Costly feed choices
With most of it going up, deciding what feed-grain to use for livestock is getting difficult. The extremely high demand for corn, soybeans, and wheat have livestock economists scratching their head over feed costs.
In the past, if corn prices got too high, lower costing wheat was a viable substitute. Or, if wheat was too costly, corn was the obvious choice.
All of the sudden, nearly $6.50-per-bushel wheat, $3.60 corn, $8.50 soybeans, even higher hay prices, and a shortage of cottonseed leave one wondering which feed-grain is the most economical.
David Anderson, a Texas A&M livestock economist says cattle producers watched the corn prices go higher and counted on feeding more wheat this year. In the future, that philosophy may need adjusted, he says.
"Though wheat has gone higher, I still see us feeding more wheat," Anderson says. "But, I think it's going to be of lesser quality."
Anderson says the heavy rains in Texas and Oklahoma caused poorer wheat quality this year. "We may feed a lot of that."
Anderson adds, "What we're really talking about here is the prices of everything we feed are higher."
There isn't a cheap, magical feed alternative to get us back to $2.25 corn, Anderson says.
"It's really an adjustment that we're just going to have to get used to," Anderson says. To get all of the acres needed for next year, corn futures prices are going to have to get higher."
In 2007, it took over $4.00 corn on the Chicago Board of Trade to get producers to plant 93.0 million acres.
With increasing demand, the ethanol industry will need even more corn in the future, Anderson says.
Perhaps the answer to the higher feed-grains is the feeding of by-products from the ethanol industry, Anderson says.
"Certainly, if you're positioned around ethanol plants, you can feed distillersâ€™ grains. I think a lot of feeding operations are using ethanol by-products in their rations," Anderson says.
PRICING OF FEEDS
If it looks like the prices of feed-grains are only going higher, and with the reality of market volatility, livestock producers may need to forward-price more supply, the economist says.
Because cow/calf producers find it tougher than feedlots, both will have to get a lot more creative in buying feed and forward-pricing cattle, Anderson says.
"It's easy to price-forward feed sources such as corn, wheat, and soybeans. But a lot of by-products are not on the CBOT board. So, now the livestock producer has to contract with an ethanol plant or a grain producer."
This type of arrangement already happens on the hay-side of buying, but this practice is being urged for other feed sources.
SHIFTING AWAY FROM WHEAT
Sid Love, Kropf & Love Consulting Services LLC, says cattle producers will be shifting away from wheat to corn, barley, or else sorghum.
Love cites a Plains feedlot customer that planned to switch from corn to wheat for its main feed source.