Archive for the ‘Economics & Markets’ Category

A Picture Says a 1000 Words

October 20th, 2011

by Denise Schwab, Extension Beef Specialist

Wow, I don’t know if you get the Daily Livestock Report by Steve Meyer and Len Steiner, but today’s issue had one of those graphs that really hits home! We know the cow slaughter has been up mostly due to the drought in the south, but this graph really hit me.  Look what has happened in the last 5 months!

There have been many articles discussing this cow herd liquidation, but what impact will this have on feeder cattle prices into next year and beyond?  Is there an opportunity for Iowa cattlemen to take advantage of our comparatively inexpensive feed to develop heifers to fill this future void?  Are you planning to make any changes to your operation based on this cow trend?

Cow-Calf Operations, Economics & Markets, Risk Management, Uncategorized

Background calves in fall 2011??

October 20th, 2011
By Shane Ellis, ISU extension program specialist
It is weaning time again, and producers are faced with the decision of selling their calves now or backgrounding the calves for a few months. The volatility of the feed markets has created some opportunities and new challenges.

Corn prices are down, but forages are not cheap. Fed cattle prices remain strong, and barring any economic catastrophe, are expected to stay strong for the next year. In turn, feeder cattle prices also remain strong, but if the futures market is giving a true indication of things to come, feeder cattle prices will continue to increase for the next year. Currently 550-pound calves are selling for around $155/cwt and 750-pound feeder cattle are selling for $140/cwt.

The table below compares the costs and benefits of backgrounding weaned 550-pound calves for 30, 60 and 90 day periods. Also included is the projected selling price for those calves at their increased weights in the future. This example assumes that the cost of gain is $0.44 per pound, yardage is $0.45 per day and the value of the weaned calf is $852.50.

cost-benefit of backgrounding calves in fall 2011
Are you planning to background your calves this year?

Cow-Calf Operations, Economics & Markets, Risk Management ,

Top Ten Cattle Market Items for 2011

January 6th, 2011

As a part of the new year top ten lists, Dr. Darrell Mark, Associate Professor of Ag Economics at the University of Nebraska, shared his thoughts in the recent In The Cattle Markets newsletter. Here are his thoughts. Please share your comments with us.

10. Heavier carcass weights. Cattle dressed weights have increased in the last twenty-five years, so the 1.4% decline in 2010 was unusual. The harsh 2009-10 winter dropped weights at the beginning of 2010 and feeders kept marketings current throughout the year. Expectations for higher corn prices in 2011, over capacity in the cattle feeding sector, a shrinking supply of feeder cattle, the need to maintain feedyard inventories, and a possible shift back to placing yearlings could all impact carcass weights.

9. Value-based marketing. Consumer demand for traceability, transparency, and other information about the food they purchase has lead to the development of several programs designed to meet these needs. This is especially evident for foreign customers who have age, source, hormone, or other requirements associated with the U.S. beef they import.

8. Animal rights. Communication efforts through social media outlets, mainstream media, and face-to-face discussions about the steps producers and processors routinely take to protect the well being of their animals should have a positive impact on consumers in the new year.

7. More hedging. Most of the cattle placed for the first five months of 2011 could have been hedged at $20-40 per head profits, and current margins suggest profits between $10 and $50 per head can still be hedged through the end of 2011.

6. Growing poultry production. Growing poultry production, when combined with various poultry trade issues, indicates U.S. consumers will have plentiful supplies of poultry which may pressure beef demand.

5. High cattle prices. The constantly decreasing cattle inventory and lower supplies of feeder cattle and fed cattle, should result in the highest-ever annual fed cattle price. The 5-area fed cattle price is forecasted to average close to $100/cwt. Current feeder cattle futures prices suggest cash feeder prices could average $15-20/cwt higher in 2011.

4. Export growth. The U.S. has regained 93% of its 2003 level of beef exports, and they are expected to continue to grow in 2011. World demand for protein should continue increasing as economic conditions improve, consumer disposable incomes increase around the globe, and currency values in Asia find support.

3. GIPSA regulations. In 2011, we will either see industry and government debate on the rule itself continue or discussion of how to practically adapt marketing and production methods to comply with the rule emerge – or possibly both.

2. Higher & more volatile feed grain prices. The stocks-to-use ratio for the 2010-11 corn marketing year is projected at 6.2% , the second tightest ratio in modern history. Wet and dry distillers grain prices have risen about $30/ton and $80/ton, and other feedstuffs like soybean hulls have almost doubled in price. The corn market will be highly volatile through the growing season, however it is still possible to earn a small profit despite costs of gain near $90/cwt.

1. Shrinking cattle herd forcing structural changes. Cattle numbers have decreased, culminating in the smallest national herd in the past sixty years, which will have a profound long-run impact on the structure of the cattle industry itself.  The likelihood of having fewer cow-calf producers, cattle feeders, and beef packing plants continues to grow as cattle numbers are set to decline for at least the next couple of years.

For more details on his thoughts, see the LMIC link .  And please share your comments on this top ten list by hitting the Leave a Comment button above!

Economics & Markets, Uncategorized

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

Economics & Markets, Uncategorized ,

Learn to better manage your risks

November 19th, 2010

You can’t eliminate risk in your operation, but you can learn how to identify risks and better manage them with the appropriate tools and techniques. Iowa Beef Center, Land O’Lakes Purina and local cooperatives are sponsoring a series of risk and margin management workshops over the next couple of months and you’re invited.

Through hands-on activities, you’ll learn about risk management tools like futures, options and livestock insurance, and how to use those tools in your operation.

You’ll use actual market prices from a two-year period to make marketing and feeder cattle and corn purchase decisions. You’ll explore the concept of locking in a margin between the selling price of fed cattle and the cost of corn and feeder cattle. You’ll learn a great deal and have fun at the same time.

Cost is $25 per person and preregistration is a must to ensure your spot in the workshop. Each site must have at least 8 participants and no more than 26. You can see the current list of locations and more information on the IBC website here

Be sure to contact us at if you have any questions.

Economics & Markets, Risk Management