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Published July 09, 2012, 09:51 AM

Corn prices affect livestock

Tim Petry, North Dakota State University Extension Service livestock marketing economist, says the recent run-up in corn prices is having an opposite effect on many of the region’s livestock producers, who are constantly adjusting production to meet market conditions.

By: Mikkel Pates, Agweek

FARGO, N.D. — Tim Petry, North Dakota State University Extension Service livestock marketing economist, says the recent run-up in corn prices is having an opposite effect on many of the region’s livestock producers, who are constantly adjusting production to meet market conditions.

North Dakota has about 1 million beef cows, producing some 900,000 calves. More than half of those calves are background-fed, even though they may not be fed to a slaughter weight, and will be affected. The number of producers feeding cattle has tended to grow.

Larry Schnell, manager of Stockmen’s Livestock Exchange in Dickinson, N.D., says the climbing corn prices mean the feeder calf prices for fall and even for yearlings will be lower than what cattlemen had been looking at all summer. “Some of the futures on feeder cattle dropped over 10 bucks (per hundredweight), but I think they’ll come back. Whether you’re feeding or not, (the price of corn) is going to affect the price of calves and yearlings.”

The rule

Petry says the price of corn can have a dramatic impact on revenues for cow-calf producers. “As a rule, a change in the corn price of 10 cents a bushel can change fall feeder cattle prices by a dollar (per hundredweight) in the opposite direction,” Petry says.

The rapid run-up in corn prices of $1.50 to $1.60 per bushel is having its effect on beef, but also other species. Hogs and chickens eat concentrated feed, largely corn, from day one, so the price of corn impacts them, too.

“In three weeks, hog production went from being profitable to not profitable because of the run-up in corn,” Petry says. Dairy production was marginally profitable a month ago and is probably going to be challenging going forward. “Even though milk prices are relatively high, they have not kept up,” he says.

North Dakota and South Dakota have more sheep, but that species of sheep is less dependent on corn than any of the major livestock groups, Petry says. “They stay on grass longer in the fall and don’t need as much corn, in the end, to reach market,” he says.

Feeder lamb prices reached record-highs last year and generally are down $15 to $20 per hundredweight from last year. The ethnic market demand for lamb is good, but last year the drought in the south — particularly Texas and New Mexico — sent a lot of lambs to the feedlot early — where they gained weight faster, creating a backlog with the packers. Some of the lambs were kept too long on feed and quality declined, Petry says.

“We had to work our way through heavy lambs, with more meat on the market,” he says.

Other, bigger factors

Increasingly hot and dry regions in western North Dakota and farther west will have a bigger impact on livestock numbers than the nominal price of corn, Schnell says. “I expect to see calves coming off cows earlier than normal, and I think people will continue to keep their herds small,” he says.

On the bullish side, many of the really good feeders may have taken some market protection against soaring corn prices. Also, Schnell expects some producers are contemplating how they might capitalize on the Northern Beef Packers plant in Aberdeen, S.D., currently under construction.

Schnell thinks that until the doors are opened and cattle are going through it, many producers won’t go far in their expansion plans. “I think everybody hopes it’ll come about,” he says. The plant initially was expected to open last fall, but has been held up with various financial challenges.

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