Feed costs look to be contained for cattle feeders heading in to 2020

Feed costs are one of the variables that cattle feeders have to keep a close eye on, no matter the year. Early indications for this year, at least, look to be feeder-friendly.

The 2019 corn crop faced very adverse conditions and still came out with a respectable yield. United States Department of Agriculture and many other analysts are forecasting an increase in corn acres in 2020 based on prevent plant acres returning to productivity. This week at the Cattle Industry Convention at San Antonio, Texas, CattleFax forecasted corn acres to increase by four million acres to 94 million acres, which would produce a record corn crop in 2020.

Slide courtesy of Cattlefax

CattleFax’s Mike Murphy emphasized that if the stock-to-use ratio stays between 12 per cent and 16 per cent, there is little opportunity for upside above $4/bu unless weather becomes a concern. USDA is estimating a corn stocks-to-use ratio of 13.4% for the 2020 calendar year.  Cattlefax presented an expected corn trading range of $3.50 to $4.00 for 2020.

On Friday’s RealAg Radio Show, Don Close of Rabobank said “cattle feeders have many concerns but feed costs are not one of them.”

It is expected in Canada, that barley acres will be higher in 2020 on top of Statistics Canada’s recent stock report that was bearish barley. Barley stocks rose 20.6% year over year to 6.0 million tonnes as of December 31, 2019. On-farm stocks were largely responsible for the increase, rising 19.5% to 5.6 million tonnes. Commercial stocks increased 36.5% to 403 900 tonnes.

There is additional increase in seeding barley in 2020 based on the decent returns barley has provided the past couple years and also direct insulation from trade wars by delivering domestically to a feedyard.

One of the wildcards in the U.S./China Phase One trade deal is the amount of corn-based ethanol that China will purchase as a part of the $40 billion in agricultural product purchases. Strong ethanol export demand would be positive for corn prices.

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