October 21, 2010

US cattle sector hit by corn price hike

Skyrocketing corn prices are affecting US cattle ranchers' bottom line, making it harder to cover the costs, sources said.

As this year's crop was lower than projected, corn prices reached over US$5 a bushel in the month of October, a level only reached during the peak of the Food Crisis in 2007-2008.

Prices for these cattle have risen some to help compensate for the costs of cattle feed, of which corn is a major ingredient.

However, it's not enough to totally cover the rise.

"Our feed costs probably went up US$10-$15 a hundred of what we put on cattle," said Rex Bland from the Cal-Tex Feed Yard. "If we put on 600 pounds, that's from US$60-$100 a head more cost."

To offset their future feeding expenses, cattle producers will drop feeder cattle prices at the auctions. These could drop US$25-$40 a head. Ranchers will also cut back on the length of time spent fattening up their cattle.

This means consumers would be paying more for beef at the grocery stores. By spring Bland estimated beef prices will be up about 5-7% more than they already are.

Right now rain is going to be the biggest help to ranchers. This will help keep the grasses growing further into the fall and also help the wheat crop.