The future of corn prices and the impact on fed livestock continues to be an unfolding, tumultuous situation, but some degree of clarity should be coming to the story in the next few weeks, according to a Texas AgriLife Extension Service economist.
“This is not just a supply situation, but demand as well,” said Dr. Mark Welch, AgriLife Extension grains marketing economist, College Station. “We are going to see some demand response to these high prices and need to carefully watch for that. What we need to see are these crop-condition reports every Monday leveling off and get an assessment of what is going to really happen.”
Until then, Welch said corn prices will continue to hover at record levels, which puts pressure on feedlot operators to be profitable.
“Can they cheapen up the prices they are paying for cattle to pay $8.50 to $9 a bushel for corn?” Welch said. “I think we will see the answer to this as well as some of the other factors weighing in on the markets in the coming weeks. I think we may see a strong push back on the use of corn, which is a natural response in this type of market environment.”
Another area to watch, according to Dr. David Anderson, AgriLife Extension livestock marketing economist, College Station, are feedlot placement numbers in Nebraska versus Texas. Due to the Midwest drought, Nebraska could soon eclipse Texas in the numbers of cattle on feed.
“The drought across the plains and corn belt is leaving cattle with no place to go, in contrast to last year’s drought in the southern plains,” Anderson said. “Last year, cattle could go from Texas and Oklahoma to states that had grass. Now the drought has hit those states. Combined with skyrocketing corn prices, calf and feeder prices have declined dramatically, with southern plains 500- to 600-pound calf prices down about 22 percent in the last few weeks.
“The drought may leave calves with no place to go, but feedlots, at lower prices. We may see more drought forced feedlot placements in Northern feedlots, closer to the drought-affected areas this year.”
In the June U.S. Department of Agriculture cattle on feed report, Nebraska had 385,000 placements and Texas had 420,000 head.