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CME: Region Six Slaughter Up 47 Per Cent

19 September 2011

US - The drought in the Southern Plains continues to push more cows to market, threaten the beef industry, and more importantly the livelihood of cattle ranchers and their families in the coming years, write Steve Meyer and Len Steiner.

The negative impact seen in the weekly data for beef cow slaughter is staggering.

Since 1 July , beef cow slaughter in region six (which includes Oklahoma, Texas, New Mexico, Louisiana, and Arkansas) has totaled 226,300 head, 72,200 head or 47 per cent higher than the comparable period a year ago.

During the same period, total US beef cow slaughter was up 17 per cent. The high slaughter rates in region six accounted for almost 75 per cent of the increase in US beef cow slaughter.

The map below is prepared by the Livestock Marketing Center every year and it outlines the change in beef cow inventories from one year to the next.

As of 1 January, 2011, the beef cow inventory in Texas had declined by 115,000 head and in Oklahoma it was down 37,000 head. The high beef cow slaughter rates we have seen this year all but assure that the beef cow inventories in these states will be even smaller on 1 January, 2012.

So far this year, cow/calf producers in region six have sent to market 140,000 more cows than they did a year ago. And that is only through the end of August.

The fear among many in the industry is that drought conditions will continue to squeeze producers this fall. Of particular concern is what happens with wheat grazing.

A recent article by Dr Derrell Peel at OSU highlighted the issue (see here) particularly with regard to stocker operations in OK that rely on wheat grazing for the next few months. The issue is critical for Texas producers as well.

Winter wheat acreage in these states declined sharply in 2009-10 and it showed minimal growth for 2010-11. Given current exceptional drought conditions, the fear is that farmers will not be able to get the wheat crop in the ground early enough to provide sufficient forage.

High wheat prices also will limit wheat acres planted for forage only (graze out). The latest USDA crop progress report showed that for the week ending 11 September, one per cent of the wheat crop in Oklahoma had been planted, compared to the five year average at eight per cent.

In Texas, two per cent of the wheat crop had been planted compared to the nine per cent average for this time of year. Poor pasture conditions and overall high grain prices are starting to show up in hay values.

August prices for hay other than alfalfa werequoted at $127/ton, 32 per cent higher than a year ago. In some areas producers are paying significantly more.

Sharply higher hay prices and limited wheat grazing opportunities could push cowcalf producers to liquidate ever more cows in the coming weeks. That will boost beef production in the short term but make for a smaller beef supply at least through 2014.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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