Forecasted drops in corn prices welcomed by livestock industry
August 12, 2013
Corn prices are falling and forecasts say they'll continue doing so through the end of the year, which is music to the ears of livestock feeders.
But dairymen and feedyard operators — like Steve Gabel of Eaton, Colo., who runs Magnum Feedyards and said his industry has not seen a profit on finished cattle in the last 70 weeks, with his losses currently ranging from $50 to $150 per head — say the fight to get out of red ink isn't over.
According to The Associated Press, forecasts for December corn prices fell 12 cents to $4.67 per bushel, after corn prices during the past year had spiked to all-time highs, well above $8, largely due to the shortage of corn caused by the widespread drought of 2012.
Although there are some concerns about remaining dry conditions in Kansas, Nebraska and Missouri, the majority of this year's corn crop is in good or excellent condition, according to U.S. Department of Agriculture reports last month, and the influx in supply after harvest this fall should bring a decrease in price for the commodity.
Livestock feeders who depend on the crop to sustain their animals say they're desperate for those forecasts on corn prices to come to fruition.
Also suffering from high feed prices, Nels Nelson — who operates Cactus Hill Ranch near Windsor, Colo., a sheep and lamb feedyard with a capacity of about 150,000 head — said his industry's situation is very similar to what Gabel and the beef industry are enduring.
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Corn prices have huge implications for the many livestock feeders here in Weld County, Colo., where large feedlots help rank the county No. 1 in the nation for its number of market sheep and lambs, according to the most recent U.S. Census of Agriculture.
Weld County is also a top-20 dairy producer nationally, with more than 70,000 dairy cows, according to the most recent Colorado Agriculture Statistics publication — although that number has likely climbed recently, with the area's dairy industry growing rapidly to meet the milk needs of an expanding Leprino Foods cheese-processing plant in Greeley.
Weld is also home to a Colorado-leading 49,500 beef cattle. Gabel and Nelson each remarked that they are waiting to see where the corn market goes next because projections are always fluctuating.
Steven Koontz, a Colorado State University agriculture economist, echoed their angst.
Koontz said many producers are "holding their breath," as they wait to see what feed prices will do later in the year.
He also expects a "stampede at the door once this thing bottoms out," as producers who have waited to buy feed all rush to purchase at the last minute.
Many factors — such fluctuating fuel costs and meat prices — impact profits, so livestock feeders say it's tough to pinpoint exactly where corn prices need to be to help them make money.
But Mike Harper — owner of Harper's Feedlot, also near Eaton, which has a capacity to feed about 65,000 lambs, and altogether sees about 200,000 head go through its facility during the course of a year — said that if corn prices can in fact drop below $5 per bushel, lamb feeders will have a sustainable profit margin.
Right now, he said, his operation is losing approximately 35 cents per pound on fat lambs due to a high price of gain, driven by feed prices.
Terry Dye — a Fort Collins, Colo.,-area dairyman, who commented that "high feed prices negatively affect the bottom line because feed is our biggest expense" — also said that if milk prices hold and forecasted corn futures eventually become cash corn prices, dairies could see an upswing in their bottom line.
Koontz acknowledged that feed prices are a key component in profit margins for livestock feeders, but he — like others — also recognizes that there are many other factors playing into the success of feeding livestock and that recovery isn't going to happen overnight.
Koontz expects it to take several years to get things "back on track" when it comes to profit margins. ❖