Much of Oklahoma has better growing conditions for early planted winter wheat than in recent years, said Oklahoma State University Livestock Marketing Specialist, Derrell Peel, in a letter called Cow-Calf Corner.
FORAGE CONDITIONS ONLY PART OF THE ISSUE
Wheat forage production conditions are only some of the challenges for winter wheat stocker producers, he said. Dynamic markets mean producers will need to evaluate stocker budget prospects carefully and frequently prior to stocker purchases.
Calf prices are moving counter-seasonally higher this summer, suggesting stocker purchase costs will continue to increase, Peel said. The Oklahoma combined auction price for 450- to 500-pound Medium/Large #1 steers in the second week of August reached $302.05 per cwt, the highest weekly price since June 2015 and just 6.4% less than the record high of $322.56 in November 2014.
As cattle numbers continue to tighten, the general market incentive is to push cattle through the pipeline faster to keep beef production as high as possible, he said. 2023 beef production is down about 4.8% but is falling more sharply recently, with July beef production down 6.7%.
HEIFER KILL DOWN
Heifer slaughter decreased more sharply in July, down 5.5% year over year and contributing to a 6.1% year over year decrease in steer and heifer slaughter for the month, Peel said. Additionally, beef cow slaughter was down 21.4% year over year in July, contributing to the faster pace of declining beef production.
In this environment, holding cattle in relatively slow-paced stocker production will be less feasible, he said. However, high quality wheat forage produces relatively rapid gains that may still be economical, but careful monitoring of rapidly changing market conditions is essential.
CORN PRICES MAY MODERATE
After two years of high feedlot cost of gain, corn prices may moderate with the current crop, Peel said. December corn futures peaked as high as $6.28 a bushel in late June but currently are around $4.85.
Grain markets remain very volatile with summer weather conditions and the feedgrain supply and price for the coming year uncertain, he said. Still, the prospect of moderating feedlot cost of gain will be another challenge for stocker producers.
Cheaper cost of gain will give feedlots more ability to compete for limited feeder cattle supplies and enhance the general need to push cattle through the system faster, Peel said.
In such an environment, the role of stocker production is squeezed toward the very lightweight end of feeder cattle and an incentive to market sooner rather than later with less weight gain prior to feedlot placement, Peel said. In the short run this general tendency may be partially offset by the strong uptrend in feeder cattle prices.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $181.39 per cwt to $191.12, compared with last week’s range of $179.34 to $190.97 per cwt. FOB dressed steers, and heifers went for $283.74 per cwt to $292.49, compared with $282.49 to $295.81
The USDA choice cutout Thursday was up $5.15 per cwt at $314.14 while select was up $1.49 at $286.26. The choice/select spread widened to $27.88 from $24.22 with 78 loads of fabricated product and 21 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.90 to $2.10 a bushel over the Sep corn contract, which settled at $4.73 a bushel, up $0.03 1/2.
No contracts were tendered for delivery against the Aug cattle contract Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $244.26 per cwt, down $0.68. This compares with Thursday’s Aug contract settlement of $244.27 per cwt, down $1.10.