Will low cattle numbers diminish feed demand?

By Jon Scheve, Superior Feed Ingredients, LLC 

Since Christmas, March corn has traded between $6.75 and $6.80 on 22 out of 27 days. March beans have also traded sideways with values between $15.00 and $15.40 for 25 out of 27 days. The market continues to search for direction.

The USDA released their cattle on feed estimates, which produced alarming headlines stating: “U.S. Beef Cow Herds in January Fall to Lowest Level Since 1962.” However, U.S. beef cows only represent 30% of total cattle on feed numbers, which is only down about 3% from last year. This number is only about 100,000 head or .3% below the 2014 beef cow numbers when cattle numbers were last this tight. 

Putting this into perspective, the USDA decreased current feed usage estimates over 7% from last year. Beef, hogs, and poultry each account for 25% of total feed demand, while milk, eggs, and turkey production make up the final 25% of corn feed usage. If cattle on feed is only down about 3%, and hog and poultry numbers are down only 2% from last year, there may be an opportunity for a feed usage increase later during the marketing year. This could potentially offset any corn export or corn for ethanol usage decrease that some market participants are suggesting could happen in future reports, which could help keep carry out tight the rest of the marketing year.

Moving forward the market will focus on how fast Brazil plants their second corn crop and if U.S. export pace changes.

Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

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