Cattle Feeders Face Uncertainty as Corn Prices Rally

URBANA, IL – In just 90 days, July 2021 corn futures increased almost $2 per bushel bringing relief to row-crop producers struggling from low prices, but providing a new challenge for livestock feeders facing lower beef prices.

According to economists from the University of Illinois, there is tremendous uncertainty regarding corn prices for the rest of this year. In early January prices averaged $4.68 per bushel and increased to $6.56 by the end of April and using the FarmDoc iFarm Price Distribution Tool there is a 25 percent chance that the expiration price for the December corn futures contract will be below $4.50 per bushel and a 25 percent chance that price will be above $6.50.

Given that the U.S. stocks to use ratio is currently only 9.2 percent and corn plantings this spring are uncertain, the researchers are considering the potential impact of relatively high corn prices on feeding cost of gain for cattle finishing.

In February, corn prices were $5.69 per bushel and alfalfa averaged $167 per ton. After averaging $80.50 per hundredweight last year, the cost of gain skyrocketed in February to $88.60 and is expected to climb to $103 for cattle placed on feed in February. If these feeding costs are realized, they will represent the highest feeding cost of gain since the fourth quarter of 2013 according to the FarmDoc article, and could add significant pressure on cattle feeders who are already losing money.

(SOURCE: All Ag News)