Last year’s drought had a devesting impact on the state’s farmers and ranchers. It’s estimated that Montana’s cattle herd shrunk anywhere between 35%-to-55% because of the dry conditions.
Montana native ShayLe Stewart, now of Cody, WY, is a Livestock Market Analyst for DTN and host of Cattle Market News on social media. Stewart said even when the drought ends, producers will feel its impacts for years to come.
“Actually, the biggest cash flow hit to your enterprise when you have to sell cows because drought conditions is actually the year after the drought,” Stewart said.
Stewart referred to the most recent drought experience that took place in the southern U.S. during 2012. An event that sent the cattle markets skyrocketing.
“Let's look at the 2012 drought,” said Stewart. “2012, then comes 2013. Then, what's next? 2014. That’s when people who reduced their herds in 2012, didn't have the calves to market in 2014. That’s when the market nearly jumped to the Moon.”
Producers who made the difficult decision to reduce their herd size in 2012 faced record-high prices to rebuild their cattle herds.
“In the studies that I've read, in the research that I've done, drought reducing situations typically affect your bottom line and your operation for, believe it or not, the next seven to ten years,” explained Stewart. “Because you get rid of the cows. You have to go find cows to rebuy. Then you have to cull out the ones that simply don't mate. You're continually just rebuilding.”
Stewart emphasized that supply and demand economics do not lie, and producers need to pay close attention to the January Cattle Inventory report as an indicator of what may come. The report is due out on 1.31.22.
“As we look to 2014, that is the smallest the U.S. cow herd has ever been at 29 million head,” Stewart shared. “As we look to the report that comes out here in just a couple of days, I think that you need to cling to that data and let it be the driver of a lot of the decisions you're making. It's going to be extremely costly to get back into these females after you've let them go.”
Stewart referred to when ranchers rebuilt their herds in the years after the 2012 drought.
“We all sat at reputable livestock sale barns and saw cows go up to $3,000 and more,” said Stewart. “While that's fun and invigorating to hear, that is hard to pencil. That is hard to make your operation profitable when it takes years for that female to earn her keep. I really would like to advocate for producers too, if they can, keep as many females as possible. I know it's hard when hay is as pricy as it is and grasses are hard to come by. This markets on the uptick. You want to be playing offense, not defense."