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Wheat Shift

Used to be, the primary question concerning wheat pasture was whether or not Mother Nature would make a crop. Now the questions are as much about whether wheat growers are willing to let cattle graze it and who wants to put cattle on it. In the past, people who owned wheat in this part of the world looked for cattle to run anywhere they could find them. I don't know that I can say that today, says

Used to be, the primary question concerning wheat pasture was whether or not Mother Nature would make a crop. Now the questions are as much about whether wheat growers are willing to let cattle graze it and who wants to put cattle on it.

“In the past, people who owned wheat in this part of the world looked for cattle to run anywhere they could find them. I don't know that I can say that today,” says Stan Bevers, Texas A&M University Extension beef economist. He's based at Vernon, TX amid the Rolling Plains, where wheat pasture on both sides of the Red River has been a stocker staple ever since folks figured out how well wheat grazing worked by the early 1970s.

Wheat prices are changing that.

As wheat and soybean markets compete to buy acres away from the corn market, cash wheat prices were around $6/bu. in this part of the world in September. Besides the increasing raw value of wheat, generally speaking, Bevers explains growing winter wheat as a dual-purpose crop — grazing it early, then harvesting — costs about 5 bu./acre in yield.

“Folks in this part of the country are having to choose whether they will be a wheat producer or a stocker producer,” Bevers says. “They're either deciding that, or they'll default to tradition. Economics are saying tradition may not be the correct choice… With the feeder board where it's at in April (this was in September), I can make that work if I own the cattle I'm grazing, but not as well taking cattle in on a gain basis.”

Further north, Greg Highfill, an Oklahoma State University (OSU) Extension area livestock specialist based at Enid, is seeing the same thing, to a point. “With wheat prices increasing, a few people won't necessarily turn cattle out on it like they have in the past. I'd say we'll see a slight reduction in cattle numbers,” Highfill says. Of course, compared to last year, when wheat pasture was next to nonexistent, it could look like a bumper crop given the moisture available heading into planting.

Where wheat pasture is available, its price is rising. For years, wheat pasture cost 35-40¢/lb. of gain in the Rolling Plains. Bevers says it's costing at least a dime more this fall. Prices have increased proportionally for the other common methods — leasing out the acres, or assessing a price per hundredweight per month, based on in-weight. Highfill is also hearing of prices in the 50¢ range.

“The tremendously high price of fertilizer probably has as much to do with wheat growers deciding not to take in cattle as anything,” Highfill explains. “If you don't graze it, you don't have to replace the nitrogen. Plus, you don't have to worry about termination dates and when to get cattle off to make a crop.”

Though Highfill says there's more competition for summer crops on ground that has traditionally been grazed, he also points out that, in this western part of the state, those opportunities are limited because of the soil and normal rainfall.

Cattle owners have changed

At the same time, demand for wheat pasture has shifted, too.

“We're just sitting and waiting,” says A.L. Hutson of Duncan, OK, a veteran stocker operator in the heart of wheat- pasture country. Between dry weather and armyworms, his optimism was flagging for much wheat pasture this year.

“But I don't see a lot of cattle, either,” Hutson adds. He knows of pasture deals trading for 40-45¢/lb. of gain. Further south he's heard of prices as high as 55¢. “If you take cattle somewhere willing to limit-feed, even with corn prices where they're at, you can get cost of gain in the low 50's. I'd rather do that than pay 55-60¢ for wheat pasture, because there isn't as much risk.”

For perspective, Derrell Peel, OSU Extension livestock marketing specialist, put together a sample budget in September for folks considering grazing their own wheat or someone else's. In simple terms, 450-lb. steers at $134/cwt. purchase price, gaining 2 lbs./day and grazing wheat November to March could have been hedged on the March futures for about a $20 return. But that was figuring a more traditional 40¢/lb. cost of gain. The budget also assumed 2% death loss and $12/head in health costs, neither a sure bet.

Plus, it's not like wheat pasture is easy.

“Getting the stocking rate right is the key to optimizing returns from grazing wheat pasture,” Highfill says. It grows so rapidly, you can go from an optimum stocking rate to being under-stocked in the blink of an eye. The clock is always ticking, too, as wheat producers look to get cattle off by the first hollow-stem stage of plant growth.

In fact, Bevers says recent years have given rise to a cottage industry of sorts. Some owners of wheat ground hire folks to ride and check the cattle. When you pay to graze, it's common for day-to-day care to be part of the deal, with the cattle owner standing a negotiated percentage death loss, and the landowner standing anything beyond that.

Hutson remembers that virtually all the stocker cattle grazing wheat pasture 20 years ago were either owned by the owners of the wheat ground or by their neighbors who contracted with them to grow them out. He estimates no more than 25% of the cattle are owned by them now. “The demand is still there for wheat pasture, but I don't think it's as broad as it was 10 years ago,” Hutson says.

“These days, people willing to put cattle out on wheat tend to be the larger stocker operations and cattle feeding organizations,” Bevers says.

“For the most part, a lot of larger cattle-feeding organizations and a few large individual stocker operations own the cattle. I think that's one reason why we don't see the runs of cattle we think we ought to see,” Hutson says. There may still be some pop in the calf market when wheat pasture prospects come into view, but it pales compared to the price explosion of old.

“By far, there's more specialization today,” Highfill says. “The producers here that run cattle on wheat tend to run larger sets of cattle and specialize in straightening out and growing cattle. That versus even five years ago, when a guy who owned wheat would buy a few hundred head, straighten them out and run them on his own.”

According to Bevers, “The other thing that's driven fewer wheat-pasture cattle is the higher calf weaning weights in the industry. Feedlots figured out a calf didn't have to weigh 750 lbs. coming to the feedlot, so there's been more competition for the lighter calves.”

Hutson concurs. “The industry has continued to place a lot of light calves on feed, even in the face of relatively expensive corn,” he explains. “I think the bigger operations prefer wheat pasture because they're targeting a market window and, in years past, wheat pasture has been a relatively cheap place to stockpile cattle. But I don't think they have to put them out on wheat to do that.” He explains feedlots are able to exploit limit-feeding more effectively than stocker operators running on forage.

Plenty of unknowns

This dynamic deserves some study as competition increases for fewer cattle numbers in general, while feed prices and cost of gain appear to favor more days outside the feedlot and fewer in it when forage is available. That hasn't happened across the board yet, in part because of the economics Hutson alludes to.

Plus, the dynamics of wheat pasture production are in flux, too.

“One thing we don't know enough about yet is what no-till wheat production will do to available forage,” Hutson says. Compared to conventional-till practices, little is known about how no-till impacts such things as nitrogen management, soil moisture and the subsequent impact on forage growth or grain yield and quality. Hutson's point is that research in that area is currently lacking. Incidentally, he also spent three decades as an OSU area agricultural economics specialist.

One thing that remains the same with grazing cattle on dual-purpose winter wheat is the diversification it offers wheat producers.

“A number of growers around here weren't able to harvest an acre of wheat last year because of flooding. Some of those would have gladly traded a few bushels of wheat yield loss for cattle grazing income earlier in the year,” says Highfill.

Or, as Bevers says, “Cattle hold up a lot better in a hailstorm than wheat does.”

TAGS: Feed Livestock