Higher Corn Prices Could Impact The Feeder Cattle Market

With the latest grain stocks report showing 50 million fewer bushels of corn in the bin, this could have an impact of the cost of feeding cattle. Livestock market economist Dr. Darrell Peel says 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.

“This year’s supply of feeder cattle is already on the ground, so those cattle are going to come through the system, they are going to get fed. But, for the individual feed lots, their making decisions every week about, do I want to buy pounds or do I want to put more weight on the lighter weight cattle in the feed lot. As cost of gain goes up, they are going to be more interested in buying some of that weight from the country, and not put as much of that expensive feed in cattle.”

This, Peel said, will most likely will change the feeder cattle market.

“There’s a number of factors that go into this. Of course, the overall price of level for feeder cattle is likely to be pressured a little bit by high corn prices, at least in an all-else equal world. If fed cattle prices are stable, then feeder cattle prices likely get lower with high grain prices. But again, within that feeder cattle complex, high grain prices would tend to kind of reduce demand for lighter weights relative to the heavier weight cattle.”

Peel said that kind of market change will take time, adding he does not expect the feed prices to impact feeder cattle immediately, but things could change in the next three to five months.

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