Winter Stocker Prospects: Risk ConsiderationsWinter Stocker Prospects: Risk Considerations
Recent rains across much of Oklahoma have provided the moisture needed to plant wheat for fall and winter forage. Many producers are likely in the process of deciding how many stockers to buy and how soon.
September 24, 2010
Recent rains across much of Oklahoma have provided the moisture needed to plant wheat for fall and winter forage. Many producers are likely in the process of deciding how many stockers to buy and how soon. Buying stockers early offers the opportunity to maximize the winter grazing enterprise but involves many production and market-risk considerations.
On the other hand, waiting another month to buy stockers could have two advantages: the quantity and quality of winter forage will be known with more certainty, and seasonally lower calf prices may provide a better purchase price. Nevertheless, this year it appears there are several reasons to consider a more aggressive and early start to winter stockers, says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.
Current prices for stocker calves relative to feeder futures suggest an unusually strong margin for stocker production. It’s possible to lock in a buy-sell margin that ensures a value of gain close to $1/lb. for winter grazing. While the normal seasonal pattern is for calf prices to fall into October and November, there’s a good chance prices will fall less than usual this year and, in fact, could increase in the next 30 days if strong wheat-pasture demand materializes. Given that the market is already offering a good buy-sell margin, there appears to be less argument than usual for waiting to buy.
The production risk is still very real. While there’s current moisture to plant wheat, in most cases, additional rain will be needed to ensure adequate fall forage growth. However, many producers have had good-to-excellent forage growth this summer and have available standing forage or hay.
With the strong value of gain, it’s feasible to put together drylot or semi-confinement growing rations that provide a return for growing cattle while waiting for wheat pasture to develop or, in the worst case of no wheat pasture, to feed stockers in a growing program long enough to sell them profitably. One of the advantages of the current small rollback in feeder prices is it doesn’t require as many days for a stocker program to be economically feasible.
The inherent risks of stocker-cattle production are often magnified when trying to initiate winter stocker programs early. However, this year there appear to be rather unique opportunities to manage both the market risk and the production risk of early winter stocker purchases. Much of what we call profit in the stocker business is the return for taking risks, and it’s the taking of those calculated risks that offer the greatest return potential. The stocker business is all about taking advantage of opportunities and there are opportunities to move more quickly and more aggressively this fall.
-- OSU’s Cow-Calf Corner
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