Cattle Economics

Value Of Gain Is Record High

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If there was ever a time to be in the stocker business, this may be it, at least when it comes to value of gain.

"Heavy-feeder prices increased to new seasonal highs in early July and are still holding at remarkably strong levels," says Derrell Peel, Oklahoma State University Extension livestock marketing specialist. "The rollback between calf and feeder prices is very narrow; almost zero in some cases, resulting in very high stocker value of gain."

Peel offered this example for the first week of August: the Oklahoma combined auction price for Medium and Large #1 steers weighing 515 lbs. was $138.56/cwt.; it was $138.05/cwt. for steers weighing 727 lbs.

"This implies a value of gain of $1.37/lb. for 212 lbs. of gain," Peel says. For steers weighing 825 lbs., the price was $132.50/cwt., resulting in a value of gain of $1.22/lb. for 310 lbs. of gain."

For the record, value of gain is defined as the gross sale price of a head of cattle minus the gross purchase price, divided by the pounds of gain. High calf and feeder prices, and the narrow price rollback, magnify the current opportunity.

"There is more incentive than there has ever been to grow and manage forage," Peel emphasizes. "Wheat pasture prospects in the southern Great Plains appear very poor at this point but the market is clearly encouraging somebody, somewhere, that has forage to put stocker gains on feeder cattle.

"The feeder cattle price structure will continue to offer high value of gain as a market incentive to add weight to cattle prior to feedlot placement. Stocker margins will generally be attractive for stocker production over a wide range of beginning and ending weights and total weight gain."

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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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