Stocker Producers Brace for Margin Squeezes as Feedlots Take Advantage of a Low Cost of GainTue, 07 Mar 2017 12:15:11 CST
In his recent observations of the cattle market at auction barns, Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel, says there is major market adjustment happening between light and heavy weight cattle and calves and yearlings. He explained to Radio Oklahoma Ag Network Farm Director Ron Hays what is driving this adjustment, that he says is squeezing profit margins in certain segments.
“We continue to see stronger prices for these light weight cattle and these adjustments have a particularly important implication for stocker producers,” Peel said. “That means that stocker producers looking ahead to graze out wheat or for summer stockers, really need to think about margin squeezes that are happening there and maybe what that tells them about what kind of cattle they want to buy and how long they want to own them.”
According to Peel, feed grain has become less expensive, bringing the cost of gain from about $0.80 in January to now $0.60, and feedlots are taking advantage of this opportunity to put pounds on light weight cattle. Unfortunately, this comes at the expense of the stocker operation.
“Really for the first time in almost a year now,” he noted, “I would say that feeder cattle markets are really reflecting the reality at the feedlot side in the sense that these feeder cattle or stocker value of gain prospects really reflect the cost of gain at the feedlots which has gotten cheaper and cheaper over time.”
Listen to Hays and Peel discuss margin squeezes happening in the cattle market, on today’s Beef Buzz.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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