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stocker cattle prices require risk management

Stocker opportunity looks positive

So, far winter grazing budgets appear to provide economic incentive for growing cattle.

“There is still a likelihood that calf prices will hold steady or decline some into October, but the seasonal pressure may be muted with strong stocker demand,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “The market appears to be developing a typical fall market pattern for mid-weight steers with a sharp break on prices from 475 to 525 pounds. and prices relatively flat for steers weighing 525-700 pounds.
 
“Heifer calf prices continued a modest seasonal decline last week. Stocker producers should evaluate a range of possible purchase weights and look at steers versus heifers to determine the best purchase opportunity.”
 
With recent moisture, Peel says there’s plenty of chatter about wheat grazing prospects this winter.
 
“Budgets for winter grazing appear to pencil out quite attractively at this point. Feeder futures have remained remarkably strong, with March feeder futures trading near $153 per cwt at the end of last week,” Peel explains.
 
“With normal basis, these contract levels offer an opportunity to price spring cattle above projected break-evens for winter grazing. However, this may be a fleeting opportunity as there several factors that might drive a futures market correction. One is that current feeder price levels result in negative projected feedlot margins in coming months. The reality is that feeder cattle supplies are still plentiful.”
 
Running the numbers for Oklahoma, Peel says, given expected wheat price along with fertilizer and seed cost, the projected cost of wheat pasture (above other wheat production costs) is estimated at near $70 per acre. 
 
“The cost per pound of gain depends on cattle average daily gain, number of days of grazing and wheat pasture stocking rate. Across a range of these assumptions, wheat pasture breakeven cost calculates out to a range from 30 cents to 45 cents per pound of gain for winter grazing,” Peel says.

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