Winter Wheat Grazing Seems Profitable, If Possible

Winter wheat grazing prospects in the Plains this fall look profitable if possible, said Oklahoma State University Livestock Marketing Specialist Derrell Peel, in a letter to Extension agents called Cow-Calf Corner.

Soils in the Plains are very dry, reducing grazing prospects in dryland wheat, but current cash and futures prices offer a profitable venture, if wheat pasture is available, he said.

 

WHEAT DUSTED IN

 

In many cases wheat was being “dusted in,” planted in dry soil, hoping rain will be forthcoming to germinate the wheat.

One market analyst said dusting in wheat often pays off, especially if fields are irrigated or subsequent rains prevent or hinder further planting.

Whether wheat is planted with enough moisture to germinate or is waiting for rain to emerge, the dry soil profile means additional timely rains will be needed to sustain a wheat stand, Peel said.

This week has brought unseasonably hot temperatures across much of the Plains states, and many cities saw new daily record highs being set.  Some precipitation is coming to the Central and Northern Plains, but little to no rain for southern Kansas, Oklahoma or Texas.

 

ECONOMIC PROSPECTS

 

Peel said, the widespread drought conditions meant that he had received far fewer than the usual number of questions about the economic prospects for winter stockers this year.  Nevertheless, there may be some grazing opportunities in some places.

Stocker budgets are driven by the overall level of cattle prices and the relationship between purchase prices for lightweight stockers and the expected price of heavy feeder cattle later, Peel said.  The difference in the purchase price and selling price of stocker cattle is the rollback that determines the gross value of gain for adding weight to feeder cattle.

The stocker price rollback is the mirror image of the cost of gain for feedlots because feeder markets reflect whether it is cheaper to put weight on feeder cattle in forage-based stocker programs before they arrive at the feedlot or with grain-based rations after feedlot placement.

Southern Plains feedlot cost of gain for steers is roughly $1.25 – $1.30 a pound currently, so stocker value of gain typically will be about the same level, Peel said.

For example, using current Oklahoma feeder prices, the value of 300 pounds of gain on a 475-pound steer is $1.29 a pound, Peel said.  Moreover, for stockers that will be marketed after winter grazing, there currently is about a $7.00-per-cwt increase in feeder futures prices between the nearby and March contracts, adding even more to the value of gain.

In other words, if winter stocker grazing is possible, the budgets look attractive at this time.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $142.00 to $147.86 per cwt, compared with last week’s range of $141.00 to $145.00 FOB dressed steers, and heifers went for $222.00 to $224.35 per cwt, versus $221.34 to $227.23.

The USDA choice cutout Wednesday was down $2.51 per cwt at $249.13 while select was off $1.09 at $226.14.  The choice/select spread narrowed to $22.99 from $24.41 with 144 loads of fabricated product and 52 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 $2.65 to $2.80 a bushel over the Dec futures and for southwest Kansas were down $0.10 at $1.00 over Dec, which settled at $6.85 1/2, down $0.06 1/2.

The CME Feeder Cattle Index for the seven days ended Monday was $178.10 per cwt down $0.10.  This compares with Tuesday’s Sep contract settlement of $178.17, down $0.62.