• If you are having problems logging in please use the Contact Us in the lower right hand corner of the forum page for assistance.

Corn Market Is Now Bigger Issue Than Beef Exports

HAY MAKER

Well-known member
Our Perspective
Corn Market Is Now Bigger Issue Than Beef Exports
While issues abound in the industry, the corn market continues to be the biggest story. With USDA's latest crop estimate being lowered to just above 10.5 billion bu., and with carryover stocks falling to 752 million bu., the corn market rallied to historical highs this week. Not surprisingly, feeder cattle and calves moved lower as a result.

The industry is trying to sort out both the short- and long-term ramifications. One can usually learn a lot by looking at history but history doesn't provide much insight into this issue. The last time corn price levels were this high was 1996, but it was a supply-driven market caused by the disappointing 1995 harvest.

That's not the case this time, as we've had three of the largest crops in history -- consecutively, no less. It's a demand-driven market and corn demand is expected to exceed production this year by a significant amount.

Fact is, the overall market structure has changed. With subsidized ethanol, it's difficult to create a scenario where corn will fall much below $3/bu. for quite some time, and the upside risk from that level is much greater than the downside risk.

Today's corn prices unquestionably are sending the signal to increase corn plantings. With corn growers looking conservatively at profits of $200/acre or more for corn, we can expect more acreage in corn than at any time in the last 60 years. What's more, the weather conditions look positive and oil prices are falling. That combination of factors will curtail demand, and feed demand will drop significantly as well, giving the industry an opportunity to rebuild carryover levels.

From a cow-calf perspective, not only does $4 corn devalue the entire inventory significantly, it also creates other problems. Hay stocks are at their lowest levels since 1988, and hay prices are expected to increase as hay ground and water are diverted to grain crops.

In addition, stocker and grazing pressure are expected to increase grass costs, as feeders look to maximize gains outside of the feedyard. The result is a terrible and simultaneous mix of exploding input costs and decreasing revenues.

The bottom line is if corn stays at today's historically high levels for an extended period of time, the industry's short-lived expansion will move into full-blown liquidation. It also poses some interesting dynamics about how the industry might change, from a management, marketing, and even genetic standpoint.

The industry has to form a plan of action and move to address the ethanol issue. Otherwise, a market-distorting government subsidy stands to take away our number-one competitive advantage.

The odds politically look extremely tough to get the ethanol issue based on true economic realities, however. The new Congress is just underway and already there's a plethora of new bills on renewable energy. Many of them attempt to lock in the artificial subsidies permanently and expand the use of ethanol.

Needless to say, these initiatives have the overwhelming support of grain-producing states. And the general public, very receptive to reducing U.S. reliance on Mideast oil, seems willing to pay the price for it. But it's a potentially devastating price the beef industry will have to pay, and we must aggressively take action.

That leaves us in the unenviable position of trying to hammer out a solution -- one where corn prices for the cattle industry are adjusted back to the real-world economic levels that would have occurred had government not intervened in the marketplace. That gets extremely messy and politically challenging.

While there's no simple answer, if we continue to do nothing, our industry will lose a good deal of its competitive advantage and constrict significantly. The effects of this subsidy, and the attempts to escalate it and make it permanent, now have supplanted the restoration of our export markets as the industry's greatest challenge.
-- Troy Marshall
 

ocm

Well-known member
Bill said:
What discussion or resolutions came out of the recent R-Calf convention on this topic?

None.

While most attendees at the convention thought the ethanol subsidy is stupid and cringe under current corn prices, the outlook from the market commentator at the Convention was much more optimistic than Troy Marshall.
 

PORKER

Well-known member
Did he think when he wrote this ,The bottom line is if corn stays at today's historically high levels for an extended period of time, the industry's short-lived expansion will move into full-blown liquidation. It also poses some interesting dynamics about how the industry might change, from a management, marketing,

What will happen is the meat industry will flourish where the producer raises his own feed. Mr. Kanitz made a remark here a few weeks back that all raw agricultural crop prices will be based upon the recovery of BTU value that corresponds to the price of crude oil. Thus when corn can be grown for $2 dollars a bushel ,the corn grower has a choice on how to market his crop,either by animals or to ethenol. The total feed purchaser has no choice but to pay the BTU price of feed.
 

Bill

Well-known member
Sandhusker said:
Bill said:
What discussion or resolutions came out of the recent R-Calf convention on this topic?

If you're so obsessed with R-CALF, why don't you join, Bill?

What's-a-matter Sadhusker. You R-Klanners don't want attention now? It would seem reasonable to expect that after a national convention that USDA was represented at that there would questions posed on ethanol subsidies or other major issues!

The SSGA discussed US/ethanol at their convention last June when they had Gregg Doud up to speak. http://www.saskatchewanstockgrowers.com/index.cfm?show=10&mid=46 Maybe R-Klan should have brought him in although he was probably busy getting ready for the Get 'er Done Convention starting Monday. It will be interesting to see what comes out of Nashville. It is also surprising that with R-Klans focus on percieved subsidies and what's supposed to be wrong with Canada they don't have "dick" to say about them when they happen right under their noses in the US of A. :oops:
 

ocm

Well-known member
ocm said:
Bill said:
What discussion or resolutions came out of the recent R-Calf convention on this topic?

None.

While most attendees at the convention thought the ethanol subsidy is stupid and cringe under current corn prices, the outlook from the market commentator at the Convention was much more optimistic than Troy Marshall.

Further clarification. It would be wrong to say it was not discussed at all. It was never a stand alone major topic. It came up in passing in a number of discussions. However, you should understand that the vast majority of R-CALF members are ranchers, not feeders.

The oldtimers have always said cheap corn means cheap cattle. The opposite is also true, but it takes a period of adjustment. The price move was relatively sudden. As long as ethanol production is relatively stable and is expected to be that way for a while the higher price of corn is bullish for the cattle market. So why whine.

That being said, the ethanol subsidy is still stupid. For the short term it amounts to a wealth transfer from feeders to farmers (or corn speculators).
 

Bill

Well-known member
ocm said:
ocm said:
Bill said:
What discussion or resolutions came out of the recent R-Calf convention on this topic?

None.

While most attendees at the convention thought the ethanol subsidy is stupid and cringe under current corn prices, the outlook from the market commentator at the Convention was much more optimistic than Troy Marshall.

Further clarification. It would be wrong to say it was not discussed at all. It was never a stand alone major topic. It came up in passing in a number of discussions. However, you should understand that the vast majority of R-CALF members are ranchers, not feeders.

The oldtimers have always said cheap corn means cheap cattle. The opposite is also true, but it takes a period of adjustment. The price move was relatively sudden. As long as ethanol production is relatively stable and is expected to be that way for a while the higher price of corn is bullish for the cattle market. So why whine.

That being said, the ethanol subsidy is still stupid. For the short term it amounts to a wealth transfer from feeders to farmers (or corn speculators).

Expensive barley is certainly not bullish for the cattle market in Canada and I doubt high price corn is positive for feeding cattle in the US either.

That translates into lower calf prices for us all. Maybe it was best not dicussed at your convention.
 

ocm

Well-known member
Bill said:
Expensive barley is certainly not bullish for the cattle market in Canada and I doubt high price corn is positive for feeding cattle in the US either.

That translates into lower calf prices for us all. Maybe it was best not dicussed at your convention.

Higher feed concentrate cost (corn or barley) will in the long run benefit ranchers. If you think otherwise, you need to reconsider or talk to an expert. Short term with such a quick rise in price it has been painful. Long term it is better for RANCHERS not FEEDERS. It will also probably diminish the advantages of retained ownership in many cases.

Some reasons it will be better for ranchers:

Pounds put on with forage will be cheaper relative to pounds put on with concentrates.
Competing meats have no easy cheaper alternates
Holstein steers will not be taken to as high weights at slaughter due to increased cost of gain, decreasing Holstein tonnage.
Placement weights will go up
Time on feed will go down, making total tonnage lower.
It will take more cattle to get the same tonnage.
Using forage land for yearling grazing will allow fewer cows decreasing the size of the calf crop.
Select / choice spread will increase.
DDGS can easily be used as feed supplements by ranchers but use in feedlot is limited. When the feedlot supply is saturated it will be cheap feed for ranchers (like for winter protein and energy source)

Think about it.


PS The reason NCBA seems more concerned than R-CALF is that R-CALF is primarily a cow/calf organization, whereas NCBA has a MUCH higher percentage of members who are FEEDERS.
 

Bill

Well-known member
ocm said:
Bill said:
Expensive barley is certainly not bullish for the cattle market in Canada and I doubt high price corn is positive for feeding cattle in the US either.

That translates into lower calf prices for us all. Maybe it was best not dicussed at your convention.

Higher feed concentrate cost (corn or barley) will in the long run benefit ranchers. If you think otherwise, you need to reconsider or talk to an expert. Short term with such a quick rise in price it has been painful. Long term it is better for RANCHERS not FEEDERS. It will also probably diminish the advantages of retained ownership in many cases.

Some reasons it will be better for ranchers:

Pounds put on with forage will be cheaper relative to pounds put on with concentrates.
Competing meats have no easy cheaper alternates
Holstein steers will not be taken to as high weights at slaughter due to increased cost of gain, decreasing Holstein tonnage.
Placement weights will go up
Time on feed will go down, making total tonnage lower.
It will take more cattle to get the same tonnage.
Using forage land for yearling grazing will allow fewer cows decreasing the size of the calf crop.
Select / choice spread will increase.
DDGS can easily be used as feed supplements by ranchers but use in feedlot is limited. When the feedlot supply is saturated it will be cheap feed for ranchers (like for winter protein and energy source)

Think about it.


PS The reason NCBA seems more concerned than R-CALF is that R-CALF is primarily a cow/calf organization, whereas NCBA has a MUCH higher percentage of members who are FEEDERS.

I don't necessarily put faith in what someone says because they are deemed an "Expert" after all a consultant really is is simply a person witrh a business card who is able to convince someone else that they need their services.

The harsh reality is that higher feed grain prices equates to feed lots having lees in their budget to pay for calves hence lower feeder prices. If you think that is good for c/calf so be it.

Any idea how DDGS can be economically moved from grain producing area where the plants are located to say Montana and the Dakotas or even Texas and Oklahoma. I doubt the oil industry in those two states care to see many ethanol plants spring up in their backyard.

One question though. If what you said is true and this turns to be a benefit to US ranchers.......................... is it another SUBSIDY?

Think about it.
 

Sandhusker

Well-known member
Bill, "One question though. If what you said is true and this turns to be a benefit to US ranchers.......................... is it another SUBSIDY? Think about it."

No :lol: :lol: :lol: :lol:
 

Bill

Well-known member
Sandhusker said:
Bill, "One question though. If what you said is true and this turns to be a benefit to US ranchers.......................... is it another SUBSIDY? Think about it."

No :lol: :lol: :lol: :lol:

I would still appreciate your response ocm as it is one from an actual producer and someone who took the time and was actually at the convention and part of the discussions. Much more credible than the hear-say contributed by some on this site.
 

IL Rancher

Well-known member
Bill, The DDGS are already being shipped all over the world. Most plants in the midwest that I know of are being built near or on rail lines... A lot of the ones around here are actually shipping to China.. Or so the byproduct reps you talk to are saying.. Has led to limited supplies and increased prices.... Wish it was less economic for them to do it, would bring local prices back down on the wet stuff.
 

Bill

Well-known member
IL Rancher said:
Bill, The DDGS are already being shipped all over the world. Most plants in the midwest that I know of are being built near or on rail lines... A lot of the ones around here are actually shipping to China.. Or so the byproduct reps you talk to are saying.. Has led to limited supplies and increased prices.... Wish it was less economic for them to do it, would bring local prices back down on the wet stuff.

Thanks
How much per ton is DDGS selling for and do you think ethanol will add to the profitablility of c/calf producers in your area?

PM me if you prefer.
 

ocm

Well-known member
Bill said:
IL Rancher said:
Bill, The DDGS are already being shipped all over the world. Most plants in the midwest that I know of are being built near or on rail lines... A lot of the ones around here are actually shipping to China.. Or so the byproduct reps you talk to are saying.. Has led to limited supplies and increased prices.... Wish it was less economic for them to do it, would bring local prices back down on the wet stuff.

Thanks
How much per ton is DDGS selling for and do you think ethanol will add to the profitablility of c/calf producers in your area?

PM me if you prefer.


The question to be asking of ranchers is:

Do you think the high price of corn will make your grass more valuable?
 

RobertMac

Well-known member
Those that desire the continuation of the status quo are the ones that fail to take advantage of the opportunities of change.

Who will hurt worse from high grain prices...poultry, pork, or beef?

Who will benefit from a narrowing retail price spread...poultry, pork, or beef?

If a pound of gain in a feedlot goes to $.80 and a pound of gain on pasture is $.40, who makes the difference?

Grain prices will change the industry...who will take advantage of it??????????????????????
 

Bill

Well-known member
RobertMac said:
Those that desire the continuation of the status quo are the ones that fail to take advantage of the opportunities of change.

Who will hurt worse from high grain prices...poultry, pork, or beef?

Who will benefit from a narrowing retail price spread...poultry, pork, or beef?

If a pound of gain in a feedlot goes to $.80 and a pound of gain on pasture is $.40, who makes the difference?

Grain prices will change the industry...who will take advantage of it??????????????????????

OK I'l bite. At what age and weight should we take them to on grass and then send them to a feedlot for finishing or are these all to be finished on grass and at then at what age and weight? I realize this depends on genetic make-up but for ease of applying it to the majority of US cattle lets use an Angus based cowherd.

The vast majority of producers currently give up control and ownership of their calves long before they are finished and the feedlot with it's grain ration is the "evening out process" which allows calves from small herds with mixed genetic makeup to be fed a ration which HELPS to create some degree of consistancy and in many cases an increase in quality.

The other question I have is where are all these acres of grass going to come from to finish these cattle on. In Canada and the northern US grass only grows for a few months of the year unlike South America. I am not saying what is being suggested here is impossible just trying to get my mind around a few things.

Thanks for the PM IL Rancher.
 
A

Anonymous

Guest
ocm: "Higher feed concentrate cost (corn or barley) will in the long run benefit ranchers. If you think otherwise, you need to reconsider or talk to an expert. Short term with such a quick rise in price it has been painful. Long term it is better for RANCHERS not FEEDERS. It will also probably diminish the advantages of retained ownership in many cases."

Talk to an expert??

Like who?? Bill Bullard???

Every $.05 per bushell rise in corn prices = $1 less for feeder cattle all other things being equal.

How stupid do you think people are?

Sure, higher costs of gains will result in reduced tonnage but less days on feed will also result in less choice cattle. The disincentive for feeding cattle too long by additional costs of gains will be washed out by the incentive of a widened choice / select spread.

This is so typical R-CULT. Trying to come up with some ORIGINAL CONCEPT to sound like they know what they are talking about.


ocm: "Some reasons it will be better for ranchers:

Pounds put on with forage will be cheaper relative to pounds put on with concentrates."

How many cattle that are finished to choice are finished on forages?

What's the demand for grass fed beef in comparison to corn fed beef?


ocm: "Competing meats have no easy cheaper alternates"

You can't finish many fat cattle to choice on forages so competing meat cost of gains is a non issue. We'll all have to keep finishing cattle on concentrates.

I'd love to see the looks on the faces of the major feedyards when R-CULT and their followers pulls into their yards to tell them they would be better off finishing cattle on forages.


ocm: "Holstein steers will not be taken to as high weights at slaughter due to increased cost of gain, decreasing Holstein tonnage."

No cattle will be taken to as high a weights at slaughter due to cost of gains but you still have the most incentive to sell choice cattle. That will not change and you are not going to get many cattle to hit choice on forages.


ocm: "Time on feed will go down, making total tonnage lower."

The increase in consumer demand for beef due to reduced tonnage will not offset the reduced feeder cattle prices to offset the higher costs of gain.


ocm: "It will take more cattle to get the same tonnage."

Wrong!

If you are taking cattle to higher weights ("placement weights will go up") on forages, then it won't take more cattle to get the same tonnage.


ocm: "Using forage land for yearling grazing will allow fewer cows decreasing the size of the calf crop."

Which defeats your previous argument that it will take more cattle to get the same tonnage.


ocm: "Select / choice spread will increase."

No doubt about it. Which means cattle will be substantially discounted if they do not finish at a choice grade which means they have to have enough days on concentrates to finish at choice.


ocm: "DDGS can easily be used as feed supplements by ranchers but use in feedlot is limited. When the feedlot supply is saturated it will be cheap feed for ranchers (like for winter protein and energy source)"

As the supply of DDGs increases, the price will definitely drop but most ranchers I know do not feed their cows any energy supplements. If the cows need protein, an alfalfa bale every third day covers those needs. Energy boosts beyond normal feed for cows is usually only during severe winters.


ocm: "The reason NCBA seems more concerned than R-CALF is that R-CALF is primarily a cow/calf organization, whereas NCBA has a MUCH higher percentage of members who are FEEDERS."

Which would explain why R-CALF fails to understand that every $.05 change in the price of a bushell of corn impacts feeder cattle prices $1 per cwt.

Leave it to R-CALF to try to convince cattle producers that higher corn prices are good for them while their calf checks are down $20 - $30 per cwt. LOL!

Only R-CULT!



~SH~
 
A

Anonymous

Guest
ocm: "Do you think the high price of corn will make your grass more valuable?"

Even if there is a better return for running grass yearlings than 5 - 6 wt feeder calves, the price of yearlings will still reflect the higher price of corn to finish those yearlings. The added value of yearlings in comparison to calves (due to forage costs in relation to concentrate costs)
will not offset the reduced overall cattle prices due to higher costs of gain.


RM: "Grain prices will change the industry...who will take advantage of it??????????????????????"

Ahhh......grain farmers?


~SH~
 

Bill

Well-known member
R-Klan will simply tell their Bulleeeeevers that the drop in calf prices was due to imported beef and cattle.

:roll:
 
Top