Flexibility making stocker cattle more popular
Is there opportunity in backgrounding cattle? Can money be made? These were just two of the questions addressed by a Breedlove professor of Agribusiness and Extension Livestock Marketing specialist at Oklahoma State University, during a recent stocker calf meeting in Nebraska.
Derrell Peel explained to producers that the beef production and marketing system is one of the most complex markets on the planet. “Everyone needs to recognize this is an immensely complex system. We think of ourselves in sectors like cow/calf, stocker, and feedlot operator. But at the end of the day, this industry has one job and that is to produce cattle that are ready to slaughter with characteristics that have value. We do that in separate sectors because we live in different places, know different folks, and we don’t know each other. Yet, we all operate through markets,” he said.
Of those sectors, Peel identified the stocker market as the least understood and well-designed. “Around the country, there are a lot of different ways the stocker industry operates. Basically, it involves taking a calf, highly productive at the cow/calf level, and producing it into an animal that at slaughter has value,” he said.
With the U.S. in the biggest cattle expansion phase it has undergone in the last 20 years, Peel sees some opportunities for a stocker enterprise. Expensive gain to finish cattle is pushing more and more feedlots to buy heavier stocker cattle to put those final pounds on. Peel doesn’t find the U.S. stocker ratio, which he calculates by dividing feeder supply on Jan. 1 in each state by the previous year’s calf crop in that state, to be highly accurate.
In states like Nebraska, it may be possible to get more accurate numbers because cow/calf operations are larger, and the calves sell in bigger groups. But in Oklahoma, a group of stocker calves could come from as many as 15 different owners. There is a lot of sorting and commingling. “In Oklahoma, we do a lot of calf feeding because we have a lot of crops and short grass prairie we can utilize,” Peel said. “After 40 years, I still don’t know how many stockers Oklahoma actually produces.”
What resources are available?
Producers interested in stock cattle need to ask themselves what will be produced, how much will it produce, what resources will be available to produce it, and where will it be produced? “They need to consider the production implications. One of the challenges of the stocker business is to regulate the flow of the different classes of cattle coming out of primary production, and finding the best way to market them,” he said.
The stocker enterprise is all about margins. Based on 19 years of data, research shows that traditionally the price per pound goes down as calf weight increases. “What you need to determine is at what weight does price drop off significantly,” Peel said. “What is average can change at any point in time. It can vary a lot.”
Producers also need to look at what point the weight of calf they buy is ready for the feedlot. “Managerially, the focus is different depending upon if you are growing these cattle or finishing them. If the emphasis is on growth, the focus will be more on forages, and maybe some concentrates used to supplement the forage,” he said.
Analyze profitability of each enterprise
Peel said producers need to look at the stocker enterprise separately, but many times they don’t. “When I am evaluating profitability, it is hard when you say I keep my calves as yearlings or all the way to the feedlot. On average, you will make some money some years, but where did you make that money? Did you make it at the cow-calf level, the stocker level, or at the feedlot level? That’s why you need to evaluate each enterprise separately,” he said.
Adding a stocker enterprise to an operation can add flexibility. Producers can delay entry into the feedlot by two to four months, just by what what they feed the stocker calves and controlling the rate of gain. “Stocker gains, on average, are some of the cheapest gains you have,” Peel said. “With cow/calf pairs, you have to feed the cow year around, and with feedlot cattle, gains are relatively expensive in the end to get the carcass we want,” he said.
Consider feed resources
One of the biggest advantages of stockers is the variety of feed they can utilize. “It can also be one of the biggest challenges,” Peel said. “Feeding hogs is basically the same production process. The ration stays pretty much the same. But from the time they are born, cattle are a lot more flexible in what they can be fed.”
Stocker cattle are the shock absorber for the beef industry, Peel said. “It is built around flexibility. The challenge for stocker producers is to look at a wide variety of market conditions and consider options from the forage side, grain side and inherent market conditions, and balance all of that,” he said. ❖
— Clark is a freelance livestock journalist from western Nebraska. She can be reached by email at firstname.lastname@example.org.