Oklahoma Wheat Behind Schedule But Stocker Demand Remains Strong
Wheat pasture has developed relatively slowly in Oklahoma so far this fall, despite the early potential that seemed to exist after the cool, wet August in the state. USDA-NASS reported that 16 percent of Oklahoma wheat was planted by the last week of September, down from a five-year average of 25 percent for that date.
A couple of factors contributed to the delay in wheat planting. Dry top soil developed in early to mid-September, especially across the northern and northwestern parts of the state, causing some producers to delay planting. A continuing threat from armyworms also prompted some producers to delay planting. Most of Oklahoma, particularly in the wheat belt, has received significant rain recently and wheat planting will likely accelerate into early October. Subsoil moisture is generally good and established wheat should develop rapidly. Wheat is still mostly on track for a normal beginning to wheat grazing in late November to early December.
Stocker cattle prices in Oklahoma have decreased only slightly through September, showing a less than seasonal price decline. Prices have been variable from week to week with fluctuating weather conditions and futures market volatility. September prices for stocker steers and heifers averaged 14 to 18 percent higher than last year despite a 20 percent increase in feeder cattle auction volume in September compared to one year ago.
It certainly appears that stocker demand remains strong. The abundance of available pasture and hay, likely has supported stocker demand with continued expectations of good wheat grazing yet to come. It appears that significant numbers of stockers are being received and started in a variety of backgrounding programs in anticipation of winter pasture. Stocker prices may weaken seasonally with the biggest calf runs expected in the next month to six weeks but the seasonal declines may be less than typical with continued strong stocker demand.
A strong rally in Feeder futures since late August offers improved winter stocker profit potential. At current levels, March Feeder futures would allow a 750 pound steer to be priced at roughly $150/cwt. in Oklahoma. A 475 pound steer at today’s prices, would have a March 1 breakeven of $130-$137/cwt. at 750 pounds depending on pasture and other costs. Such opportunities to price in winter stocker margins are rare and generally fleeting.
Frankly, it is hard to justify current Feeder futures prices for the spring based on cattle market fundamentals and speculative moves in futures are wildly unpredictable. Producers should act promptly if these futures price levels are attractive. Remember that futures have been notoriously volatile in recent years and Feeder futures can move $11.25/cwt. in two days of limit moves. While no major cattle market weakness is foreseeable at this time, general expectations are for modestly lower cattle prices in 2018 on continued growth in cattle supplies and beef production. There is clearly more downside risk than upside potential from current levels.
