Extension by Dallas MountWritten by Dallas Mount
By Dallas Mount, Southeast Wyoming Extension Educator
We are thick in the throes of another drought this year. Many of the old timers I speak with say this one is the worst they have seen. Here in Wheatland and around southeast Wyoming, it is the worst I’ve seen in my short 12 years here. As with all droughts some areas are worse off than others.
Let’s explore some management options for this year’s drought. Should your approach be different from the last drought? I think so. I’ll discuss three common approaches and then some general principles ending with my personal opinion. Three general approaches include sell animals, feed them or relocate them. I think each of these or a combination of these can be the best choice but it depends on many other factors.
Sell ‘em versus feed ‘em
When balancing the decision to sell or feed the most economically important factor is the direction of cattle prices. If prices are likely to fall over the next three to five years, it usually makes more sense to sell, but if prices are likely to rise over this time, it may make more sense to feed. If you feed during periods of high prices, followed by periods of declining prices you are paying a high price to keep an animal that will be worth less in subsequent years. Also the calves from that cow will be worth less during the subsequent years. If you sell an animal at a higher price point you can buy back at a lower price point when restocking. Of course no one can predict the market very accurately, but we can assess broad trends and weigh the likelihood of various scenarios. Most cattlemen are very reluctant to sell off too much of their breeding stock, an understandable decision. However, given the severity of this year’s drought this may be an economic reality. Selling can be a difficult decision, especially if you feel your cattle are quality animals and, perhaps more importantly, acclimated to your environment. These factors are certainly to be considered, but I think sometimes we let this guide our decision making to the detriment of our business. Love your spouse not your cows.
Another economic consideration is the cost of feeding them. Hay prices seem to be around the $200 per ton mark. I expect that hay will increase in value as the season goes on, however some early hay auctions have been a bit softer than one might have thought. If you choose to buy feed to make it through this drought be diligent in your purchases and definitely explore options beyond simply “buy hay.” Dried distillers grains fed with low quality roughage, such as wheat straw or corn stalk, is a good alternative and may be cheaper than $200 hay. Price feeds from an energy standpoint and consider cost of feeding and estimated loss in feeding.
Send the cows to camp
Relocating the cows is an option that should be explored. Look at the U.S. Drought Monitor (droughtmonitor.unl.edu), find a place that should have grass and make some calls. The decision to depopulate the ranch (sell livestock) is a distinctly different decision than destocking the ranch (removing livestock). You’ll likely be shocked by the price of summer grass as you go east, but balance that out with winter costs of grazing on cornstalks or other crop aftermath that may be more available in those locations.
If your ranch is predominantly upland range or non-irrigated, because of our climate, the forage production on your ranch will vary greatly from one year to the next. To better match stocking rate to forage production many experts suggest that your ranch should be stocked with some type of livestock that are easily sold when a dry year comes. Most of the recommendations suggest that between 40 percent and 60 percent of your total stocking rate should be these types of animals. These can be stockers, short-term cows or other classes as well. Keep in mind that to dedicate 50 percent of your annual forage to stockers, you will likely need twice as many stockers as cows.
Grass is gold
The thought of depopulating or destocking the ranch might be extremely frightening to some. After all, what would we do if we didn’t have cows? I believe the market for take-in cattle is hot and for many ranches I’ve run the numbers for, it is more profitable than running owned cattle. In southeast Wyoming, by providing full care, you would have no problem getting $35 per month per pair or $20 per yearling for custom grazing cattle. I think the demand and price will go up from here during the year. Long story short, I think you’re in a good situation if you have grass whether you own cattle or not.
It always annoys me when an expert talks about a subject but never really gives you their opinion. So, for what it is worth, here is my opinion with the caveat that I’m likely wrong. I think cattle prices will be good this year and likely next year. Beyond that I think prices will begin to soften. With that in mind, if you need to pump an additional $400 in a cow to keep her this year, I expect it will take her profit for the next four to eight years at best to return this investment. By then, if she is worth less than she is today, it was money thrown away. I think if your ranch is in drought, you will be better off to depopulate (sell) deeply this year and wait and see what next spring brings. If you have grass and prices are too high to get back in, take in yearlings or pairs until prices soften to where you can re-enter the game. When you do re-enter I would challenge you to consider stocking the ranch with at least 40 percent of the carrying capacity devoted to stockers or some other type of animal that is easily sold when the next drought hits. There you have it. I’m sure I’m not right on all accounts.
Hopefully, if nothing else, I’ve challenged you to think about your own plan for making it through this drought and the inevitable future drought. I was speaking on drought in Colorado recently, and one producer said of the options we discussed, “They all suck.” This may be true from his perspective, but a colleague of mine recently put it another way that I thought is a better way of looking at this drought. He asked the group, “What opportunities does this drought provide?” While it may not feel this way at the moment I think challenging your ranch management team with this question may open some doors to some restructuring options that you may not have otherwise explored.