Effect of Corn Prices on Feeder Cattle and Calf Prices

Effect of Corn Prices on Feeder Cattle and Calf Prices

August 2007

Cattle-Fax® analysts noted that sharply higher corn prices have created turmoil in the cattle market. Calf and feeder prices have declined significantly as feedyard costs of gain have increased. They projected that corn prices will likely move higher than the underlying fundamentals would suggest. Following is a table showing the effects of corn price and fed cattle price on the necessary breakeven purchase price for a 750-lb steer.

Necessary breakeven purchase price
Corn Price ($/bushel) | Feeder Cattle price
Fed Cattle price: 80.00 2.50 | 98.28 3.00 | 91.70 3.50 | 85.12 4.00 | 78.54 4.50 | 71.96
Fed Cattle price: 82.00 2.50 | 101.74 3.00 | 95.16 3.50 | 88.58 4.00 | 82.00 4.50 | 75.42
Fed Cattle price: 84.00 2.50 | 105.20 3.00 | 98.62 3.50 | 92.04 4.00 | 85.46 4.50 | 78.88
Fed Cattle price: 86.00 2.50 | 108.66 3.00 | 102.08 3.50 | 95.50 4.00 | 88.92 4.50 | 82.34
Fed Cattle price: 88.00 2.50 | 112.12 3.00 | 105.54 3.50 | 98.96 4.00 | 92.38 4.50 | 85.80
Fed Cattle price: 90.00 2.50 | 115.58 3.00 | 109.00 3.50 | 102.42 4.00 | 95.84 4.50 | 89.26
Fed Cattle price: 92.00 2.50 | 119.04 3.00 | 112.46 3.50 | 105.88 4.00 | 99.30 4.50 | 92.72

 

As shown above, a $0.50/bushel increase in corn price lowers feeder cattle prices by nearly $7/cwt (about $52/head), assuming a steady fed cattle market. Although not shown here, for every $0.50/bu increase in the price of corn, the price of a 550-lb calf decreases by about $12.50/cwt ($65 to $70/head).

Rick Rasby Dr. Rick Rasby
Professor of Animal Science
University of Nebraska–Lincoln