PEORIA, Ill. — Beef and dairy cattle producers, along with pork and poultry farmers, are bracing for higher feed costs this year. It’s a predictable economic consequence of the high futures prices currently enjoyed by growers of soybeans and corn. 

The extent of the rise in feed costs is still under speculation, with soybean futures ranging from $12.03 per bushel for September 2021 to $13. 71 for March (as of 1-29-21) in Illinois, along with rising corn and wheat futures and lowered stocks. Meanwhile, producers are looking into cutting losses via cheaper, alternative feed options.

Cobank’s updated feed costs forecast pegs feed cost increases for US livestock and poultry producers at 27 percent for 2021, the highest year over year increase in more than a decade. 

“The higher feed costs come at a challenging time, as meat and poultry industry margins have been pressured by weak prices in 2020 due to COVID-19,” reported Will Sawyer, lead animal protein economist with Cobank, a part of the US Farm Credit System. “Average producer margins for cattle, hogs and broilers fell into negative territory after the pandemic disrupted foodservice demand and drove widespread meat plant slowdowns and shutdowns.”

Feed cost inflation is starting to impact global prices for cereals and overall feed costs. It will likely require several years for animal protein producers to adjust to the increase, rather than months, according to Sawyer, whose comments were posted on The Poultry Site.

“We’ve all watched as feed costs have been largely a tailwind for meat producers across the species for a number of years now,” he said. “That’s helped keep profit margins in a positive territory. It’s allowed some deflation in the meat case over the last decade and allowed many producers to continue to expand supply and build new facilities.”

Adding to his dire forecast, Sawyer warned that while many economists are projecting corn in the $5 range for 2021, higher prices are possible. “The bad news is that the worst of the feed cost inflation is really still on the horizon. It’s going to be in the summer of 2021 where feed cost inflation for beef, pork and chicken producers climbs...into the 30 percent to 40 percent level,” he stated. 

Great Plains cattle producers seeking feed alternatives to corn often turn to North Dakota State University Extension livestock system specialists Karl Hoppe and Tim Petry. Producers should consider several factors, according to Hoppe, including dry matter, protein and energy content in alternative feeds, as well as freight costs associated with alternative feed options. 

In an extension article, Hoppe noted that pulse crops, such as field peas, chickpeas and lentils are high in protein (22-27 percent) and contain energy content not dissimilar to other feed grains in cattle rations. Field peas are currently competitive as cattle feed due to the dramatic rise in soybean and corn prices, he said.

Other options are limited with high priced feeds, according to Petry, an NDSU Extension livestock economist. “If feed prices remain high and slaughter cattle prices don’t increase, the only other option is for the feeder calf price to decrease,” he said, adding that for every dime increase in a bushel of corn, the price for feeder cattle decreases $1 per hundredweight. 

Freight costs can be a barrier to acquiring alternative feedstuffs. Depending on the distance traveled, feed prices can take on the additional expense of $15 to $30 per ton. In addition, high moisture feeds cannot be hauled very far without freight costs making the feeds financially uncompetitive, the NDSU experts concluded. 

Hoppe advises farmers to grind their feeds finely and avoid purchasing grain screenings, which can contain weed infestations.  He also advises that alternative high fiber feeds such as soy hulls and wheat midds will likely prove too pricey to be considered as a viable alternative feed. 

“We get complacent about purchasing feeds until we need them,” said Petry. “This year’s unanticipated rise in feed prices reminds us that grain prices can change quickly as worldwide supply and demand conditions change.”

Some farm economists believe that prices for both soybeans and corn will level off. The University of Illinois farmdoc team revised their projection for corn and soybean prices, noting: “Based on these price increases and current levels of futures contracts on the Chicago Mercantile Exchange, projected levels of $4.00 per bushel for corn and $10.50 per bushel for soybeans are appropriate for 2021,” the team wrote in their article, Revised 2020 and 2021 Crop Budgets Indicate Higher Returns, published on January 26 on the farmocDAILY website. 

“Lower prices likely would be associated with large crops in Brazil and the United States. Conversely, short crops could lead to higher prices. Demand factors will obviously have an impact on prices as well.”