Cattle Feeding Growth in the Corn Belt

June 3, 2010 07:00 PM
 

Beef Today Editors

Two analysts take a closer look at data that shows growth in cattle feeding in the Corn Belt. While the numbers indicate increases in cattle on feed in this region, it does not necessarily indicate that there will be a major shift in cattle feeding strongholds any time soon. But the growth could impact seasonal production and prices.

In today's edition of the CME Daily Livestock Report, Steve Meyer and Len Steiner with Paragon Economics, Inc., take a closer look at the growth of cattle feeding in the Corn Belt, especially when looking at availability of DDGs as an inexpensive feed source:

"In case you missed it — or just want to see it again, CME Group's education webinar "Distillers' Dried Grains Impact on Livestock Markets” is now archived on the CME Group Website. The hour-long webinar, features Dr. Darrell Mark of the University of Nebraska and DLR lead author, Dr. Steve Meyer, and presents a wide array of information about DDGs production, their usage in livestock diets, and animal performance on diets utilizing DDGs.

"One topic that was discussed only briefly during the webinar was the geographic impact that DDGs production is having on cattle feeding and the implications that might have for production and cattle pricing in the future,. Ethanol, and thus DDGs, production is quite logically centered in Iowa and Minnesota, areas generally the farthest from water transport routes to the Gulf where corn basis has always been the weakest and corn prices have always been the lowest. DDGs (ie. DRIED distillers grains) are quite transportable but wet and modified wet distillers grains are not. And, as was discussed in the webinar, WDGs/MWDGs are actually superior in many feedlot applications and far less expensive due to no drying costs, giving cattle feeders near the ethanol plants an advantage. And the data say that cattle feeders in those areas are indeed taking advantage of this low-cost, nutritious feed source.

"The chart (above) shows monthly numbers of cattle on feed in major Midwestern feeding states. Texas, Kansas and Nebraska are clearly the leading states but direct your attention to the lower set of lines. Iowa's cattle-on-feed numbers are growing steadily, from roughly 300,000 in the mid-'90s to 610,000 in March of this year. While not as apparent due to the scale of this chart, South Dakota's fed cattle numbers have roughly doubled since the mid-'90s. USDA has not published state-level data for Minnesota or Illinois since 1993 but the resurgence of cattle feeding in Iowa and South Dakota suggests that they perhaps should consider doing so once again, especially for Minnesota.

"The growth of Cornbelt feeding is even more obvious when one considers the shares (chart above) of total cattle on feed represented by the Southern Plains (Kansas, Texas, Oklahoma) and Cornbelt (Iowa, Nebraska and South Dakota). Though quite seasonal, these shares were relatively stable from 1996 through 2005 but began to change in 2006 — the year that ethanol output began to increase rapidly.

"So does this mean that cattle feeding is merely growing in the Cornbelt or is moving back to the Cornbelt? We are firmly in the "growing” camp for two main reasons. First, higher Cornbelt cattle numbers will eventually run into slaughter capacity issues. Iowa has only two cattle slaughter plants and one is very small. South Dakota has none of any size and there is not likely a lot of slack capacity in Nebraska's seven big plants. There is still slack capacity in the national beef slaughter sector so it is very unlikely that a new plant will be added until that slack is rationalized. Second, it was not feed costs that drove cattle feeding to the Southern Plains in the first place. It was weather and that advantage still exists. Cheaper feed will no doubt lessen the advantage but will not offset it entirely. We look for Cornbelt feeding to continue to grow in both numbers and share. That shift may impact the seasonal patterns of production and prices but appears to be having little impact so far."


Follow this link for more information on the CME's Daily Livestock Report, provided free of charge by the CME group: .

 

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