The Newsletter, August 16, 2021
A First Look at Fall/Winter Stocker Grazing
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist
Current market conditions provide insight into fall and winter stocker grazing prospects. Feeder cattle auction prices show the current value of gain. For the last four weeks, the average price of 450 lb., medium/large no. 1 steers was $186.08/cwt. and the price of 750 pound steers was $156.31/cwt. This results in a value of gain $1.12/lb. on 300 pounds of gain. Values of stocker gain are higher this year and reflect the increased feedlot cost of gain due to high feedgrain prices. Stocker value of gain is expected to remain elevated in the coming months. The value of gain reflects the broad market environment for adding weight to feeder cattle. Actual profitability will , of course depends on actual purchase and sale prices and production costs for stockers.
Feeder futures prices at any point in time provide an indication of feeder cattle prices later. For next spring, the current March Feeder futures price is around $166 - $167/cwt. Average March Oklahoma basis for 750 pound steers is about $2.00/cwt. resulting in a current estimated March price of $168 - $169/cwt. This is well above the current price of 750 pound steers and reflects the optimism baked into future cattle market expectations. Of course, futures prices change daily and the only way to assure the current price level is to take a position on feeder futures or options.
Another question for stocker producers is the expected purchase price of stocker calves later in the fall. The price of 450-500 pound steers typically decreases seasonally from summer to an October low, dropping about 4.5 percent from August to October. This suggests a price of roughly $177/cwt, for 450 pound steers in October. However, cattle markets are trending higher and may offset the seasonal price patterns. Current October feeder futures plus average basis for calves suggests a price of 450 pound steers of roughly $196/cwt. I suspect the most likely calf price for October will be between these values, perhaps in the range from $180-$190/cwt.
The actual price of calves in Oklahoma will be affected by numerous market factors including the size and timing of fall calf marketings. Good pasture conditions could result in some delay in calf weaning and marketing this fall. Stocker prices will also be affected by the development, availability and supply of wheat pasture. Conditions may be favorable for early wheat planting but the threat of armyworms appears to be elevated this year.
Production costs are also unknown at this time, especially the cost of wheat pasture, but early budgets suggest decent return potential. It will be important reevaluate budget components frequently over time. Most components of fall and winter stocker budgets are uncertain at this point but it’s not too early to begin pencil out possibilities, evaluating risk and perhaps taking actions to lock in some budget components.
Mark Z. Johnson, Oklahoma State University Extension Beef Cattle Breeding Specialist
Regardless of when and how many calves you will wean, methods of reducing stress on fresh weaned calves is of great interest to cattlemen and of benefit to cow-calf operations. Traditional methods of weaning calves typically involve total separation of calves from cows by moving calves to a new pasture or dry lot pen. This week we address the concept of “fenceline weaning” a management process that allows fenceline contact between calf and dam for at least four to ten days following weaning. Fences need to be sturdy enough to permit nose to nose contact while preventing nursing. The objective of fenceline weaning is to allow social interaction between calf and dam while weaning the calves off of mother’s milk.
Studies have shown several benefits of fenceline weaning:
- Calves bawl and walk less for the first several days post weaning.
- Calves spend more time resting and eating during the first several days post weaning.
- Calves gain more weight in the first couple of weeks post-weaning.
- Calves that eat and drink more during the first days after weaning stay healthier.
Best Practices for Successful Fenceline Weaning
- Move the cows and leave calves in the same pasture or lot. When this is done, calves already know location of water, feed and grazing areas. If this is not possible, locate water troughs and feeders along the fenceline where calves and cows will initially congregate increasing the likelihood calves will find water and feed early on in the process, thereby minimizing walking perimeter fences.
- Avoid adding unnecessary stress like castrating, dehorning, branding or vaccinations at the time of weaning by completing these processes several weeks prior to weaning, or after weaning is complete.
- Fencing needs to be adequate. A typical five-strand barbed wire fence will usually be satisfactory. If calves are still able to nurse through the fence, adding a single strand of electric fence offset from the main fence, possibly on both sides should be adequate.
Will Small Local Locker Plants be able to Replace Lost Beef Packing Capacity?
Paul Beck, Oklahoma State University Extension Beef Cattle Nutrition Specialist
At a recent conference of the American Registry of Professional Animal Scientists there was a set of presentations entitled “Building a Resilient Food Production System in the US: What Covid-19 and other Black Swan events Exposed about Modern Food Production”.
An overview of the impacts the Covid-19 shutdown had on food production and distribution showed that only 100 days separated the announcement by China to the WHO that ‘a unique virus’ was causing hospitalization from a ‘pneumonia like disease’ in January 2020 to warnings from the CEO of a major food company that the “food supply chain is breaking” in April. The biggest problem was not the event itself, but the open-ended timeline and the unpredictability of the reaction to this event that was a shock to both supply and demand with a surge in demand and consumer stockpiling followed by decreased demand with the shutdown. A widening of the retail/wholesale spread was the result of large negative demands by packers and large positive demands by retailers, low retail meat supply and high livestock supply.
One strategy to improve supply chain resilience is to alter the current supply chain configuration, such as efforts to increase local and regional food systems, or ‘shorten the supply chain’ with smaller less specialized systems. The large centralized packing industry evolved because economies of scale and efficiency are a competitive advantage resulting in 35% reduction in per-head processing costs.
An analysis of possible changes in the beef production chain stated “If expansion is achieved through in-plant technology improvements and consumer demand driven small and medium sized plants, profitability will be more evenly distributed through the beef and cattle supply chain…” which provides affirmation to conventional wisdom. But another analysis suggests “…we are probably short one mainline 5,000 to 6,000 head capacity plant right now.”
So, will there be enough small to medium sized plants to effectively make up this shortfall? Small plants lack economies of scale, so that offal disposal, other drop credit, and hides have a net cost of disposal. Paperwork requirements for HACCP and sanitation are major obstacles, and animal care and welfare concerns are hard to address by small packers. Many of the charges for custom slaughter are not sufficient to cover these added costs. The final analysis: No, small packers cannot make up lost capacity due to loss of capacity in large plants, but yes they can meet food desires of consumers for local food and play an important role in the meat supply chain as a service to local livestock producers and communities.
Large packers are already addressing labor issues with investment in enhanced technology increasing automation. Smaller producers face competition from large packers. The success of these small local packers depends on how durable the demand by consumers is for locally produced food sources and how durable political resolve is to support small local and regional packers.