Stocker value of gain incentive is shifting

Lower cost of feedlot gain is increasing incentive for stocker producers to market lighter calves and turn them quicker.

“Stocker producers grazing out wheat or looking ahead to summer stocker grazing should carefully evaluate production and marketing plans with respect to purchase weight, enterprise length and sale weight of stocker cattle,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Until or unless feed grain prices increase significantly, stocker margins will generally be squeezed; though seasonal opportunities will continue to be offered in the market.”

Peel’s recommendation is based on the fact that until recently, the equilibrium between feedlot cost of gain and stocker value of gain—about equivalent over time and on average—was out of whack.

“Record feed grain supplies and low feed prices were not fully reflected in lightweight feeder cattle prices in the second half of 2016 and into early 2017.  However, feeder prices in the past month or so have increasingly adjusted

to reflect the continued reduction in feedlot cost of gain,” Peel says.

Source: BEEF