Drought Business Planning

Drought is not a surprise on most ranches, only the timing is. A plan written before the dry spell lets you make business decisions calmly instead of in a panic.

Key points

Write the plan before the drought starts.
Budget forage and water and track conditions.
Set triggers and decide in advance what each one means.
Talk to your lender, accountant and FSA early.
Protect cattle condition and the land for recovery.

Why plan before the dry spell

Drought puts pressure on grass, water, feed costs and cash flow all at once. Decisions made early, when you still have options, usually cost less than decisions made after pastures are gone.

A written plan also helps your family, your lender and your employees see what comes next and who decides.

Drought is usually a stretch of lower than normal rainfall that lasts long enough to hurt forage and water. Because it creeps in, many ranchers do not act until options have shrunk.

Know your forage and water budget

Start with what you have. Estimate how much forage your pastures are likely to produce this year, how much your cattle will need and how much water is reliable. Your extension office and NRCS can help you with methods for estimating forage for your region.

Check rainfall records and the forecast, and compare them with past dry years. Keep a log of conditions by pasture so decisions are based on what you see.

Update your numbers during the season rather than relying on early spring estimates. Conditions change fast, and what looked adequate in May may not look so in July.

Forage available by pasture
Hay and feed on hand and available to buy
Reliable water sources and backup options
Herd needs by class of cattle
Rainfall and conditions record

Set triggers and decide ahead of time

A trigger is a condition that tells you to act, such as a certain date without rain, pasture condition or water level. Decide in advance what you will do when each trigger is hit: move cattle, wean early, feed, sell part of the herd or lease grass.

Writing triggers down makes it easier to act. It is hard to sell cows in a hurry, so make these decisions with family and advisers when you are calm.

Share the triggers with everyone involved, including family members, hired help and your lender. Everyone should know what happens at each step.

Destocking and herd decisions

Selling cattle is painful, but often the most effective way to protect land and the rest of the herd. Think through which animals to sell first, such as animals with poor performance, open cows and older cows, and which ones to protect. Your veterinarian can help with pregnancy checks and health decisions.

Consider how and when you will rebuild. Ask your extension office about what others did in past droughts and what the market trends looked like. Do not rely on live prices from memory.

Think about weaning earlier than normal, culling the lowest producers, moving cattle to rented grass or using drylot feeding with advice from your nutritionist. Each option has costs and animal welfare effects to weigh.

Talk to your lender and advisers early

Meet your lender before you are in trouble. Bring your plan, your records and your cash flow outlook. Ask about options for restructuring or extra operating credit. Ask your accountant about tax issues related to livestock sales, and USDA FSA about programs and deadlines. Programs change, so call your local office for current details.

Not financial advice. Individual circumstances vary.

Keep your records clear and current. Lenders and FSA staff can help faster when they can see your inventory, feed costs, sales and plan on paper.

What credit options exist?
What documents do you need?
How would selling cattle affect your taxes?
What programs might help and what are the deadlines?

Look after cattle and the land

Watch body condition on the one-to-nine scale and adjust before cattle get thin. Work with your nutritionist on feeding when forage is short, and do not make sudden feed changes without advice. Drought-stressed forage can carry risks such as nitrates, so call your vet and nutritionist before using unfamiliar feed.

Protect the land too. Resting pastures after drought speeds recovery, and overgrazing now costs you production for years.

Check the water supply often and have a plan for hauling if a source fails. Hot weather greatly raises water needs.

Common mistakes

Waiting for rain that does not come, delaying the lender conversation, buying feed without testing, ignoring the recovery plan and having no written triggers are the usual errors. Another is leaving family out of the decisions.

Review the plan every year and update it after each dry spell.

Share your plan with someone outside the ranch, such as an adviser or a neighbor, who can see what you cannot.

When to get help: Contact your lender, accountant and local USDA FSA office early, your extension office for forage budgeting and your veterinarian and nutritionist about herd condition and feed choices.

Sources and further reading

Organization homepages are linked so you can search them for current guidance on this topic.

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