Low grain prices are good for feeders, but low prices all around are a tough break for producers
April 5, 2016
Even though producers are making less off milk and meat they sell, they aren't paying as much to feed their animals.
Many cattle feeders and dairy owners are buying their feed at a low price because of the depressed commodities market.
Some producers say the low grain and corn prices are making a huge difference in their profits, while others say those prices just balance out their own depressed cattle and milk markets.
Jeff Hasbrouck, owner of Double J Farms and Feed in Ault, Colo., said they are feeling the positive impact. When commodity prices were $7-8 a few years ago, the cost of gain, or how producers measure how much it costs for an animal to gain a pound, was $1.10-1.25 per pound.
"But when corn is $3.70, then that cost of gain is lower," he said. "So currently, for lambs, our cost of gain is 75-90 cents (per pound). In the lamb industry, a fat lamb — a good quality one — is worth $1.30 (per pound).
"So it's a good time to be feeding animals."
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Dairy producers seem to be feeling the low prices more than enjoying them.
"The commodities have gone down, but so has the price of milk, so it's kind of a net neutral effect," said Rick Podtburg, owner of Long's Peak Dairy in Pierce.
According to a USDA report, the average price of a gallon of milk is $2.18 nationwide and $2.16 in the southcentral U.S., which includes Colorado.
But, Podtburg said, about half the cost of running a dairy is the feed cost, so it's been helpful in avoiding a bad situation.
Steve Gabel, owner of Magnum Feedyard, a commercial 22,000-head feed lot in Wiggins, said they're seeing some effects, but like the dairy industry, the losses are mitigated by low prices.
"Feed prices have become more attractive," Gabel said. "Unfortunately, we have also lost value in the marketplace, and because of that margins are still negative."
President of JBS's Five Rivers Cattle Feeding Mike Thoren said the lower grain prices are having a positive impact on their operation.
"We're seeing positive impacts as a result of lower commodity prices," he said in a statement. "Of course any time we have lower feed and energy costs, that's beneficial to our business."
Bob Winter, Weld County representative with the Colorado Farm Bureau, said the costs of fertilizer, tractors and other equipment have remained the same, so it's still a hard time in the industry.
"Prices are lower, but expenses seem to be staying right up there," Winter said. "The ironic thing is, when the farmers' income goes down, that doesn't mean their expenses go down."
Bill Hammerich, CEO of the Colorado Livestock Association, said the low grain market brings with it a few other concerns for producers. Many ranchers overpaid for cattle, he said, because the feed was so low, they thought they could make up the difference. But it's not working out that way.
"They maybe bought themselves a loss at the time and didn't know it," Hammerich said.
And then some producers overfed or decided to keep cattle for too long.
There's an old saying in the agriculture community that cheap corn makes for cheap cattle, "meaning that you can either make them too heavy or give too much and hold them too long," he said.
Often when grain prices are low, producers overfeed their animals.
"As cheap as corn has been, it has created a scenario where, even on this depressed cattle price, you are still putting a pound of gain on for less than you can get for it," Hammerich said. "But it tends to be, as far as the finish price of an animal, it tends to have a depressing effect."❖