Editor's Note: This item was prepared by Derrell S. Peel, livestock market analyst, Oklahoma State University.
Record high stocker prices this spring have producers and their lenders nervous about the financial exposure of summer stockers and rightly so.
Feeder prices have dropped the last month but the change has actually decreased the stocker margin, meaning the value of gain for summer stockers. Moreover, the changing price relationships have changed the implications for stocker production and marketing.
In mid-March, the price of 475-pound steers in OKC was about $203/cwt. which is an initial stocker value of $959 per head, using the actual weighted average prices and weights. At that time, the price of 725-pound steers was $160/cwt. or a per-head value of $1,165. This implied a value of gain of 81 cents per pound for 250 pounds of gain.
Using last week’s Oklahoma auction averages, the 475-pound steer price was $190/cwt, or $905 per head. The 725-pound steer price was $151/cwt. with a per head value of $1,095. This implies a value of gain of 76 cents pound.
Over the last month, a sharp price break has developed in the 600-700 pound weight range, such that there is currently about a $20/cwt. price break over that 100 pounds. The value of gain in that range is less than 40 cents per pound.
This means stocker gains (for steers) are being valued at 80 cents to $1 per pound up to about 600 pounds, followed by very low-value gains for the next 100 pounds or so and then by higher value gains again between 725 and 875 pounds.
Using last week’s actual prices and weights, gains up to 619 pounds were worth $1.07 per pound but the next hundred pounds, up to 726 pounds, were worth only 35 cents per pound. Gains above this level, up to 875 pounds, were worth 70-75 cents per pound.
Clearly, these price patterns have implications for summer stockers, but what are they?
The current price breaks may favor early intensive stockers, which utilize more lightweight animals and less total gain per head, compared with season-long stockers, which put on slow gains late in the summer and which would produce little value in the current market structure.
The good news is that feeder futures have not dropped as much, only down about $2.50/cwt in the past month for the August contract.
At the current time, it is still possible to lock in value of gain in the mid-$80/cwt. range. Summer stockers have potential for decent returns but market conditions may have implications for both production and marketing considerations.