DEFINITION of 'Feed Ratio'
The relationship between the price for which a unit of livestock can be sold in the commodities markets and the price of the food required to raise that unit to market weight. The feed ratio takes the market price of the animal at sale and divides it by the price of the food that the animal must consume. Examples include the hog-corn ratio and the steer-corn ratio. These ratios divide the hundredweight price of the animal by the bushel price of corn.
BREAKING DOWN 'Feed Ratio'
Feed ratios help farmers determine how much feed to produce and what to use it for. If 100 pounds of feed is more valuable than the livestock that can be raised with that feed, it makes more sense for the farmer to shift his production to sell more feed directly as a commodity and reduce his production of livestock. The reverse is also true - if livestock is relatively more valuable than feed, the farmer will shift more of his crop toward feeding animals.