With the rising cost of corn and other grains, local cattle growers are struggling to stay afloat.
U.S. beef producers now spend 60-70 percent of their production costs on animal feed as corn prices hover near $8 a bushel, up from about $4 a year ago.
“This is not sustainable. The cattle industry is going to have to get smaller,” said James Herring, president and CEO of Amarillo, Texas-based Friona Industries, which buys 20 million bushels of corn each year to feed 550,000 cattle.
Corn prices were rising before the Midwest floods, driven up 80 percent over the past year as developing countries like China and India scramble for grains to feed people and livestock. U.S. production of ethanol, an alternative fuel that can be made with corn, has also pushed prices higher, prompting livestock owners to lobby Washington to roll back ethanol mandates.
Bob Sims, owner of Tri-State Cattle Feeders in Hereford, Texas, decided to sell his feedyard last winter he couldn’t make a profit.
Sims said his is lot a smaller operation, feeding a maximum of 15,000 cattle to get them up to size before they are sold to the meat packing plants.
“You can’t feed 14 dollars worth of corn to an animal that brings a dollar,” he said. “I did not see it coming. Not to this magnitude.”
Cattle losses can run more than $150 a head, he said, after the costs of feeding.
“Something really outstanding’s got to happen... there’ve got to be enough people out there to buy beef; to want it worse than they want it now,” he said.
A poor economy has dropped the value of beef while costs of feeding livestock have risen, he said.
“I’m not trying to be a pessimist but I’ve been doing this long enough that it’s something else to bet $100 something a head ... It’s like playing craps.”
And livestock owners are suffering too, said Gail Morris, general manager of Bovina Feeders.
“Everybody’s hurting (because of) high feed ... people are trying to get rid of them quicker, trying to stop the losses,” he said.
“The feeding end hasn’t made any money since about six to eight months ago.”
Since the first of the year, Morris said the cost of feed has risen by $30 to $40 a ton, with corn nearly doubling.
Tim Foote, owner of Bouziden Cattle Company in Pleasant Hill, said he watches the futures market and hedges his herds. Just about everybody in the industry is feeling it, he said.
“It’s kind of hurt the farmers too because their input costs have gone up so much — fertilizer, water, diesel — then they’re locked in a process... they’ve been having to put a lot of money into the cattle,” he said.
Foote, who’s been in the business almost 25 years, said he has been grazing his cattle more. When he does feed, he finds alternate sources of feed for his cattle, using byproducts and pellet feed.
“Small guys like me are getting to be a thing of the past,” Foot said. “(Most people) would normally feed more and take their profit now, than later. (But now) they sell them to somebody else and let them take the risk and feed them.”
But it isn’t all dismal, Morris said.
“If you’ve got enough equity you can ride it out — it just tries to make you a better buyer of feeders,” he said. “Cattle always goes in cycles. It’ll be down and hopefully you’re (still) around when it comes back up.”
— The Associated Press contributed to this report