Break in Feed Costs this Spring?

[errolanderson]

Know you guys have gone to hell 'n back paying big money for feed. And it's no doubt cost you dearly in margins.

Personally believe there is a fairly significant break in feed values within the next 3 months. Famous last words . . . providing Alberta doesn't have a drought this summer.

Corn prices are in a tailspin (IMO). If the U.S. weather can be somewhat normal, U.S. cash corn prices may break toward $4.50/bu (again an opinion). That's a far cry from the $8/bu seen this past summer.

Realize there is little barley left in the bin. But once feedlot inventories start to decline (late April?) and demand eases, barley bids should begin to slide.

Believe a number of feeders are trying to buy barley around $220 to $225/MT for fall delivery in central/southern Alberta about $1/bu lower than current bids.

What comes around, goes around . . . the economics of cattle feeding will start to repair itself as the over-exuberant grain industry starts to take a price beating (which is just starting IMO).

Just want to wish the best for feeders in the difficult economic time and please realize this current mess in cattle feeding economics will gradually straighten itself . . .

p.s. . . . expect the fat market to pick up hopefully by late March, early April. Select beef did test record highs this week in the U.S.

all the best . . . .

[ASRG]

errol: Just wondering what you think barley will be in Lethbridge this fall if we get an average crop (and the US gets an average corn crop)?
The old ball park figure for barley was 3/4 of the corn price.....eg. Corn was $4.50....barley should be about $3.38?
Do you see barley that cheap?

[errolanderson]

ASRG . . . everything depends on the weather for the fall feed market. But don't expect barley prices to get that low even if U.S. cash corn hits $4.50/bu.

Frankly, it's because the board is now out-of-the-picture and Canada's grain trade offers a lot more export firepower. There will be more export competition as a result of the open market.

But feedlot delivered barley could slide toward $200/MT if weather is OK in Alberta and the U.S.

In the broad-picture, I'm a believer that commodity markets as a whole have now entered a period of deflation. Don't have a clue how long this might last. Interest rates will be this low or lower for a very long time despite what the Bank of Canada may suggest.

ps . . . Friday's cattle board drop really have the technicals screaming oversold. An idea . . . if you are marketing cattle now, possibly consider replacing with call options to re-open your price ceiling. A rebound nears (IMO).

all the best in your marketing . . . .