Good Opportunities for Winter Wheat Grazing

There appears to be considerable interest and excitement about winter wheat grazing this year. The September 11 USDA-NASS Crop Progress report shows 2 percent of Oklahoma winter wheat planted, equal to the previous five-year average for that date. Planting progress may jump sharply in the coming days. Anecdotal indications are that many producers are preparing to plant winter wheat soon, some waiting for wet conditions to dry down and permit planting. I have received some reports of fall armyworms damaging pastures and hay fields; armyworms may be a significant threat to early planted wheat.

Despite seasonal tendencies for lower prices, prices for Oklahoma steers under 500 pounds increased last week. This sometimes happens when demand for stockers outpaces the fall run of calves coming to town in September. There is still a likelihood that calf prices will hold steady or decline some into October but the seasonal pressure may be muted with strong stocker demand. The market appears to be developing a typical fall market pattern for mid-weight steers with a sharp break on prices from 475 to 525 pounds and prices relatively flat for steers weighing 525-700 pounds. Heifer calf prices continued a modest seasonal decline last week. Stocker producers should evaluate a range of possible purchase weights and look at steers versus heifers to determine the best purchase opportunity.

Budgets for winter grazing appear to pencil out quite attractively at this point. Feeder futures have remained remarkably strong, with March feeder futures trading near $153/cwt. at the end of last week. With normal basis, these contract levels offer an opportunity to price spring cattle above projected breakevens for winter grazing. However, this may be a fleeting opportunity as there several factors that might drive a futures market correction. One is that current feeder price levels result in negative projected feedlot margins in coming months. The reality is that feeder cattle supplies are still plentiful and the September cattle on feed report, due out on September 21, could indicate a large feedlot placement level with implications for spring feeder markets.

Cost of wheat pasture is a major factor in winter grazing budgets. The market for wheat pasture is always difficult to determine and this year, with potentially strong demand for wheat pasture matching up against potentially abundant wheat pasture supplies, is no exception. This makes it challenging to anticipate wheat pasture rental rates. However, wheat pasture owners can budget the breakeven cost of providing wheat pasture based on seeding and fertilizer adjustments needed for grazing as well as expected loss of wheat yield to grazing. For dual-purpose wheat, research shows that winter grazing decreases wheat yields by about six bushels per acre on average. This average is quite variable from year to year. Given expected wheat price along with fertilizer and seed cost, the projected cost of wheat pasture (above other wheat production costs) is estimated at near $70/acre. The cost per pound of gain depends on cattle average daily gain, number of days of grazing and wheat pasture stocking rate. Across a range of these assumptions, wheat pasture breakeven cost calculates out to a range from $0.30 to $0.45/lb. gain for winter grazing.