Author: Francisco Abello

This summer’s drought is affecting a large part of the western half of the South, producing unfortunate losses for many ranchers and farmers in our area. The most affected States are Texas, Oklahoma, Arkansas, Louisiana, Mississippi, and Tennessee within the Southern Region. The last U.S. Drought Monitor reported that 92% of this area is abnormally dry, and about 64% is in severe drought.

U.S. Drought Monitor – South Region. July 26, 2022.

Unfortunately, droughts always have a negative financial and economic effect on our business. The USDA’s Pasture, Rangeland, and Forage Insurance (PRF) has shown to be an essential tool to support ranchers during these times. PRF showed a positive net benefit, indemnities over premiums, in many cases. Still, most importantly, it generated significant payments in drought years when needed most.

USDA created the Pasture, Rangeland, Forage (PRF) insurance program in 2007 as a tool for livestock and forage producers to reduce the risk of forage loss associated with lower precipitation. The program is available in 48 states and policies covered over 247 million acres in 2022. In southern states, the adoption of this program has nearly doubled since 2007. During the program’s first year, the total enrolled acres in this area was 20.8 million. Producers from these states have insured about 41 million acres for 2022.

Ranchers in Texas and Oklahoma have adopted the PRF insurance most quickly within the Southern region and are better prepared when compared to the 2011 drought. The percentage of enrolled acres of total ​​pasture and rangeland in Texas and Oklahoma is 36% and 18%, respectively. The rest of the southern states had an adoption rate between 1 and 4% over their total grassland and rangeland. Texas has 71% more acres enrolled in the PRF program than in 2011, while Oklahoma has almost 990% more.

PRF Enrolled Acres as a Percent of Total Grassland Pasture and Rangeland in Selected Southern States.

Comparison of PRF Coverage in 2011 Compared to 2022 for Selected Southern States

Abello, Francisco “Pancho”. “PRF Adoption Rate to Mitigate Drought Impact“. Southern Ag Today 2(32.2). August 2, 2022. Permalink

The latest CPC-IRI Forecast of the Niño/Southern Oscillation has increased the probability of being in a Niña season through summer and fall (Graph 1). La Niña patterns typically bring drought to the Southern Plains.  The risk of continuing to suffer the consequences of being in a drought is increasing day after day. The chance of a third consecutive Niña, is rising. The sooner we get prepared for it, the higher our chances of successfully implementing a drought management plan, saving costs, and having a solid business in the future.

Graph 1. CPC-IRI Official Probabilistic ENSO Forecast. 

Most cow-calf production is highly dependent on rainfall. With very high input and feeding costs, a drought management plan should incorporate more than one strategy to lessen adverse economic impacts. It should also consider future restocking strategies given the business’s financial position, long-term profitability, cash-flow, years to rebuild your livestock equity lost during drought, and other productive variables such as forage productivity, genetics, or leasing alternatives.  

Our model analyzed the impact of integrating drought management practices to mitigate losses and reduce risk (https://vernon.tamu.edu/extension-projects/d3-agricultural-economics/). Integrating these proactive and reactive strategies such as early weaning, early culling, pre-stocking hay, destocking, and restocking strategies has a significantly higher economic and financial impact than each strategy. These strategies resulted in a $426 saving per breeding cow unit (BCU) during year one. 

Other pro-active strategies like USDA’s Pasture, Rangeland, and Forage Insurance (PRF) are essential tools that can be implemented in many cases. PRF showed a positive net benefit in many cases, but most importantly, it generated significant payments in drought years when it was needed most. 

Unfortunately, droughts always have a negative effect on our companies. Waiting for it to rain to solve problems has not always been the best solution. These types of tools will help you prepare your operation given your production data, financial position, experience, and future expectations.

Abello, Francisco. “Are we ready for one more Niña season?“. Southern Ag Today 2(21.2). May 17, 2022. Permalink

The USDA-NASS Cattle report from January 2022 showed a 1% reduction of cattle grazing on small grain pastures in Kansas, Oklahoma, and Texas (1.71 million head in 2022 vs. 1.73 million head in 2021).  However, small grain pasture conditions are much worse than last year.  

Producers face challenges putting weight on stocker cattle given the overall poor condition of small grains pastures in these areas during this winter. Even though Southern Plains drought conditions improved last week, most areas are still under drought. The Southern Plains will need more moisture for 1.71 million head grazing on small grain pastures.  Although it’s likely that some of these cattle have already gone to feedlots since the inventory survey was completed.

Small grain pasture conditions have decreased considerably this year. In Kansas, winter wheat categorized in very poor, poor, and fair condition is 13 percentage points higher than last year.  Oklahoma and Texas wheat conditions are 45 and 25 points higher, respectively, for similar categories. These areas represent 91 and 84 percent of total winter wheat planted in Texas and Oklahoma.  

Grazing small grain pastures in poor condition will reduce average daily gain and might affect spring productivity. Poor grazing conditions will also increase supplemental feeding costs and mitigate future stockers’ margins.

In some areas, stockers are grazing deferred summer grasses. These cattle will probably have a lower daily gain unless supplemented. However, it will increase costs and potentially reduce spring forage supply for their cow-calf operation.  As the drought continues, it’s likely that a significant number of cattle will be sold at lighter weights and earlier in the market. 

Abello, Franisco Pancho. “Cattle Grazing on Small Grain Pastures – Challenges During this Drought Period“. Southern Ag Today 2(8.2). February 15, 2022. Permalink