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In Drought, Consider the Economics of Options When Dealing With Cattle

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Posted Jul. 31, 2006

It is a pleasure to be delivering my first NF Ag News and Views article. In May, I joined the Ag Division's NF-2 team as the agricultural economist. Since then, I have made several farm visits, and I am quickly becoming familiar with the area. As an economist, I plan to help farmers, ranchers and other stewards of natural resources with financial recordkeeping, budgeting, marketing and strategic farm planning.

A current topic of interest to many in Noble's service area involves what to do with cattle given the extreme drought conditions prevailing in the region. Pastures are quickly burning up due to the heat and dry conditions, resulting in ranchers quickly running out of grazeable pasture that provides the necessary energy, protein, vitamins and minerals. Since the drought is covering such a large area (Figure 1), accessible supplemental hay and available rental pasture is not abundant in nearby areas.

In order to obtain the maximum profitability level for a particular operation, one must keep an open mind and make long-term plans. Given that there is a drought, there are a couple of different options to weigh.

Currently, market prices have been holding relatively steady for cows and trending slightly downward for calves. Economically, it is not in a producer's best interest to keep any open cows at this time with such a limited amount of forage available. Spring calves, at this point of the year, could be weaned and sold in the market. When deciding whether to keep or sell calves, one must consider if the potential revenue from additional gain would exceed the expected cost of the gain. If expected costs for additional gain are higher than the expected revenue, it would be a good time to market the calves. Selling the calves would also provide more forage for the cows in order to increase their nutrients and the likelihood of having a healthy calf in the spring.

Another option would be to locate and purchase hay for winter use and to help supplement scarce forage in the pasture. Prices for every type of hay in the area are quickly increasing, and transportation costs from available hay sources add up fast. In addition to drought expectations as seen in Figure 1, drought conditions for the area are expected to be an on-going phenomenon for the next several years.

Currently, prices for round-baled grass hay in south-central Oklahoma are $70 to $80 per ton, depending on quality. Coastal Bermuda grass in Texas is selling for between $45 and $85 per roll.

With conditions not expected to improve significantly in the near future, I suggest locating and purchasing hay as soon as possible, before higher winter prices take effect. The hay directory for Oklahoma can be accessed at the Oklahoma Department of Agriculture's Web site at www.oda.state.ok.us or by calling (800) 580-6543. The hay directory for Texas can be accessed at the Texas Department of Agriculture's Web site at www.agr.state.tx.us or by calling (877) 429-1998. Also, the Noble Research Institute's Ag Division website has a hay listing.

Another option would be to supplement cattle with a by-product feed such as soybean hulls. Prices for a feed ration containing a mixture of by-products will run around $115 a ton. Although this is not as filling to the cattle as roughage like hay, it will provide the cattle with their necessary nutrient requirements.

These are a couple of different options to look into given the current severity of the drought. If cattle are not marketed, make sure to use the most economical way to provide the cattle with the nutrition that they require over this dry period.

In closing, it is truly a pleasure to be part of a tremendous organization and a great consulting team. In the future, I hope to be meeting and getting to know many of you. If you have any questions, please do not hesitate to give me a call at (580) 224-6443.