Feed costs are one variable factor in the cattle business that can make the difference between profit or loss. The severe drought a few years caused feed costs go to record levels. Corn was in heavy demand from the feeding sector, export demand along with ethanol production. Today abundant corn supplies have brought corn prices down substantially. Informa Economics Senior Vice President Mike Sands said those volatile feed prices have a huge impact on profitability.
“I think that’s a critical part of this overall still cautiously-optimistic picture that we would paint for the cattle and beef industry,” Sands said. “We need to see feed costs stay fairly stable.”
While feed prices are certainly cheaper than the previous two or three years, they remain well-above historical averages. Looking at the 2015 growing season, Sands expects farmers to plant fewer acres of corn and yields may not be as high as last year.
“If that’s the case, as we move into the next crop year, we do have the potential for reducing carryover stocks,” Sands said. “That begins to paint a picture, not necessarily of dramatically higher feed costs, but probably not a lot of additional downside risk. But even stable feed costs at current levels won’t necessarily be bad news for the beef industry.”
In managing that risk, Sands said the principles of cattle production remain the same. He said cattle producers will need to control their costs, along with being more defensive on pricing decisions as the year progresses.
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