News last update:6 Aug 2012

Higher prices pose new challenges for cattle

When it comes to feeding cattle, you can forget much of what you have known for the last few years. The run up in feed prices since last fall changes everything.

That's the message cattle feedlot operators got this week at a series of meetings across the Midwest. In a tour stop at Carroll, Iowa, USA they were told that higher feed costs may give a competitive advantage to Midwest feedlots, will reduce the time cattle spend in feedlots, and may widen the price spread between cattle that reach the Choice grade, and those that don't. It may even impact your choice of feeding steers or heifers.

Where's the cheapest place to feed cattle?
The Midwest usually has an advantage with the cheapest corn prices in the country. That's still true, and the advantage may be greater in this new price plateau. Justin Sindt, a consultant for VetLife, shared information from his company's Benchmark database, which combines production records from 280 feed yards.
In December of 2006, the average feedlot ration cost was about $190 a ton for the complete feed in the central Plains states (Kansas south through the Texas panhandle). The average cost in the Midwest (Iowa and surrounding states) was $150 a ton, or 21% lower than the Plains. In the northern Plains (Nebraska and the Dakotas) it was $163.
Cost of gain was also cheapest in the Midwest in December, at $53 per hundredweight of gain, compared to $62 in Plains area feed yards. The reason is simple: the run up in corn prices is felt more acutely the farther you get from the central Corn Belt. With cash corn now over $3.50 a bushel in Iowa and Nebraska, it is close to $5 in Texas.

Improving feed conversion
Sindt also pointed out to producers that with high feed costs, it becomes more important that they concentrate on improving feed conversion of feedlot cattle. His numbers show that when the cost of a complete feedlot ration is under $165 a ton, feed conversion accounts for about 66% of the variation in the total cost of gain on the cattle. But when feed goes over $165 a ton, the cost of the feed overwhelms the impact of the other yardage costs. At that price level, feed conversion accounts for 88% of the variation in total cost of gain.

Grass or feed yard?
Which is better; put the cattle on grass, or in the feed yard? For the past several years with relatively cheap corn, this was a no brainer: Put the cattle in the yard, and pour the grain to them. The longer they were on feed, the more money they made. An increase in the number of light calves going straight to the feed yard, and steadily increasing slaughter weights have resulted from cheap corn for the past several years.
That's all changing as we speak, said Duane Lenz, a Cattle-Fax market analyst. "I know some Texas yards that have shown $50-$150 per head losses on cattle that have finished out in the last 30 days," he said.
One thing he predicts will happen is the cattle will spend more time on grass, provided it's available. The cost of gain on good grass is about $35-$40 per hundred now. With cheap corn, feedlot gains could come close to that, but not today. Now, feedlot cost of gain is $85 or $90 per hundred in Texas yards, Lenz said.
"With that situation, you're going to leave the calves on grass as long as possible before they go into the yard." He thinks cattle might stay on pasture an extra 30-60 days this year, and those days will come off of the feedlot cycle.
The problem then could be getting the cattle to develop enough marbling to grade choice and get top prices. If there are more short-fed cattle as we go through this year of high feed prices, the spread between select and choice cattle could widen. You'll get more of a premium on the cattle that reach choice and prime, and more severe discounts on those that don't.

Steers, or heifers?
This long-standing debate involves sex which is more profitable to feed. Actually, they can both make money, if you buy them right. That's what Jeff Pastoor, a senior cattle consultant for Land O'Lakes Feed, told the producers. Heifers will often sell for $5 to $10 a hundred less than their herd mate steers, but Pastoor wonders if that's enough of a discount. He shared feedlot closeout data from yards that participate in the Land O'Lakes feed programe.
On average, he said, heifers will gain 0.2 to 0.3 pounds per day less than steers in the feed yard. And, they'll require 0.2 to 0.5 pounds more feed to put on a pound of gain. They will average 100 less pounds at sale weight. The effects of those things is more dramatic as feed prices increase to $4 a bushel.
"With 5-weight (500+ pounds) cattle, the heifers are worth $17 a hundred less than the steers," he says. "You can feed heifers, but just pay accordingly."

The series of meetings was sponsored by Land O'Lakes Feed, Diamond V, and Quality Liquid Feed.

Related links:
Land O'Lakes Feed
Diamond V
Quality Liquid Feed

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