What About Stocker Cattle Price Prospects?Mon, 05 Jul 2010 21:19:46 CDT
Early July is not normally a time when we are talking much about buying stocker cattle. Typically summer cattle are already out and we are not thinking yet about fall stockers. Nevertheless, I am beginning to get questions about stocker cattle grazing prospects. I think the interest may be coming from two sources: first, forage conditions are generally very good around the country and there may still be some summer cattle going on pasture and, second, at least here in the southern plains, some producers may already be thinking about when they might want to buy lightweight cattle for fall and winter grazing.
Prices for stocker cattle have decreased from the spring highs but are at least $10/cwt. higher than this time last year. The buy/sell margin is often the primary determinant of profit potential and the spread between stocker buy price and feeder sell price is more important than the general level of prices. With tight supplies largely in control of the market, buy prices tend to be relatively high compared to sell prices. It is critical for producers evaluate the margins offered in the market and to consider the price risk associated with future selling price compared to buying at today's prices. Feeder futures prices provide an indication of potential margins and an opportunity to lock in margins when offered by the market.
Fall and winter stocker producers may be wondering about the merits of buying lightweight cattle early in the fall versus later in the fall. Stocker calf prices usually are lowest seasonally in October. However, the timing of winter pasture establishment can affect that pattern considerably in Oklahoma. If wheat pasture is established early, increased demand for stocker cattle can mute the seasonal decline into October and November, particularly when feeder supplies are limited. An uptrending market over the course of a year will have the same effect, with fall prices decreasing less than expected compared to earlier in the year.
It is impossible to say what will happen this fall, but there is risk, from a buying perspective, that prices may not be as seasonally attractive as one might expect on average. I anticipate that there will be considerable interest in grazing wheat this fall and if wheat pasture conditions are favorable early there may be less seasonal weakness in calf prices in the fall. Producers will want to monitor feeder futures prices relative to stocker prices in late summer and early fall to see if attractive margins are offered. Producers with available forage and production flexibility may have an opportunity to benefit from earlier than usual stocker cattle purchases.
These comments are provided by Dr. Derrell Peel of Oklahoma State University- coming from the weekly Cow Calf Corner from OSU.
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