Extension and Ag Research News


Livestock Producers Face Higher Feed Prices

An NDSU Extension beef specialist offers strategies to offset higher feed costs.

Since fall 2006, rising corn prices have driven up prices for nearly all feed commodities and byproducts, costing livestock producers more to feed their animals.

While increased ethanol production largely is responsible for the higher corn prices, byproduct prices have gone up, too, as livestock producers search for alternatives to corn, says North Dakota State University Extension Service beef cattle specialist Greg Lardy.

Supplies of once abundant byproducts have tightened, which makes purchasing spot loads of many different commodities difficult. As a result, many producers seem to be interested in contracting for long-term supplies. The price of pasture and other forages also is up, while feedlot and stocker cattle operations respond to increased feed costs by paying less for feeder cattle.

“Unfortunately, cow-calf producers are unable to pass on the additional increased feed cost,” Lardy says. “This means that you’ll have to take other steps to address the situation.”

Short term, producers don’t have a lot of options for dealing with the increased commodity prices, according to Lardy. Strategies such as more aggressive culling or using locally produced feedstuffs and alternative feeds that haven’t been affected by the price increases yet, or have seasonal price variations in the summer months that make them an attractive buy, may be workable for some producers, but not for many others.

Early weaning may be one option to stretch tight forage supplies, Lardy says. However, producers need to balance the forage savings and benefits to the cow with the additional costs of feeding the early weaned calf. Producers may have opportunities to increase their stocking rate with early weaning management, which can help spread fixed pasture and forage costs over more cows.

“In any case, be sure you carefully evaluate the economics of this decision before proceeding,” Lardy recommends.

Long term, producers likely will need to make a combination of changes to their operation to deal with higher feed prices. These could include managing price risk on the feed side through the use of contracts and futures markets.

“While the long-term effects on the feed market are unknown, it is clear that the ethanol industry will consume a significant amount of corn,” Lardy says. “With the current federal government policies supporting ethanol production, it is clear that the industry can pay a significant amount for corn. Increased attention to financial management of feed costs, including hedging, contracting and utilization of forward contracting for feed byproducts, may be required to successfully deal with the increased feed costs.”

Increased feed costs also may mean paying closer attention to the long-term core mission and values of the beef cattle operation. Lardy says producers should give some thought to the suitability of the cow herd to their particular resource base by asking themselves these questions: Have your purchases for feed inputs increased during the last 10 years? Is this in response to drought or a symptom that your cow herd is not well matched to the resource base in which you operate?

Increasing reliance on purchased feed inputs may mean the herd’s nutrient requirements have exceeded the productive capacity of the ranch, he says. Producers’ future genetic selections may need to be directed toward purchasing/raising animals with lower nutrient requirements to reduce purchased inputs.

One area that will become more and more important is feed efficiency, but genetic, management and nutritional factors affecting feed efficiency in both the feedlot and on pasture have not been explored fully, Lardy says. In addition, the research is quite expensive. However, preliminary evidence hints that feed efficiency rankings in forage-based systems may not be the same for high-grain diets. That means producers may need to consider trade-offs as they select for feed efficiency in the feedlot on high-grain diets versus feed efficiency for their cow herd in a forage-based system.

“One of the long-term impacts of higher corn prices may be a return to production systems that have more focus on utilization of forages and use of cow-calf/yearling systems, as opposed to selling calves directly off the cow,” Lardy says.

Whether this will occur depends on a large number of factors, he adds. For example, cow-calf/yearling operations require more forage per unit, and the relationship of corn prices to pasture prices will be an important determinant of whether this shift will occur on a large scale.

“These changes will be slow to develop, but several continued years of higher corn prices may initiate these types of fundamental changes,” he says.

NDSU Agriculture Communication

Source:Greg Lardy, (701) 231-7660, gregory.lardy@ndsu.edu
Editor:Ellen Crawford, (701) 231-5391, ellen.crawford@ndsu.edu
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