Drought conditions throughout much of the western Corn Belt are pushing corn prices higher, likely resulting in higher feed costs.
Matthew Diersen, an economist with South Dakota State University, says the markets are also indicating volatility in the new-crop corn market.
“As a result, the prospects for higher meat prices have waned,” he says in this week’s In the Cattle Market analysis from the Livestock Marketing Information Center. “Feeder cattle futures have been under downward pressure in recent weeks. Regionally, corn acres have areas that look quite stressed from heat and limited precipitation. There is also wide variability in conditions. Live cattle prices have been at record high levels, so the effect on feeders has been clouded or offset.”
In addition to corn prices, dry conditions are negatively impacting hay yields.
“The hay stocks situation in South Dakota was close to expectations, as winter use was in line with typical disappearance levels,” Diersen says. “With the expected 2023 hay acres, supplies would be good for the year.
“However, producers and Extension colleagues have already called attention to lower yields. The national picture would mirror the local situation and winter use was in line with expectations.”
Diersen says even with good yields, “there would not be a sizable enough increase to warrant widespread cattle herd expansion. Now, with dryer conditions, the prospect for alfalfa yields would be limited.”
Soybean prices have also increased, which impacts hog production.
“Pork prices have been under pressure as larger supplies have weighed on the market,” Diersen says. “Tighter pork supplies moving forward would be supportive or stabilizing of beef prices.
“Higher corn, soybean meal and hay prices would also be negative for dairy margins. Any downturn in milk prices could lead to a contraction in cow numbers and be a short-run source of additional beef supplies. The dairy sector has been the driver behind high alfalfa prices, and that pressure is likely to continue.”
He says beef demand has helped keep live cattle futures prices at record levels, and while feeder cattle prices have drop recently, they still look very favorable.