The DROUGHT HUB
Drought Resources for Montana Ranchers

MSGA is committed to keeping its members up-to-date on drought related information and resources. As our members work to find solutions during this challenging time, resources and information will be posted on this information hub as they become available.

REPORT DROUGHT CONDITIONS IN YOUR AREA

MSGA encourages its members to provide condition and drought reports to the National Drought Mitigation Center and the state Drought and Water Supply Advisory Committee.

Drought Impact Reporter

Report local drought impacts. The information gathered will be used to investigate trends and impacts and will help to inform potential responses during drought.

MENTAL HEALTH RESOURCES

At a time when many producers are making tough decisions for their operations, it’s important to take note of mental health in yourself and those around you. We all know working in the agricultural industry can be exhausting not only physically, but mentally as well. It’s more important than ever to make sure mental health is a priority for everyone on your ranch. MSGA has compiled some resources for suicide prevention for you or someone you know.

If you or someone you know is in immediate danger, please call 911

US DEPARTMENT OF AGRICULTURE

USDA’s Farm Service Agency (FSA) offers disaster assistance and low-interest loan programs to assist you in your recovery efforts following drought. For more information on these programs, contact your USDA Service Center and visit fsa.usda.gov/disaster.

Tax Deferral Options for Livestock Producers
Provided by WIPFLI

As ranching operations across the nation continue to get hit with drought this summer, the possibility of liquidating all or a portion of their herd grows larger by the day. This also will lead to unexpected income by the end of the year on the excess sales of breeding and/or market livestock for the operations. The good news is there are deferral options in the internal revenue code (IRC) to help reduce or eliminate any additional tax liability on the excess sales. They are as follows:

IRC 451(g) Election

  • Deferral of income into next tax year for breeding OR market livestock sales
  • Allows rancher to even out income over a two‐year span
  • Rancher is forced to sell more cattle than normal due to USDA designated adverse weather conditions in rancher’s county
  • Attach an election statement (example attached)
  • Calculation of excess sale to defer:
    • Take 3‐year average of annual head count sold and corresponding sale price from prior three years
    • Take current year head count sold and find the excess number
    • Take that excess number and multiply it by the average sale price of prior three years
  • 3‐year average is the safe harbor approach per regs.
  • Can also use the “facts & circumstances” approach by simply identifying the additional sale made during the year

451(g) Example

  • Rancher commonly sells calves every November and from 2017‐2019 the sales averaged 50 head @ $25,000 ($500/head) each year
  • In 2020, that rancher’s county received a drought designation and forces him to sell an additional 40 head in December @ $24,000 ($600/head)
  • Per the safe harbor method, he can defer $20,000 (40 head @ $500/head) of the $24,000 December sale
  • He could also just choose to defer the full $24,000 based off facts and circumstances

Election to Defer Livestock Sale Proceeds Pursuant to Code Section 451(g)

(Client Name)

(Client Address)

(Client City & Zip Code)

ID Number: (Tax ID Number)

Tax Year End: (Enter Here)

(Client name) is making an election to defer gain from the sale or exchange of livestock

pursuant to the provisions of Code Sec. 451(g) of the Internal Revenue Code.

Classification of Livestock: The election is being made for market livestock.

Evidence of Disaster: (Insert Type of Disaster Here)

Federal Aid Designation Date: (Insert Date Here)

Relationship of Disaster Area to Early Sales or Exchanges: (Insert Reason Here)

Computation of Deferral Amount:

(Described how you got to your deferral number here)

Total Amount Deferred to (Insert Year):                       (Insert Total)

IRC 1033(e) Election

  • Deferral of income into future tax years for breeding livestock sales only
  • This is a replacement deferral meaning the breeding stock were forced to be sold due to a USDA designated adverse weather condition or disease
  • The rancher gets the chance to buy back replacement breeding stock to take the place of the sold ones over either a 2 (disease) or 4 (continues adverse conditions) year span
  • Attach an election statement (example attached)
  • Same calculation options as 451(g)
    • “Safe Harbor” or “Facts & Circumstances” Approach
  • Deferred income reduces basis of replacement breeding stock purchased until absorbed
    • Meaning the taxpayer has no depreciable basis on the purchased breeding stock as they are being bought to offset the deferred gain
  • The value of the reinvestment must match or eclipse the deferred sale by the end of the replacement period
    • If not, you will have to amend prior year returns dating back to the year of the original sale to account for gain that was not completed deferred by end of replacement period
  • Based off type of breeding stock (raised or purchased), be prepared to analyze benefit of 1231 long‐term capital gain rates vs. a foregone depreciation deduction in future years

1033(e) Example

  • Rancher sells some of his old breeding stock each year and from 2017‐2019 the sales averaged 20 head @ $20,000 ($1,000/head) each year
  • In 2020, that rancher’s county received a drought designation and forces him to sell an additional 10 head in December @ $9,000 ($900/head)
  • Per the safe harbor method & facts/circumstances, he can defer the full $9,000 and likely will have 4 years to replace the 10 head of breeding stock
  • In 2021, he purchases 10 head of breeding stock to replace the additional 10 sold in 2020 for $10,000. In this scenario, the full $9,000 sale got absorbed by the replaced purchase and an additional $1,000 is added as depreciable basis in the new breeding stock.

Election to Defer Livestock Sale Proceeds Pursuant to Code Section 1033(e)

(Client Name)

(Client Address)

(Client City & Zip Code)

ID Number: (Tax ID Number)

Tax Year End: (Enter Here)

(Client name) are making an election to defer gain from the sale or exchange of livestock

pursuant to the provisions of Code Sec. 1033(e) of the Internal Revenue Code.

Classification of Livestock: The election is being made for breeding livestock.

Evidence of Disaster: (Insert Type of Disaster Here)

Federal Aid Designation Date: (Insert Date Here)

Relationship of Disaster Area to Early Sales or Exchanges: (Insert Reason Here)

Computation of Deferral Amount:

(Simply show the calculation and track what has been replaced each year)

Total Amount Deferred to (Insert Year Here Each Year):                                                         (Insert Total)

Educational Drought Resources from MSU Extension Service

Written by Mike Schuldt, Custer County Extension Agent

Water quality often decreases during drought. This article focuses on water quality concerns, testing, and interpretation. Many Eastern Montana County Extension offices have a meter to measure total dissolved solids (TDS) which can be a first step in investigating water quality. If TDS measures in the 2500-3000 ppm range or higher, a lab analysis should be obtained to identify the salts that make up the TDS. A basic laboratory water quality analysis will measure, at a minimum, sodium, calcium, magnesium, pH, nitrate, sulfate, and total dissolved solids.

Total dissolved solids (TDS) consist of the dissolved salts in the water, including sodium, chloride, carbonates, nitrates, sulfates, calcium, magnesium and potassium. It is generally expressed in parts per million (ppm). A guide to livestock and poultry response to saline water is: Less than 1000 ppm is excellent for livestock use, 1000 – 3000 satisfactory for our cattle, horses and sheep, 3000 – 7000 may cause diarrhea in animals not accustomed to the water and has a risk of sulfate issues. Over 7000  ppm should be avoided and laboratory test to determine specific at risk salts should be obtained.

In our area high-sulfate water is one of the major risk factors. Elevated sulfate levels  lead to poor animal performance, reproductive issues and at higher levels polioencepahlomalacia (Polio) and death. High-sulfate water has a laxative effect and usually tastes bitter. Water analysis results this year have measured sulfate levels that make up nearly 100% of the TDS, critical levels may be present in our water sources with TDS levels as low as 3500 TDS. Sulfur negatively impacts the absorption of copper. Producers with elevated water sulfate concentrations may wish to address these copper availability issues by increasing their copper in their mineral package

The use recommendations for sulfate containing water are: Up to 2500 ppm, relatively safe, 2500 – 3500 reduce copper availability, some polio, 3500 – 4500 very laxative and higher risk of polio induced death, over 4500 not recommended for use.

Sodium should also be monitored as excessive levels of sodium have a diuretic effect. By themselves, sodium and magnesium normally pose little risk to livestock, but their association with sulfate is a major concern. Water over 800 ppm sodium in the presence of high sulfates would be of concern. Also, the laxative effects of high sulfate water will be more dramatic as water pH increases.

High nitrate concentrations in water can be poisonous. Just as with nitrate toxicity from forages, nitrate from water is converted to nitrite in the rumen. This is of special concern as many of our forages have elevated nitrate with the drought conditions.

One other issue to be monitoring is the presence of Blue-green algae, or cyanobacteria, are photosynthetic bacteria that live and grow in aquatic environments. Poisoning usually does not occur unless there is a heavy bloom that forms a dense surface scum. Colonies may look like a skin or paint on or just below the water surface. Ruminants and birds are more sensitive to the toxins than monogastrics. Among domestic animals, dogs are most susceptible. Ranchers have reported dead birds and other wildlife along shorelines of affected water sources.

Water quality is a critical nutritional factor that influences animal health, performance, and wellbeing. Please don’t hesitate to contact me if you have questions about water sampling, testing, or interpretation of analyses.

Written by Mike Schuldt, Custer County Extension Agent

The risk of nitrate in our drought situation is inherently high as the conditions in SE Montana favor nitrate accumulation in our cereal forages. Standard nitrate testing protocol has been developed for harvested forages to be fed as a winter of feedlot diet – no credit is given for selective grazing by the livestock. We really have no established protocol for evaluating risk of nitrate in a grazing situation. Experience indicates that animals grazing fields that test positive for nitrate have less risk of developing symptoms that those fed similar testing forages that are harvested.

First, animals tend to eat more slowly when grazing compared to those being fed hay and the grazing cattle also tend to be more selective while grazing.  Stems have the highest level of nitrates, followed by leaves, then heads.  So, if the cattle are allowed to access these cereal fields as a whole (not strip graze) they will typically graze the upper portions (i.e., leaves and heads) first and will be consuming the lowest nitrate plant parts.  Second, more mature forages will have less nitrates than younger.  Typically, the highest nitrate levels are when cereals are late vegetative to boot growth stage and decrease toward milk and less when soft dough.  This typically only holds true, though, when soil moistures are normal, so we don’t want to judge a field based on maturity alone.

Decisions we make should take in these considerations:

  • Forages from each field considered for grazing should be tested using the newly implemented strip test at the Local County Extension office.  Two tests can be performed, one on the top portion (leaves and heads) of the plant and another on the lower stems.  To get a differential of accumulations.  (not to be confused when we are testing for hay harvest, we evaluate the entire plant in the case of hay)
  • A ‘Graze Lightly’ recommendation should be given to those fields with high NO3.
  • The graze lightly recommendation will not only allow the cows to primarily eat the low nitrate leaves and heads but it will also allow the rumen bacteria to adapt to processing higher nitrate feeds, allowing more nitrite to be converted to ammonia rather than entering the blood stream.
  • Animals at times have shown evidence of adapting to elevated levels of nitrates so a graduated approach to increasing level of nitrates would be advisable if possible. “step up nitrates slowly”
  • If at all possible, lower risk cattle should be used.  Open cows are probably the best choice followed by stockers or non-pregnant replacement heifers.
  • Turn cattle out to novel fields after a grazing bout, not hungry.  Grass waterways that are incorporated with the drought grain fields will help alleviate some issues and / or allow the cattle access to the fallow strips to pick and graze last year’s stubble also.
  • Be sure you are not compounding forage nitrates with nitrates that may be elevated in the cattle’s water source.  A normal water source with only minor levels of nitrates that on a normal year is not a problem could elevate the animal’s intake to a level the produces nitrate toxicity.
  • If the producer has an option, supplementing the cattle with an grain supplement while they are adapting to the higher-nitrate forages will supply the energy the rumen microbes need to convert nitrate into bacterial protein because it minimizes the middle step of nitrite. Use a readily available energy source for the cattle. NO energy sources with NPN. Protein should be all-natural protein.
  • Cattle should be monitored closely for signs of nitrate poisoning.

Other things to consider:

Should the crop have any grain fill it will aid in reducing nitrate toxicity but realize, wheat is highly digestible so associated grain problems could occur, Acidosis, bloat or founder. When we are talking cows the idea of increased foot problems may be important in the long run.  This may not be a high risk on some peoples list but definitely comes into play with hailed out grain just prior to grain harvest.

Be sure the cattle are on a high-quality mineral if possible 30 days prior and the entire time they are on the drought pastures

Remove cattle at the first sign of symptoms, move to a safe field.  Methylene blue is the treatment, consult your veterinarian before using this treatment.

There is only two ways to reduce nitrates in the plant, let the plant mature or ensile the crop.  Cutting and windrow grazing will do nothing to reduce the nitrates.

If the producers can keep their pregnant cattle from risk it would be best, perhaps graze yearling steers or non-replacement animals rather than pregnant animals, if possible. Think about the effect of nitrate on both the cow and bull if the bulls are still with the cows, you may negatively impact breed up.

Emergency forages will be used throughout Montana this year. Producers need to realize there are inherent risks associated with them and how each risk can be mediated or judged appropriate, so they can make the best decision for their operation.

Signs of chronic and acute toxicity can be found here:  https://store.msuextension.org/publications/AgandNaturalResources/MT200205AG.pdf [nam10.safelinks.protection.outlook.com]

Megan Van Emon, Extension Beef Cattle Specialist, Montana State University

Mike Schuldt, Custer County Extension Agent, Montana State University

Due to the extended drought in Montana, water availability in many areas has become severely limited. Reservoirs have dried up and in many instances are now covered in weeds. Due to the severe drought, weeds have become prevalent across pastures. Many producers are limited in their cattle movement this year due to the severe drought.

Although weeds can be high in protein and energy for your livestock, caution should be used when cattle are grazing weedy areas or are fed weedy hay. Many weeds in these areas, kochia, prostrate knotweed, Rocky Mountain Goosefoot, and Lambs Quarter, accumulate nitrate. Due to the severe drought, these weeds may be the only green feed available, and livestock often gravitate to these areas to graze.

Recently, Mike Schuldt, Custer County Extension Agent, and Megan Van Emon, Extension Beef Cattle Specialist, were called to investigate a weedy reservoir and collect samples for nitrates. When analyzed through the Nitrate Strip Test, offered in many county Extension offices, the Rocky Mountain Goosefoot had approximately 50,000 ppm and the Lambs Quarter and knotweed had approximately 10,000 ppm of nitrate. These levels are extremely high and should not be fed to livestock.

“These weeds were extremely worrisome due to their ability to accumulate nitrates, and this became more apparent after we watched a cow grazing in the area and eating the Rocky Mountain Goosefoot,” Van Emon said. The producer indicated that these weeds are normally not present and when traveling through the pasture, the Goosefoot and Lambs Quarter were not observed anywhere other than the dried reservoir.

The least risk for feeding nitrate containing feedstuffs is less than 1,500 ppm of nitrate. As the concentration of nitrate increases, more risk is associated with providing those feeds to livestock. The recommendation for concentrations over 10,000 ppm nitrate is to not provide that feed to livestock.

“The recommendation to the producer was to remove the cattle from the area of concern or fence off the reservoir to reduce the risk of the cattle grazing the weeds, “Schuldt said. “Nitrate concentrations at that level are concerning and symptoms and death can occur rapidly,” he continued. Symptoms of nitrate toxicity include labored breathing, muscle tremors, weakness, and staggering gait. If these symptoms are observed, remove the nitrate containing feed or move the cattle out of the pasture and contact your veterinarian for a treatment plan. When moving cattle from a high-nitrate feed area, move them slowly, moving the livestock too quickly can exacerbate the symptoms.

Additional USDA Program and Loan Resources

Noninsured Crop Disaster Assistance Program (NAP)

Provides financial assistance to producers of non-insurable crops when low yields, loss of inventory, or prevented planting occur due to natural disasters including qualifying drought (includes native grass for grazing). NAP Application for Coverage must have been obtained by the Sales Closing date to be eligible for this program.

Livestock Forage Disaster Program (LFP)

Provides compensation to eligible livestock producers who suffered grazing losses for covered livestock due to drought on privately owned or cash leased land. (See qualified counties listed above)

Livestock Indemnity Program (LIP)

Offers payments to eligible producers for livestock death losses in excess of normal mortality due to adverse weather. Drought is not an eligible adverse weather event, except when associated with anthrax, a condition that occurs because of drought and directly results in the death of eligible livestock. Producers should submit Notice of Loss within 30 calendar days of when the loss is first apparent. Producers should document the adverse weather conditions and date(s) of weather events.

Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP)

Provides emergency relief for losses due to feed or water shortages, disease, adverse weather, or other conditions, which are not adequately addressed by other disaster programs. Starting in 2020 for covered livestock losses,, including livestock feed, grazing and farm-raised fish losses, producers have a notice of loss deadline of 30 days from when the loss is first apparent to the producer.

Emergency Loan Program

Available to producers with agriculture operations located in a county under a primary or contiguous Secretarial Disaster designation. These low interest loans help producers recover from production and physical losses.

Emergency Conservation Program (ECP)

Provides emergency funding for farmers and ranchers to rehabilitate land severely damaged by natural disasters and to implement emergency water conservation measures in periods of severe drought.

To establish or retain FSA program eligibility, you must report prevented planting and failed acres (crops and grasses). Prevented planting acreage must be reported on form FSA-576, Notice of Loss, no later than 15 calendar days after the final planting date as established by FSA and Risk Management Agency (RMA).