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Northwest Iowa Dairy Outlooks

A local discussion of current science and issues concerning dairying in northwest iowa

At this point there is no reason to believe that the drought is over going into 2012. However, unexpected and welcome moisture in late 2011 reminds us that it could be. Derrell S. Peel, OSU Extension Livestock Marketing Specialist notes it is just as important to plan ahead for drought recovery as it is to plan ahead for managing through a drought. That is especially true given the unique current market conditions of the cattle industry with respect to both short run and long run factors. The drought in 2011 in the Southern Plains not only impacted producers in the region directly but also had significant impacts on cattle markets nationally. The recovery for the drought, whenever it happens will likewise have impacts in the broader cattle market.

The drought caused enough additional cow liquidation to push down herd inventories which will result  in even tighter feeder supplies in 2012 and beyond, from which replacement heifers must be retained in order to rebuild the herd. As recovery commences, breeding females are in very short supply and becoming very expensive. There is simply not be enough available females to support widespread repopulation in one year. Of course, we won’t actually run out of females; the price will simply get high enough for a period of time to encourage some producers to wait a bit to buy females. Producers should consider a more patient recovery strategy of rebuilding cow herds over a two to four year period. This may be beneficial to promote optimal recovery and healing of pastures but also fit cattle market conditions better. Slower herd rebuilding could leave some additional forage available. That opens the door for other options to complement cow-calf production.

The other major market factor that should be considered is that higher grain prices, which are likely to remain well above long term historical levels, result in more value for forage based gains on feeder cattle. Feedlots, facing high ration costs, have an incentive to purchase heavier feeder animals and reduce feed use at the feedlot level. This change in feeder cattle demand will be even more pronounced in two or three years when feeder supplies begin to grow. Thus, the value of additional pounds on feeder cattle is higher now than ever before. Producers with forage have more flexibility now to mix and match cow-calf and stocker enterprises. For producers with no interest in or experience with purchased stockers, this can be accomplished by retaining weaned calves in some sort of stocker or backgrounding program. The value of post-weaning gains is likely to be higher from now on. Purchased stockers can provide even more flexibility to seasonally utilize excess forages. Permanently higher grain prices makes forage worth more for both stocker production and for cow-calf production. Eventually, in 5-6 years, cattle numbers could increase to a point where the value for cow-calf production is tempered in a cyclical sense but the value of stocker production is likely to be permanently higher.

The next few years will be characterized generally by record high cattle prices which imply considerable profit potential for cow-calf producers. However, cost management will be paramount and especially the high cost of replacing females must be planned and monitored, particularly for the short run financial implications but also for the long run profitability implications. Forage owners will see generally more potential value for forage based cattle production whether in weaned calf sales, retained feeder sales or purchased stocker production. Producers should evaluate whether they want to limit their operation to only weaned calf production on a long term basis or expand the mix of cow-calf and stocker enterprises on a regular basis. The key question for producers is even more important than it always has been. What cattle production program maximizes the return to my investment in forage resources in the coming years?

Finding the answer to this question will be the focus of the Cattle Trails Cow-Calf Conference on Jan. 6 in Wichita Falls.

The slogan of the annual conference is “driving your cattle to profits,” however Bevers said this year’s drought made it tough to generate any profit.  However, ranchers have been through droughts before.  The difference now is the additional rising input costs and market volatility.  Coming out of this drought will require a new level of understanding and pencil pushing.

The conference will be held from 8 a.m. to 2 p.m. at the MPEC Center, 1000 5th Street in Wichita Falls.

Registration is $25 per person and includes educational materials, a copy of the Cattle Trails Cow-Calf Conference proceedings, a noon meal and refreshments

The keynote speaker for the event will be Bryan Rupp, KFDX TV 3 meteorologist from Wichita Falls. Rupp will provide his forecast as well as what to expect from changing weather patterns in this area.

Additional speakers include faculty from both Oklahoma and Texas. Topics to be discussed include drought-related effects on the area’s cow herd, reinvesting after the drought, the droughts impact on natural resources, and how herd dynamics can and should. Industry sponsors also will have their products on display during the event.

Producers are encouraged to pre-register by contacting their local AgriLife Extension county agent, their Oklahoma Cooperative Extension county educator, or by contacting Karen Thompson at 940-552-9941, extension 217 or by email at kethompson@ag.tamu.edu.

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