Winter Grazing Prospects

The condition of winter grazing pasture in Texas, Oklahoma, Kansas, and surrounding areas has a significant impact on market prices in the Southeast. It is directly tied to demand for calves because good pasture can support more calves while poor pasture conditions lead to fewer calves needed and lower demand. Below is analysis and commentary from Dr. Derrell Peel at Oklahoma State University discussing the impact of the current prospects of good winter pasture on current calf prices. I think it is spot-on and is a big driver of our relatively strong market prices right now. 

Winter wheat pasture continues to develop rapidly in Oklahoma.  Some pasture will be ready for grazing in the next few weeks.  As a result strong stocker cattle demand is evident.  Despite a 32 percent year over year increase in combined auction volume this past week, average Oklahoma auction prices for preferred stocker weights jumped sharply last week.  Prices for 450-500 pound, Medium/Large, number 1 steers increased $6.64/cwt. from the week before to $183.23/cwt. and prices for 500-550 pound steers were up $4.89/cwt. to 171.77/cwt.  Prices for steers under 450 pounds were mostly higher as well, compared to the previous week.  These counter-seasonal price increases sometimes happen when winter stocker demand kicks in before the fall run of calves thereby offsetting, at least in the early fall, the supply pressure that typically pushes prices to a seasonal low in October.  Oklahoma feeder prices at the end of September were generally 4 to 10 percent higher than the same time last year.

Prices for feeder steers over 650 pounds were also higher compared to the previous week.  However, prices for steers between 550 and 650 pounds declined compared to the previous week.  As a result, weekly average prices are nearly equal for steers weighing from 550 to 750 pounds: 550-600 pounds, $163.67/cwt.; 600-650 pounds, $162.80/cwt.; 650-700 pounds, $162.62/cwt.; and 700-750 pounds, $163.01/cwt.  This price pattern contrasts with the more typical pattern of higher prices for lighter weight animals.  However, this unusual feeder price pattern occurs quite commonly in Oklahoma in the fall when stocker demand supports lightweight feeder prices and feedlot demand supports heavy feeder prices leaving a hole with weak demand for the middle weight feeder animals.  In general, six-weight steers at this time of the year are too heavy to be preferred for stockers and too light for feedlots, who favor heavier placement weights to maximize the number of fed cattle that will finish against the April Live Cattle futures contract and avoid the sharp break between the April and June Live Cattle contracts.

Numerous factors will affect the likelihood of a seasonal stocker calf price low in the next month.  Supplies will grow as feeder volumes increase to a seasonal peak by early to mid-November. With the larger 2018 calf crop, the fall run of calves is expected to exceed last year.  However, demand for wheat pasture stockers may partially or totally offset increased stocker calf supplies.  I really don’t expect much more increase in stocker prices but additional increases are possible in the next couple of weeks.  As we move through October into November, feeder prices are likely to stabilize or perhaps move lower but the seasonal low may be quite muted. Recent purchase price increases have reduced the return potential for winter stockers meaning that producers should carefully budget winter stockers to guide upcoming purchases.  For cow-calf producers, recent calf price increases have added upwards of $50/head to calf value in the past six weeks or so.

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