If there’s a seasonality to replacing some of the corn in feedlot cattle diets with wheat, it’ll happen in the summer. And this is what is happening this year.
Summer is when the winter wheat harvest is done, and the corn harvest is a couple of months away. Supplies of the two are out of position, and local prices of wheat can drop below prices for corn. Often, price spreads correct themselves by fall when new crop corn comes rolling in out of the fields.
PRICE SPREADS WORK FOR FEEDING WHEAT
Currently, the math says it’s cheaper to feed wheat than to feed corn. And trade sources said some feedlots are substituting wheat for some of the corn in their cattle rations.
Tuesday’s Kansas City truck grains bids report shows a range in the basis for spot-delivered No. 1 hard red winter wheat of 10 cents a bushel under the Sep futures close of $4.31 ½ a bushel to 20 cents over the Sep close. This puts the range of cash prices paid to producers at $4.21 ½ a bushel to $4.51 ½.
Alternatively, the basis for spot-delivered No. 2 yellow corn, at five cents over the Sep futures close of $4.25 ½ a bushel to 20 cents over yields a delivered price range of $4.30 ½ to $4.45 ½.
Comparing the averages of the price ranges for truck delivered corn and wheat to Kansas City, the difference is only 1 ½ cents a bushel in favor of wheat as a feed grain.
But that doesn’t tell the whole story. One market analyst said that as a rule-of-thumb, the crossover point for feeding wheat versus corn is when the local price of wheat is $1.35 a bushel more than the local cost of corn. This changes from year to year depending on the rising costs of the grains, but it’s an easy reference point, he said.
However, using that rule-of-thumb, it would be price-advantageous to feed wheat over corn if truck-delivered wheat to Kansas City Tuesday were $5.73 a bushel.
SOME AVOIDING WHEAT
Yet some feedlot managers are not feeding wheat. Some won’t even consider feeding wheat, and some try very hard not to use wheat as a substitute for some of their corn.
Feedlot managers and university nutrition specialists agree that once feeder cattle are started on a feed ration, it is difficult to change them to another ration because it upsets the bacterial balance in their digestive systems. If not done carefully, it can be lethal.
And feeding wheat brings on an extra set of feed bunk management issues to avoid bloating, a buildup of gas in the stomach that can kill the animal.
One western Kansas feedlot owner said he doesn’t feed wheat because after starting a set of calves on wheat, it never seems to fail that price relationships have changed after two months that would make it better to feed corn. Harvest, maybe?
CATTLE, BEEF RECAP
Cash cattle traded in the Plains last week at $111 to $114.50 per cwt on a live basis, steady to down $0.50 from the previous week. Dressed-basis trading was reported at a steady $182 to $185.
The USDA choice cutout Tuesday was up $0.46 per cwt at $213.78, while select was up $0.12 at $189.71. The choice/select spread widened to $24.07 from $23.73 with 98 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $136.94 per cwt, down $1.22 from the previous day. This compares with Tuesday’s Aug contract settlement of $142.20, up $0.02.