Growing Cattle Inventories Could Present Unique Opportunities for Producers in the Stocker SegmentMon, 16 Oct 2017 12:04:47 CDT
Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel examines the opportunities for stocker producers that may be presented by growing cattle inventories.
"Feeder cattle prices typically decline seasonally in the fall. Oklahoma stocker and feeder prices typically drop about four percent between August and October. However, as of mid-October this year, calf and stocker prices are down only about two percent, indicating strong stocker demand despite larger calf supplies. Oklahoma auction volume has been 11 percent higher year over year for the past six weeks. It appears that abundant supplies of other forages have permitted stocker purchases despite delays in wheat pasture this fall. Fall armyworms have either damaged early-planted wheat or have prompted delays in wheat planting to reduce the risk of damage. Nevertheless, it seems that significant numbers of stockers are waiting in the wings on other forages until wheat pasture is ready.
"Big feeder cattle (over 700 pounds) have not only failed to decline seasonally but have increased so far this fall. Current prices for heavy feeders are about eight percent above August levels. Strong feedlot demand for bigger yearlings is more than offsetting increased feeder cattle supplies this fall. Feedlots continue to have an incentive to place and feed cattle and, with bigger feeder supplies, to focus more on yearlings rather than calves at this time of the year. Feedlots have the ability to be more choosy about the kind of cattle they want to feed and the resulting demand for yearlings relative to middleweight feeders produces a more pronounced stocker signal in the form of a higher value of gain. It’s typical this time of year to see middleweight feeder price weaken relative to heavy feeders but the tendency is even more evident with larger feeder cattle supplies.
"The stocker industry provides a number of production and marketing values for the cattle industry. The stocker industry adds value to calves by assembling dispersed calf supplies into larger lots; sorting for uniformity; adding weight and age to feeder cattle, improving health; and moving cattle closer to ultimate feedlot demand in the middle of the country. The stocker industry provides flexibility in cattle production with more or less forage-based gains compared to grain-based gains in the feedlot as relative feed and forage values change.
"One of the most important roles of the stocker industry is to balance the flow of cattle into feedlots against the flow of calves coming from the cow-calf sector both seasonally as well as across years. This shock absorber function is more critical when cattle numbers are growing. Feedlot preferences to “buy pounds” in the form of heavy feeders rather than placing lighter feeders and adding more weight per animal in the feedlot necessarily translates into a signal for stocker producers to provide that additional weight gain on feeder cattle. As stocker producers respond to these signals, they are not only adding weight to feeder cattle but are spreading out feeder supplies over time. Larger cattle supplies allows feedlots for focus more on feeding yearlings and that, in turn, provides more opportunities for stocker producers to profitably add weight to calves to meet that feedlot demand."
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