By Andrew Griffith
Will higher corn prices or the expectation of higher corn prices temper the expectation for higher feeder cattle prices this year?
The simple answer is yes. If input costs increase then that means there is less money available for the feedlot to pay for feeder cattle. However, live cattle futures have been gaining strength which provides support for feeder cattle prices. Thus, corn and other feedstuff prices are increasing which is putting pressure on feeder cattle prices while the expectation for finished cattle prices is supportive of higher prices. This means that the two most important aspects of the feeder cattle market are pulling market prices in opposite directions. It is not known at this time which one will exert more force and win the tug of war, but what is known is that they will temper each other.
What is known at this time is that the futures market and livestock risk protection insurance are providing an opportunity to hedge summer and fall cattle sales at profitable prices. It may be worth considering.
Source : osu.edu