June 11, 2012

 

US crop dryness affects livestock industry

 

 

Cattle ranchers based in the US may have cause for concern as the impact of local crop dryness spread to livestock.

 

One of the major drivers in Chicago feeder cattle futures to record a high, on a spot lot basis, close to 160 cents a pound has been the switch to buying by southern US ranchers, who last year sold-down herds as a long-running drought dried up paddocks.

 

The proportion of Texas pasture rated "good" or "excellent" by the USDA stood at 27% as of Sunday (June 3), up from 9% in early June last year, and in Oklahoma at 50%, compared with 29% a year before.

 

Ranchers' increasing willingness to rebuild herds is also evident in a reduced slaughter rate, which fell 16.5% last month, with a particular drop in beef cow liquidation in the south, a sign of producers keeping hold of breeding stock.

 

However, the improvement in southern grass condition, even to relatively weak levels in Texas, has not been mirrored elsewhere, with pastures nationwide rated 47% in good or excellent health, down from 53% a year before.

 

Missouri now shows as one of the states with the worst pasture condition, of 28%, compared with 64% a year ago.

 

"Pasture conditions are worse than a year ago and the 10-year average despite a significant improvement in the situation in Texas and Oklahoma," a report by Paragon Economics and Steiner Consulting said.

 

"The dividends of a warm winter and improved moisture conditions have largely been had," the briefing said, adding that the question now was whether dryness would force a revival in cow slaughter rates.

 

"Some early indications show that despite improvements in areas hit by drought last year, there is plenty of room for worry."

 

The comments come amid broader concerns over dryness in the Midwest which have led many analysts to question USDA forecasts for a record corn yield, of 166 bushels per acre, although USDA chief economist, Joseph Glauber, urged caution over reduced estimates.

 

Official data on Tuesday (June 5) rated more than half the Midwest as suffering abnormally dry or drought conditions, compared with 1.2% a year before, besides 71% of the High Plains, up from 21%.

 

"A number of areas in the Midwest have experienced below-normal precipitation in the last month, negatively affecting pastures," Paragon and Steiner said.

 

In the South, 85% was still unusually dry, although the severity of the moisture shortages was generally lower than a year before.

 

"If current conditions continue, then we will likely see more pressure around the country. Herd rebuilding will have to wait for another year."