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Producers seek options against higher feed costs

By Staff | Nov 12, 2010

With Tuesday’s USDA announcement that carryover stocks of feed grains like corn and soybeans will be lower than expected, producers are bracing for even higher feed costs and looking for alternatives for finishing hogs and cattle for less money.

By LARRY KERSHNER

Farm News news editor

For grain producers, Tuesday’s U.S. Department of Agriculture’s crop production report is expected to be bullish and even better prices for the corn and soybeans in their bins as the next several months rolls by.

However, the report was not encouraging because their primary feed stocks – corn and soybeans – are going to cost them more.

The cost of feed grains has gone up $2 per bushel during the past two months and some analyists think corn can reach $6.50 or higher before things level out.

With Tuesday’s USDA announcement that carryover stocks of feed grains like corn and soybeans will be lower than expected, producers are bracing for even higher feed costs and looking for alternatives for finishing hogs and cattle for less money.

“Producers are concerned about it,”?said Beth Doran, an Iowa State University Extension beef program specialist, based in Sioux County.

As a result, she said, cattle producers are looking at different options for keeping their input costs down as they finish cattle to market weights. These include:

  • Buying bigger feeder calves and yearling steers when refilling feedlots. Doran said the attempt is to spend less time feeding each head, thereby cutting the amount of corn needed to finish them.
  • Switching diets and rations. “Iowans are fortunate to be close to ethanol byproducts,”?Doran said. She noted that some producers are opting for feeding more byproducts and less con.

The tradeoff is lower feed costs, even if it means the cattle don’t reach market weight as quickly as if on a hotter corn diet.

  • Sending cattle to market earlier. “Producers will sell their cattle when they think they are ready to go,”?Doran said. “When feed costs are down, they tend to market their cattle later, trying to get those extra pounds.”

One saving grace for cattlemen restocking feedlots is that the supply of cattle is down.

Doran said cattle numbers are the smallest they’ve been since the 1950s. That translates into a high cash price at market time, as well as higher replacement costs.

“So these prices are offsetting,” said Shane Ellis, an Extension livestock economist, “and as feed costs climb, feeder calf prices will tend to fall.”

He expects producers who are restocking feedlots are comparing the futures cash markets for fed cattle with the cost of buying feeders and the rising cost of feed.

But with April 2011 cash futures for cattle closing Tuesday at $106 per hundredweight, Ellis said, “producers have to be saying, ‘we’ve got to be able to make money with that.'”

Pork and beans

A similar dynamic is at work between the relationship of swine and soybean meal, Ellis said, “”but it’s not quite as drastic.”

He said the rule of thumb is that it takes about 25 pounds of soymeal to finish a pig, and 10 bushels of corn for a calf.

But just as in the feeder cattle market, as soymeal prices go up in the hog industry, the cost to replace those animals will be pushed down.

Contact Larry Kershner at (515) 573-2141, ext 453, or at kersh@farm-news.com.

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