Farm News
06-20-07
Cattle report indicates shift in the industry
By Kristin Danley-Greiner, Farm News staff
The U.S. Department of Agriculture’s (USDA) cattle on feed report indicated that
beef numbers in Iowa are down, even though new beef feedlots are cropping up
in sections of the state. The reason lies in the reporting of the USDA, as well as
the changing face of feeding cattle.
John Lawrence, Iowa State University livestock economist, said the USDA
only reports the number of cattle on feed in feedlots with 1,000 head or more
capacity, which he said have been expanding and adding pen space. In May,
these lots had 530,000 cattle in Iowa, the largest since at least 1992 when they
started this data series. However, each January, USDA reports cattle on feed in
all feedlots and on Jan. 1, 2007 that number (the less than 1,000 and greater
than 1,000 head combined) was the lowest since at least 1948.
“So Iowa is seeing a shift to feedlots that are serious about cattle feeding and
that are larger and the smaller feedlots are reducing—often quitting—the cattle
they feed,” he said.
Lawrence identified several reasons behind the industry shift, among them larger
feedlots making investments to meet the more stringent environmental
regulations and deciding to go ahead and expand. Larger lots also see
opportunities for profitable cattle feeding in Iowa, particularly with the increased
availability of wet distillers grains and solubles, he said.
“Many of the smaller feedlots also produce calves from a cowherd or corn, and
often both. They saw an opportunity to sell calves and corn rather than feeding
them. Their motivation may be opportunity, risk, or age and labor issues. We are
seeing expansion and there is a lot of interest and talk. It takes concrete, fence
and bunks to feed cattle,” he said. “Interest and talk is not enough. Remember,
distillers grains don’t feed cattle, people feed cattle.”
Bernie Punt, manager of Siouxland Energy and Livestock, said that the feedlot
he used to manage, which is co-located with Siouxland Energy, actually is
tearing down its old facility and building a brand new one that will have a larger
capacity.
“We do see other farmers in the area who are increasing their feedlot capacities,
Punt said. ’’But, conversely, some smaller producers are exiting the industry
because of the environmental regulations. So, it’s hard to tell at the end of the
day if we’ve gained in numbers or not.
But the proof is hard to overlook.
“We have seen a few new facilities go up in close proximity to this plant in the
past few years, which is a positive step, Punt said. ’’We do see producers using
the byproducts as a higher percentage in the diet. There’s also another facility
maybe 80 or so miles from me that’s a 10,000-head confinement in northwest
Iowa that’s been in the news. That’s why it’s hard to know the exact number,
because the new regulations are prompting some guys to downsize or quit, while
others are involved in some nice, new, large expansions of facilities.
Chris Hurt, ag economist at Purdue, said that Iowa has been losing cattle-onfeed numbers in recent years due to structural changes in the industry.
“The Western Corn Belt (Minn., Iowa and Mo.) have decreased from about 11
percent of the nation’s cattle-on-feed in 1985 to about 8 percent today as farmer
feeders have been reduced in Iowa, he said. ’’There’s growth in the central and
southern Plains. Commercial feedlots tend to have lower costs of production due
to their size and the level of technology they can employee. They also gain
managerial talent and better human expertise than can smaller farmer feeders. In
addition, the packing plants are located close to the highly concentrated feedlots,
which provide some better transportation costs.
Hurt said that the big issue is whether or not the costs and lower value of feeding
wet distillers grains in Iowa can overcome the disadvantages that farmer feedlots
face.
“If so, there could be some resurgence of feedlot cattle in Iowa, he said. ’’The
bigger issue is whether very large feedlots of say 20,000 head and larger can
develop in the state. These larger feedlots can gain the size and costs
advantages of the commercial feedlots on the Plains, but also have the lower
costs of feed from distillers. That question will depend on a host of factors
including environmental restrictions in the state and attitudes of neighbors
regarding these much larger feedlots.
Because ethanol plants can feed a significant number of cattle, the feedlots that
develop in Iowa need to be large, Hurt said.
“Farmer feedlots are just not set up to feed very many cattle, and with high corn
prices, few grain farmers are interested in getting back into cattle feeding, he
said. ’’The packing industry is already established around the large commercial
feedlots, too. It will almost take a major packer relocating to stimulate the cattle
feeding in Iowa. The problem is a chicken and egg item. The packer doesn’t want
to re-locate until the on-feed numbers shift back toward Iowa, but the feedlots
don’t want to relocate until the packer moves. This infrastructure shift generally
has to occur over time as both cattle and packing start to shift back.
For Iowa to continue to increase its cattle feeding numbers, Lawrence said that
producers also will have to look outside the state.
’’There is opportunity of export growth for U.S. beef, but it will be slow. Likewise,
the number of feeder cattle is limited by the cowherd, which is slow to grow. Thus
if Iowa feedlots want more cattle, they have to outbid feedlots in another region,î
he said. ’’Expanding feedlots are bidding feeder cattle away from smaller feedlots
within Iowa. Feedlots in other states are larger and well established, but their
cost structure is changing with higher feed cost and higher energy cost to
transport feed.î
Iowa producers may want to consider taking advantage of the distiller’s grains in
hog and poultry diets, Hurt said.
“This may be the bigger opportunity in the short-run, as inclusion rates increase
and more is learned about the maximum amounts that can go into rations, he
said. ’’Right now, the feedlot industry is under a lot of pressure to not put young
calves into the feedlot, but keep those on backgrounding programs for longer.
This is due to the very high feed costs right now. Unfortunately, not only is corn
and soybean meal high priced, but forages have advanced as well.