Wheat Pasture Conditions and Feeder Marketing StrategiesWed, 27 Oct 2010 7:30:50 CDT
Most of the state of Oklahoma has received significant rain in the last 10 days. Many areas received one to two inches with some areas getting significantly more. The timing was good in that most of the wheat is planted with much of it up and the response to this moisture should be good. At this time, there is very little wheat pasture ready for grazing but this rain will help pasture develop, if somewhat later than planned. I expect that, similar to last year, we may see slow but steady wheat grazing develop through the winter with stockers dribbling out to pasture all winter.
Feeder prices in Oklahoma are likely at the seasonal low and are expected to strengthen a bit in the last part of the year. Relative feeder prices provide several distinct signals to cow-calf, stocker and feedlot producers. Last week in Oklahoma, the cheapest feeder animal up to 850 pounds, on a $/cwt. basis was a 600 pound steer. At this time, there is relatively little demand for such an animal. It is a bit too heavy for traditional stocker programs and too light for feedlots to want to feed a lot of expensive corn to. There is also a relatively sharp break above and below 500 pounds. These price signals suggest several strategies for cattle producers.
Obviously feedlots want to buy and place heavier animals. Currently the price is a bit higher for animals 700 - 800 pounds compared to 600 pounds. Moreover, this feedlot demand keeps the normal price break to a minimum up to weights over 900 pounds. In general this gives stocker producers lots of flexibility to implement various stocker programs. Based on current prices, a short term program starting with a 600 pound steer, could put on 200 pounds of gain with no rollback in price. At current prices, that results in a value of gain of $1.09/pound. This may work well with late wheat pasture for a short winter grazing period. Alternatively, although there is more price rollback for the lightweight stockers, there is good value of gain in owning animals for a long period of time and adding lots of weight. This is even more true given the current premium on Feeder futures and the ability to lock in a good margin on stockers. A 475 pound steer purchased this last week can be locked in against the May Feeder futures with a value of gain of roughly $1.05/pound when sold at 800 pounds.
For cow-calf producers, it depends on weaning weights. If the calves are less than 500 pounds, there is little advantage to putting a small amount of weight on. The value of another 50-100 pounds is between $0.55 and $0.70/pound. However, if these animals are retained to heavier weights, the value of gain rises. The point is not to sell into the 600 pound market for which there is little demand. Either sell them lighter for stocker demand or retain them to 700+ pounds for feedlot demand.
Our thanks to OSU Livestock Market Economist Derrell Peel for this latest look at wheat pasture prospects with an economic perspective.
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