A rancher with cattle to feed and no hay must travel until he finds some. A 200- or 300-mile trip isn’t unusual, but trips to Canada are, which is exactly where the drought drove Joe Goggins this summer.
“Our dryland crop this year was almost non-existent,” said Goggins, whose family’s auctioneering and ranching legacy is deeply rooted in southern Montana. “I don’t think people realize the severity of this drought. It’s always been before if you had to buy hay you could go 200 to 300 miles to get it. Now, there’s no hay from here to Texas. It’s a huge expense.”
The last time southern Montana was this dry was 1988, which has become the drought of comparison for 2012. Billings is actually drier this year than it was 24 years ago. Miles City is tenths of an inch better on the misery index, but more than 400 square miles of the southeastern Montana has been blackened by fire. Cattle prices are relatively strong, but ranchers who are struggling to feed livestock say the upside is hard to find.
Hay prices are skyrocketing, up $50 a ton in a single week, reports the U.S. Department of Agriculture Market News Service. Prices range from $150 a ton for large alfalfa bales of fair quality to $265 a ton for premium hay.
Drought-stricken Montana ranchers are scrambling to find hay, but most of the buyers are currently from out of state and they’re interested in all classes. That interest is driving up prices and prompting farmers with hay to hold out for even better deals, according to Market News. At some point, that rising cost of business will push meat prices up in the supermarket as well.
“I sold some in June a lot cheaper than I am now,” said Bill Bergin, of Foster Ranch and Feedlot in Melstone. Bergin who draws water from the Musselshell River to irrigate alfalfa, is now asking $200 a ton for his first cut hay, which tends to be the best crop of a two-cut season.
The Montana market price report for mid-August is slated for release Friday and analysts expect a significant increase from the average mid-July hay price of $122 a ton.
Many farmers still had hay left over from a 2011 bumper crop. That 2011 hay is wearing thin and with hay production down 21 percent from a year ago, a rise in prices is expected.
“Two-hundred-dollar hay is about the maximum you can afford to put in a cow,” said David Vanek, who farms small grain and hay near Lewistown. Beyond $200 a ton, a lot of ranchers faced with not only buying hay but also renting pasture because of drought or fire will have to decide whether liquidating their stock makes more sense.
This summer, $200-a-ton hay from central Montana is being hauled as far away Colorado, Vanek said, maybe New Mexico. That’s $200 a ton before delivery costs are added in, which leads Vanek to assume the hay is going to horses. Horses need a higher quality hay. Cattle can live on the poorer quality hay so long as it’s blended with a supplement. But, going through winter solely on baled hay, as some with burned pasture or poor pasture might have to do, isn’t realistic, which is where the business decisions get tough.
Cattle prices have been relatively strong and with ranchers in other drought-stricken states already liquidating their herds, demand for cattle looking ahead is going to be strong, said Gary Brester, economist at Montana State University.
A rancher who sells his cattle now is basically taking himself out of a strong market for 18 months to two years, which is roughly the time it takes to breed a replacement cow and raise her calf to a marketable size. It's a long time without a paycheck and business costs piling up.
Drought is a challenge, Brester said, but it could be a short-term problem if conditions improve next year.
Ranchers who hold on will be praying for rain. Goggins said city dwellers should be praying, too. High animal feed costs now mean higher grocery bills months later. Prices for meat have been leading food inflation numbers this year as the impact of last year’s drought in Oklahoma,Texas and Kansas hit the supermarket.
In July, beef prices were 6.6 percent higher than the same month a year ago, according to the Consumer Price Index forecast released Aug. 24. Poultry prices were 6 percent higher, also while prices for most other foods increased 2.3 percent. Retail prices usually trail production prices by several months.
Ranchers will be waiting until early winter to see what kind of moisture the new season will bring. If a dry fall turns into a parched winter, ranchers and townees alike are going to be in trouble, Goggins said.
"If it doesn't rain this fall, I think that’s when people in town are going to go to church and pray for rain," Goggins said. "That’s when food prices are going to rise."