What is in this article?:
- Higher feedlot placements will increase corn consumption
- Startling reduction
• The real surprise was the higher number of placements in September that has resulted in more than one-half million more cattle being fed than a year ago.
• Feed grains used by cattle in feedlots from the 2011 crop will now likely be more than 5 percent higher than was fed from the 2010 crop.
Cattle feeders are going to use more corn than previously expected according to USDA's latest Cattle on Feed report that showed 5 percent more cattle in the nation's feedlots, said Purdue University economist Chris Hurt.
"The real surprise was the higher number of placements in September that has resulted in more than one-half million more cattle being fed than a year ago. Feed grains used by cattle in feedlots from the 2011 crop will now likely be more than 5 percent higher than was fed from the 2010 crop," he said.
Although calves can eat corn, they can also add weight with forages. The surprisingly high rate of placements in September indicates that corn had gotten "cheap" relative to forages.
"December corn futures fell by $1.75 per bushel during September, which was enough to shift the feedlot outlook from bleak to rosy. Managers responded by buying lightweight animals as placements of calves under 700 pounds were up a remarkable 14 percent," he said.
The implication of placing such a large number of young calves is that they will be on feed a long time and eat a lot of feed grains. The broader implication for the corn market is that most end users of corn saw a similar shift in their industry's outlooks as corn prices fell.
Also contributing to the interest in putting young calves in the feedlot has been a bullish finished cattle market. April 2012 live cattle futures moved $2 per hundredweight higher in September, and have since added another $2 in October. On Oct. 21, April 2012 futures approached $130.
"Three factors are driving the bullish cattle market: the anticipation of very limited 2012 domestic beef supplies; foreign buyers of U.S. beef who are willing to pay the high prices; and a more optimistic tone for the world economy," he said.