Drought, grain prices crushing East Iowa livestock producers

Some could be forced out of business

Orlan Love
Published: July 20 2012 | 5:30 am - Updated: 31 March 2014 | 9:59 pm in

The drought of 2012, which has now attained “severe” status in all of Eastern Iowa, has already hurt livestock producers, and they will likely continue to feel its effects more painfully than any other segment of the ag economy.

The sudden spike in grain prices as the extent and severity of the grain belt drought became apparent will put many hog producers out of business, according to Bill Tentinger of Le Mars, president of the Iowa Pork Producers Association.

High grain prices — both corn and soybeans set records Thursday at $8.12 and $17.46 per bushel, respectively — also will squeeze beef and dairy producers, whose problems are compounded by shortages of hay, pasture and even water, said Ross Havens of Wiota in western Iowa, president of the Iowa Cattlemen’s Association.

While Iowa corn growers will likely suffer as much as a 30 percent reduction in their anticipated yields, they and the growers of soybeans, which could still produce respectable yields with timely August rains, are to a large extent protected from financial ruin by federal crop insurance.

No such protection is available for livestock producers, who accordingly will be most severely impacted by the drought, said Iowa Farm Bureau President Craig Hill, who raises both hogs and grain in Warren County.

Operating at loss

Ken Cook, 65, of rural Winthrop, who with his brother Alan feeds about 20,000 hogs a year, said the drought-driven spike in corn and soybean prices has erased their enterprise’s profit margin.

“Right now the feed required to raise a pig to market weight costs about $150. Add the cost of buying the pig, housing it and caring for it, and all of a sudden your production costs are more than you can get for the pig,” Cook said.

While the Cook brothers raise most of their corn and soybeans, “it’s still $8 corn, whether you grow it or buy it,” he said.

Most pork producers will feed hogs at a loss rather than shutting down their operations, he said.

“With all the overhead and contract obligations, you can’t just get in and out of the hog business like farmers did 40 years ago. We are in it until we run out of money,” Cook said.

Cook said he and his brother buy about 10,000 feeder pigs every year from his son, Aaron Cook. “If we let our buildings sit empty, he has no outlet for his pigs,” he said.

Dry water sources

Kevin Heiserman of rural Rowley, whose corn crop, like that of many other Iowa farmers, is withering in the hot, dry summer of 2012, also has been forced to provide additional expensive care for his cow-calf beef herd.

The scorched earth of his pasture, which usually feeds his cattle all summer, now looks like an Afghanistan landscape, and the cattle converge on his pickup twice a day as he brings them bales of hay, the price of which has more than tripled this summer to about $250 per ton.

The water hole in the lowest spot of his pasture, where his cattle usually cool themselves in the summer, has long since dried up, but Heiserman said he has no problem keeping his cattle watered with tanks at the pasture’s edge.

But many other beef herd operators are scrambling to keep their cattle watered as creeks and ponds dry up, according to Havens.

Doug Havel, owner of Bud's Custom Meats in Riverside, said some meat prices already are being affected by the increased cost to producers.

"Meat prices have really gone up in the last three weeks," Havel said.  "Steak is up two (dollars) a pound."

Rob Wonderlich, 49, who milks 260 cows on his farm near Ollie in Keokuk County, said his 200 head of young dairy stock are already consuming the hay he intended to feed them this winter.

His hay and pasture shortages, coupled with high grain prices, has him “kind of teetering on the edge,” Wonderlich said.

“Current milk prices don’t leave you any profit margin,” said Wonderlich, whose corn crop, for the third year in a row, will be stunted by either too little or too much rain.

Wonderlich said his best corn, which once had the potential to yield 200 bushels per acre, has “terribly small kernels” and will likely yield no better than 130 bushels per acre. His worst corn will be in the 50 bushels per acre range, he said.

Wonderlich said he hopes to survive by chopping his worst corn for forage for his cows. “My big hope is there will be enough dairy herd liquidation to tighten supply and raise prices,” he said.

Needless to say, he also hopes he won’t be one of the dairy farmers forced to liquidate.

 
 

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