Farm Talk

Area Farm & Ranch News

October 2, 2012

Drought takes $128 million bite out of Arkansas beef cattle industry

Parsons, Kansas — Drought has cost Arkansas’ beef cattle industry $128 million and the losses may continue to rise, with three percent of ranchers saying they planned to sell all their livestock, according to a study released Thursday by University of Arkansas System Division of Agriculture.

The study’s authors cautioned that the $128 million figure “should be deemed a conservative estimate of the direct economic impact of the drought on cow-calf producers’ income.” When induced impacts are calculated, the numbers increase to $133 million in labor income losses and a $136 million loss in value added.

The study, “Estimate of Economic Impact of Drought on Commercial Beef Cow/ Calf Operations in Arkansas,” is the second phase of the university’s analysis of the drought’s impact. A preliminary report, which also included row crops, was released Aug. 24 (See “UA report: drought accelerates herd sell-off, hay price increase, /august2012/824ArkUADroughtImpact.html#.UFyjrq TyZ7B)

The study was conducted by Michael Popp, Nathan Kemper, trade adjustment assistance program coordinator for the Southern Risk Management Education Center, and S. Aaron Smith, a Ph.D. student at the University of Arkansas.

For many of Arkansas’ cattle producers, the drought that rekindled in May of this year was an extension of already dry conditions that began during the previous summer. The University of Arkansas System Division of Agriculture study covers the period between August 2011 and July 2012.

“It was important to help the beef cattle industry quantify its losses,” said Michael Popp, professor of agricultural economics, and one of the authors of the study. “Getting a handle on the reasons and the costs is the first step to helping the industry recover.”

On a ranch level, the loss boils down to $141 per cow. Herd sizes vary widely in Arkansas, from a few head to hundreds, but the average size historically has been about 35 head, Popp said. At that average size, the loss translates to nearly $5,000 per producer.

Higher hay prices,

lower calf sale prices

The researchers limited the scope to immediate economic losses that could be quantified from the survey. Those factors were:

•Hay purchases. Hay prices during the drought rose from what producers reported they would pay in a typical year. “The reported average price for the standard 1,000-pound bale delivered to the farm $37.05 for a typical year and $58.56 this past 12 months,” Popp said.

•Hay sales. Some producers, in addition to raising calves for sale, also sometimes have extra hay for sale. “The selling price for a 1,000-pound bale of hay ready for pickup at the side of the field was reported at $27.52 in a typical year, and $31.52 for the last 12 months,” he said. While the price rose as a result of the drought, quantity sold did decline and producers were about $10 worse off per bred cow on average.

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