Cattle Economics

Stockers Offer Tremendous Marketing Flexibility

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If cattle feeding returns are aided by substantially lower feedstuff costs, calf and yearling prices are forecast to post annual increases throughout 2014.

“If ever there was a year for cow-calf producers to wean, precondition and background spring-born calves, this is the year to do it, because most folks’ cost of gain would be less than the value of gain,” says Andrew P. Griffith, University of Tennessee agricultural economist.

In late August, Griffith used the example of a 350-lb. calf bringing $192/cwt. in the Southeast. Assuming the calf was grown to 750 lbs. and sold for $150/cwt., the stocker value of gain would be $1.13/lb.

Retaining home-raised calves through a growing phase comes with an added benefit, depending on the genetics. It’s that cattle performance has more relative value with the increased stocker value of gain seen in recent years.

“Higher value of gain puts more relative emphasis on the ability of cattle to gain weight,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.

He explains the market has historically paid relatively more for upgrading cattle and assembling them into larger and more uniform groups. Though still true, Peel points out, “All else being equal, a high value of gain puts more of a premium on higher-quality cattle. Cattle that gain better have more value.”

For others, carving more net return from available forage may come from marketing home-raised calves and buying back others. The point is that increased value of gain opens more doors of stocker opportunity.

“Now that feedlot cost of gain is not the cheapest way to add pounds, stockers have another 200 lbs. of weight gain to work with, and a broader range of placement weights,” Peel says. “We have more opportunity to hold cattle longer and to put more weight on them. The market gives you more room to work than it ever did.”
Jay O’Brien of Amarillo, TX, this year’s BEEF Stocker Award winner sees extra opportunity for stocker producers in the Southeast who buy and straighten out calves there before shipping them west. He uses this approach for calves coming to the ranches he owns and manages in Texas and Colorado.

“If I had pasture in the Southeast, I’m not sure I wouldn’t look at double-stocking it,” O’Brien says. “There is great benefit to stocker operators in that part of the country to buy calves from the sale barns and get them straightened out before shipping them this far … There are fewer lightweight calves now than there used to be, but they’re discounted more because of the health risk.”

 

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Obviously, none of this is easy or makes for any sort of guarantee, especially with dwindling cattle numbers.
The August Cattle on Feed report indicated a staggering 10% fewer cattle placed in July than the previous year. That’s way fewer than the industry expected. The total number of cattle on feed on Aug. 1 was 6% fewer.

The recent reduction in beef-cow slaughter also suggests that moisture and forage are finally allowing some cow-calf producers to begin thinking about expansion. Some are even beginning to inch their way across the starting line.

Snubbed to a different post, between cattle supply and empty feedlot pens that could look for residents to feed grower rations, competition for calves will likely remain fierce.

In early September, analysts with the Livestock Marketing Information Center (LMIC) expected 500- to 600-lb. steer calves (basis Southern Plains) to average in the low $170s/cwt. for the remainder of 2013. LMIC analysts forecast that 700- to 800-lb. yearling steers would average in the low to mid-$150s.

“Looking ahead, if cattle feeding returns are aided by substantially lower feedstuff costs, calf and yearling prices are forecast to post annual increases throughout 2014,” LMIC analysts say. “More year-on-year increases could happen in 2015, with the normal drought caveat, and two additional requirements — the U.S. economy steers clear of economic recession, and foreign markets can absorb most of the expected dramatic increase in U.S. chicken and pork production.” 

 

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What's Cattle Economics?

Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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