Winter Stocker Opportunities in
Today’s Cattle Market
Cattle and beef markets have strengthened in October despite the uncertainty of the past couple of weeks. Feeder and fed-cattle prices, along with boxed beef have all advanced compared to pre-shutdown reports, with fed cattle showing the strongest relative increase. By the end of this week many of the data holes may be filled in with a clearer picture of slaughter, carcass weights and beef production.
Feeder markets continue to offer high value of gain for stocker production. Though the high absolute price levels for stocker calves is scary for buyers and their lenders, the combination of high price levels and relatively little price rollback means that the value of putting weight on feeder cattle remains very high, in fact, well above what I would expect to see longer term.
Last week, based on reported feeder prices at the Joplin Regional Stockyards, a 476-pound (lb.), medium/large-frame steer could be purchased for $181.38 per hundredweight (cwt.), or $863.37 per head. A 567-lb. steer was priced at $172.68 per cwt., or $979.10 per head. Notice the additional 91 lb. of beginning weight cost only $1.27 per lb., an important consideration as producers decide what weight to begin the stocker enterprise.
For dual-purpose wheat, winter stockers will be marketed in late February or early March, which allows for roughly 120 days of grazing and roughly 250 lb. of gain. That takes the 476-lb. steer to 726 lb., currently at $164.95 per cwt. or $1,197.54 per head. The difference in value per head is a $334.17 gross margin or a value of gain of $1.34 per lb.
By comparison, the reported price for an 823-lb. steer, which is 256 lb. of gain on the 567-lb. beginning weight, is $159.75 per cwt., or $1,314.74 per head. This results in a gross margin of $334.64 per head, or $1.31 per lb. There are many combinations of beginning weight and total gain for either dual-purpose winter stockers or graze-out steers marketed in May.
In all cases, the current value of gain is in the range of $0.25-$1.35 per lb. of gain. Perhaps most important, current feeder-cattle futures prices for March and May would allow hedging with expected selling prices that are at or a bit higher than these current cash prices. Regarding the purchase prices, we would typically expect to see seasonally low calf and stocker prices in the next month; however, I don’t expect to see much seasonal weakness given the current market situation. In fact, strong feedlot and stocker demand may result in limited counter-seasonal strength in feeder-cattle prices into November.
Editor’s Note: Derrell Peel is extension livestock marketing specialist for Oklahoma State University.