High corn prices hit hard locally
Costs expected to affect price of cattle and hay supply
June 8, 2008
Steamboat Springs — Most cattle ranchers don’t pump pounds of corn into the bellies of their beasts. But by all accounts, the record high price of the grain is having a negative impact on the ranching industry.
The average price for a bushel of corn hit a record at more than $4 during the 2007-08 season. Prices now sit at more than $6 a bushel, and the average for next season is expected to be $5 to $6. A couple of years ago, rancher Doug Matthews recalled, the price was $2.60 a bushel.
High corn prices push down the price of calves, Routt County Extension Agent CJ Mucklow said. Local ranchers produce mostly calves and yearlings, which end up eating grain in feedlots, he said.
“The input costs are higher, and that pushes up the cost of beef, and the price of calves goes down,” Mucklow said. “Whenever we have high corn prices, we have stagnation or decrease in calf prices. : In the long run, beef gets so expensive that people switch to other protein sources like chicken or pork because they’re cheaper.”
Cattle accounts for about 70 percent of the agriculture in Routt County, Mucklow said.
Costs are up for feedlots on the Front Range and elsewhere because they use corn. Those cost increases get passed on to the rancher. On top of that, transporting animals has become more expensive because of high diesel fuel prices.
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Ranchers, feed sellers and Mucklow attribute high corn prices in part to the demand for biodiesel fuel. The Economic Research Service of the U.S. Department of Agriculture reported that corn use for ethanol was expected to increase by 33 percent in 2008-09, after an estimated 42 percent increase in 2007-08.
Monthly ethanol production hit a record high at 518,000 barrels a day in February, the most recent data available.
The research service predicts record prices of feed grain for the 2008-09 season, too. Production of feed grain for 2008-09 is projected at 325 million tons, down from 351 million in 2007-08.
Hay is no escape
Local ranchers typically feed cattle hay and grass and then sometimes grain supplements, said Colby Townsend, who owns Elk River Farm & Feed with his wife. Their habits are changing, however, he said.
“A lot are not using supplements. : Most don’t for their entire herd, but they might put replacement heifers on higher-quality feed, and that has been tough with feed prices,” Townsend said. “With the cost of fuel driving up hay prices, that’s just going to make it tough for everybody.”
Yampa Valley Feeds owner Doug Meacham said the effects aren’t clear.
“The impact of the high price of corn is people are just not feeding any,” Meacham said. “It just doesn’t pencil out, and whether this fall it affects the cattle prices remains to be seen. I’m sure it will have some effect on it – lower prices for cattle maybe. I hope not.”
Townsend said he has had to raise prices 30 percent at the feed store during the past six to eight months. He attributes the increase to higher prices for grain and diesel fuel. Fewer truckers are willing to come all the way to the Steamboat Springs area, Townsend said.
“Obviously, our prices have had to go up to affect overhead and the cost of goods,” he said. “Our labor requirements have been down some because of not selling so much feed, but we haven’t had to lay anybody off or anything like that.”
Cutting back on grain
in favor of hay doesn’t save ranchers from cost increases, Mucklow said. The price of hay has increased steadily in the Yampa Valley and nationwide.
“It’s a tight supply, a locally tight supply,” he said. “A lot is exported to the Front Range.”
Mucklow said hay production accounts for 15 percent to 20 percent of the agriculture industry in Routt County. The price of cutting, raking, baling and stacking hay – known as “putting it up” – has risen from about $40 a ton five years ago to more than $60 a ton last year, he said.
Hay prices and corn prices are not directly related locally, Mucklow said. In the Yampa Valley, prices are up because demand is up and the valley’s hay is perceived as valuable. Demand for hay for recreational horses also strains the supply, he said.
“There is a correlation between hay prices and corn on a national basis,” Mucklow said. “As the corn price goes up, we try to substitute more with hay, and that supply tightens.”
Trends and some hope
Matthews, who produces and sells all-natural beef locally through his River Ranches, said he paid 40 percent more for hay this year. Record diesel fuel costs also have made him feed more money into hay production on his own land.
“We use a lot of diesel fuel in our tractors to bale the hay,” he said. River Ranches had to increase prices last year to address high overhead.
Matthews uses supplemental grain to finish about 40 percent of his cattle, and the rest feed totally on grass. He said he benefits from raising highland cattle because the animals’ meat marbles well on grass.
“I think we’ll see more of a shift to grass-fed beef,” Matthews said of the industry. “I think we have the particular genetics to finish out our cattle on less grain, so I think our particular breed of cattle has an advantage.”
Mucklow said a bigger international market could stabilize cattle prices. Japan and South Korea are allowing U.S. beef imports after banning them for years because of mad cow disease fears.
Whatever happens, the bigger picture is sure to affect the smaller picture in Routt County, Matthews said.
“Even though we’re a local producer,” he said, “we’re part of the global economy.”
– To reach Blythe Terrell, call 871-4234
or e-mail firstname.lastname@example.org
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