Corn value futures for the July 2021 contract (December 2021 contract) elevated from $4.68 per bushel ($4.31 per bushel) in early January to $6.56 ($5.57) for the week ending April 30. Furthermore, utilizing the iFarm Price Distribution Tool there was a 25 % probability on Could 4 that the expiration value for the December corn futures contract can be beneath $4.50 per bushel and a 25 % probability that value can be above $6.50. Provided that the U.S. shares to make use of ratio is presently solely 9.2 % and continued questions associated to U.S. corn acreage in 2021, there’s great uncertainty concerning corn prices for the remainder of this yr. To deal with this uncertainty, this text examines the influence of comparatively excessive corn prices on feeding price of acquire for cattle ending.
Feeding Price of Achieve
Feeding price of acquire is delicate to modifications in feed conversions, corn prices, and alfalfa prices. Info on these things can be found from month-to-month problems with the Focus on Feedlots e-newsletter. Determine 1 illustrates feeding price of acquire from January 2011 to February 2021. In February 2021, corn and alfalfa stock prices had been $5.69 per bushel and $167 per ton, respectively. After averaging $80.50 per cwt. in 2020, feeding price of acquire for January and February was $82.30 and $88.60, respectively. The estimated feeding price of acquire within the February challenge of Deal with Feedlots for placements in February was $103 per cwt. It is very important be aware that since this estimate was made corn prices have continued to extend.
Feeding of acquire for the remainder of 2021 was estimated utilizing early Could projections of corn and alfalfa prices, and seasonal common feed conversions. As a result of feeding price of acquire is computed utilizing corn prices from the time cattle are positioned to the time they’re offered, the comparatively excessive corn prices we’re presently experiencing will influence feeding price of acquire for the subsequent a number of months. In different phrases, despite the fact that corn prices are anticipated to say no this fall, feeding price of acquire will stay comparatively excessive by means of at the least the third quarter of 2021. With this in thoughts, feeding price of acquire for the second quarter of 2021 is anticipated to vary from $93 to $98 per cwt., with the higher price occurring in June. For the third quarter, feeding price of acquire is anticipated to vary from $102 to $105 per cwt. Feeding price of acquire for the fourth quarter is anticipated to vary from $101 to $104 per cwt., with the very best price occurring in July. If these feeding prices are realized, they may symbolize the very best feeding price of acquire because the fourth quarter of 2013.
Sensitivity of Feeding Price of Achieve to Adjustments in Corn Prices
To find out the sensitivity of feeding price of acquire to modifications in corn prices, alfalfa prices, and feed conversion, a regression utilizing knowledge for the final ten years was estimated. Outcomes are as follows: every 0.10 improve in feed conversion will increase feeding price of acquire by $1.20 per cwt., every $0.10 per bushel improve in corn prices will increase feeding price of acquire by $0.88 per cwt., and every $5 per ton improve in alfalfa prices will increase feeding price of acquire by $0.45 per cwt. To extra totally perceive the influence of feed conversion, corn value, and alfalfa value on feeding price of acquire, we computed coefficients of separate dedication (Langemeier et al., 1992). These coefficients can be utilized to measure the affect of every unbiased variable upon the dependent variable. The sum of the coefficients of separate dedication for every variable equals the R-square goodness of match measure, which was 0.976 for the feeding price of acquire regression. This goodness of match statistic signifies that 97.6 % of the variation in feeding price of acquire was defined by fluctuations in feed conversions, corn prices, and alfalfa prices. Computed coefficients of separate dedication indicated that corn value defined roughly 79 % of the variation in feeding price of acquire.
As famous above, there’s presently a $2 per bushel distinction between the December corn futures value at expiration on the decrease and higher 25 percentiles. The projections above used the center vary of corn prices. For instance, the common corn value for July closeouts was projected to be $6.45. If corn value was $1 decrease, feeding price of acquire could be $93.10 fairly than $101.90. In distinction, if corn was $1 higher, feeding price of acquire could be $110.70 fairly than $101.90.
Abstract and Conclusions
Corn prices have elevated steadily to date this yr and are anticipated to be fairly unstable for the remainder of the yr. This text examined the influence of higher corn prices on feeding price of acquire for cattle ending. Utilizing projected corn prices, feeding price of acquire is anticipated to peak within the third quarter at roughly $103.50. Nevertheless, every $0.10 improve in corn value leads to a rise in feeding price of acquire of $0.88 per cwt. If corn prices are $1 higher than projected prices, which is actually doable in at the moment’s surroundings, feeding price of acquire could be roughly $111 within the third quarter of 2021.
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