Is it time to lock in DDG prices for cattle on feed?

US - Seasonally, cattle on feed numbers bottom in September, and through increased placements during the fall, increase by 12 percent to the seasonal high in December.
calendar icon 11 October 2006
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As cattle feeders place fall calves over the coming months, they typically consider locking in feed costs.

Seasonally, corn prices are at their lowest during fall harvest and feeders can take advantage of those prices by purchasing corn, forward contracting, and basis contracting. As feed rations continue to replace an increasing amount of corn with wet and dry distillers grains, cattle feeders need to focus more on managing distillers grain prices.

Long series of price data on wet and dry distillers grains to analyze are limited, and prices that are available may be thinly traded or not necessarily representative of actual trades made between ethanol plants and cattle feeders or feed buyers. Still, it is useful to consider trends in these feed products.

The seasonal trend is for DDG prices to peak in mid-April and decline throughout the summer. Seasonal lows typically occur in August at about 80 percent of the annual average. DDG prices then increase through the fall and early winter months to peak in December and January close to 20 percent higher than their annual average.

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