Aug. 10 (Bloomberg) -- The grass in Melvin Korte’s 280 acres of pasture in northern Missouri is dead, burnt away in the worst drought in the Corn Belt in more than a half-century. Now he’s doing all he can to keep his herd of 63 cattle alive.
He’s using up winter hay and buying feed at prices more than a third higher than three months ago. Later this year, he may bale the dead corn stalks from his neighbors’ fields for feed. “There’s not much nutrition in it,” the 65-year-old farmer says. “But it gets something in the animals’ stomachs.”
Feed-rationing may help Korte save two-thirds of his herd as he and other cattle farmers struggle to feed animals grazing on the brown and barren fields. Otherwise, “liquidation” is the alternative. Without the government-backed insurance available to corn and soybean farmers, cattle-producers may be suffering the most under the drought, responding to higher costs by sending cattle for slaughter early, with some eventually selling their herds entirely.
“You tough it out,” said Korte, whose farm near Curryville is about 70 miles northwest of St. Louis. “People will be deciding how much they need to sell based on whether it rains or not or if they can make it through the winter.”
Missouri, the sixth-biggest U.S. cattle producer, has the nation’s worst-quality pasture, with 99 percent in poor condition or worse as of Aug. 5, according to the U.S. Department of Agriculture. The drought may further thin a national herd that at the start of the year was the smallest since 1952, even as meatpackers including Tyson Foods Inc. and Cargill Inc. boost short-term slaughter, adding to the beef supply, said Bill Lapp, a former chief economist for ConAgra Foods Inc.
Cattle prices gained about 8 percent since mid-June through yesterday on the Chicago Mercantile Exchange, as the drought tightened its grip on central U.S. Corn, the main ingredient in livestock feed, surged 63 percent in the same period. Today, the grain surged to a record $8.49 after the USDA cut its estimate for the U.S. crop to a six-year low.
The Corn Belt just went through the third-driest June-July period on record, according to the government.
As ranchers try to avoid the higher feed costs, they are pushing younger cattle through the food chain faster. At the Callaway Livestock Center in Kingdom City, about 100 miles west of St. Louis, animals normally sold at 700 pounds are coming to market 100 pounds lighter, and up to twice as many are being sold each week, said rancher Claude Niemeyer.
Many of the cattle are going to feedlots that typically buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, called feeders. They are fattened on corn for about four to five months until they weigh about 1,200 pounds, when they are sold to meatpackers.
Ranchers haven’t had much help from the heavens lately. In July, the St. Louis area got only about 0.72 inches of rain, less than a fifth of the normal amount, while the mean temperature was 88.1 degrees Fahrenheit, about 10 percent higher than the average, according to National Weather Service data.
The drought doesn’t just kill the grass heifers rely on to grow, he said. The heat makes it difficult for cows to gain weight, meaning producers need to supply more nutrition at the same time their herds have lost their natural forage.
With everything brown but the weeds and rain the only hope for rejuvenation, most area ranchers are hesitant to feed animals any more grass, for fear that overgrazing will leave them with nothing to grow back next year, Korte said.
“If it rains, I can save hay for the winter, use the grass for now and save all my cows,” Korte said. “If it doesn’t rain, then I use my hay, and when winter comes, then what? I need to sell more cows, and it can take a long time to build back a herd.”
In the short term, what’s bad for ranchers may be good for consumers. The increased sales of animals to slaughterhouses will boost beef supplies and slow price increases at the supermarket, Lapp said. The USDA last month lowered its forecast for beef-price inflation for 2012 half a percentage point to 3.5 percent to 4.5 percent. For 2013, the expectation is a gain of as much as 5 percent.
“Near term, there is an adequate supply of meat from all species,” Michael Martin, a spokesman for Minneapolis-based Cargill, said in an e-mail. “As we move into 2013, the supply of beef, in particular, could be constrained by the U.S. herd being the smallest in 60 years.”
More heifers and steers means more hamburger on shelves, Lapp said. Still, when cows that could be bred instead are sold for slaughter, the livestock herd contracts, contributing to a long-term decline in numbers partly caused by consumers buying less beef. The quality of meat shouldn’t be affected, he said.
“When you liquidate a cow, that’s the future of livestock,” Lapp said. “How many cows end up sold for breeding or sent for slaughter will be a key question.”
While many growers of corn and soybeans in the region will be indemnified for their drought losses by government crop insurance, livestock producers have no such recourse. Congress left Washington for vacation last week without acting on a drought-relief measure for ranchers.
A livestock-assistance program in the current five-year farm bill expired last year. The U.S. Senate and the House Agriculture Committee have approved bills to replace the current law which contain livestock relief provisions. But House Republican leaders have not set a vote on their legislation. Last week, the House approved a $383 million stopgap measure to reinstate the livestock aid, while the Senate took no action. The current farm bill was passed in 2008 and expires in September.
President Barack Obama said Aug. 7 the administration will provide $30 million to aid farmers and ranchers affected by the drought.
Arthur Meyer, who raises Angus cattle and grows corn and soybeans on his farm outside Bowling Green, Missouri, said federal aid to help defray higher feed costs would be helpful. Still, he said he doesn’t expect Congress to do anything.
He’s planning to sell his calves in September, three months early, as he runs out of the hay he normally feeds in winter months and which is costing him twice as much as it did three months ago.
“You can’t let them sit out there and not feed them anything,” the 77-year-old farmer said. “They lose weight, and now you’re going backward.”
Without rain, “I’m just going to have to bite the bullet, cut my costs, and sell,” he said.