Beef Buzz News
Tight Corn Supplies Equals Higher Corn Prices And Raises Cost of Gain For Feedlots, Says OSU's Derrell Peel
Thu, 11 Feb 2021 08:37:04 CST
With the latest grain stocks report showing 50 million fewer bushels of corn in the bin, Dr. Derrell Peel, OSU Extension livestock market economist, said this could have an impact of the cost of feeding cattle.
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, Peel said.
When we see high corn prices, we know it’s going to raise the cost of gain for feedlots, Peel said.
But that doesn’t mean we’re not going to feed cattle, he quickly added.
Feedlots are forced to decide to either “buy pounds” or “put more weight on lighter cattle,” Peel said.
As cost of gain goes up the feedlots are going to be more interested in “buying weight” from the country and not put as much of that expensive feed in cattle, he said.
This most likely will change the feeder cattle market.
There are several factors that go into the feeder cattle market equation, Peel said.
The overall price level of feeder cattle is likely to be pressured by higher corn prices, Peel said.
Lighter weight cattle, coming off grass or even calves, seasonally we’re seeing stronger prices, Peel said.
I don’t think we’re seeing higher corn prices showing up in the feeder cattle market yet, but three or four months down the road we will see that built into this market, Peel said.
Wholesale boxed beef prices have been strong, and Dr. Peel says that reflects how the food service industry has adapted to the pandemic.
Restaurants have found ways to meet the challenges to some extent, Peel said, and many are looking forward to spring with more potential for some of the restrictions to be lifted.
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