When Feed Prices Jump: What a Cow-Calf Man Does About It

Every few years the feed bill jumps and every cow-calf man gets the same sinking feeling. You will see big multi-year percentages quoted in the press about how far feed rose. I could not trace one popular figure to a source I trust, so I will give you numbers I can stand behind and then talk about what to do. Because what to do matters more than the percentage.

What I can verify

The USDA's Economic Research Service reported beef cattle feed prices up 16 percent in May 2022 over May 2021. In that same chart of note, ERS called feed the biggest operating cost for cow-calf producers at about 75 percent of costs in 2021. It said hay prices were estimated 16 percent above the average of the previous nine years and that roughly 46 percent of hay was growing in drought areas as of August 2022. Separately, NDSU Extension reported the USDA livestock and poultry feed price index up 26.6 percent from September 2020 to September 2022. Those are different yardsticks, so do not stack them. The point is the same either way: feed costs move, and fast.

Why your neighbor three states over has a different problem

Hay does not travel well. A load costs real money to haul, so the price follows local rain. A drought in your county can double hay while a county two states away sees little change. Grain moves easier, but freight and local supply still shift what you pay. The things that drive the differences:

• Rainfall, which sets your own forage and hay.
• Distance to grain and byproduct feeds like distillers grains.
• Dairy and other buyers bidding for the same hay.
• Fuel and fertilizer.
• Length of your grazing season, which sets how much you buy at all.

Your hay costs more than the invoice

The Angus Journal gave an example worth remembering: a $90 hay purchase can cost $140 by the time it is eaten once you add hauling, storage, labor and waste. Your numbers will be different, but the idea holds. What you pay at the barn and what it costs at the bunk are not the same. Our piece on hay math shows how to figure what your cows need.

What I would do

1. Know your cost per cow per day. Write it down by category.
2. Price feed by the pound of protein and energy, not by the ton.
3. Stretch your grazing. Every grazing day is a day you are not feeding hay.
4. Buy early if you need to buy. Hay tends to climb through winter in short years.
5. Stop waste. Feeders, covered storage and the right amount per feeding.
6. Look at cow size. A 1,400-pound cow eats about 40 percent more than a 1,000-pound cow, per the Angus Journal. Make sure she weans enough calf to pay for it.
7. Cull hard. An open cow eats like a bred one.
8. Keep a reserve of hay and cash.

Cull and cut, but think first

When feed jumps, the easy move is to cut cows. Sometimes it is right. If cattle prices are strong, selling a marginal cow can pay well. But selling good young cows to save feed can cost you for years when prices turn. Sort first: open, old and poor producers go. Keep the cows that wean a good calf every year. Farm.fm's page on financial planning for Angus producers covers how to think about it.

Look at both sides

Feed is one side of the ledger. The calf is the other. The same stretch that pushed feed up also brought strong cattle markets, so margins were not squeezed everywhere. Do the math on what a cow costs to carry and what her calf brings. If the gap is shrinking, you need to act. If it is fine, do not panic.

Talk to your banker before you need to

A higher feed bill means a bigger operating loan, and bankers like surprises about as much as you do. Sit down before winter and show him your cost per cow, your hay inventory and your plan if prices climb another notch. Walk in with numbers and a plan, and he sees a manager. Walk in late with a short check, and he sees a problem. Show him what you will cull, what you will buy early and what you will do if the rains do not come. The conversation is easier in October than in February.

Write the plan down

Put your triggers on paper while you are calm. If hay passes a certain price, you cull a set number of cows. If the pond drops below a certain level, you sell calves early. Decisions made under stress cost more than decisions made at the kitchen table, and a written plan keeps you honest when the market gets loud.

Bottom line

You cannot control the weather or the market. You can control waste, herd size, grazing days and when you buy. Build a budget that survives a bad year. The University of Nebraska's beef program has tools for comparing feed, and agriculture.directory can help you find your extension office. Check current USDA numbers before you decide anything, because they change.