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Cattle Prices Too Low!?!

January 5th, 2011

Did I catch your attention with this headline? I was a little surprised also when I read today’s Daily Livestock Report written by Steve Meyer and Len Steiner. But they make a great point when looking at the cattle to corn ratio. If you look at the last 40-year live cattle to corn ratio, we are currently back to 1970 levels. Corn prices from 1980 to 2005 average in the $2.50/bushel range, and now are bouncing around the $5+ per bushel range.

They suggest “If corn prices hold at around $6 per bushel (some are thinking even higher money to ration demand and “buy” more acres this spring), then cattle prices need to fetch about $130/cwt to come back anywhere close to the five year average ratio levels. Much higher cattle prices (or sharply lower corn prices) will be needed to return to the longer run levels of the past two decades.”

One other interesting point they made is the big change in livestock usage of the corn supply. In the past about half of the US corn supply went to livestock feed, and we are currently down to using only 37% of the corn supply for livestock feed. Much of this shift is due to the growth of the ethanol industry, but along with that is the shift to feeding more co-products in place of corn.

If you would like to learn more about Meyer and Steiner’s Daily Livestock Report check out their webpage at www.dailylivestockreport.com

Economics & Markets, Uncategorized ,

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