Stockers are stalking out of the fields to the feedlots, making an impact on the feeder cattle market this fall.
Darrell S. Peel, livestock marketing specialist at the Oklahoma State University Extension, said there is a reason. Peel said feeder cattle prices typically decline seasonally in the fall. In Oklahoma, he said, stocker and feeder prices typically drop about 4% between August and October.
But at mid-October this year, calf and stocker prices are down only about 2%, indicating strong stocker demand despite larger calf supplies. Oklahoma auction volume has been 11% higher year over year for the past six weeks.
ABUNDANCE OF FORAGE
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, Peel said.
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 8% above August levels. Strong feedlot demand for bigger yearlings is more than offsetting increased feeder cattle supplies. Feedlots have an incentive to place and feed cattle. With bigger feeder supplies, they can focus more on yearlings rather than calves.
Feedlots can be more choosy about the kind of cattle they feed, Peel said. The resulting demand for yearlings relative to middleweight feeders produces a more pronounced stocker signal as a higher value of gain. It’s typical this time of year to see middleweight feeder price weaken relative to heavy feeders, Peel said, but the tendency is even more evident with larger feeder cattle supplies.
FLEXIBILITY IN PRODUCTION
The stocker industry provides several production and marketing values for the cattle industry. Peel said. It adds value to calves by assembling dispersed calf supplies into larger lots. That sorts for uniformity, adds weight and age to feeder cattle, improves health and moves cattle closer to ultimate feedlot demand in the middle of the country.
An important role of the stocker industry is to balance the flow of cattle into feedlots against the flow of calves coming from the cow-calf sector.
CATTLE, BEEF RECAP
Cattle feeders earned an average of $10 per head on cattle shipped to market last week. That represents a rebound of $23 per head after recording losses of $13 per head the prior week. Erasing the red ink from closeouts was the result of a $2 per cwt. rally in cash fed cattle prices, according to the Sterling Beef Profit Tracker.
Beef packers saw their margins decline $16 per head, but held on to strong positive margins of $165 per head. Last week’s beef cutout price was $196, steady with the previous week.
On Wednesday, boxed beef cutout values were weak to lower on light to moderate demand and offerings. Choice was at $197.26 down 40 cents and select was 76 cents lower at $189.09. The choice/select spread was $8.17. There were 138 loads of fabricated product delivered into the market.
The USDA said early cash trade Wednesday was light to moderate on moderate demand. Some Plains processors raised cash bids from $109 to $110 per cwt after a few cattle at the Fed Cattle Exchange brought $109. Remaining sellers, however, are holding out for $113.
Sources said some investors are skeptical whether Wednesday’s futures gains will hold given seasonally-lackluster wholesale beef demand and declining packer margins — the result of higher cash prices in recent weeks. The CME Feeder Cattle Index for the seven days ending Tuesday was $155.26, up 20 cents. The CME October feeder cattle contract closed at $152.550.