Vet's Corner: Profit can be made if producers keep consumer trust

US - What a difference a year makes! In 2006 we were locked in a drought with no end in sight. Now we have excess moisture in many areas. Wheat prices are at all time highs, calves are still a good price and corn has gone through the roof. The major question is, how will these high feed prices affect the calf market?
calendar icon 6 July 2007
clock icon 2 minute read
Last winter when many producers were selling calves, the corn price shot up drastically. Calf prices went down and all the buyers said, “Sell now while you still have a decent market.” Many took $120 to $150 less per head than in 2006. We all believed that the seller or cow/calf man was going to absorb the total change in the market. Surprisingly, the market adjusted and the consumer actually absorbed most of the increase.

The feedlots should have made good profits last year if they had purchased their feedstuffs in advance. If corn was piled in the yard at roughly $2, it was billed out at $4. This was a $2 profit for every bushel of pre-purchased grain. For some reason, February took out the hay reserves. With everyone scrambling for roughage, its cost also almost doubled. An average increase in cost to add 500 pounds to a feedlot calf was about $120 to $140 per head.

The consumer demand for product was very high and they were willing to pay higher prices for beef. The average price for fat cattle increased about $100 in each fed animal. When this is placed against computed $130 increase in feed costs, it leaves only $30 to be absorbed by the producer. This would calculate to about a $5 per hundred decrease in calf price. This is a far cry from the $15 to $20 per hundred which was taken from the producers.

What does the future hold for cow/calf producers? If we knew, we would all be rich. Fall-delivered calves appear to be trading at about $120 compared to $130 last summer. It seems that the higher prices for corn, protein and hay will be here for the foreseeable future. This calf price seems fair with the increases in feed costs, but we must remember there were some large profits turned on the calves sold by producers during the “corn scare sell off” which were delivered on the higher fat market.

Most large commercial lots had pre-purchased cheap feed and profited by marketing it at higher prices. All in all, I feel the feedyards had a pretty good turn in spite of the higher feed costs. They should have the funds to pay reasonable prices for producers' calves.

Source: Tri State Neighbor
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