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Drought's impacts felt by livestock producers

By Janet Kubat Willette
jkubat@agrinews.com

Date Modified: 10/10/2012 3:45 PM

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The drought of 2012 isn't only impacting grain producers.

"Any livestock producer is under stress right now because of the cost of feed," said Bill Crawford, of Fairmont, president of the Minnesota Pork Board.

Minnesota's corn crop will be better than the crop in many areas of North America and there will likely be a lot of demand for that corn.

Kent Meschke, a Little Falls turkey producer and past president of the Minnesota Turkey Growers Association, is concerned about corn supplies. He worries it may be tough to find enough grain to feed the turkeys he has already ordered for 2013.

He would like to see the ethanol mandate waived because of the projected short crop. Plants that have already purchased corn could sell it on the open market and still make a profit, he said.

He envisions ethanol plants operating like a grain bank, turning corn into fuel when there is more than enough for other uses.

The turkey industry is unique in Minnesota in that most Minnesota turkey growers buy their feed mixed and have it delivered to the farm. A few supply some of their own feed.

By contrast, the state has a fair amount of dairy, beef and hog producers who raise all their own feed. Their situation isn't as dire as it is for those who purchase the majority of their feed, said Jim Salfer, a regional Extension educator.

Salfer said the dairy farmers who are suffering the worst financially are those who started milking from 2007 to 2010 and are renting a barn and buying all their feed.

Milk prices haven't been that bad, he said, but input prices have soared.

Meschke said his feed costs are up 30 percent from the beginning of the year and he's heard increases are as high as 60 percent in other states. This comes on top of a 50 percent increase the year before.

"We've never seen feed prices this high," he said.

Salfer remembers discussions with producers this spring who would wondering if they should look in $5.50 to $6.25 bushel corn. Who knew that would be cheap in a few short months?

He expects some dairy farmers to exit the industry this fall. It won't be bankruptcy situations, rather situations where farmers don't feel they are getting ahead and where they can't compete with high priced land rent. He also figures a few dairy producers in their 50s will sell out and turn instead to selling corn for $8. A few producers haven't recovered fully from the low milk prices of 2009 and they will likely exit as well.

Nationwide, cow slaughter is up 10 percent from last year, or about two weeks ahead of a typical year, Salfer said. The numbers began ticking upward in April.

Joe Martin, executive director of the Minnesota State Cattlemen's Association, said a few beef feedlots that have been empty in southern Minnesota may once again have cattle in them as a result of the drought. Minnesota has forage and feed that other states don't.

The state's beef cow numbers have held steady, even though there has been drought conditions in portions of southwestern, northwestern and southeastern Minnesota. Dry conditions may have put a damper on producers' plans to grow their cow herds, Martin said.

The cow-calf operators in are the best shape the way the market looks. It's more risky to feed cattle, with producers losing up to $100 per head if they purchase all their feed.

Those who grow their own feed have more options to manage risk, Martin said.

Extension educator Dan Martens, who works in Benton, Stearns and Morrison counties, encourages producers to put up as much forage as they can as the hay price has increased because of the short crop.

Meschke said the hay yield in his area was about half last year's yield.

Each individual producer's situation will dictate their strategy, Crawford said.

For pork producers, the situation has turned "really ugly" over the past 30 to 60 days. Most producers are now in the red on each hog they sell.

Producers who could shift to cheaper alternative feedstuffs have already done so. All that remains is to pay for higher priced corn and dried distillers grains and making changes in production. Producers may cut back on farrowing, skip a farrowing cycle or reduce their sow herd to the bare minimum.

Futures prices are still negative into 2013.

Purdue economist Chris Hurt predicts losses this fall will be $60 per head, followed by losses of $38 and $5 per head in the first two quarters of 2013.

The industry is responding by slaughtering sows, with a .6 percent reduction in the national sow herd in August alone, Hurt said.

Crawford said the losses are similar to what producers experienced in 1998. The prices are better, but there are more dollars involved