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Drought impact on livestock industry displays importance of risk management precautions

Your Farm Business

August 10, 2012
From Tina LeBrun and Wayne Schoper - South Central College , The Journal

You may drive through the local country side and think that all this talk about the drought we are experiencing must not be in our local environment since the crops appear to be in better condition than the rest of the Midwestern states we see in national news pictures. The most recent U.S. Drought Monitor shows nearly 70 percent of the country is dealing with drought conditions at some level.

Yes, our neighboring states are facing much more devastating crop damage than our local rural areas; however there most certainly is a dramatic impact from the drought placed on the entire agricultural environment, especially livestock producers. If you are a livestock producer, do you have a plan in place to manage your farm operation through the storm brought on by this year's excessive dry weather?

The impacts of the drought are just beginning to show up nationwide. Corn, soybean, and wheat prices have increased dramatically through July, meaning increased feed costs that result in high break-evens for livestock producers. The drought is already causing a lack of available forages for harvesting and also low grass production on pastures. That being said, livestock producers need to be proactive in finding feed for their livestock while managing their margins.

Article Photos

Tina LeBrun and Wayne Schoper

Feed for cattle doesn't always have to come in the form of grass or alfalfa hay. Other forage options to consider include small grain hays such as wheat, oats, or barley, CRP hay, forage sorghum or sudangrass, straw, and corn stalks. With any of these options, it is essential to get the feed tested to determine feed quality and understand which specific nutrients are short or in excess. Next, price these substitute feeds against grass or hay costs to establish the most economical feed source.

The trick to determining the best option for feed substitution is to compare feeds on actual nutrient analysis and then compare on a price per pound of nutrient basis. If it looks like you are going to be short on your hay needs and you need to find a feed source that is most economical, you need to compare the two feeds on a cost per pound of energy basis. The agricultural markets are telling producers to think outside the box when determining feed needs in this current environment.

Since we have no direct control of what grain markets do, the best strategy producers can follow is to stay focused on the situations that can be managed. Accurate yield estimates of your current growing crop depend upon your willingness to walk your own fields and evaluate what's actually out there. You know your fields best, so take time to evaluate crop conditions and yields which can help you plan ahead for the coming years feed needs.

Live market quotes are now available to virtually every farmer. All you need is a computer to receive up-to-the-minute market quotes. Time is critical during these volatile market conditions; you can easily miss a target in less than 10-15 minutes as you wait for delayed quotes. Another bonus to live market quote tools is access of additional information to better assist you with marketing decisions to cover feed needs.

Although the drought is far from over and its final toll on U.S. agriculture is still uncertain, the impact is sure to be widespread across many of our nation's livestock producers. Remember to stay focused on the parts of your business you can control to provide the best margin opportunities in the long run when dealing with these crazy markets. Become proactive in managing the input needs of your livestock operation while eliminating market risks that are out of our control.



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