Corn price effects on cost of gain for feedlot cattle: Implications for breakeven budgeting

Elasticities calculated from an econometric model of cost of gain (COG) for cattle infeedlots indicate that COG is considerably less responsive to cor n price changes than breakeven budgets assume. This difference in elasticit ies can lead to substantial errors in COG estimates obtained from budgeting . Size of error will depend upon the initial corn price and the magnitude o f corn price change. Given average corn price levels and month-to-month cha nges, the error in budget-based net revenue projections will be about $3/he ad.