Stocker grazing programs for 2001 look like a profitable enterprise – if you already own the cattle. Buying cattle from now forward, however, will reduce your profit opportunities due to the expected “grass fever” price rally on stocker cattle that’s already started.

Abundant winter moisture throughout most of the major grazing areas means forage production will be excellent, at least during the early season. And the bull market found across all classes of cattle this winter has made most stocker operators optimistic about the potential for grass profits. The key limiting factor to those profits this spring will be the competition for a smaller supply of available cattle. Feeder cattle numbers are at extremely low levels, and some analysts believe they ae at all-time lows. At the same time, national feelot capacity has grown rapidly over the last few years to historically high levels. Those factors suggest that prices for grazing type cattle could see a significant rally this spring as competition for stockers increases.

According to Drovers 50-market auction summary, steers weighing 400 to 500 pounds averaged $107.88 per hundredweight during February. That’s an increase of $3.20 per hundredweight since December. Additionally, those prices are national averages, which could be several dollars lower than what you find locally. For instance, the range of prices for 400 to 500 pound steers was $103 to $122.50 per hundredweight at Dodge City, Kan., the last week of February. That would mean that average grazing type steers would cost $110 to $112 per hundredweight at that auction.

If you’re building a budget for grazing steers, starting costs for a 450-pound stocker will likely exceed $500 per head. Just the interest on that animal, assuming you maintain a 25 percent equity, will be $2.50 per month at 9 percent. But even with those relatively high fixed costs, a stocker grazing program can be a profitable enterprise this summer.

Historical price data suggest that stocker-feeder prices will decline 10 percent to 12 percent from the spring highs to the summer lows. But that price decline should be significantly less during years when the cattle cycle produces low numbers and higher prices. So analysts expect 2001 could produce a smaller than average decline in prices from the spring highs to the summer lows. And that has been true for the past two years, as supplies have declined. For instance, prices recorded in the Drovers 50-market auction summary found relatively small declines from March to August in both 1999 and 2000. In 1999, steers 400 to 500 pounds declined just $1.06 per hundredweight from March to August, while yearling steers 600 to 700 pounds actually increased $1.63 per hundredweight. Last year the light steers declined $2.58 per hundredweight while the yearlings increased $0.66 per hundredweight from March to August.

Your decisions about a stocker grazing program, however, must consider factors other than historical price trends. For instance, analysts believe that feedyard placements against the summer market could be record large this year. Winter weather and poor feedyard performance have limited fed cattle supplies and beef production, which has helped concentrate the number of fed cattle expected to be shipped in May, June and July. That will pressure fed cattle prices this summer, and, in turn, will negatively impact stocker and feeder prices.

Grain production in 2001 will also create an impact on demand for feeder cattle this fall. Any reduction in normal production due to weather could drive grain prices higher and negatively impact the price of feeder cattle.

Overall, the prospect for stocker grazing programs remains positive. But producers need to be prepared with flexible marketing options this summer and fall if prices move contrary to expected trends.