Fall 2015 Marketing Considerations
Prices set to fall below year-ago levels for remainder of year.
Feeder-cattle prices have bounced off recent summer lows. For the week ending Aug. 14, 2015, the Oklahoma seven-market average price for 450- to 500-pound (lb.), Medium/Large, No. 1 steers was $283.81 per hundredweight (cwt.), up from recent summer lows and $7-$8 per cwt. higher than this time last year.
The price of 500- to 550-lb. steers is currently $259.26 per cwt., also up the past two weeks, but roughly $4 per cwt. lower than one year ago. For 550- to 600-lb. steers, the current price is $244.08 per cwt., about $7 per cwt. lower than last year. We are at the point where prices this year, which have been above year-ago levels so far, will cross and likely be below year-ago levels for the remainder of the year.
Last year, prices for 400- to 500-lb. steers increased 12% from August to November and, in fact, these calf prices have averaged a 9% price increase from August to November for the last five years. The 10- to 15-year average is an increase of 3% from August to November. However, the larger 2014 calf crop, indicated by the 1.8% increase in July estimated feeder supplies, means that more price pressure will build over the next two to four years.
Given continued strong heifer retention, it’s not clear how much of that pressure hits this fall. During herd expansion it is typical to see Oklahoma prices for 400- to 500-lb. steers drop by roughly 3% from August to November. I expect the most likely price range for 400- to 500-lb. steers in November is 97%-103% of current prices. There is probably a better chance of being in the lower part of that range.
The pattern for 500- to 600-lb. steers is generally similar. In 2014, the price of 500- to 600-lb. steers increased 13% from August to November and has averaged an 8% increase the last five years. The 10- to 15-year average is a 1% increase in price, but during herd expansion a 4%-5% decrease is more likely from August to November.
November prices for five-weight calves in Oklahoma are likely to range from 95%-101% of current prices. Strong wheat pasture demand for stockers could moderate modestly higher feeder supply pressure this fall and limit calf price decreases. Corn prices matter, as well, and current corn production estimates suggest that corn prices will continue near current levels in the coming crop year. The absence of feed price pressure will also moderate calf price declines this fall.
Now is a good time to evaluate whether preconditioning calves makes sense for cow-calf producers. The decision depends on a number of factors that vary across producers. These factors include feed availability, labor and management constraints and adequate facilities. While preconditioning takes work, there is no doubt it has value. With calf prices still near record levels, preconditioning is even more valuable for buyers. Preconditioning significantly reduces the risk and high cost of death loss, sickness and poor performance on purchased calves whether those calves are going to stocker production or directly into the feedlot.
The Oklahoma Quality Beef Network (OQBN) is available to provide Oklahoma producers a certified preconditioning program and enhance feeder-cattle values. In 2014, the weighted average premium of all OQBN feeder cattle over non-preconditioned cattle was $19.20 per cwt. For 400- to 500-lb. calves, the premium was $25 per cwt. for steers and $20 per cwt. for heifers. For 500- to 600-lb. calves, the premium was $34 per cwt. for steers and $18 per cwt. for heifers. OQBN premiums have averaged between 8% and 13% above the price of non-preconditioned calves in recent years.
OQBN sellers are receiving a premium for calves and are selling bigger calves as a result of weight gain during preconditioning. Eight certified OQBN sales are scheduled this fall. Visit the OQBN website at www.oqbn.okstate.edu/ for more information about OQBN protocols and upcoming sales.
Cow-calf producers will enjoy the second-highest-ever returns in 2015 despite slightly lower calf prices compared to 2014. It is important however for cow-calf producers to anticipate lower prices over time and to carefully consider market conditions; production plans and costs; and value-added opportunities in the future.
Editor’s Note: Derrell Peel, is an extension livestock marketing specialist with Oklahoma State University. This article is reprinted with permission from the OSU Cow-Calf Corner Newsletter.