A look back at past price relationships during May sheds some light on the gross margin of running stockers. This spring the gross margin and feed costs have again changed suggesting implications for several different prices. In May a stocker can be purchased in South Dakota and turned out on grass or fed to gain 200 lbs. over a 4.5 month period.

The sale value would be as a feeder-weight sold in September or the September feeder cattle futures price observed in May plus the basis for South Dakota. This May to September scenario is one of several followed to assess risk and rewards in the cattle complex.

The gross margin is calculated as the expected feeder price times 7.5 minus the spot stocker price times 5.5 with the basis assumed known with perfect foresight. The gross margin was only $135/head as recently as 2009 and in 2013 was an unprecedented $292/head. In 2014 the September feeder futures contract price averaged $183 during April while the stocker price averaged $226. Assuming basis equals the five-year average for September of $5 implies a gross margin for 2014 of $163/head after rounding.

To read more on current stocker trends, click here.

 

More articles to enjoy:

Is Now The Time To Castrate Calves? BEEF Vet Explains

Best Tips To Control Parasites In Cattle

Industry Experts: Skipping The Basics Can Carry A Big Penalty