This year’s Southern Plains fall wheat grazing season is starting with profit potential, but care must be taken to avoid losing out, said Derrell Peel, Oklahoma State University agricultural economist in a letter to Extension agents called Cow/Calf Corner.
Risk management should be considered carefully, Peel said. Futures markets may offer an opportunity to lock in a margin on winter grazing, but risk management requires deliberate action including purchasing and marketing the cattle.
WEATHER ISSUES
Winter wheat is used for grain-only, forage-only or dual-purpose systems targeting cattle grazing and grain production, he said. In the Southern Plains, those interested in grazing winter wheat pastures often begin planting in late August or early September.
However, the desire to jump-start wheat forage growth by planting early in the fall must be balanced against frequent seasonal drought and hot soil temperatures that prevent germination, Peel said. Conditions this year range from very dry to adequate moisture with generally favorable soil temperatures.
Early planted wheat also faces a bigger likelihood of fall armyworm or other pests, disease pressure and increased weed competition, he said. Dual-purpose wheat producers must navigate the tradeoffs between wheat forage and grain production as well as the economic challenges in wheat and cattle markets.
FEEDER CATTLE PRICES
Current feeder cattle prices provide an indication of the economic prospects for fall and winter grazing, Peel said. In the last week of August, the Oklahoma average auction price for 475-pound steers was $165.25 per cwt with 750-pound steers at $140.40.
That calculates to a value of gain of $0.975 a pound for 275 pounds of gain, he said. Across beginning weights of 450 to 600 pounds, the value of gain ranges from $0.90 to $1.00 a pound using current auction prices.
Cost of production likely is less than $0.90 a pound, suggesting potential positive returns for stocker production, Peel said.
A common wheat pasture grazing budget is based on October stocker purchases with feeders marketed in early March, he said.
So, based on current market conditions, a 475-pound steer price is projected to range from $160 to $165 per cwt in October, Peel said. This estimate is suggested by typical seasonal cash price patterns and current Oct feeder futures.
Budgets using a range of purchase prices, feed costs and average daily gain result in a range of estimated March breakeven prices from $129 to $139 per cwt with the most likely values from $132 to $136 for animals weighing about 750 pounds at sale.
Current March feeder futures, adjusted for Oklahoma basis, suggest a 750-pound steer price of about $140 per cwt in early March, suggesting potential for positive winter grazing returns.
Markets will fluctuate this fall, so producers must continue to evaluate winter grazing potential, Peel said.
Prior to purchase, producers should consider flexibility for stocker operations including the size of animals purchased, gender and quality and length of grazing period.
CATTLE, BEEF RECAP
Fed cattle trading was reported in the Plains this week at $102.50 to $104 per cwt on a live basis, down $2 to $2.50 from last week. Dressed-trading was done at $163 to $164 per cwt, down $3 to $4.
The USDA choice cutout Thursday was down $0.34 per cwt at $227.24, while select was off $1.32 at $212.50. The choice/select spread widened to $14.74 from $13.76 with 115 loads of fabricated product and 33 loads of trimmings and grinds sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Wednesday was at $139.68 per cwt, down $0.67. This compares with Thursday’s Sep contract settlement of $137.60 per cwt, down $1.10.