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Drought will limit farm income in 2011

Texas under one of worst droughts ever. Financial risk is enhanced. Careful management essential for livestock.  

Despite near record high commodity prices, Texas farmers and ranchers will have to overcome one of the worst droughts in history to reach financial goals for 2011.

“The drought will make 2011 a financially difficult year for agriculture even though prices for most U.S. agricultural commodities have surged to record or near-record levels,” says Texas AgriLife professor and Extension economist Jose Pena.

Pena, who works from the Texas A&M Research and Extension Center in Uvalde, says La Nina has wreaked havoc with much of the Southwest. “The El Nino weather pattern, which favors rain in the southern U.S. tier, was active in Texas during the first half of 2010, but now most of the South-Central U.S. region, including Texas, is experiencing the effects of La Nina. La Nina favors a dry southern U.S. tier.”

Pena says part of Texas received some rain May 2 but most of the state and much of the Southwest remains seriously dry. “Most of Texas is facing the fourth driest period on record.”

And part of the state, he says, from Oct. 1, 2010, through April 30, 2011, is enduring “the driest period on record.” Only 1.13 inches of moisture fell (in the Uvalde area) during that period, Pena says, compared to a long-term “cumulative average of 11.3 inches.”

He says the South Central U.S. region, “where a large proportion of the U.S. cattle herd resides, is in a similar moisture situation.”

Pena says the drought so far has had only a minor impact on the cattle market. “But the drought will have a major impact in agricultural production from that region. A significant portion of crops normally produced under dryland conditions may fail and forage availability is becoming critical in some areas.”

Wheat acreage in many cases is being grazed out instead of harvested this spring. “Livestock and wildlife stock tanks in Southwest Texas are dry or almost dry and will limit livestock and wildlife production.”

Wildlife management, Pena says, has become an important part of many operations.

Hot, dry temperatures, combined with high winds, also increase the risk of wildfires. Some estimates indicate wildfires have burned as much as 2 million acres in Texas.

Livestock managers must manage forage and pastureland carefully during drought conditions, Pena says, to reduce financial risk.

“The key is to plan ahead and react quickly while some management flexibility remains,” he says. That time is now. “The April 21, 2011, U.S. Seasonal Drought Outlook shows the drought to persist in a large portion of the south Central U.S. region at least through July 2011. This means the spring growing season will be missed in most of the region.”

Pena says ranchers should reduce stocking rates to match available forage. “The list of drought planning alternatives is long. The critical element in successful grazing management is maintaining the proper stocking rate, which should be reduced to prevent increased use of purchased hay and supplements and to insure acceptable animal performance.

“Keep in mind that prolonging the decision to reduce the herd to match forage availability usually creates an overgrazing situation, which causes harm in the long term. Start by liquidating livestock that will not produce income in the near term—open females, replacement heifers and low performing cows and bulls.”

Pena says producers often put off the hard decision to begin liquidation when signs of over-grazing begin to appear. “Producers tend to increase use of hay or concentrate feeds,” he says. “This means increased production costs and requires careful financial planning to survive a drought. Increased use of purchased feeds will reduce the economic performance of a ranch.”

Pena recommends producers keep accurate records of drought sales and to “document income tax implications of drought liquidation and for insurance/disaster assistance requirements.”



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