The Best Time to Think about DroughtWritten by John Ritten
Most of us start worrying about drought when we need to, not when we want to. I encourage all of you to start thinking about drought management and contingency plans now, both because we are able to consider various strategies that may require time and money to implement – a luxury not often afforded to us during a drought – and because the next drought could be just around the corner.
We are in a “slower” time of year for most operations, and we should have some time to do some long-term planning. Take advantage of the colder weather by staying inside by the fire and looking at ways to improve your operation’s resiliency, especially as it regards drought.
This is a time of year that should allow of you to revisit the experiences from the last drought and ask the questions, “What did we have to do? And, in hindsight, were there better options?” “What would have helped if we had done it sooner?” and “What resources would have helped us if we had them in place?”
The next drought
As we all know, in Wyoming we are never far from the next drought. The most recent drought monitor, available at droughtmonitor.unl.edu, puts over 61 percent of the state in “Abnormally Dry” conditions. Granted, much of our forage is currently dormant, but I am still concerned about the lack of moisture. Most of us have seen the research showing how important spring precipitation is to forage production in our state.
Further, recent research out of the Agricultural Research Service shows that cow/calf production in our region is also dependent on prior winter precipitation. This work implies that now is a very good time to start thinking about drought, as we are two months into an important period for precipitation and we are behind.
Granted, the El Niño cycle is projected to bring moisture yet this winter, but we are already behind, and the moisture has not materialized yet. I’ll be happy if it does, but I also want to be prepared in case it doesn’t.
Another reason I think it is a good time to revisit our drought plans is that we are probably in the best situation we have been in and are likely to be able to implement some of our grander plans.
While cattle prices have tumbled a bit in recent months, they are still well above any year other than 2014. We are in the unique position of having had two good price years in a row. Of course, annual cow costs have increased year-over-year, but even with the increased cow costs, we are expecting very high returns to cow/calf producers this year.
Don’t get too comfortable, though. Most analysts expect these annual returns to drop dramatically as inventory numbers increase. As you can see in the accompanying figure, the 2014 and 2015 annual returns on a per-cow basis have been much higher than any other time in recent history, and no one expects these to last.
Therefore, as everyone begins the tax management part of the year, I encourage you to see if there are any infrastructure improvements that can be implemented now. We should be in the unique position of having available capital to invest and be able to make proactive decisions in regards to drought rather than the reactive strategies we usually have to make.
Most proactive strategies take some time and capital to implement and will vary greatly across operations but may include fencing/water placement to encourage more uniform utilization, the establishment of grass banks and even irrigation systems.
The goal of any proactive strategy should allow us to rely less on the reactive strategies such as excessive destocking, early weaning and buying additional feed that often allows us to get through the tough times but can hurt our operation in the long-run.
Again, deciding on which investment is right for your place is dependent on the operation’s resources, and I encourage you to ask a range and/or animal specialist for help prioritizing improvements on your place.
This is the year you will most likely be able to afford the improvements you’ve been meaning to make on your operation. Before the end of the year, sit down and figure those out.
But, don’t spend money just to spend it. There may not be any specific projects that would have helped you in recent drought years. In that case, I encourage you to not spend money just to decrease your tax bill this year.
It may be the wisest investment to leave some profit in the savings account so you have access to a “rainy day” account when you need it, which, in the livestock business, is usually those days that aren’t actually rainy.
The USDA Agricultural Research Service research report referenced in this article can be found at Reeves, J.L., Derner, J.D., Sanderson, M.A., Petersen, M.K., Vermeire, L.T., Hendrickson, J.R., Kronberg, S.L., 2013a. Seasonal temperature and precipitation effects on cow-calf production in northern mixed-grass prairie. Livest. Science 155, 355-363.