Stocker production opportunities increasing with feeder prices
The ingredients for the best winter wheat grazing opportunity in several years seem to be coming together this fall. Most all of Oklahoma has received significant rain in the past two weeks. The rain is sufficient, in most cases, to get wheat planted and up. However, according to the Oklahoma Mesonet, the rainfall total for the last 30 days is below average so additional timely moisture will be needed to maintain the crop.
The latest Cattle on Feed report jump-started both cash and cattle futures markets as markets anticipate sharply lower fed cattle and beef production beginning in the fourth quarter. Feeder cattle prices have continued to move higher, with heavy feeders advancing to record levels the in the most recent report.
Higher Live Cattle futures and lower corn costs as corn harvest progresses continue to support feeder prices. There has been relatively less strength on light weight feeders (steers below 600 pounds). In fact, for the past two weeks, Oklahoma combined auction data has steers between 550 and 600 pounds at a lower price than 650 pound steers. While feedlot demand for feeders is strong, it does not extend to steers less than 650 pounds. At the same time, these 550-600 steers are bigger than traditionally demanded stockers resulting in the weak demand for these steers that are too big for stocker demand and too small for feedlot demand. There is opportunity in this for stocker producers as these bigger stockers offer the highest value of gain for stocker production.
However, stocker value of gain has advanced for all stocker weights so there is increased opportunity for traditional lightweight stockers as well as for these mid weights that are heavier than traditional stockers. The increase in heavy feeder prices relative to lighter weights continues to push up the value of gain across the board. This value of gain is evident, not only in current cash prices, but is currently being offered by Feeder futures as well.
March Feeder futures advanced nearly $3.00 last week to a contract high of $162.85/ cwt. on Friday with May Feeder futures at similar levels. The combination of market opportunities and production opportunities winter grazing should spark additional stocker demand in October. Demand could easily offset the fall run of calves resulting steady or higher calf prices into November, in contrast to seasonal weakness that would be more typical. — Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist