Cattlemen suffering from rising feed prices

With the rising cost of corn and other grains, local cattle growers are struggling to stay afloat.

U.S. beef producers now spend a whopping 60-70 percent of their production costs on animal feed and are seeing that number rise daily as corn prices hover near an unprecedented $8 a bushel, up from about $4 a year ago.

“This is not sustainable. The cattle industry is going to have to get smaller,” said James Herring, president and CEO of Amarillo, Texas-based Friona Industries, which buys 20 million bushels of corn each year to feed 550,000 cattle.

Corn prices were already rising before the Midwest floods, driven up 80 percent over the past year as developing countries like China and India scramble for grains to feed people and livestock. U.S. production of ethanol, an alternative fuel that can be made with corn, has also pushed prices higher, prompting livestock owners to lobby Washington to roll back ethanol mandates.

Bob Sims, owner of Tri-State Cattle Feeders in Hereford, Texas, said he decided to sell his feedyard last winter when costs started overtaking profit.

Sims said his lot is one of the smaller operations, feeding a maximum of 15,000 cattle to get them up to size before they are sold to the meat packing plants.

“You can’t feed 14 dollars worth of corn to an animal that brings a dollar,” he said. “I did not see it coming. Not to this magnitude.”
Cattle losses can run more than $150 a head, he said, after the costs of feeding.

“Something really outstanding’s got to happen ... there’ve got to be enough people out there to buy beef; to want it worse than they want it now,” he said.

A poor economy has dropped the value of beef while costs of feeding livestock have risen, he said.

 “I’m not trying to be a pessimist but I’ve been doing this long enough that it’s something else to bet $100 something a head ... It’s like playing craps.”

After more than 30 years in the business, Sims said selling is the only thing that makes sense.

“I can’t answer the question for people that keep (feedlots) full. They’ve got a magic wand that I have not had ... The best thing for me to do is quit,” the 70-year-old said.

And it’s not just the feedyards that are suffering, said Gail Morris, general manager of Bovina Feeders.

Livestock owners can’t get rid of their animals fast enough because they don’t want to take the risk associated with feeding them.

“Everybody’s hurting (because of) high feed ... people are trying to get rid of them quicker, trying to stop the losses,” he said.

“The feeding end hasn’t made any money since about six to eight months ago.”

Since the first of the year, Morris said the cost of feed has risen by $30 to $40 a ton, with corn nearly doubling.

“Customers are more interested in selling their feeders than feeding them — normally a producer will run his cattle on pasture and anymore he wants to sell them,” he said. “Consequently we’re losing customers and our numbers are going down (and we’re) also trying to manage all our input costs.”

Tim Foote, owner of Bouziden Cattle Company in Pleasant Hill, said he watches the futures market and hedges his herds, trying to reduce losses.

Just about everybody in the industry is feeling it, he said.

“It’s kind of hurt the farmers too because their input costs have gone up so much — fertilizer, water, diesel — then they’re locked in a process... they’ve been having to put a lot of money into the cattle,” he said.

Foote, who’s been in the business almost 25 years, said he has been grazing his cattle more.

“I don’t try to feed a lot of them. We feed cattle out here but most of the ones we feed (out on pasture). I get them ready, put them together and then sell them to the feedyards,” he said.

Foote said when he does feed, he finds alternate sources of feed for his cattle, using by products and pellet feed.

“Most of the cattle are out in the country on the pastures and then they end up coming into the feedyards. Most of that’s going into bigger, larger entities that feed,” he said.

“Small guys like me are getting to be a thing of the past - (Most people) would normally feed more and take their profit now, then later. (But now) they sell them to somebody else and let them take the risk and feed them.”

But it isn’t all dismal, Morris said. “If you’ve got enough equity you can ride it out — it just tries to make you a better buyer of feeders,” he said. “Cattle always goes in cycles. It’ll be down and hopefully you’re (still) around when it comes back up.”

— The Associated Press contributed to this report