Page 6 - MWC 02-04-2021s

High grain price The Midwest Cattleman · February 4, 2021 · P6

impacts on the breed and type, gender and over- centrate feed use is significant.
all quality of the feeder cattle
When feedlots demand heavi-
they purchase but also flexibility er cattle, prices for lighter weight
cattle industry to feed a variety of animals. In feeder cattle will decline relative
general, feedlots can place feed- to heavier cattle. For example,
er cattle weighing from less than the price for 825-pound steers
by Derrell S. Peel, Oklahoma State University 600 pounds to over 1,000 pounds. in Oklahoma is currently about
One of the biggest decisions $131/cwt. When corn is, say $3.65/
Grain and oilseed prices have and by-product feeds will all gen- for feedlots is whether to “buy bu., feedlots would be willing to
risen dramatically in the last erally rise proportionally through pounds” (place heavier feeder cat- pay roughly $155/cwt. for a 575
three to four months. For exam- market arbitrage. tle) or “feed the pounds onto the steer based on the cost of gain to
ple, the weekly cash price of corn The cattle industry will react cattle” by placing lighter weight put on the 250 pounds from 575
reported for Dodge City, Kansas to high feed prices somewhat feeder cattle. This decision will to 825 pounds. When corn price
averaged $3.41/bu. from Janu- differently than other livestock change according to feed prices. increases to say, $5.35/bu., the in-
ary-September 2020. The price species. Unlike hogs and poul- As high feed prices push feedlot creased cost of gain means that
rose above $4.00/bu. by mid-Octo- try, where their monogastric bi- cost of gain up, feedlots have an the feedlot would only be willing
ber and by mid-January 2021 was ology means that using less feed incentive to “buy more pounds” to pay roughly $146/cwt. for a
reported at $5.44/bu. July corn implies reducing production, the and place heavier feeder cat- 575-pound steer – even though
futures are currently priced at ruminant biology of cattle means tle. Thus, the cattle industry re- the price of the 825-pound steer
$5.20/bu. Market prices for corn that the industry will use less sponds to corn market signals to has not changed. Of course, high-
are increasing to ensure that de- grain by changing how cattle are use less corn by placing cattle at er feed prices likely also means
mand is rationed to match avail- produced more than by chang- heavier weights and using other that the overall feeder cattle
able supplies and adequate corn ing production levels. Indeed, the (i.e., forage) feeds to add addition- price level will decline as well.
is available until the next har- supply of feeder cattle is mostly al weight to cattle prior to feedlot The change in feedlot demand for
vest. Corn demand comes from determined for 2021 and those placement. This is the advantage light versus heavy weight feeder
many different markets includ- cattle will go through the feedlot (and necessity!) of the cattle in- cattle simultaneously provides
ing livestock feed, industrial use as usual but with a different pro- dustry to use the ruminant ca- incentives for stocker produc-
(primarily ethanol) and exports. duction system. pabilities of cattle to respond to ers to add the needed additional
As corn prices rise each market The central decision that de- the corn market situation. If all weight to feeder cattle. In the ex-
will react to reduce corn use in termines how feeder cattle get the cattle finished in feedlots in ample above, the value of stock-
varying degrees according to the finished and become part of the 2021 (that would have been fed er gain is roughly $0.75/lb. when
economic claim each demand beef supply is feedlot placements. anyway) are placed, say, an av- corn is $3.65/bu. but increases to
type makes on corn. With corn as Individual feedlots often have erage of 100 pounds heavier, the
the main driver, other feedgrains particular preferences for size, amount of reduction in total con- continued on page 14

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