In the fall of 2006, increases in the price of corn have pressured the entire feed complex, resulting in higher prices for nearly all feed commodities and byproducts. While the increase in corn prices has been driven, in large part, by increased ethanol production capacity, other byproduct prices have gone up along with corn as livestock producers search for replacements and alternatives to corn. Supplies of once abundant byproducts have tightened, making it difficult, in some cases impossible, to purchase spot loads of many different commodities. It seems everyone is interested in contracting for long-term supplies.

So what’s the best strategy for dealing with the run-up in commodity prices? The answer in the short term is, “probably not a lot.” Strategies such as more aggressive culling or utilization of a locally produced byproduct not yet affected by the price increases may be workable for some producers, but not for many others.

In the long term, you will likely need to make a combination of changes to your operation. These may include increased attention to managing price risk on the feed side through the use of contracts, futures markets, etc. It may also mean paying closer attention to the long-term core mission and values of your beef cattle operation. Thought should be given to the suitability of the cow herd to your particular resource base. Have your purchases for feed inputs increased over the last 10 years? Is this in response to drought or a symptom that your cow herd is not well matched to the resource base in which you operate? Increasing reliance on purchased feed inputs may mean your herd’s nutrient requirements have exceeded the productive capacity of your ranch. Your genetic selection in the future may need to be directed toward purchasing/raising animals with lower nutrient requirements as a means to reduce purchased inputs. As one producer stated to me, “I prefer that my cows work for me, rather than me working for the cows.”

One of the long-term impacts of higher corn prices may be a return to production systems that have more focus on utilization of forages and use of cow-calf/yearling systems as opposed to selling calves directly off the cow.

These changes will be slow to develop, but several continued years of higher corn prices may initiate these types of fundamental changes.