As the dust settles, the drought of 2012 still a hot topic for some

The world may be greener and the air crisper and cooler as summer slouches into fall, but the epic drought of 2012 is not through with Wisconsinites just yet.

The impact on many farmers of this season’s unusually hot and dry weather may be felt well into next year – and consumers will likely feel the heat again when they look to put meat on their families’ tables in the first part of 2013.

But for dairy and beef farmers, who have many more mouths to feed than just their families’, the drought is an ever-present and immediate concern.

With the Corn Belt hit hard by this summer’s almost surreal heat wave and dry spell, and with pastureland at times looking like pre-Dust Bowl Oklahoma, many farmers have been left squarely behind the eight ball when it comes to feeding their herds.

“What’s really hurting the cattle people right now is the fact that they lost their pastures.” – Terry Quam, co-owner, Marda Angus Farms

Terry Quam, co-owner of Marda Angus Farms in Lodi, has felt the impact of the feed shortage that many farmers are facing, though not as intensely as some others. Because he grows much of his own feed on-site, and also grows crops for human consumption, Quam has had some leeway in the wake of the drought, but that doesn’t mean he hasn’t been hurt. He says he likely won’t make a profit this year, and is setting aside much of what he would have sold directly to market to feed his cattle through to next year.

“What the drought really did was shut down all of our grass and hay type of feed that we produce,” said Quam. “We run a lot of pasture, and it just basically shut the pastures right down to nothing. I normally would have enough pasture to go to the first of November.”

Quam, whose problems were compounded by a fire that wiped out a third of his feed supply at the end of June, said high feed prices are severely affecting farmers with large animals. He said he’s seen square hay bales that went for about $55 last year selling anywhere from $80 to $250, depending on the quality of the hay.

That, he said, has really thrown some farmers for a loop, and he noted that he knows several younger farmers who are now in trouble because they haven’t built up much equity.

“A lot of it has to do with how fast you started to make plans for the drought and how your cash flow sits,” said Quam. “What’s really hurting the cattle people right now is the fact that they lost their pastures. They lost at least one crop of hay, probably two, so they’re going to be faced with extremely high replacement feed costs going into winter, and they’re going to have to make up their mind whether they can afford to keep those cows over the winter months.”

Badger State better off?

While the drought could well wreak havoc on farmers who rely on livestock for their livelihoods, ironically, farmers in Wisconsin – where cows dot the landscape along nearly every highway – could be somewhat better situated than many of their competitors.

For one thing, the drought was largely a southern Wisconsin phenomenon. While it seemed at times like southern Wisconsinites were bearing witness to an old-school Egyptian plague, if you travel into the northern part of the state, the landscape changes considerably. According to the Wisconsin office of the National Agriculture Statistics Service, overall, state corn production is expected to drop 12% to 455 million bushels, while the state soybean crop, which has been hurt by an infestation of spider mites, is expected to drop 18% to 60.5 million bushels. But most of the damage to crops occurred in the southern part of the state, and northern farmers should actually be poised to reap the windfall that higher commodity prices will bring.

Also, according to Casey Langan, the public relations director for the Wisconsin Farm Bureau Federations (and an IB Wisconsin blogger), Wisconsin has a big advantage over other dairy states and generally has a bigger margin for error when faced with adverse conditions like the recent drought.

“Wisconsin’s economic advantage when it comes to dairying has always been that it rains here, we’ve got a temperate climate, and we by and large grow our own feed here,” said Langan. “That is not the situation out West, in large dairy states like California and Idaho. Out there, those dairy industries are largely built on the concept of cheap corn, so in 2009 [when dairy prices were low and feed costs were high], they were really in a tough spot because they don’t grow their own feed like we do here. So in California, you had entire dairy herds being sold because the milk price was low, the cattle market was flat, and to buy more corn and hay for these animals would have been extremely expensive, so you actually saw the herd in California drop.

“Meanwhile, in Wisconsin, it was rough here, and yes, farmers were eating into their equity, but they had feed for the cattle to last them through the winter, and overall we did not see cow numbers drop in 2009 in Wisconsin because they were able to ride out the storm.”

Of course, while Wisconsin dairy farmers may not face the same hurdles that other states’ farmers do, it remains to be seen whether dairy and cattle farmers can power through this drought with their herds reasonably intact, said Langan.

“Now we’re faced with this drought, and it’s our hope that our livestock industry does not needlessly shrink in size,” said Langan. “And we look at 2009’s example as kind of a glimmer of hope. … Our hope is that some of this drought-damaged crop is still utilized for feed so that we don’t see a large selloff of our beef and dairy herds in this state. Going into this year, we had the smallest cattle herd in 60 years. That’s because the last two years farmers in the south have been experiencing drought, so as their feed runs short, they have been selling off more and more of the herd.”

Beefed-up prices

While a herd selloff might be a boon to consumers in the short term as a glut of supply hits the market, the potential long-term effect on farmers is troubling. Unlike animals such as chickens and pigs that reproduce relatively quickly, cattle herds take time to recover.

“It takes a long time for the cattle industry to grow out of a slump like this,” said Langan. “Going into this year, we already had this record small cattle herd in the nation, which is going to have an impact on beef prices in the store eventually. Now we’ve got the Midwest gripped in drought. Midwest livestock farmers are facing the same situation, and we’ve heard reports that the sale barns in Wisconsin this year have been full. I’m not saying entire herds are going to market, but people are already looking at their feed capacity and wondering, ‘Am I going to have enough feed to feed all these mouths until next summer?’”

Of course, for some, the decision does not simply boil down to whether or not they should sell their animals, but how much of a dwindling grain supply they should devote to supporting livestock.

“Yeah, every farmer’s going to have to make [that decision],” said Quam. “Like I said, 10 to 1, I will not make a profit this year because of everything that’s going on. We’re a purebred Angus farm, and my cow herd’s genetics are valuable to me, and I want to make sure I have enough feed so I don’t have to sell those genetics at the wrong time. So if it means taking less income on the cash grain side, I’m going to do it because I’m going to make sure I have enough feed to make it well through next summer and into next fall.”

Meanwhile, consumers should be prepared for some prices to spike upward.

“There’s going to be a little glut on the market right now, and beef pries will probably go down in the short term, but that’s just setting us up for a bigger problem next year,” said Langan. “That’s one thing that I think people are going to notice is the beef.”

Sign up for the free In Business Wisconsin Report – your weekly resource for local business news, analysis, voices, and the names you need to know. Click hereIf you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.