Unseasonably mild weather around the United States is keeping pastures green and slowing feed consumption rates by livestock, exacerbating an animal feed glut that has dragged grain prices in many areas to the lowest levels in years.
Feed grain sales that normally accelerate in November, when colder weather increases the appetites of cattle and hogs, have remained tepid. There is little hope for a bounce in the near term, analysts said.
The National Weather Service has forecast above-normal temperatures this month across the Plains and Midwest, home to large cattle and hog herds.
Cattle rancher Barbara Cooksley has kept her 900 cows on pasture a month longer than normal near Broken Bow, Nebraska. Frost usually hits the area in mid-September, signaling the time when cattle need feed pellets to supplement shrinking supplies of forage.
“Cows would much prefer to keep on grazing. When there’s native grass available, it’s better to leave the cows on that,” Cooksley said.
Feed is abundant after record-large autumn harvests of U.S. corn and soybeans followed a bumper crop of winter wheat. The U.S. Department of Agriculture predicted wheat feed and residual use as the highest in four years due to plentiful supplies and low prices.
Reduced shipments of distillers’ grains, a byproduct of corn-based ethanol, to China after the top buyer imposed anti-dumping duties on imports from the United States also left more available for the domestic market.
The feed options are a welcome reprieve for livestock producers struggling with low prices for their animals. Reduced profits have already prompted some cattle producers to cull heifers.
“If you’re an end user, this is a dream come true because they are dealing with some horrendous livestock prices right now,” said Tanner Ehmke, senior economist with CoBank.
“But if you’re a grain producer, it’s not such a great thing because we’re going to be dealing with overhanging supplies for quite some time,” he said.
Bids for corn shipped by rail into Hereford, Texas, a location seen as a barometer for feed demand from the cattle industry, sank to a 52-cent premium above Chicago Board of Trade corn futures, the weakest in nearly four years.
Pasture conditions in the Southern Plains feedlot states of Texas and Kansas were above average, according to USDA data.
“The weather is so nice, the grass continues to grow. There’s not a lot of reasons to go out and buy grain. Until we start to see the weather change, it’s going to be slow,” said a Minnesota feed dealer.
The feed oversupply already is squeezing margins for grain handlers such as Archer Daniels Midland Co and Bunge Ltd , who blamed heightened competition in feed sales for weak soy processing profit margins in their most recent quarters.
“Margins globally were impacted by softer-than-anticipated (soy) meal demand, as low-quality, low-price wheat replaced corn and soy meal in feed formulations,” Bunge Chief Executive Soren Schroder said during an earnings-day conference call last week.
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