• 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 price vs. feeder price

T

Tommy

Well-known member
Joined
Feb 11, 2005
Messages
755
Location
South East Kansas
SH...For each $.05 change in a bushell of corn, feeder cattle prices are affected $1.00/cwt. In other words a $1.00 change in the price of a bushell of corn will result in a $20/cwt drop in the price of feeder cattle.

Does everyone believe this to be true? Last fall corn prices were $2.20 per bushel now it is $4.20. This is $2 dollars per bushel more than last fall. Today feeders traded for $104.85. So with your figures Scott, feeders last fall should have been $140.00 or so. How many people got $140.00 cwt for their feeders?
I note that you did not say that feeder cattle are sometimes affected. You said feeder cattle prices are affected. I do know that corn prices affect the feeder price along with all cattle prices, but to say as a fact that for every certain amount the price goes up or down it equates to a fixed price swing is just not so.
 
US - By Dan Frobose, OSU Extension Beef Marketing Educator, ABE Center - During the past 40 years we have been schooled on the inherent advantages that the Great Plains has in feeding cattle (environment, proximity to corn and harvest facilities).


For the most part this has been a fairly accurate scenario. However, with the current focus on renewable fuels the wind may be changing course to the north and east.

I am not going to say that large scale cattle feeding is going to come back to the eastern corn belt. But I would like to point out that there is opportunity to feed cattle as a part of your farm production plan. I crunched a few numbers, feeder calf prices, hot carcass prices and corn prices for the eastern corn belt versus the Great Plains/Midwest. I did not look at historical data over several years but current prices in February. Why, well right now I think we are seeing history making some shifts based on renewable fuels.

Let's compare feeder calf prices from the Midwest and NE United States to the main feeder calf production regions of (Kansas, Nebraska, Dakota's). A 650 pound steer calf sold for $100.78/cwt the 1st week of February. The same calf sold for $91.87/cwt in our eastern region of the corn belt. That's a +$58 difference in favor of the eastern feeder.

Now let's also look at hot carcass prices paid that same week. A steer harvested in the 5 state area (Kansas, Nebraska, Iowa, Colorado, Illinois) brought $139.69 for a base with 80% choice or higher. That same steer in the eastern corn belt brought $1.48/cwt based on a Ohio Signature Beef base bid. The difference is $63 in favor of the eastern market.

Next let's look at corn. The average price of a bushel of corn in Iowa on February 27th was $3.78/bu, in Ohio it was $3.98/bu, that's a 20¢ spread. If we put 65 bushel of corn into that steer it equals a difference of $13/hd in additional grain costs for the eastern feeder. Add up the differences and the eastern feeder has a net advantage in these areas of $108/hd.

Times may be changing. Will the southwest be able to compete for grain and water from the traditional production regions? Will renewable fuels change the dynamics of supply and demand that redirect cattle finishing economics? Keep your pencil sharpened and your calculator handy, we may be charting a new direction in cattle finishing in the U.S.
 
Tommy, you give SH more credit than he is due...that actually came from Agman! :wink:

Good post, andybob. Stockering and putting pounds on with grass is another place to look for more dollars...and in the long run, I think, will increase the quality of beef.
 
RobertMac...Tommy, you give SH more credit than he is due...that actually came from Agman.

It was from his post to Kevin on SwiftHorses blog. My only point was that corn prices affect cattle prices, but can one say as a fact that for every 5 cent rise or fall in corn price, feeder cattle will rise or fall a given amount.....$1cwt? If that is the case then feeder cattle should be around $60-70 dollars cwt right now.
 
Tommy said:
RobertMac...Tommy, you give SH more credit than he is due...that actually came from Agman.

It was from his post to Kevin on SwiftHorses blog. My only point was that corn prices affect cattle prices, but can one say as a fact that for every 5 cent rise or fall in corn price, feeder cattle will rise or fall a given amount.....$1cwt? If that is the case then feeder cattle should be around $60-70 dollars cwt right now.
Click to expand...

Many econometric calculations are only applicable to a small range and hold true for a certain time period. Many of these kind of calculations can not be extrapolated outside of the range they were calculated in. This is one of the problems with econometric analysis. Part of the reason is that substitutes for actions are not fully accounted for in the longer run where they do play a huge part. If, for instance, grass is substituted for grain feeding in the mid to longer term, the calculation which previously did not include this substitution would be affected. If prices for corn fed went up because of the increased price, the quantity of corn fed beef may decrease. The time period on corn may decrease, and so would a lot of other factors.

In economics, we have a saying "all other things held constant". Usually this only occurs in a short period of time where substitution has not had a chance to affect the outcome, hence the econometric "theory" holds more validity during this time where it will not in others.

SH is just an idiot quoting agman.
 
What ever happened to the 'Old Farmers Tale' that cheap corn makes cheap beef? Was it ever correct? Has it now become out of date?

Just curious. I sure hope the rains come to SD so we can go back to keeping our calves on grass to sell as yearlings.....but it can't happen before '08, as we had to sell as calves right off the cows due to drought last summer.

We did see the steers at their new home last Feb. and they sure were gaining well and looking good, if a little muddy. Mud was definitely something they had not experienced in SD!

MRJ
 
Tommy said:
SH...For each $.05 change in a bushell of corn, feeder cattle prices are affected $1.00/cwt. In other words a $1.00 change in the price of a bushell of corn will result in a $20/cwt drop in the price of feeder cattle.

Does everyone believe this to be true? Last fall corn prices were $2.20 per bushel now it is $4.20. This is $2 dollars per bushel more than last fall. Today feeders traded for $104.85. So with your figures Scott, feeders last fall should have been $140.00 or so. How many people got $140.00 cwt for their feeders?
I note that you did not say that feeder cattle are sometimes affected. You said feeder cattle prices are affected. I do know that corn prices affect the feeder price along with all cattle prices, but to say as a fact that for every certain amount the price goes up or down it equates to a fixed price swing is just not so.
Click to expand...

Tommy, during the fall feeder and calf receipts are at their peak. Do you deny that corn prices were rising rapidly last fall when receipts were at their peak? Were corn prices as high as now, NO? On the other-hand receipts were much larger then they are now. Have you forgotten that feeders have rebounded more than $10/cwt from their respective lows. Do you think $99 fed cattle prices and the wettest winter since 1960, when weighted by cattle inventory, has anything to do with the price rebound in feeders and calves? The aforementioned moisture will allow many areas to have the best spring grazing conditions in decades.

Since corn is an input cost, if other factors are equal, feeder and calf prices will adjust lower to reflect the increased cost of gain. Historically, feeder and calf prices decline in direct relation to the change in gain costs. If you have any historical data to suggest otherwise please present it. Citing one snapshot of time as you did hardly qualifies as proof of anything.

A $2.00 per bushel advance in corn prices would raise the cost of gain by approximately $35.70/cwt. For an 800 pound feeder that will finish at 1300 pounds the added cost from the rise in corn prices is $178.50. That suggests if all other factors are equal the price of that 800 pound feeder would decline by $22.31/cwt ($178.50 / 8 cwt). The feeder index peaked at $120 and bottomed near $98 or a $22.00/cwt decline. It looks to me like the market appropriately reflected the advance in corn prices. The feeder index, along with cash feeders, has since rebounded to reflect the $13-$14/cwt advance in fed cattle prices and seasonally reduced receipts.
 
agman...Tommy, during the fall feeder and calf receipts are at their peak. Do you deny that corn prices were rising rapidly last fall when receipts were at their peak? Were corn prices as high as now, NO? On the other-hand receipts were much larger then they are now. Have you forgotten that feeders have rebounded more than $10/cwt from their respective lows. Do you think $99 fed cattle prices and the wettest winter since 1960, when weighted by cattle inventory, has anything to do with the price rebound in feeders and calves? The aforementioned moisture will allow many areas to have the best spring grazing conditions in decades.



Agman you just made my point to Scott. He stated that for every 5 cent change in corn prices, feeder cattle are affected $1.00/cwt.
He did not say that if feeders are at their peak or if corn prices are rising there would be a change. I know there are a lot of variables, I am not argueing that.
 
Tommy, Agman just showed you where feeders went down because corn went up.

If corn were to drop by the same amount, feeders would climb.

Feeders are climbing now, and corn hasn't dropped. That means other factors are pushing them.

Instead of trying to catch Scott on a technicality, try to see what he is saying about the dynamic of the beef industry. If you quit looking for a scapegoat you might stumble on a opportunity.
 
Jason...Instead of trying to catch Scott on a technicality, try to see what he is saying about the dynamic of the beef industry. If you quit looking for a scapegoat you might stumble on a opportunity.

Jason, I am not trying to catch him or anyone on a technicality. He stated it as a fact. I do know that the price of corn affects cattle prices, I have stated that. There are also a lot of other variables. If all things were equal I am sure he might have a point, but they never are.

I make my opportunities Jason, I do not have to stumble onto one.
 
So if you know corn affects feeder prices, why would you latch on to statement by Scott about the amount?

You know he has learned much from Agman, and no doubt the relationship of feed costs vs feeder costs is part of that learning.

It is incredibly handy to have a ratio as a starting point to decide how many other factors are involved. Just aditting there are more factors than the price of corn in the feeder price has shown the lunacy of R-calf saying the Canadian border has been the reason for higher then lower American prices.

That is the lesson Scott tries to teach. Closing the border to Canadian cattle is such a small factor on American prices. Canadian cattle will go somewhere and displace an equal amount of beef. It is far better for American producers to have the beef to resell at a profit than to compete against it internationally.
 
Jason, when Tyson and Cargill bring Canadian beef down here, just how the hell do US producers profit from reselling it?

Scott doesn't teach, he repeats.
 
According to some, they have to bid higher than their competitor regardless of their financial condition.

Are you saying they will pay less if the books don't look good?
 
Jason said:
Can Cargill and Tyson pay more for American fats if they are losing money or making money?
Click to expand...

I'm sorry, Jason, but that arguement is weak, weak, weak. Do Tyson and Cargill ever pay a cent more than they have to? When have you ever heard of a feeder claiming those two got in a bidding war over a pen?

If anything, deep pockets in an industry with so few players gives them power to effect prices lower.
 
Mike said:
According to some, they have to bid higher than their competitor regardless of their financial condition.

Are you saying they will pay less if the books don't look good?
Click to expand...

In the short term that is true Mike. They will lose money to get cattle bought at times.

If they always lose money, they won't stay in business.

sandhusker said:
Jason wrote:
Can Cargill and Tyson pay more for American fats if they are losing money or making money?


I'm sorry, Jason, but that arguement is weak, weak, weak. Do Tyson and Cargill ever pay a cent more than they have to? When have you ever heard of a feeder claiming those two got in a bidding war over a pen?

If anything, deep pockets in an industry with so few players gives them power to effect prices lower.
Click to expand...

No one in any industry pays a cent more than they have to.

Do feeders sell to the low bidder?

If there is money in an industry there is always a new player looking to see if they can do it a buck cheaper.

If Tyson was making $50 a head consistantly, someone would figure out how to do it for $45.

No pockets are deep enough to sustain continued losses indefinately.

Robertmac said:
Jason, do Tyson and Cargill make more profit if the price of live cattle in the USA goes down or if their margin on Canadian cattle increases?
Click to expand...

That is impossible to answer Robert. Tyson and Cargill can lose money while the price of US fats goes down. They can also make money as the price increases. The margin on Canadian cattle can increase at the same time and they can still lose money. To think that there are enough Canadian cattle to affect the US market enough to manipulate prices is dreaming.

If our cattle can move the prices in the US that much, then our shipping the beef to US markets would have the same effect. It can't be both ways.
 

Latest posts

Back
Top