With the latest grain stocks report showing 50 million fewer bushels of corn in the bin, this could have an impact of the cost of feeding cattle. Oklahoma State University Extension livestock market economist Dr. Darrell Peel says tighter corn supplies are pushing corn prices over $5 per bushel, heading towards $6, and the cost of gain for feedlot cattle is on the rise.
“This year’s supply of feeder cattle is already on the ground, so those cattle are going to come through the system, they are going to get fed. But, for the individual feed lots, their making decisions every week about, do I want to buy pounds or do I want to put more weight on the lighter weight cattle in the feed lot. As cost of gain goes up, they are going to be more interested in buying some of that weight from the country, and not put as much of that expensive feed in cattle.”
This most likely will change the feeder cattle market. Peel says, “There’s a number of factors that go into this. Of course, the overall price of level for feeder cattle is likely to be pressured a little bit by high corn prices, at least in an all-else equal world. If fed cattle prices are stable, then feeder cattle prices likely get lower with high grain prices. But again, within that feeder cattle complex, high grain prices would tend to kind of reduce demand for lighter weights relative to the heavier weight cattle.”
Peel says that market change though, will take time. “I don’t think we’re seeing that corn price effect really showing up in the feeder cattle market yet, but as we move forward, another three-four-five months, then I think we will see that effect get built into this market.”