drought in the Southern
Plains is a significant concern going into the summer. If there is not enough moisture now, how will those pastures be in July and August.
In addition, some of the biggest declines in hay acres were in Texas and Oklahoma. These two states account for almost a quarter of the US beef cow inventory and producers there indicated they will harvest a combined 8.1 million hay acres, 330,000 head or 4% less than in 2010. The reduction in hay production will further exacerbate feed availability for cow-calf operators and delay any plans for herd rebuilding. Indeed, some of the reports we have seen indicate that producers continue to operate in survival mode, trying to maintain as much of the core herd as they can. The competition for feed likely will become even more pronounced due to the sharp rise in corn prices. This should provide an incentive to try and feed cattle outside of feedlots as much as possible. So far that has not happened because live cattle prices have increased at such a brisk pace. Feedlots are very current and there is strong demand for feeders, pushing lighter weight calves on feed.
This has kept dry hay prices in check. If cattle prices stall, however, the situation could reverse and we could see a spike in hay values, thus further complicating herd rebuilding plans.