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There's Only One Cure To Excess Feeding Capacity

Article-There's Only One Cure To Excess Feeding Capacity

Talk to almost any cattle feeder for very long and he'll express dismay at the cost of feeder cattle and calves. Despite a fed market averaging the low $90s for the year, feeding profitability has been tough to come by.

Typically, as losses mount, the feeding industry will buy some profitability by purchasing cattle cheaper. However, with great prospects for wheat pasture on lighter-weight cattle, and deferred futures on fed cattle at near-record levels, demand has been shocking to those feeders who continue to have losses mount. They almost quizzically ask: "Who is buying these feeders with a first cost approaching $1,000?"

The answer, of course, is "they are." The real question is why?

The answer here is a little more difficult to quantify, but I believe it can largely be explained by looking at the excess capacity in the feeding industry.

Sure, it's true that an overabundance of bunk space has been the case for quite some time, and we haven't seen any quantum shift in capacity numbers. So the question becomes: "What has changed?"

It's simply another ripple effect of higher corn prices. Cattle are being kept on grass longer, placed at higher weights and are on feed for fewer days. As a result, while numbers from a supply side (and capacity from the feeder side) hasn't changed, the number of days on feed has dropped dramatically. Essentially that means there's more capacity chasing fewer numbers.

-- Troy Marshall