Rising corn prices have driven up the cost of feeding cattle, wiping out profits for feedlot operators and adding another element of uncertainty for West River ranchers looking to sell this spring's calves next fall.

Prices for heavy calves headed to feedlots have held up pretty well, according to Myron Williams of Wall, who, with his sons, Monty and Marty, raise calves and feed cattle in a feedlot.

"Last year, we sold 800-pound heifers for 93 cents a pound. That same price is there this year," Williams said. "But corn last year was at $3 a bushel. Now, it's $4.50 to $5."

He said it takes 60 to 70 bushels of corn to finish a calf in the feedlot.

"We're not getting paid for our feed like we should. That's a challenge," Williams said.

He said he and other feeders didn't make any profit last year. "We're selling the product for the same price as a year ago, but our input costs have gone up 25 percent."

Marty Beutler, economist with South Dakota State University's West River Agricultural Center, agreed that higher feed costs have squeezed feedlot operators who own the cattle they feed. "They're not making a whole lot of money."

And Beutler said overall cattle prices have dropped a bit from last year.

But because of the high feed costs, feedlots are now paying a little more than they were last year for the heavier feeder calves, those weighing about 800 pounds. "With the high cost of feed and energy, they don't really want to feed cattle as long as they have in the past," he said.

So heavier calves are bringing better relative prices than lighter, 500- to 600-pound calves, Beutler said.

That could provide an opportunity for West River ranchers whose cows are just starting to calve, he said.

Instead of selling those calves in the fall, when they're light, ranchers might want to consider "background" feeding the calves until next spring.

The key is putting more weight on with minimal cost, he said. Backgrounding can be done with grass (if there is grass), hay and lesser amounts of corn - or a variety of combinations of grass, hay and corn.

The feed-cost crunch didn't hit ranchers who sold their calves last fall, Beutler said. It could hit them this fall, though.

Williams attended a meeting for livestock dealers during the Black Hills Stock Show last week. A hot topic was the outlook for fall calf prices, he said.

"Half the guys are saying it's going to be lower; some folks think they'll be higher. But it's anybody's guess what fat cattle will bring and what calves will bring," Williams said.

Brad Brunner feeds about 3,500 cattle at his ranch near Vale over the winter. However, because he owns only about 15 percent of those, he has been insulated somewhat from the high feed costs.

Corn makes up two-thirds of his feed, and the remainder is dried distillers grain, a byproduct of ethanol production. Ethanol production has pushed up the price of corn.

"The fact of high feed costs is not going away," Brunner said. He said feedlot operators like him are either going to have to buy calves cheaper from ranchers or get more money for the finished cattle.

He said cow-calf producers have been somewhat protected from the crunch so far because the overall cattle herd is smaller and the feed industry has more capacity than they can supply.

The U.S. has had a cheap food policy since the 1940s, Brunner said. "But now, as we try to lessen the energy costs by relying on ag products for energy, we can't have both cheap food and cheap energy."

Beutler said the overall national economy also could start affecting retail beef prices, too. "With the general perception that the economy is slowing, with talks of layoffs, that makes people retract their spending," he said.

With higher fuel prices, people may start buying more hamburger instead of steak, he said.

Still, retail prices for beef, especially steaks, are running as high as $9 a pound and more.

But Beutler cautions: "There's a lot underneath that price. It's not necessarily a profit."

The high feed prices are hitting other livestock producers, too.

Charles Maude of Hermosa said he has felt the pressure of higher feed costs on his pig operation. He has 40 sows and 200 pigs on feed. The cost of corn and soybean meal both rose sharply. He had to raise his prices twice in the past year to the local packing plants he supplies with pigs.

"Money can be made when there's risk," Maude said. "But money can be lost, too."

With cattle herds downsized because of drought over the past few years, most ranchers are still reluctant to build up their numbers. Jerry Hammerquist, who ranches near Caputa, said most ranchers he knows are selling heifers because of high feed costs rather than holding on to them to build up their herds.

"We're taking a hit because of the drought and the market," Hammerquist said during last week's stock show.

Ranchers and feeders are looking for ways to cushion the blow of higher feed costs and the uncertainty of the market.

Williams said he was considering selling calves in the fall instead of his usual practice of holding onto them and fattening them in his feedlot.

He is also considering trading in futures, which is a way to try to lock in a price for a later sale.

He said another option is risk-management insurance. "There's more of that being done all the time," Williams said.

Of course, the specter of continued drought still lurks in the background.

Again, ranchers are waiting to see if the West River region gets adequate snow this winter and rain this spring to create runoff into stock ponds and to grow grass.

"We're at the mercy of the market and the drought," Hammerquist said.

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com