Cattle and beef markets have strengthened in October despite the uncertainty of the past couple of weeks. Feeder and fed cattle prices, along with boxed beef have all advanced compared to pre-shutdown reports with fed cattle showing the strongest relative increase. By the end of this week many of the data holes may be filled in with a clearer picture of slaughter, carcass weights and beef production.
Feeder markets continue to offer high value of gain for stocker production. Though the high absolute price levels for stocker calves is scary for buyers and their lenders, the combination of high price levels and relatively little price rollback means that the value of putting weight on feeder cattle remains very high, in fact, well above what I would expect to see longer term.
Last week, based on reported feeder prices at the Joplin Regional Stockyards, a 476 pound, medium/large frame steer could be purchased for $181.38.cwt. or $863.37/head. Or, a 567 pound steer was priced at $172.68/cwt. or $979.10/head. Notice that the additional 91 pounds of beginning weight only cost $1.27/lb., an important consideration as producers decide what weight to begin the stocker enterprise.
For dual-purpose wheat, winter stocker will be marketed in late February or early March which allows for roughly 120 days of grazing and roughly 250 pounds of gain. That takes the 476 pound steer to 726 pounds, currently at $164.95/cwt. or $1197.54/head. The difference in value per head is a $334.17 gross margin or a value of gain of $1.34/lb. By comparison, the reported price for an 823 pound steer, which is 256 pounds of gain on the 567 pound beginning weight, is $159.75/cwt. or $1314.74/head. This results in a gross margin of $334.64/head or $1.31/lb. There are many combinations of beginning weight and total gain for either dual-purpose winter stockers or graze-out steers marketed in May. In all cases the current value of gain is in the range of $.25-$1.35/lb. of gain. Perhaps most important, current feeder cattle futures prices for March and May would allow hedging with expected selling prices that are at or a bit higher than these current cash prices. Regarding the purchase prices, we would typically expect to see seasonally low calf and stocker prices in the next month; however, I don’t expect to see much seasonal weakness given the current market situation. In fact, strong feedlot and stocker demand may result in limited counter-seasonal strength in feeder cattle prices into November.