*This is a preliminary report. Please do not quote without the permission of the authors.
 Figure 1: Cattle in dry wash in southern Arizona Photo: Dorn Moore ©1996 All Rights Reserved |
The University of Arizona All Rights Reserved
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The winter and spring of 1995-1996 was one of the driest on record in the southwestern United States with many stations reporting less than 2" of precipitation and temperatures 2 to 6 degrees F above normal (NOAA, June 1996). This followed dry conditions in 1995 over much of the region and northern Mexico. The Palmer Drought Index, which measures the severity of drought, with -4.0 representing extreme drought conditions, reached -4.0 over much of the southwest and Texas by May 1996 (Figure 2). These dry conditions were associated with a strong La Nina and a negative phase of the North Atlantic Oscillation which produced a ridge of high pressure over the southwest and displaced the jet stream and winter storms to the north (NOAA, June 1996).
Figure 2: Palmer Index for 1996 for Arizona Climate Divisions (graphs for other states can be plotted with the NCDC Climate Visualization System
The agricultural impacts of the drought varied across the region. The winter wheat crop was the lowest in more than a decade (FAO, 1996), with extremely low yields in Texas, and a failure of the rainfed wheat crop in New Mexico. The appearance of the Karnal bunt virus on durum wheat in Arizona, New Mexico and Texas compounded the disaster for wheat producers in the region. In Texas, the economic ripple effects of the drought were felt in a 30% drop in farm input sales, a drop in land prices, an increase in loan defaults, and job losses (Fohn, 1996).
Poor weather in the US, combined with drought in Mexico, and Argentina, and decreasing returns to fertilizer and other inputs, contributed to low global grain harvests in 1995 and 1996, and a shortfall of 65 million tons below world demand (Brown, 1996, Hargreaves 1996). An increase in demand is associated, in particular, with economic and population growth in China, and with new demands for grain for cattle feed, breweries, and industrial applications such as paper and fuels (Edgerstrom, 1996). World food stocks fell to 48 days, the lowest point in several decades, and grain prices increased dramatically. For example, US export prices for corn increased from $113 per ton in May 1995 to $200 per ton in May 1996 and wheat export prices increased from $169 per ton to $244 per ton over the same period (FAO, 1996). Although some farmers, especially those with reliable irrigation, were able to benefit from the price increase, many had no grain to sell because of the drought.
The high grain prices were particularly devastating to the livestock sector, which depends on grain for supplemental feed, especially when pasture conditions are poor. Ranching was one of the most severely affected sectors, suffering what some feel was permanent damage as a result of the drought.
Why was ranching so vulnerable to the drought? Ranching embraces structural and environmental circumstances which serve to compound the severity of effects from drought. The vulnerability of ranching to drought underscores the importance of the coincidental interaction of drought, environmental policy, and economic and social forces operating at different scales. The dessication of pastures combined with high grain prices, low cattle prices, and other economic forces, to cause severe problems for ranchers in the southwest.
By 1995, the livestock industry had been under strain for several years as beef prices declined with a shift in domestic demand and overstocked herds were sold as part of the regular "cattle cycle". From 1987 to 1993 ranchers built herds in response to high prices. In 1994, prices began to decline as these herds reached prime sales age, and the impacts of NAFTA and of drought in Mexico began to be felt on the US side of the border. NAFTA reduced tariffs on trade in live cattle and beef products (Markley, 1996), and the collapse of the Mexican peso in 1994, combined with an intensification of a drought which began in 1993, meant that Mexican livestock flooded US border state cattle auctions as Mexican ranchers sold off their herds. Cattle exports from Mexico to the US rose by 50% in 1995 and cattle prices plummeted by up to $40 per head (Breyer, 1995). A number of Mexican ranchers were vulnerable to the drought because they had overstocked and overgrazed their pastures in attempts to survive economic crisis.
Many of the ranchers in Arizona and New Mexico grow their own supplemental cattle feed in the form of hay, alfalfa and winter wheat. But many of these crops failed over the dry winter of 1995-96 and hay prices rose rapidly into the spring of 1996. With pastures too dry to graze, and ranchers unable to afford high hay and grain prices from other regions, many began to liquididate their herds. Continuing drought in Mexico resulted in even greater cattle sales. By the end of 1996, the Sonoran cattle herds had dropped by almost 50% from 1990. The Mexican imports, and the combination of ranchers selling cattle throughout the Southwest, caused livestock prices to fall even further to below $200 per head (from $400 in 1991-92) and as low as 17 cents a pound.
In
the Marana stockyards near Tucson, cattle sales were elevated all
year with record sales in the late fall of 1996 as ranchers
realized they couldn’t keep their herds through the winter.
USDA statistics for the state of Arizona indicate the average
number of cattle sold increased by 45% from 1993 to 1996, and by
10% alone from 1995 to 1996. The cattle inventory for Arizona
shows a decrease in the number of head of cattle from 870
thousand to 790 thousand from 1994 to 1997, with the greatest
decrease (50,000 head) between January 1996 and 1997. However
other factors could contribute to this decrease.
The destocking trend might also have
been a contributor in the change in the profile of cattle
operations in Arizona from 1993 to 1996. There was an overall
decline in all cattle operations in Arizona by 15 percent during
this period. However there was an increase in the number of
operations with 50-99 head of cattle between 1995 and 1996
perhaps reflecting downsized operations. As well a significant
number of ranchers have converted their deeded land for
real-estate development and have left the cattle industry.
A number of
ranchers went out of business as a result of the drought,
especially small family enterprises with less than 50 head of
cattle (Markley, 1996). Larger, more diversified corporate
operations were better able to cope, and some benefited by buying
cattle at low prices. In many cases disaster relief came too
late. In August 1996, $40 million became available through the
Federal Emergency Feed Program, financed by the sale of 15
million bushels of grain from the federal reserves. For those
with a 40% loss or greater of pasture, up to 50% of the cost of
supplemental feed could be reimbursed. The restrictions on the
grazing of Conservation Reserve Program land were also relaxed.
This study was conducted in southern Arizona on the heels of the 1996 drought to examine in greater detail characteristics and structural circumstances that may make some ranchers more vulnerable than others. As well, rancher attitudes about climate information and its potential utility were assessed in an effort to understand better the utility of forecasts and information needs for improving the management of drought in the ranching population. The study was conducted using a semi-structured questionnaire to look at 11 ranching operations in southern Arizona during the first five months of 1997. These do not represent the most vulnerable ranches, some of which had actually gone out of operation by the time the survey was conducted, and tended to the upper size distribution for Arizona. All but one were family run cow/calf operations, and most leased land from the BLM or the Forest Service. They ranged from 5000 to 70,000 hectares, and were located in the southeastern part of the state.
Perceptions of drought rainfall variability and climate change
While most of the ranchers interviewed believed that the 1996 drought began 2-3 years ago, some believed it was part of a drought which had been in effect since the beginning of the decade. They expected an annual rainfall between 12 and 15 inches and many had recieved less than half that amount during the previous 12 months. Evidence of drought observed by ranchers included not only a decrease in rainfall, but also deterioration in the condition of their range, defoliation of the mesquite trees, and a diminishing store of water in earthen dams.
The temporal and spatial variability of rainfall was a primary concern, with precipitation varying across the region and within an invididual ranch. Several respondents did believe that the climate was changing or becoming more uncertain with summer monsoons diminishing and fall hurricanes and winter rains becoming more significant.
It was clear from conversations with ranchers that the drought’s affects could not be easily distinguished from the effects of different types of range management strategies, poor market conditions, and economic constraints of ranchers entering the drought. It was a combination of structural, physical and ranch specific characteristics which defined the vulnerability of the drought for each individual.
Range conditions and water supplies
All but one of the ranchers (who happened to use irrigated fields for pasture) observed a decline in pasture quality between 1995 and 1997, and half of them felt that their rangeland was already in poor condition in the spring of 1995.
Utilization of rangeland is governed by available water supplies for livestock, and the existence of wells and dirt tanks allows for flexible management options. One rancher commented that the extensive use of groundwater from wells is what has made ranching in Arizona possible. Without the well water, ranchers would not have the same degree of flexibility and sophistication in responding to climatic variability. Wells in most cases were not affected by the drought, unless they were quite shallow and dependent on annual recharge for consistent volume supply. Dirt tanks on the other hand, which are recharged every summer from rain run-off, were significantly affected on every ranch where they are used. Some went completely dry, depriving whole pastures of water. Although in the short-term, the availability of ground water for livestock management appears to reduce vulnerability to drought, in the long-term the industry may be much more vulnerable to drought because of its dependence on groundwater. Ground water in southern Arizona is being depleted at a rate which exceeds the natural recharge rate of the aquifer.
Direct Impacts on Livestock
Direct impacts of the drought on livestock were evident in both decreased weight of cattle on the market in 1996, with weights being at least 100-200 lbs less in 1996 than in 1994 (Figure 3).
Income from
cattle sales was effectively cut in half for many ranchers (20-37
cents for cows and 13 to72 cents for calves) while overhead costs
remained the same or increased. One auction manager from Wilcox
said that he had not seen such low prices since the 1960s. One
rancher illustrated this point explaining that a .10c decrease in
price for a ‘fat’ steer could mean a total loss of
$40,000 for a calf crop of 800 head. This loss might be
manageable for some of the larger ranches, particularly if they
were not mortgaged. However if the price falls by this amount
during a drought year when steers may be a little more lean, a
rancher could lose $96,000.
The lack of spring rain in 1996 also delayed breeding for cows who normally give birth in the early spring, and in other cases cows did not produce calves at all due to the drought. About half of the respondents usually sell calves when they reach 500 lbs or higher, the remainder when they are 400-500 lbs. In 1996, many sold at 100 lbs lighter, one at half the normal sale weight. In addition, many cattle apparently died in the drought from thirst and starvation, especially on the San Carlos, Navajo, Papago and Tohono O’odham reservations. Four of the respondents indicated drought related cattle deaths, one lost 100 head, and the other 20% of his herd.
Coping Strategies: Destocking
The primary coping strategy that ranchers employed was to ‘destock’ or cull more than the usual percentage of cattle. Auction managers reported average destocking rates of 30%, up from the normal 10-15%. The ranchers that culled most deeply in 1995-96 were the smaller of those interviewed. The largest cattle ranches (1000+ head) either did not cull more than usual, or culled only by another 10-20%. In contrast, among the smaller ranches, culling rates were 40-80%.
For ranchers leasing from the Forest Service, destocking was often mandated by Forest Service policy. Ranchers could either move their herd off the Forest Service land, lease new land, or they could cull the herd. Others destocked simply because their pasture had either run out of forage or water, and the cost of supplemental feed and for leasing new land was prohibitive. Many of the ranchers on tribal land also culled their herds significantly above normal. With a couple of ranchers indicating that they had sold all of their cattle – effectively liquidating their herds.
Supplemental Feed and Water
An option for some ranchers was to either bring supplemental feed to livestock, or transport livestock to other feed and water sources; always at considerable cost. Feed costs rnaged from $5 to $100 per head, and from 3% to 75% of operating costs. The higher figures were for a rancher who was purchasing feed for some cattle that were in feedlots.
Ranchers who grew forage themselves are able to profit by selling the surplus to other ranchers. Two of those interviewed grew their own hay and alfalfa, and responded to the drought by planting more acreage in forage. They were able to do this through assured supplies of groundwater for irrigation. Such ranchers can also benefit from the low prices of breeding stock being sold.
Sixty-three percent of the respondents reported that they had had to lease new pasture or transport their herd to different pastures in response to the drought, with the cost of transporting the cattle to the new pasture as much as $1700 one-way. A report from the Arizona Cattle Growers Association reported that many ranchers had shipped their cattle to grain fields or feed lots out of state.
Obtaining adequate water supplies in times of drought involves purchases and transportation with less water overall available for this purpose. A livestock expert commented that the expense of hauling and purchasing water often makes destocking the herd a more viable option. Nevertheless many ranchers took out additional loans from local banks, while others attempted to take advantage of federal programs in order to obtain additional feed and water. Some purchased city water and incurred extra costs of up to $600 a month.
Several livestock extension agents emphasized importance of sound range management strategies in ensuring the resilience of a ranch in face of drought. One agent commented, "drought sends poor management over the hill." However while virtually all respondents practiced range rotation for their herds, they noted that it is difficult if not impossible in a drought year to persist with a rotation schedule because of the general lack of grazing. Several respondents abandoned or heavily modified their schedule of rotation in order to allow the cattle to graze where ever possible to find feed. All the ranchers interviewed indicated that their cattle could not survive another summer of poor rainfall, given the current state of their pastures.
NAFTA
While some ranchers thought that the decimation of Mexican livestock herds due to the drought meant that cheap Mexican cattle were flooding the US market under NAFTA, further depressing prices, others considered that NAFTA would also allow the flow of livestock to be reversed when Mexican ranchers started to recover from the drought and rebuild their herds. As well, Mexican demand for US meat would possibly increase as the Mexican herd would not be able to supply the Mexican market adequately until herds were rebuilt.
Uncertainty
Weather conditions and pasture conditions were thought to be almost synonymous by many ranchers and were by far the greatest concerns in terms of the primary source of uncertainly in their production, planning and operations. Secondary concerns were livestock prices, input prices and trade with Mexico. Some ranchers thought that government policies, especially those that placed environmental and endangered species protection in conflict with grazing, were a major source of uncertainty. Ohter were concerned with costs of leasing land and with estate tax laws that were forcing them to consider converting their land to real estate.
Potential Value of Climate Forecasts
Part of the purpose of the ranching case study was to determine the utility of weather information to ranchers in southern Arizona. Reliability, timeliness and accuracy of information were expressed as the primary concerns related to forecasting. Responses as to the importance of climate information to their operations ranged from "extremely important" to "not at all," with about half of those interviewed noting the latter. These ranchers were very skeptical about forecasting, claiming that information seldom could account for the local (spatial) variability in weather, nor could they accurately predict the summer storms in the desert area. Winter weather was perceived as more predictable, but even then the forecasts were not very reliable. Those who were interested in long-range forecasts got them primarily from livestock and agricultural journals such as the Farmer’s Almanac and Drover’s Journal. However these were also not perceived as very reliable. Only one respondent reported that he received long-range forecasts from the National Oceanic and Atmospheric Administration via the National Weather Service radio broadcast. The ranchers who listened to the weather forecasts often and read the long-range forecasts also appeared to be more articulate and informed about meso-scale and global atmospheric influences on local weather conditions.
When asked about the hypothetical value of a long-range, qualitative forecast of precipitation and temperature for either the winter or summer seasons, those ranchers for who climate information was of little value were typically more skeptical and would only consider using such a forecast if it were proven to be 80% or more reliable. The two respondents who seemed most interested in the use of long range forecasts would consider using them if they were simply more than 50% reliable. There did not appear to be any pattern in the ranchers’ interest in long-range forecasts related to ranch size or type of operations.
Each rancher was asked to speculate on what actions he might take if the forecast was as reliable as he required. The ranchers who also engaged in crop agriculture indicated that they would use the forecasts in deciding how much forage to plant and when to cut and bale it. The forecasts would also be useful for deciding what the demand for forage might be from other ranchers. Another rancher said that if the forecast were 100% reliable, he would act on it by buying cattle ahead of his calf crop in anticipation that the crop might be short from bad weather. Almost all the ranchers indicated that they might use the forecasts to determine when and where to buy and sell cattle and how much cattle to cull.
In terms of forecast content, most ranchers thought that it would be most important to know the amount and timing of the summer rains, although several ranchers thought that this might be much more difficult to accomplish than winter forecasts. Several ranchers also indicated that it would be helpful to know the range of temperature during the winter months, particularly if there were going to be a long period of days below freezing. The combination of temperature and moisture during the winter was thought to be very important for anticipating the condition of the range. Several of the ranchers interviewed said that the forecasts would need to be more geographically specific than "south-east" Arizona.
The personal financial circumstances of a rancher very likely also contributed to his or her vulnerability in face of drought. The role that bank debt or having mortgaged property might play in a rancher’s response to drought was brought up repeatedly in the course of several conversations both with ranchers and with livestock experts (auction managers, association representatives). One livestock specialist with the state agricultural department explained that many of the smaller, family-run ranches have very little financial margin to play with during a drought. A large number of them are mortgaged and when they have to face several years of poor rainfall, the banks foreclose them. Pressure from banks was also identified by some respondents as one reason why many ranchers liquidated their herds or were forced to sell off a large percentage in the period of the worst market prices. This was thought to be a particularly severe problem for the ranches with 100 cattle or less. Ranchers who must respond to the demands of their creditors no longer can make decisions predominantly on the basis of range conditions.
It is difficult to generalize about vulnerability to drought in southern Arizona, although ranching is clearly sensitive to climatic variation and change, and has become vulnerable as a result of economic and other changes. Our study suggests that:
Statement by Senator Domenci on New Mexico drought
References
Breyer, Michelle, 1995. Beef glut lowers retail prices leaving cattlement in the lurch. Austin American Statesman. September 27, 1995.
Brown, Lester. 1996. Rebuilding World Grain Stocks - the Challenge of 1996. Worldwatch Vital Signs Brief 96-1. 25 January 1996.
Edgerstrom, Lee. 1996. A corn-fed economy: crops and versatility lays seed for barn-busters, droughts in a wide variety of markets. St Paul Pioneer Press. May 20, 1996.
FAO, 1996. Food Outlook. FAO, Rome, June 1996.
Fohn, Joe. 1996. State declares drought disaster - Texas agriculture suffers estimated $6.5 billion loss. San Antonio Express News. May 23, 1996.
Hargreaves, Deborah. 1996. Grain prices soar as poor crops leave stocks low. The Financial Times. April 25, 1996.
NOAA, June 1996. Special climate summary 96/2: Drought in the Southern Plains and the Southwest. June 1996.
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