– James Mitchell, Livestock Marketing Specialist, University of Arkansas
Feed costs are higher this year, and we expect them to remain high through the winter. As an example, I have included a table below that summarizes prices for various livestock feeds. This year, prices range from 16% higher for whole cottonseed to 57% higher for grain sorghum. Hay prices are also higher this year, averaging $144/ton or 9% higher year-over-year. Alfalfa hay is averaging $194/ton or 12% higher year-over-year. The point is that prices are noticeably higher for all feedstuffs.
For feedlots, higher feed costs will impact feedlot cost of gain (COG). The first graph below is from K-State’s Focus on Feedlots monthly report. The data are COG estimates for steers in Kansas feedlots. The COG averaged $110/cwt in October, a 45% increase year-over-year. Feedlot COG has trended higher each month this year and is counter to typical seasonal patterns. The regular seasonal pattern is for feedlot cost of gain to peak in the winter before declining through the summer and fall. A higher COG means that feedlots will want to place heavier feeder cattle, which translates to a decline in the feeder cattle price-weight slide. This also creates opportunities for stocker and backgrounding operations to add those pounds outside of feedlots this winter.
For cow-calf operations, higher feed costs will increase cow costs. The second graph (below) shows what it costs to run a cow each year. The data are LMIC estimates for cow cash costs which do not include things like depreciation on buildings and equipment. Importantly, costs estimates are for the average operation. Average cow-calf costs in 2021 are $853/cow. LMIC estimates a 6% increase in average cow-calf costs in 2022, totaling $902/cow.
Higher cow costs mean we have a higher breakeven price. Assuming no non-cash costs and cull cow revenue, this year’s projected breakeven price for a 600-pound steer is $142/cwt ($853/6). Under the same assumptions, the breakeven price for a 600-pound steer in 2022 is $150/cwt ($902/6). Assuming $300/cow for non-cash costs and 20% cull cow revenue, the projected breakeven price for a 600-pound steer in 2021 increases to $154/cwt. Under the same assumptions, the projected breakeven price for a 600-pound steer in 2022 increases to $160/cwt. We could go through other scenarios to see how breakeven prices change with costs. One of the biggest factors impacting costs will be feed.
Feed costs will be higher this winter, and we need to plan accordingly. These higher prices provide the proper incentives to refine our winter supplemental feeding programs. Submitting hay samples for testing would be a good start to help us determine where we are deficient. This winter, we will need to be more precise with what and how we feed.