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Agricultural News

Peel Offers Fall 2015 Cow-Calf Marketing Considerations

Mon, 17 Aug 2015 11:49:23 CDT

Peel Offers Fall 2015 Cow-Calf Marketing Considerations Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter.

Feeder cattle prices have bounced off the recent summer lows. For the week ending August 14, 2015, the Oklahoma seven-market average price of 450-500 pound, Medium/Large, number one steers was $283.81/cwt., up from recent summer lows and $7-$8/cwt higher than this time last year. The price of 500-550 pound steers is currently $259.26/cwt., also up the past two weeks but roughly $4/cwt lower than one year ago. For 550-600 pound steers, the current price is $244.08/cwt., about $7/cwt. lower than last year. We are at the point where prices this year, which have been above year ago levels so far, will cross and likely be below year ago levels for the remainder of the year.

Last year, 400-500 pound steer prices increased 12 percent from August to November and, in fact, these calf prices have averaged a 9 percent price increase from August to November for the last five years. The 10-15 year average is an increase of 3 percent from August to November. However, the larger 2014 calf crop, indicated by the 1.8 percent increase in July estimated feeder supplies, means that more price pressure will build over the next two to four years. Given continued strong heifer retention, it's not clear how much of that pressure hits this fall. During herd expansion it is typical to see Oklahoma 400-500 pound steer prices drop by roughly 3 percent from August to November. I expect the most likely price range for 400-500 pound steers in November is 97 to 103 percent of current prices. There is probably a better chance of being in the lower part of that range.

The pattern for 500-600 pound steers is generally similar. In 2014, the price of 500-600 pound steers increased 13 percent from August to November and has averaged an 8 percent increase the last five years. The 10-15 year average is a one percent increase in price but during herd expansion a four to five percent decrease is more likely from August to November. November prices for five-weight calves in Oklahoma are likely to range from 95 to 101 percent of current prices. Strong wheat pasture demand for stockers could moderate modestly higher feeder supply pressure this fall and limit calf price decreases. Corn prices matter as well and current corn production estimates suggest that corn prices will continue near current levels in the coming crop year. The absence of feed price pressure will also moderate calf price declines this fall.

Now is a good time to evaluate whether pre-conditioning calves makes sense for cow-calf producers. The decision depends on a number of factors that vary across producers. These factors include feed availability, labor and management constraints and adequate facilities. While pre-conditioning takes work, there is no doubt it has value. With calf prices still near record levels, preconditioning is even more valuable for buyers. Preconditioning significantly reduces the risk and high cost of death loss, sickness and poor performance on purchased calves whether those calves are going to stocker production or directly into the feedlot.

The Oklahoma Quality Beef Network (OQBN) is available to provide Oklahoma producers a certified preconditioning program and enhance feeder cattle values.   In 2014, the weighted average premium of all OQBN feeder cattle over non-preconditioned cattle was $19.20/cwt. For 400-500 pound calves, the premium was $25/cwt. for steers and $20/cwt. for heifers. For 500-600 pound calves, the premium was $34/cwt. for steers and $18/cwt. for heifers. OQBN premiums have averaged between 8 and 13 percent above the price of non-preconditioned calves in recent years. OQBN sellers are receiving a premium for calves and are selling bigger calves as a result of weight gain during pre-conditioning. Eight certified OQBN sales are scheduled this fall. Visit the OQBN website at http://www.oqbn.okstate.edu/ for more information about OQBN protocols and upcoming sales.

Cow-calf producers will enjoy the second highest ever returns in 2015 despite slightly lower calf prices compared to 2014. It is important however for cow-calf producer to anticipate lower prices over time and to carefully consider market conditions; production plans and costs; and value-added opportunities in the future.



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