Fall Feeder Markets and Stocker Prospects
Oklahoma feeder cattle prices averaged nearly four percent above one year ago in the first week of August with calf prices increasing from the previous week. Feeder prices are holding strong despite continued growth in feeder cattle supplies. Combined Oklahoma feeder auction totals have averaged 13 percent higher year over year since early July. National data for feeder and stocker cattle sales in the month of July were seven percent over last year. The July Cattle report estimated the 2018 calf crop nearly two percent higher than 2017. Estimated feeder supplies on July 1 were 0.5 percent higher than one year ago. All indications are that fall feeder markets will feature a calf run larger than last year and abundant feeder supplies.
Prices for feeder cattle typically decline seasonally for all weight classes after August. Calf and stockers up to 600 pounds (which peak in March) typically have a seasonal low price in October while heavier feeder cattle decline from an August peak lower through the end of the year. On average, feeder cattle prices decline four to five percent from August to lows in the fourth quarter.
Will feeder markets follow seasonal patterns this fall? With the ample supplies described above, there is plenty of supply pressure to expect seasonal price declines or more this fall. However, feeder cattle demand will be the key. Stocker demand will be the key to calf prices and that will largely be determined by forage conditions. In the Southern Plains, stocker cattle demand for winter wheat grazing plays a big role in seasonal demand to offset large seasonal supplies of calves in the fall. The current Drought Monitor shows widespread moderate to extreme drought conditions in western Oklahoma. However, an unseasonal cool, wet weather pattern is in place in Oklahoma with more rain expected in coming days. In general, moisture conditions are quite variable across most of the wheat belt in Oklahoma. Cooler than average temperatures is resulting in cooler soil temperatures which may support early wheat planting after Labor Day.
Forage conditions will determine the ability of stocker producers to demand stocker cattle but it is economic conditions that will determine the willingness of producers to purchase stockers for winter grazing. Current markets may suggest opportunities for stockers or backgrounding this fall. For example, combined Oklahoma feeder auction prices in the first week of August for 465 pound steers (Medium/Large Number 1) were $171.59/cwt. and price of 774 pound steers at $150.65/cwt. This results in a value of gain of $1.19/pound on 309 pounds of gain, calculated as [(7.74 x 150.65 – 4.65 x 171.59)/(774-465)]. Value of gain for added feeder cattle weight is largely a reflection of feedlot demand for feeder cattle of various weights. A value of gain at this level indicates relatively less feedlot demand for lightweight feeders and is an economic signal for increased stocker production. If feeder cattle prices maintain a similar price relationship into the fall and forage conditions are good, fall feeder markets may follow seasonal price patterns rather closely.
