The stocker sector is vital to the cattle and beef business, yet it remains a moving target.Don't miss the full series:Part 1: Industry Big PicturePart 2: Seedstock SectorPart 3: Cow-Calf Sector

Wes Ishmael

October 25, 2012

5 Min Read
Beef Industry’s Stocker Sector Is Vital But Fluid

Defining the stocker cattle sector should be relatively straightforward. Producers add weight to calves removed from their mamas before those calves enter a feedlot.

By and large, it’s a margin business that revolves around the value of gain – what the market is paying for additional weight – relative to the cost of adding that weight. Pay too much up front and margins are so narrow you’ll have a hard time ever catching up.

A Closer Look: Managing The Margin Is Critical In Today's Environment

Looking more broadly, stocker cattle and those who run them serve as the lynchpin of the entire cattle and beef business.

For one thing, this sector acts as governor to the industry engine, receiving cattle from a national cowherd that churns out most of its calves in the spring of the year, then parceling them out so that feedlots, beef packers and consumers have a steady supply throughout the year. This warehousing function also enables the industry to absorb supply shocks within and across years, whether it’s drought forcing more cattle to market than usual, or cowherd attrition serving up fewer calves.

Even before the recent higher grain price paradigm, the forage-focused nature of most stocker enterprises offered a more valuable alternative use to forage. With higher grain prices, cheaper forage-based gains are one way the industry can be more price-competitive with other meat proteins.

The stocker sector also removes incalculable levels of variation from the industry. No one can turn the proverbial sow’s ear into a silk purse, of course, but stocker operators can gather, manage and market load-lots and pen-lots of similar cattle. This packaging offers more value to buyers because management can be more consistent. In turn, that offers more value to the industry.

Stockers - ubiquitous, invisible

Yet, the stocker sector remains so nebulous that no one has ever been able to wrap their arms completely and surely around it.

For one thing, it’s often difficult to distinguish stocker operators from their participation in other industry sectors. The 2008 BEEF National Stocker Survey (NSS) found only 17.2% of stocker producers were exclusively in that segment of the cattle business. Of those, 52.3% said stocker cattle accounted for 50% or more of their annual gross income.

Cow-calf producers who also stocker cattle comprise the largest segment of stocker operators (64.6%). Others running stocker cattle include producers involved from cow-calf through cattle feeding (10.6%) and feedlots (4.8%).

Definitions and terminology create confusion, too. One person’s backgrounding program is another’s stocker enterprise. One person sees a starter yard where someone else perceives a preconditioning program. It’s that kind of thing.

Who's Who In The Stocker Business:  Bob Price, Gracie Creek Ranch Named 2012 Stocker

Part of the murkiness has to do with animal classification. One of the surest opportunities over time has been buying cull cows at their typical seasonal price ebb in the fall of the year, adding weight to them, and exploiting typically higher prices during the winter. Few would regard them as stocker cattle, though.

“The stocker industry can’t be distinguished by a particular age, size or class of cattle, or by a particular production system,” explains Derrell Peel, Oklahoma State University Extension livestock marketing specialist.

Even when you confine the stocker classification to calves, there’s no way to calculate how many there are at any given time. But you can estimate the potential supply of stocker cattle with the annual Jan. 1 USDA Cattle Inventory report.

For instance, there were 25.7 million head of stockers last January, 28.3% of all cattle and calves. Specifically, that number is derived from inventory classifications of calves weighing less than 500 lbs., as well as non-replacement heifers and steers outside feedlots weighing more than 500 lbs. But it can’t account for suckling calves at the time, nor does it consider what percentage of the inventory’s 500-lb.-and-heavier bulls will end up as steers.

Incidentally, while an imperfect measure, Peel explains this potential stocker calf pool can also be used to measure the relative supply snugness that feedlots face. The number of cattle on feed relative to the pool of calves outside of the feedlot used to run about 4:1. In other words, for every animal on feed, there were four more out in the country that could replace it. This ratio is now about 2:1.

Moreover, there’s no way of telling how much of that potential supply will go through some sort of stocker program. Common sense suggests most will, but any guesses are just that. And, there’s no telling how many different stocker programs an individual calf ultimately traverses.

Consider a calf that’s purchased and commingled, held on grass for a while, shipped to a starter yard, put on winter wheat pasture, and then sent to summer grass. When considering potential supply, this single head represented multiple opportunities. So, the supply of available stocker cattle at any given point in time is larger in reality.

Stockers are also difficult to describe because of the variety of business models. Traditionally, those outside the sector often view stocker operators as those who buy holes in the market, procuring the mismanagement of others. That’s true on one end of the spectrum, but on the other end are operations that buy only preconditioned calves of strict genetic profiles in order to sell into value-added markets. A wide variety exists in between.

For perspective, according to the NSS, 23.9% of stocker-exclusive operators buy cattle below the average (straightening out someone else’s problems), while 65.3% say they buy at market average; 10.8% say they buy over the market. Stockers of all operation types and tenure in the NSS say buying high-quality cattle is a chief tool for managing market risk.

Finally, the stocker business is difficult to corral because there are few biological boundaries. Cows typically remain in the herd until they’re culled. Calves move to another production phase at weaning. And, for every head entering a feedlot, there’s a narrow marketing window for its exit. For stocker operators, though, they’ll buy and sell whenever the market offers opportunity.

Subscribe to Our Newsletters
BEEF Magazine is the source for beef production, management and market news.

You May Also Like