Iowa cattle producers see potential return to profitability

Combined with softening corn costs, tight supplies have driven up feeder cattle prices

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For the first time in years, the cattle industry is moving toward profitability, according to an Iowa State University cattle market expert.

High corn prices in recent years have driven up the cost of feed for cattle producers, causing the industry to operate at a loss.

With corn prices falling during the second half of 2013, cattle producers are beginning to see light at the end of the tunnel, according to Lee Schulz, ISU Extension and Outreach livestock specialist and assistant professor of economics.

“A lot of things still need to go right in 2014, but at least from the standpoint of market conditions, there’s the potential for profitability,” Schulz said. “In years past, producers were mostly in survival mode, and now producers are talking expansion in the industry.

"There’s interest in building new facilities and growing the herd.”

Combined with softening corn costs, tight supplies have driven up feeder cattle prices, which benefits cow-calf producers but creates headaches for feedlots as they try to outbid one another to fill up bunk space, Schulz said.

The tight supply developed as producers reduced their herds to deal with severe drought and the high cost of feed.

The USDA said cattle and calves on feed for slaughter market for feedlots with a capacity of 1,000 or more head totaled 10.7 million head on Dec. 1,  5 percent below Dec. 1, 2012. It was the second lowest inventory for Dec. 1 since the series began in 1996.

The number of cattle and calves on feed for slaughter market in Iowa totaled 1,335,000 on Dec. 1, up 6 percent from  Nov. 1 and 5 percent higher than Dec. 1, 2012, according to the U.S. Department of Agriculture's National Agricultural Statistics Service.

Feedlots with a capacity greater than 1,000 head had 610,000 head on feed, up 3 percent from last month but unchanged from last year. Feedlots with a capacity of less than 1,000 head had 725,000 head on feed, up 8 percent from last month and up 10 percent from last year.

Schulz said cattle producers are unlikely to ramp up production to take advantage of improving market conditions. It takes more than a year to bring a heifer calf into the breeding herd.

“We’re several years off from building the herd with increased calf crops and increasing cattle supplies,” Schulz said. “A lot of the supplies are pretty certain at this point. It’s the demand that’s uncertain.”

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