It is likely that corn prices in the future will average at least twice the level under which the feedlot industry we know today evolved. The point is that even without the drought, feedlots face a significantly different business environment. Forty years of cheap corn had many structural implications on the beef industry, most of which were manifest through the feedlot sector. Much of the changes in cattle genetics and preferences for animal size and type were largely a function of feedlot-driven demand, which was in turn based on inexpensive corn.
More than anything else, feedlots have become a calf-feeding industry where an ever-higher percentage of the total cattle weight, and thus beef production, has been based on grains.
As cattle numbers peaked in the 1970s and then began to fall, feedlots maintained inventories by feeding lighter and younger animals for longer periods of time. In the 1970s, the average Jan. 1 feedlot inventory was 13 million head, with an average all-cattle inventory of 120.4 million head and an average estimated feeder supply of 42.1 million head.
“Feedlot inventories represented slightly less than 11 percent of total cattle numbers and 31 percent of feeder supply,” Peel said. “This last figure means that there were approximately three feeder cattle available to replace every animal already on feed at the beginning of the year.”
These proportions persisted into the 1980s but began to change late in the decade. The changes became more dramatic in the 1990s with feedlot inventory representing nearly 13 percent of total inventory and more than 40 percent of feeder supply. Thus, there were typically fewer than 2.5 replacement cattle available for every animal in the feedlot during the 1990s.
In the last 10 years, the situation has reached an extreme level. While total cattle inventories have fallen to an average of 94.6 million head for the 2003-2012 time period and feeder supplies have fallen to an average of 27.4 million head, average feedlot inventories increased to 14 million head.