FAYETTEVILLE — Drought has cost Arkansas' beef cattle industry $128 million and the

FAYETTEVILLE — Drought has cost Arkansas’ beef cattle industry $128 million and the

losses may continue to rise, with 3 percent of ranchers saying they planned to sell all their

livestock, according to a study released Thursday by the 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,” www.uaex.edu/news/august2012/

824ArkUADroughtImpact.html#.UFyjrqTyZ7B)

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

For many of Arkansas’ cattle producers, the drought that rekindled in May 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,” Popp said. “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.

The difference between the purchase and sale price is a function of transportation cost, but

should not be used as an estimate of transport cost in this case, because sellers may ship to

different markets than where a buyer is obtaining his or her product.

• Calf sales. Producers sustained losses from calf sales in two ways: Weaning early

as a result of reduced available forage, and fewer calves, because herd size has decreased

given lack of feed in the drought year.

WIDER IMPACT

The researchers said additional costs incurred by producers that were not quantifiable from the

survey included supplemental feed, transport and purchase of drinking water, and replacement

costs incurred when restocking the herd. “These costs vary from farm to farm and can be a

significant expense to cow-calf producers,” Popp said.

Popp said the drought has also prompted producers to change their herd management. The

survey found:

• 73 percent would sell their calves earlier than in a typical year

• 49 percent had reduced their herd size by selling more mature cows than usual

• 41 percent planned to sell more mature cows this fall

• 41 percent sold replacement heifers that would otherwise replace mature cows

• 30 percent said they would sell more replacement heifers this fall

Other production changes included:

• 40 percent said they would apply more weed control to allow grasses on pastures to

recover better than if weeds were competing.

• 3 percent said they would sell all their livestock

• 76 percent were feeding extra hay and supplements

• 18 percent were bringing in water from off-farm sources

“Longer term cow-calf producer economic losses attributed to the drought, such as pasture

recovery, increased breeding failures, reduced heard body condition scores and the impact on

agricultural input industries will take additional time to quantify,” Popp said.

Analyses of those longer term effects are subject to ongoing studies.

RIPPLE EFFECT

The $128 million in cow-calf losses also ripple into other industries, according to the

University of Arkansas system Division of Agriculture.

“The health and social services industry experienced the most income and value added

losses due to induced impacts,” Kemper said. Those were followed by retail trade, finance and

insurance, wholesale trade real estate and rental.

“When cow-calf farmers lose income, that translates into fewer dollars being spent back into the

local economy buying groceries and clothes and eating in local restaurants. It also means fewer

trips to the doctor and dentist for those farm families,” he said.

Kemper calculated the total loss in labor income to those other industries at $4.4 million. Value added losses were pegged at $8.1 million.

“In rural communities where the cow-calf sector makes up an important part of local economic activity, the impacts to main street businesses are substantial.”

METHODOLOGY

During August, surveys were distributed to cow-calf producers who attended

drought-production tactics meetings in Hot Springs, Harrison and Quitman, emailed to 971

producers through an Animal Science list and another 916 producers on file with the state

Department of Agriculture.

Researchers received 545 responses from producers in 58 counties. The study results are from 406 usable responses – those where all the questions were answered – and the operations encompassed by those surveys accounted for nearly 23,000 bred cows, or approximately 2.5 percent of the cow-calf industry.

The studies are available online at:

• www.uaex.edu/depts/ag_economics/publications/

Ark_Drought_Report_Comm_Beef_September2012.pdf

• www.uaex.edu/depts/ag_economics/publications/

Ark_Drought_Report_CowCalf_September2012.pdf

For more information about cattle production or risk management, visit www.uaex.edu or

contact your county extension office.

The Cooperative Extension Service is part of the University of Arkansas System Division of

Agriculture and offers its programs without discrimination.

Mary Hightower is assistant director of communications/marketing at the Cooperative Extension Service, part of the U of A System Division of Agriculture.