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Lingering Drought, Low Wheat Yields Could Cause Higher Beef Prices

Cattle at the Oklahoma City Stockyards.
Brent Fuchs
/
The Journal Record
Cattle at the Oklahoma City Stockyards.

On Wednesday Associate State Climatologist Gary McManus released figures showing it's been a dry September. Oklahoma only averaged 2.6 inches of rainfall, which is roughly 33 percent below normal.

About half of the state is still in a "severe" drought, and the Journal Record’s Brian Brus reports the U.S. Department of Agriculture says that’s going to affect the retail prices for meat, particularly beef.

Nationwide, cattle inventories have dropped to their lowest level since 1951 as ranchers sell off their assets to an insatiable market. The USDA’s latest market guidance projects meat prices to rise 6.5 percent through 2014, up from 5.5 percent forecast a month earlier and far beyond a 20-year average increase of 2.9 percent. Beef was revised upward to an 8.5-percent increase this year. The USDA’s Economic Research Service’s latest food price outlook projects that food prices in general will see normal to slightly lower-than-average inflation, increasing just 2 percent to 3 percent in the short term.

The drought makes it difficult and expensive to feed cattle, so ranchers want to get rid of them. It's also a good time to sell, since demand domestically and internationally is high, which bumps up prices even further. The Oklahoma City Stockyards estimates cattle are worth anywhere from $1,200 to $3,500 per head right now.

But this causes two problems:

  • If herds get too small, and ranchers can't keep up with demand, consumers could see even higher prices.
  • If the weather gets better, it will take a while to bring herd sizes back up, since all the female (read: mother) cows are in the belly of the beef-lover.

Another reason prices are so high has to do with what these ungulates are supposed to eat, as StateImpact Oklahoma's Joe Wertz reported in May:

In southwest Oklahoma, you see field after field dotted with big, round bales. That’s a bad sign. It means many farmers have already abandoned their wheat and are salvaging what they can to make hay for cattle. Edwards, the wheat expert, says the state might not even have enough hay. That could be a bigger, longer-term problem for Oklahoma agriculture. “If this drought continues and we don’t have wheat pasture this fall, it affects cow-calf producers across the entire U.S,” (small grains extension specialist at Oklahoma State University Jeff) Edwards says. Those producers bring their cattle to Oklahoma and other Southern Plains states to stay for the winter. If the drought continues, and pastures and hay supplies continue to dwindle, the effect could ripple.

Now it's October, and the time of year these farmers plant winter wheat they plan to harvest in May. If conditions stay dry and this isn't a temporary setback, Brus reports some farmers have contingency plans.

Oklahoma Cattlemen’s Association spokeswoman Chancey Hanson said her family members and friends in the industry are hovering on the edge of expectations, but they’re also making contingency plans to compensate for a bad scenario. Fortunately, hay stocks are strong this year, she said. The drought has reshaped the industry’s landscape. Some ranchers, especially older operators without family inheritors, have no plans to rebuild their herds, Hanson said. Many others have had to seek alternative sources of income as they wait for weather patterns to improve. And marking time by going back to college isn’t often a viable alternative for an agricultural family business. “You find other ways to make a dollar,” she said. “You find niche markets or value-added opportunities to fit your resources into market niches. Or you sell your cattle early.”

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The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.

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Brian Hardzinski is from Flower Mound, Texas and a graduate of the University of Oklahoma. He began his career at KGOU as a student intern, joining KGOU full time in 2009 as Operations and Public Service Announcement Director. He began regularly hosting Morning Edition in 2014, and became the station's first Digital News Editor in 2015-16. Brian’s work at KGOU has been honored by Public Radio News Directors Incorporated (PRNDI), the Oklahoma Association of Broadcasters, the Oklahoma Associated Press Broadcasters, and local and regional chapters of the Society of Professional Journalists. Brian enjoys competing in triathlons, distance running, playing tennis, and entertaining his rambunctious Boston Terrier, Bucky.
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