In just a few weeks, producers interested in grazing winter wheat (or other cool season cereals) for dual-purpose or forage-only grazing will be thinking about planting for fall/winter grazing.
Derrell Peel, Oklahoma State University Extension livestock marketing specialist, went on to say in a newsletter called Cow-Calf Corner that it’s not too early to begin evaluating the economic and agronomic conditions and considerations for possible winter stocker production.
AGRONOMIC CONDITIONS ALL IMPORTANT
Agronomic conditions will determine the feasibility and potential for early wheat planting, Peel said. Factors like soil moisture and soil temperature will determine just how early wheat can be planted.
Additionally, producers must evaluate the early planting trade-off between earlier grazing potential and the additional risk of limited forage production from prospective increased pest and weed challenges and uncertainty about fall moisture for continued growth of the wheat, he said.
ECONOMIC CONSIDERATIONS
Economic considerations include preparing a budget, estimating the breakeven cost of production in light of return potential and risk, Peel said. General market conditions determine the overall potential for stocker production, expressed as the gross margin, i.e. value of gain for added weight of feeder cattle.
For example, the value of 250 pounds of gain for a 500-pound steer in early August was $2.03 a pound, he said. The value of gain varies depending on the beginning weight and the total amount of weight added.
Changes in feeder cattle price levels and relative prices between stocker purchase prices and feeder sales prices also change the value of gain, Peel said.
PRODUCTION COST
The next step is to determine the cost of production and determine if the value of gain covers production costs and offers acceptable returns for the stocker enterprise, he said. Beyond the first cost of the stocker animal, the value of gain must cover all other production costs plus economic returns to the enterprise.
In the example above, $2.03 per pound times 250 pounds of gain is a per-head margin of $508, which must cover costs for feed, vet/medicine, death loss, interest and daily care costs plus returns for management and unpaid labor, Peel said. Total cattle and production cost divided by ending weight provides a breakeven value that is compared to expected selling price to determine potential returns.
Cattle break-evens will vary significantly across different operations and depend heavily on the grazing cost, he said.
The market risk of stocker production is because the animal is not bought and sold at the same time, he said. The stocker purchase price is known from current market values, but the selling price depends on market changes.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $236.22 per cwt to $244.13, compared with last week’s range of $236.15 to $246.50 per cwt. FOB dressed steers and heifers went for $370.47 per cwt to $383.15, compared with $371.08 to $384.31.
The USDA choice cutout Thursday was up $2.01 per cwt at $407.86 while select was up $0.44 at $383.60. The choice/select spread widened to $24.26 from $22.69 with 57 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $428.95 per cwt, and 50% beef was $186.21.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.30 to $1.40 a bushel over the Sep corn contract, which settled at $3.87 1/4, up $0.07 1/4.
No live cattle delivery intentions were posted.
The CME Feeder Cattle Index for the seven days ended Wednesday was $347.44 per cwt, up $1.86. This compares with Thursday’s Aug contract settlement of $356.37, up $0.60.