CME: Poor pasture conditions affecting beef cow inventory
click image to zoom The latest US crop progress report showed further deterioration of grain crops as well as worsening pasture and range conditions. We will touch on the grain markets later in the week as trade prepares for the important USDA August supply/demand update. This is arguably one of the more important reports of the year as it provides the first assessment of the US grain crops based on objective yield survey data. Needless to say, there will be plenty of nervous trading going into the reports, especially considering the very wide range of crop production ideas among analysts and market participants. Pastures and ranges for the week ending August 5 left plenty to be desired. The attached chart shows the percentage of pastures and ranges rated in poor or very poor state during the course of the season. The latest survey indicated that 31% of pastures nationally were in very poor state with another 28% rated as poor. Missouri appears to be in a particularly dire situation, with 99% of pastures and ranges rated in poor or very poor condition. This is a state that as of January 1 had 1.857 million beef cows, or 6.2% of the overall US beef cow stock. Other large beef cow states struggling with poor pastures were Nebraska (1.884 mil beef cows, 89% poor/v.poor), Kansas (1.427 MM, 89% poor/v.poor), Oklahoma (1.728 MM, 76% poor/v.poor). How do current conditions compare to other drought years (data goes back to 1995).
As you can see from the chart to the right, the conditions in the Great Plains and Cornbelt this year are the worst recorded in at least 17 years. The four regions analyzed here account for almost 90% of the US beef cow inventory. Three of those regions, with 64% of the beef cow herd, now have pastures that are over 60% in poor/very poor condition. The more comparable year from purely a conditions rating perspective appears to be 2006. In that year, pastures in the Great Plains and Southern Plains were in similar shape as today. Interesting to note that in that year, the US beef cow slaughter for the period Jul - Nov increased 27% from the comparable period the previous year. Will we see a similar situation this year? It’s hard to say given how high cow slaughter rates were a year ago. Cow slaughter in 2004 and 2005 was notably lower hence the jump in 2006 when pastures were parched. A better parallel may be 2002. In that year, over 70% of pastures in the Great Plains was in poor/v.poor condition. It was a significant drought year. But, cow slaughter in the previous year (2001) was relatively high, posting a 14% increase from the year prior. This is similar to what happened in 2011 when cow slaughter rose 13% from the prior year. Beef cow slaughter for Jul - Nov 2002 was down 2% from the year before. But again, as you can see above, current conditions are much worse than in 2002. And producers have to contend with record high grain prices and hay prices that are almost double what they were just two years ago. So far, the rise in US cow slaughter has been driven by the dairy complex but August and September could see more beef cows come to market.