HIGHER FEED COSTS HIJACKING LIVESTOCK PROFITS IN 2021
With corn prices at an eight-year high, Iowa State University ag economist Lee Schulz is dusting off his records from the 2012-13 drought years to see the impact of higher prices on livestock production. “We are already at large production levels, which are pressuring prices, and now we have the added factor, the wild card, of higher feed costs,” he says. In the cattle industry, cost of production impacts placement into feedlots. “Farmer/feeders who walk corn off the farm through feeding cattle may change decisions now that corn is worth a lot more,” Schulz says. In the long run, livestock markets will adjust, says Schulz, but in the short run there can be some harsh pinch points. “A producer may have placed feeder cattle at higher prices than the current feed cost situation dictates. In the long run, higher feed prices will increase finished animal values, because it cost more to finish those animals. It also brings down prices for feeder animals,” he says.The beef herd was already declining in 2020 as a natural part of the current cattle cycle, says Schulz. He estimates the beef cow herd is down about 1% in early 2021 from a year ago. COVID-19 likely didn’t have a huge impact, he explains, because 75% of U.S. producers calve in the spring and market them in the fall or winter. Calf prices in fall 2020 had rebounded from the spring and were steady with fall 2019 levels. Higher feed prices didn’t fully start to hit until late November. “I don’t think we will see as large of declines in beef cow numbers as some would suggest,” he says. Schulz also thinks the 2020 calf crop will be reported as slightly lower than in 2019...MORE
With corn prices at an eight-year high, Iowa State University ag economist Lee Schulz is dusting off his records from the 2012-13 drought years to see the impact of higher prices on livestock production. “We are already at large production levels, which are pressuring prices, and now we have the added factor, the wild card, of higher feed costs,” he says. In the cattle industry, cost of production impacts placement into feedlots. “Farmer/feeders who walk corn off the farm through feeding cattle may change decisions now that corn is worth a lot more,” Schulz says. In the long run, livestock markets will adjust, says Schulz, but in the short run there can be some harsh pinch points. “A producer may have placed feeder cattle at higher prices than the current feed cost situation dictates. In the long run, higher feed prices will increase finished animal values, because it cost more to finish those animals. It also brings down prices for feeder animals,” he says.The beef herd was already declining in 2020 as a natural part of the current cattle cycle, says Schulz. He estimates the beef cow herd is down about 1% in early 2021 from a year ago. COVID-19 likely didn’t have a huge impact, he explains, because 75% of U.S. producers calve in the spring and market them in the fall or winter. Calf prices in fall 2020 had rebounded from the spring and were steady with fall 2019 levels. Higher feed prices didn’t fully start to hit until late November. “I don’t think we will see as large of declines in beef cow numbers as some would suggest,” he says. Schulz also thinks the 2020 calf crop will be reported as slightly lower than in 2019...MORE
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