Peel Addresses Marketing Considerations for Fall Cattle MarketsMon, 20 Oct 2014 11:31:24 CDT
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter
The price of 475 pound, Medium and Large Number 1 steers in Oklahoma have averaged $281.81/cwt. the past six weeks. This includes the latest weekly average price of $294.80/cwt at the seven federally reported auctions in the state. This price compares to an average of $183.15/cwt. in late September and early October one year ago (no price reported in much of October 2013 due to federal government shutdown). Prices this fall are up almost $100/cwt. or 54 percent over last year. So far this fall, prices have shown no seasonal tendency to decrease from September to October and, in fact, the most recent price is the highest in the six week average.
Cow-calf producers will sell weaned calves this fall for record revenues by a large margin (revenues are up $500-$550 per head over last year) and will, in the majority of situations, receive record profits, at least on a per head basis. In some drought areas, total ranch profits may not be up as much due to reduced due to reduced animal numbers. The market is begging for animal numbers so selling calves at weaning is a very profitable strategy now.
Is there is reason to hurry fall calf sales? Producers are understandably nervous at these price levels and there certainly has been a lot of volatility outside cash cattle markets recently. The stock market and futures markets have reacted wildly to concerns over Federal Reserve policy; European economic weakness; oil prices; Hong Kong protests; and Ebola, among other things. These are all external factors that could impact beef markets, primarily through beef demand, and should be monitored. However, none of these factors change basic cattle market fundamentals, especially in feeder cattle markets and not in the next month. I don't believe there is a reason to hurry fall calf sales. The current value of another 25 to 50 pounds of weight on calves is roughly $1.20-$1.40/lb. The marginal cost of delaying calf sales is quite small for calves not yet weaned. Despite the seasonal tendency for calf prices to weaken from October to November, I expect less seasonal pressure than usual. Ideally, calves would already be in a preconditioning program and the value of gain applies to another two to four weeks of gain to finish the preconditioning period prior to weaned calf sales in November to early December.
At these prices, does retained ownership of calves in a stocker or backgrounding program make sense? It depends specifically on the availability and cost of feed, labor and management resources in individual situations. However, the general market signal is a value of gain for 250 to 300 pounds of gain in the range of $1.50 to $1.60/lb. In many cases, there is an opportunity for decent returns to feed, labor and the cattle in backgrounding programs. There is no reason that all calves must be marketed in the same manner. It may make sense to sell the heavy end of calves and background the lighter weights. Or it may make sense to background just the steers or the heifers. Heifers may have considerable flexibility to background and sell as open heifers; to breed and sell as bred heifers; or to calve and sell as pairs. Or maybe just keep them if there is room for more cows in the operation. Conditions permitting, herd rebuilding is likely to ramp up considerably in 2015.
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