Farm News, IA
05-11-07
High feed prices impact beef sector
By Kristin Danley-Greiner, Farm News staff
AMES — While fed cattle producers have enjoyed recent surprisingly high prices,
the possibility of prices plummeting this fall is a reality.
Economist John Lawrence at Iowa State University said the fed cattle market
is coming off of seasonal high prices over a $1 per pound live weight — the
highest prices on record except for a period of time in the fall of 2003. In fact, the
purchase price on cattle sold this spring and summer are lower than earlier in the
winter, so feedlots will be selling profitable cattle well into the summer,î he said.
“However, the recent strength in fed cattle prices and distant futures has
encouraged them to bid up feeder cattle, creating the potential for losses in the
fall if fed cattle prices weaken,Ӕ he said.
Chris Hurt, Extension economist with Purdue University, said calf and feeder
cattle prices bore the brunt of high feed prices in the first quarter. He said the
picture was even more dismalî for the prices of heifer calves.
“The negative impact of higher feed prices on the cow-calf sector was an
estimated $1.2 billion in the six months from October 2006 through March 2007,î”
he said. “This puts the industry on track to have in excess of a $2 billion annual
negative impact from higher feed prices.
“Feeder cattle and calf prices may face the greater uncertainty given the potential
volatility of the corn market,î” he added. “Steer calf prices are expected to trade
in the $115 to $125 range this summer, and then $110 to $120 this fall. If the
large corn acreage does get planted this year, and with normal or better weather,
those calf prices could easily be $5 to $10 higher by the fall.î”
Kelvin Leibold, ISU farm management field specialist, said that beef cow
producers should do better than anticipated, since calf prices have remained
higher than some originally thought with the higher corn prices.
“Feedlots aren’t going to pay big bucks for calves if they pencil out to be a big
loss.”
The feeders are going to make money if the current margins continue, but that is
a big if,î he said.
Leibold also said that producers could help with their bottom line by managing
feed costs and price risks, which are still critical to profitability.
“From a feeders standpoint, getting calves bought right and sold right makes a
huge difference in profit. Utilizing lower cost feed sources such as distillers’ coproducts to help reduce feed costs is critical to profit,”î he said.
Essentially, the best thing producers can do to prepare themselves for the near
future is to review their budgets.
“Feedlots have already adjusted to higher corn prices by bidding less for feeder
cattle last fall and by being aware of the higher feed costs as then bid on feeder
cattle. The corn market is expected to be volatile this summer and feedlots
should recognize that we are in a different feed supply and price world,î”
Lawrence said.