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Agricultural News


Thinking Outside of the Traditional Stocker Box

Mon, 04 Nov 2013 10:24:35 CST

Thinking Outside of the Traditional Stocker Box
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow-Calf Newsletter:


Oklahoma winter wheat is mostly emerged and more than two-thirds is rated good to excellent condition. However, from a forage standpoint, most of the wheat is delayed in development and will need another two to three weeks before stocker turnout. This suggests that the winter grazing period for dual-purpose wheat is likely to be limited to no more than 90 to 95 days. Stocker producers should evaluate carefully what stocker alternatives will work the best in a short winter grazing season.   


Feeder cattle prices have made impressive gains in the past four months. Through the summer and early fall, heavy feeder prices increased proportionately more than calves based on strong feedlot demand driven by dropping corn prices. In the past month, calf prices in Oklahoma have increased faster than heavy feeders, with calf prices up 5 to 10 percent while heavy feeder prices have increased 3 to 4 percent. This reflects the strong preference among Oklahoma stocker producers for light stockers, typically less than 550 pounds.   


The result is a sharp break in feeder cattle prices in the most recent combined auction prices for Oklahoma, with prices very high and decreasing rapidly at weights up 575 pounds, and decreasing much more slowly at weights above 575 pounds. Consider the following weighted average weights and prices for Medium/Large, Number 1 steers in Oklahoma for the week ending November 1:                        

475 pounds @ $203.17/cwt. or $965/head                        

576 pounds@ $174.14/cwt. or $1003/head                        

670 pounds@ $168.89/cwt. or $1132/head                        

772 pounds@ $167.08/cwt. or $1290/head


The short winter grazing period may limit stocker gains to roughly 200 pounds. The 475 pound steer above has a gross margin of $167/head ($1132-$965) for 195 pounds of gain (670-475) to 670 pounds. This is an average value of gain of $0.86/pound. Notice that the 101 pounds from 475 to 576 pounds only has a value of $38/head or $0.38/pound of gain.


By contrast, purchasing the 576 pound steer only costs an additional $38/head ($1003-$965). Now the gross margin for 196 pounds of gain (772-576) is $287/head ($1290-$1003), which is a value of gain of $1.46/pound. In a complete budget using March Feeder futures and appropriate basis to estimate selling prices, the 475 pound steer loses $30-$35/head while the 576 pound steer shows a positive return above costs of $35-$40/head. Feeder cattle market conditions may change rapidly and must be evaluated regularly. At the current time, there are strong reasons to consider heavier beginning weights for a shortened winter grazing period. However, the bigger beginning weights may not work when more total gain is planned. For producers that plan to graze out wheat, the lighter steer will not get too heavy before May. In a situation where the animal will be owned long enough for considerable weight gain, the value of the later gain will mostly offset the poor value of early gains.    



   

 

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