Testimony

on behalf of the

**Virginia Cattlemen's Association**

with regard to

The Impact of Drought Conditions on Virginia Livestock Operations

Submitted to the

United States House of Representative -- Committee on Agriculture

The Honorable Collin Peterson, Chairman

submitted by

Mr. Bill R. McKinnon

Executive Secretary

Virginia Cattlemen's Association

October 25, 2007

Washington, D.C.

My name is Bill McKinnon and I am the executive secretary for the
Virginia Cattlemen's Association. The Association was organized in 1944
to promote the profit potential of Virginia's cattle industry. The
Virginia Cattlemen's Association's 5000 plus members represent all
segments of the cattle industry. I appreciate the opportunity to address
this committee and relate to you the impact that the current drought in
the Southeastern states is having on the region's cattle producers.

Cattle production in Virginia is very much a forage based industry.
Typically our cattle are maintained and grown on pastures during the
growing season and wintered on stored hay that was harvested during the
spring and summer. Normally in October, you might drive through Virginia
and still notice lush green pastures. As you tour Virginia and much of
the rest of the Southeast this October you view primarily brown grazing
boundaries with little or no forage.

The USDA National Agricultural Statistics Service has projected Virginia
hay yields this year to be down 15 to 31 percent. That projection fails
to paint a clear picture of the current forage feed situation in the
state, nor is it reflective of the extremely devastating conditions
found in other Southeastern states such as Tennessee, Alabama, or
Georgia. In the southwestern region of Virginia, a major cattle growing
area, hay yields are down more than 40-60 percent from last year.
Further exacerbating the situation is that much of that limited hay
harvest was then used to maintain cattle during the summer months while
the drought continued to devastate pastures. In September, 86 percent of
Tennessee's pastures were rated as "Poor" or "Very Poor." Many
operations had hoped for late summer rains to spur typical fall pasture
growth; however that moisture has not materialized. The limited rainfall
combined with continued above average temperatures has forced cattle
producers to continue digging into their already limited feed supply.

The drought has certainly had a marked effect on producers' management
decisions. Within the last two months we have increasingly heard of
producers forced to sell cattle because of limited water supplies. Many
shallow stock ponds, small springs, and wells have gone dry. Even on
operations with flexible feed supplies, the owners are reluctant to hold
their cattle inventories or purchase additional numbers due to their
concerns over water availability.

The dry weather and poor pasture conditions have forced many cattle
producers to market their feeder cattle earlier than planned. In
Virginia, we have noticed the volume of feeder cattle sales running
nearly thirty days ahead of normal. As producers must pull cattle off
pastures early to market them, they are selling feeder cattle at lighter
weights. The lighter weights have resulted in reduced receipts per head.

Cow calf producers are also experiencing the impact of the drought when
they market their calves. In a normal year, many operations would keep
their lightweight calves through the winter to put on additional weight.
Limited feed supplies are forcing producers to sell their whole calf
crop now. As I spend time in livestock auctions and talk with market
operators and buyers, there seems to be almost no local demand for those
lighter weight calves - again fueled by scare feed resources. The need
to market and ship these lighter weight cattle out of the region
adversely impacts their price.

Of most concern, the impact of this devastating extended drought is
causing structural changes within our industry. Many cow/calf operators
are being forced to sell off significant portions of their brood cows as
a result of restricted stored feed supplies. Data compiled by the
Virginia Market News Service indicates that during the last month
slaughter cow marketings are up 72 percent over a year ago. In the
Southwestern part of the state, producers are selling off cows at a rate
of 2 ½ times that of last year. Anecdotal information suggests that
almost all cow/calf producers in the region have either already made or
are planning abnormally high breeding cattle sales. The vast majority of
these cows are selling for harvest not breeding prices since there is
little demand for additional breeding stock in the whole Southeast.

It is important to recognize that it takes nearly two years of
investment on the producer's part to bring these breeding animals to a
point when they produce their first calf. A significant amount of time
and expense is spent developing this foundation of the cow herd, and
these animals are not readily replaceable. When producers are finally
able to rebuild their herds, it will cost them at least twice as much to
replace those cows as they are currently receiving for them. Rebuilding
cattle herds to optimally utilize their available resources will place
severe economic strain on already financially stressed farm businesses.

Faced with this difficult situation, cattle producers in the region have
been evaluating all their options to secure enough feed resources with
which to maintain their herds. With the drought conditions being
widespread, the normal option of purchasing local hay or other
feedstuffs from neighbors is not an option. Given this, we have explored
the option of bringing in hay supplies from regions with surplus stores.
Available hay supplies generally appear to be located at least 800 miles
from the most devastated regions. Given current fuel prices and the
constraints of transporting hay, the projected hauling costs appear to
be in the \$100 to \$125 per ton range. These transportation costs are
roughly twice the cost of the hay, which effectively triples the price
of shipped in hay.

Many cattle producers in the region who are not already supplementing
their herds are examining the option of purchasing corn and various
grain byproducts to extend their forage feed supplies. The rapid rise in
all grain and grain byproducts during the last fifteen months has made
this option more expensive than in past seasons. Grain prices are
roughly 50% higher than fifteen months ago.

An additional cost as a result of the drought that livestock producers
are yet to face is the expense of renovating damaged pasture lands. The
extended dry period during the region's growing season caused many grass
plants and legumes to die out. The thinning of the pasture lands will
reduce their productivity and render them more prone to erosion. Once
normal precipitation patterns return, producers will need to expend a
tremendous amount to reseed and fertilize damaged grasslands to make
them productive again.

Overall, the Southeastern drought is causing economic devastation to
livestock producers on five fronts. These include forced liquidation of
breeding herds, early marketing of lighter weight feeder cattle,
significantly higher feeding costs, reduced prices for lightweight
feeder cattle, and grasslands renovation costs.

Livestock producers are used to dealing with short term dry spells, and
most do their best to plan for them. However, during periods of extreme
and prolonged disaster such as this, access to federal disaster programs
is essential to the viability of many livestock businesses located in
the Southeast region of the country. Additional expenses for
supplemental feed, grassland restoration, and herd rebuilding will be
debilitating to the financial situation of cattle operations.

The Livestock Compensation Program (LCP) is of immediate concern to the
region's livestock operations. LCP was originally created in 2002 as an
emergency Farm Services Agency (FSA) program to provide immediate
assistance, in the form of direct payments, to livestock producers for
damages and losses resulting from natural disasters. Payments from LCP
can provide crucial assistance to producers having difficulty obtaining
feed for their livestock. Producers need to be assured within the next
two months that those funds could be available to offset the substantial
expenses involved in securing their additional feed supplies.

The Emergency Conservation Program (ECP) will also provide essential
assistance to livestock operations. ECP provides emergency funding and
technical guidance to farmers to rehabilitate lands damaged by natural
disasters. The program can also be used to provide water to livestock in
drought conditions.

In some cases the Livestock Indemnity Program will also be crucial to
producers as it helps to offset death losses suffered due to natural
disasters. Anecdotal information suggests that there have been
unexpected additional cattle death losses due to the drought. LIP is of
paramount importance since it provides reimbursement for a percentage of
the applicable market value of these deceased animals.

Today, I have discussed primarily the situation facing cattle producers
in Virginia, fully realizing that other states may be facing more dire
circumstances. Chairman Peterson, thank you for the opportunity to
testify here today and explain the plight of cattle producers in our
region. I would be happy to answer any questions the Committee may have.