The continued drought is forcing tough decisions on how to feed calves through the winter. For the month of October we’ll review programs that mitigate the impacts of drought. Today, we review the current state of precipitation and water for the region, and preview the programs we’ll review in detail the rest of the month.
Local Market Conditions
It is no secret that much of western Texas has suffered from a lack of moisture through late summer. The current Drought Severity Coverage Index (DSCI) for Texas is 111. The bulk of the area in drought is west of Abilene, which means the localized drought is much more severe. At least 16 counties are partially in D4 (Exceptional) drought, the worst rating.
U.S. Drought Monitor 10/1/2020
For more perspective, we look at the Crop Progress Report, which includes a rating of the topsoil and subsoil moisture conditions for a given region. In this case, you can see that approximately 50% of the state’s topsoil and subsoil layers are short to very short on moisture. This has negative implications for the establishment of winter/cool-season forage crops that were recently sown or for which planting season is approaching.
Crop Progress Report; Texas Topsoil and Subsoil Moisture Conditions 9/28/2020
Local Conditions Outlook
Possibly more concerning than the current state of drought in Texas is the intermediate and long-term precipitation outlook. The National Weather Service, a division of the National Oceanic and Atmospheric Administration, provides monthly and seasonal outlook maps for both precipitation and temperature. Some of the programs we will review this month are only precipitation-based, but some are dependent on drought status. Below are seasonal outlooks for both precipitation and temperature through April, 2021.
These maps must be read with care. The measurements do not indicate actual precipitation and/or temperature levels, but the probability of difference (above or below) normal levels. For example let’s take a look at the first map, “Three-Month Precipitation Outlook; October, November, December”. The dark brown color that covers all of Texas other than the northern Panhandle and southeastern Texas into the Valley indicates a 50-60% probability of below normal precipitation. The darker the shade in any map, the greater probability of divergence from normal. No color indicates equal chances for above normal, normal, or below normal conditions (temperature or precipitation). Remember, these are probabilities and forecasts and are not guaranteed outcomes.
The combination of the probability of lower than average precipitation coupled with the probability of higher than average temperature indicate the likelihood of drought is increased. I am not a climatologist or a meteorologist, but the outlook for the field of agriculture is concerning to me as an economist. The picture is clear; increased production risk through at least next spring.
A Note on Risk Management
Risk management has many meanings depending on who you’re speaking to. Some automatically jump to thoughts of the futures market. To a human resources specialist risk management likely deals with employee conduct. In agriculture, we face risk from dozens of sources. A huge source of risk that receives an abundance of attention in agriculture is price risk. How do we receive the highest price for what we produce? Unfortunately in a competitive marketplace that risk is the least under our control, though there are opportunities available for management. However over the winter season price risk is not the foremost concern in my mind; it’s production risk.
Remember, risk management is not designed to increase profits in a single year. In fact, purchasing or enrolling in one of the programs we’ll talk about may net a small overall loss in the event that drought conditions do not come to fruition. Let’s remember that that outcome is a good thing. Bumper crops, ample forage, fat calves, and a small loss on a risk management tool is a much better outcome than the possibility of dry cracked ground, early weaned calves and culled cows, and no financial protection. Limiting our downside sometimes means taking a much smaller loss on the upside.
Production is at risk due to the forecasted potential for lower rainfall and increased temperature. Now obviously, we can’t control the weather. However, there are tools available to producers to mitigate the losses induced by conditions in the forecast. For the month of October we’ll dive in to three programs and hopefully provide an idea as to which is best for you. In this rare instance we have both the time and tools to protect our operations from known upcoming hardships; consider all your options.