Higher commodity prices are the result of very tight grain supplies with prices showing volatility seldom seen in our domestic grain business. Livestock farms rely on growing all or part of their feed and forage needs each season. The remaining balance of the feed and forage needs are then purchased for their beef and dairy cattle. These purchased feeds are becoming more of a challenge with tightening feed supplies. Most cattle and livestock farms have been making adjustments to their feed rations over the past several months to take advantage of any and all feed sources that allow them to maintain production while lowering the cost of the feeds being fed. One example, for many farms, is shifting some of the corn grain out of the ration and replacing it with less expensive wheat. As harvest wraps up, we are currently seeing a major difference between the price of corn and wheat, of which either can be used as a protein and energy sources within nutritional limits. Any farm shifting from one feed source to another should consult with a nutritional expert to stay within acceptable nutritional guidelines. But any savings in overall feed costs can help a farm to stretch current feed supplies or help them budget future feed needs as we look at some concerns as to the quality, quantity and price of the 2011 feed and forages being grown at this time.
A key issue in a farm’s profitability for 2011 will be to avoid running out of feed before this year’s new crop is available. The second part of this process is to consider how farms can take advantage of lower priced feed input options to meet the long term feed needs of the farm. This longer term outlook may be to purchase lower cost feed sources as they become available to buffer a smaller corn crop this fall, as we do not know the outcome of how this year’s late planted corn or the extended hot, dry periods during this summer will impact crop yields this fall. Any and all reductions in feed or forage production will need to be covered by other adjustments to manage the feed needs of your livestock herd. It is recommended that you consider starting the planning process for your feed and forage needs budget as early as possible to avoid being left short of the required feed needs for your livestock herd over the next 18 months. Shorter overall supplies and high demands on a domestic and international basis may support higher highs in commodity prices with more overall volatility in prices and supplies. Price risk management is a vital part of your farm’s overall management strategies. You may want to engage your farm’s feed and management team to build a plan of action to carry your farm through these fast moving and changing times.