The era of cheap feed for cattle is probably over for years to come, said a Purdue University Extension marketing specialist.
"Over the past eight crop years from 1998 to 2005, U.S. corn prices averaged just $2.05 per bushel," said Chris Hurt. "Historically, the cattle industry has been the animal segment that makes the biggest adjustments to high-priced feed and that will likely be the case this time as well.
"The recent decline in calf prices represents a potential for $1.9 billion in lower annual returns for cow-calf operations. Excess capacity in feedlots will be costly as well. However, learning to feed distillers grains at much higher inclusion rates remains the opportunity."
Hurt's comments came as he reviewed the state of the cattle industry in light of much higher feed prices, a situation complicated by the existence of large numbers of cattle in feedlots.
"The Oct. 1, 2006 inventory is the largest since the current records began in 1996," he said. "Feedlot managers have placed large numbers of calves this summer and early fall, and paid high prices for the privilege of ownership. Now, feed prices have moved much higher, raising the costs of production and breakeven levels."
Hurt said the latest USDA Cattle on Feed report gives a few clues about how the cattle feeding industry will respond to much higher feed prices.