Economics of Cattle Feeding

[cedardell]

Just looking for an opinion from all you experts out there. I assume a lot of the western feedlots raise their own crops. I have seen miles and miles of irrigated corn growing on the high plains and in western Nebraska. With ever increasing fuel costs, the breakeven must keep rising. What is the current breakeven cost for corn on the average for irrigated corn? The thing that I am worried about is how you and the large packer feedlots can keep producing if fuel costs keep rising as they are predicted to do. Am also under the impression that lower water tables are causing increasing costs. With these low prices does the govt subsidize corn farming for irrigated farms over and above the LDP rate? If they don't it looks to me like the big corporate feedlots are farming at a loss. Was just wondering if continually rising imput costs and conceivably lower cattle prices will change structure of cattle feeding industry. How are big packer feeders going to react to negative fed margines? Will they raise product prices or quit feeding?

 

[GLA]

You ask alot of questions which probably will not have an answer until next spring.

Breakeven cost for a bushel of irrigated corn in the Texas Panhandle is probably around $3, taking into account the corn will yield around 200 bushels or more per acre.

Most of the current cost of gains in the feedlot is anywhere from $.50 to $.60 per pound of gain. The farther north you go, Iowa, Nebraska, etc., the costs would be in the 40's and the farther south you get, they are in the 50's or low 60's. Cattle are gaining exceptionally well, 3 to 4 lbs per day. Therefore the feeding spread is around 30 cents per pound of gain. That does not say that cattle are making money or even breaking even, but with $84 cattle, they are getting close.

With all the carryover of grain and another bumper crop coming, it may be two years before we feel the energy crunch. However, I am worried that next spring, no one in this area will be planting corn, unless the feedlot finances the crop 100%! Several farmers around here are selling their grain equipment and getting into the cotton business!!! More acres to cotton and sunflowers. Just cannot continue to raise corn with $10 gas. The high priced gas will save our water!!

So, to answer your question, next spring, corn acreage down 15% with most of it grown in the midwest.

 

[Jason]

cedardell, by looking only at fuel and costs, you miss half the picture of feedlots that own their own farmland.

The big players have made huge gains in efficiency to the point that fuel is not the big factor you may assume.

In my own small farming deal I have farmed more acres this year than the previous 2 with the same machinery even, but have a lower fuel bill this year than the last 2 years. I have looked for ways to lessen trips to and from the fields, to and from town etc.

Big feedlots have to have access to big land acres for manure disposal, at least in Canada. With water on that land the yields are amazing, and relatively cheap. The energy cost to pump water is the biggest factor I believe. Yet this year the pumps hardly ran except during July.( Again at least in Canada)

In drought areas of the States, many on this board have said how acres of corn did not fill and are being silaged. More cheap(cheaper relatively speaking) feed.

Grain stocks in Canada are at near record levels. Much wheat is feed quality and will negate any Canadian demand for US corn.

Again going back to my situation, I have nearly double the number of cows I should have, yet my feed bill will be near zero because of better yields etc. If I was to price the feed for sale, it would not be worthwhile to sell it and the cows in current markets. Feed is too low, and so are cows, yet.

The next step is to study to see if I can compost my manure stockpile and make 'teas' that will eliminate the need for any high priced fertilizer. If I just spread it I have enough for 20% of my landbase.(no Irrigation so more acres for less cattle)

Basically efficencies are being looked at for every aspect of these operations. I can find many, and bigger outfits have the capital to invest in many more than I can.

 

[cedardell]

Thanks for responding to my silly questions. I think a lot of small farmer, cattle ranchers don't understand the economics of the conglomerated feedlots. It seems to me like their inputs from feed costs are a lot higher than mine. Yet their breakevens seem to be lower. This must come either from an economy of scale or from marketing advantages. Probably both. Due to confidentiality policy probably is not much way to find out about the feeding margins of vertically integrated feedlots. However, it seems important to know if something comes along that effects their margins either positively or negatively because it has big impacts on the markets.