Farm Talk

September 5, 2012

Rain raises wheat pasture prospects

by Derrell S. Peel
CNHI

Parsons, Kansas — Much of Oklahoma has received some rain the past ten days, with a broad swath of the state receiving significant rain this past weekend. Recent rain totals vary from less than one inch up to about three inches. Moisture combined with cooler temperatures (and cooler soil temperatures) has wheat producers thinking about planting wheat for grazing. While conditions are developing favorably at this time, additional timely moisture will be needed to make wheat pasture a reality. Nevertheless, some wheat planting could begin in the next couple of weeks.

Market conditions for winter grazing appear to be favorable as well, though producers may need to consider stocker enterprises that are somewhat different than the traditional stocker system. Historically, there is a strong preference for very lightweight stockers in Oklahoma, with many stocker calves purchased in the 375-500 pound range. With typical winter gains, this often results in feeders marketed in late February or early March at weights ranging from 675 to 750 pounds. This system worked well in the past and, in fact was often the most economical stocker alternative. Cattle markets have changed dramatically and may make this system much less attractive if not infeasible this year.

The 2012 drought reduced feeder prices this summer with impacts expected to continue until next summer due to high grain prices. Lightweight calf and stocker prices dropped sharply through July but have bounced back strongly in the past two weeks. Four-weight steer prices in Oklahoma have increased about $15/cwt. since the end of July. Heavy feeder prices dropped less than calves but have recovered only about $4/cwt. in the past month.

The result is a feeder price pattern that has again developed the increasingly familiar bent shape reflecting sharp price decreases from calves to middle weight feeders then small price decreases from middle weights to heavy feeders. This past week, Oklahoma steer prices indicated a $39/cwt. price decrease from 425 pounds to 625 pounds but only a $3.50/cwt. price decrease from 625 pounds to 825 pounds. This feeder price pattern is consistent with the small feeder inventories that keep calf prices high combined with high grain prices that force a high value of gain and encourage more weight on feeders prior to feedlot placement.

If the current price patterns persist, the traditional four-weight steer has a very low value of gain for the first two hundred pounds of gain that is only partially overcome if the animal is grown to heavy feeder weight. By contrast, a heavier beginning weight of 575 to 625 pounds has a value of gain well over a dollar a pound from the beginning of stocker production. With typical winter gains, these animals will be marketed from 800 to 850 pounds in the spring.

The prospect of winter grazing will likely increase demand for lightweight stockers with prices remaining strong or going higher. At the same time, high feedlot cost of gain and the likelihood of continued cattle feeding losses means that upward price potential for middle and heavy weight feeders is limited. It is possible that feedlot cost of gain could get high enough to cause feeder prices to invert with the lowest prices likely for middleweight feeders (roughly 600 pounds) and higher prices for lightweight and heavyweight feeders. The current cattle market conditions open up more stocker production possibilities in terms of a wider range of beginning weights and heavier ending weights. It is important for stocker producers to explore an expanded array of stocker production possibilities in light of these very dynamic market conditions.£