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Montana Ag Network: Droughts continue impacting cattle markets

Because of the dry circumstances, Montana’s cow herd is predicted to have dropped from 35 percent to 55 percent.

The state’s farmers and ranchers were devastated by the drought last year. Because of the dry circumstances, Montana’s cow herd is predicted to have dropped from 35 percent to 55 percent.

ShayLe Stewart, a Montana native who currently lives in Cody, Wyoming, works for DTN as a Livestock Market Analyst and hosts Cattle Market News on social media. Stewart believes that even once the drought passes, growers will be affected for years to come.

“Actually, when you have to sell cows due to drought circumstances, the largest cash flow blow to your business is the year following the drought,” Stewart added.

Stewart alluded to the most recent drought in the southern United States, which occurred in 2012. The cattle markets skyrocketed as a result of this catastrophe.

“Take a look at the 2012 drought,” Stewart remarked. “Then there’s 2013,” says the narrator. So, what comes next? 2014. People who had downsized their herds in 2012 didn’t have any calves to sell in 2014. The market practically soared to the Moon at that point.”

Producers that took the painful choice to limit their herd size in 2012 had to restore their herds at record-high prices.

“In the studies that I’ve read, in the research that I’ve done, drought reducing situations typically affect your bottom line and your operation for, believe it or not, the next seven to ten years,” explained Stewart. “Because you get rid of the cows. You have to go find cows to rebuy. Then you have to cull out the ones that simply don’t mate. You’re continually just rebuilding.”

Stewart emphasized that supply and demand economics do not lie, and producers need to pay close attention to the January Cattle Inventory report as an indicator of what may come. The report is due out on 1.31.22.

“As we look to 2014, that is the smallest the U.S. cow herd has ever been at 29 million head,” Stewart shared. “As we look to the report that comes out here in just a couple of days, I think that you need to cling to that data and let it be the driver of a lot of the decisions you’re making. It’s going to be extremely costly to get back into these females after you’ve let them go.”

Stewart referred to when ranchers rebuilt their herds in the years after the 2012 drought.

“We all sat at reputable livestock sale barns and saw cows go up to $3,000 and more,” said Stewart. “While that’s fun and invigorating to hear, that is hard to pencil. That is hard to make your operation profitable when it takes years for that female to earn her keep. I really would like to advocate for producers too, if they can, keep as many females as possible. I know it’s hard when hay is as pricy as it is and grasses are hard to come by. This markets on the uptick. You want to be playing offense, not defense.”