Fill Beef Feedlot or Sell Crop

Roy Black and Jim HilkerAg, Food, and Resource Economics, Michigan State University

andDennis Stein

Farm Management Educator, MSUE

Frame the Question

• Givens– Have:

• Corn ready to harvest as silage or later as grain• Corn crop may have both reduced yield and grain content

if farm is in droughty area.• Have feedlot and silage story capacity

– Opportunities:• Sell corn as dry grain or perhaps as silage or high

moisture corn to a dairy farm neighbor• Feed corn to beef feeders• Or, some combination

Challenges• Returns from feeding cattle have been negative in

recent weeks when corn has been priced on a current basis

• The decision for most farms is corn will be harvested for silage before the next round of feeders are purchased.

• Current gross margins for cattle placed in October and sold in April, based upon futures, and don’t cover current feed costs for High Plains feedlots.

• Do I make silage and place cattle in my lot?

Approaches

• Standard break-even analysis: What price for feeders with generated a competitive net return to the corn I have standing in the field and feedlot capacity.

• Budgeting process that looks in more detail at crop yields, cattle budgets, ration choices, and pricing alternatives given corn plant in field and feedlot.

Let’s start with Break-Even Analysis

• Base case– Native yearling steer– Purchased @ 800 lb and sold @ 1300 lbs– Corn, Corn silage, and disiller’s grains ration– ADG @ 3.5 lb and feed/gain @ 7.25 (pay to pay)– Death loss at 0.6% of feeders purchased– Yardage @ $0.40/hd/day

• Let’s turn the standard break-even on its head• What is the value of corn on a corn grain

equivalent basis at different combinations of fed price prospects and anticipated feeder prices.

• What are price prospects

Farm Budget• Choices:– Fed cattle budgets• Type and purchase weights of feeders• Ration

– Corn plant in field• What form to harvest?• Grain drying capacity• Sell or feed or some combination

• What are the relevant costs to consider?