For 500 lb steers, target purchase prices ranged from $2.50 to $2.69 per lb. This gives a reasonable range of possible purchase prices for each sized calf this spring. Normally we would use a range of $50-$150 per head, but we feel that given the high feed prices this will be more representative this year. Target purchase prices were estimated for both sizes of steers and adjusted so that gross returns over variable costs ranged from $100-$200 per head. Any of these costs could be much higher in certain situations, so producers should adjust accordingly. However, producers who sell feeders in smaller groups will pay higher commission rates which could exceed $50 per head based on the revenue assumptions of this analysis. Sale expenses (commission) are based on the assumption that cattle will be sold in larger groups and producers will pay the lower corresponding commission rate. Most of these are self-explanatory except the pasture charge, which accounts for variable costs such as bush-hogging, fertilizer, seeding clovers, etc., and is considered a bare-bones scenario. Stocking rates of 1.0 acre per 500 lb steer and 1.2 acres per 600 lb steer were assumed in arriving at these charges. Stocker operators who typically sell in smaller lots should adjust their expected sale prices downward accordingly.Įstimated costs for carrying the 500 and 600 lb steers are shown in Table 1. These sale prices are also based on the assumption that cattle are sold in lots of 40 or more head. This estimate uses a -$10 per cwt basis for an 800 lb steer and a $3 per cwt price slide. Using a $220.50 CME© futures contract price for October 2023 to estimate sale price, a 775 lb steer is estimated to sell for $2.11/b and an 875 lb steer is estimated to sell for $2.08/lb. Given these assumptions, sale weights would be 775 lbs and 875 lbs for 500 lb and 600 lb purchased calves, respectively. The interest rate used in this analysis may seem high for producers who are self-financed or have very low interest rates but is likely pretty close for those going through traditional lenders. Key assumptions for the stocker analysis are as follows: 1) Graze steers April 1 to October 15 (197 days), 1.4 lb/day gain (no grain feeding), 2% death loss, and 7% interest on the calf. Once this has been done, a better assessment can be made of what can be paid for stocker cattle this spring to build in an acceptable return to management, capital, and risk. are estimated and subtracted from the expected value of the fall feeders. Grazing costs including pasture costs, veterinary and health expenses, hauling, commission, etc. The fall CME© feeder cattle futures price (adjusted for basis) is the best way to estimate likely feeder cattle prices for fall. While it is impossible to predict where feeder cattle markets will end up this fall, producers need to estimate this and not rely on the current price (March) for 750-850 lb feeder calves. The purpose of this article is to assess the likely profitability of summer stocker programs for 2023 and establish target purchase prices for calves based on a range of return levels. Still, high calf prices have many stocker operators questioning whether profit opportunities will exist for 2023. This suggests that heavy feeder cattle prices should increase throughout 2023, which partially explains the sharp increases being seen in calf prices. It’s hard to remember a year with this much carry on the feeder cattle board between spring and fall. At the time of this writing (March 21st), fall 2023 CME© feeder cattle futures were trading around $220 per cwt, which is roughly a $25 per cwt premium over the April contract. While it is likely that some stocker operators purchased calves early, to get ahead of the seasonal spring price increase, most will place calves into stocker programs in the coming weeks. On a state average basis, a medium / large frame #1-2 steer in March has sold for over $40 per cwt more than that same steer in December. Calf prices typically increase seasonally as we move into spring but have increased at a larger-than-normal rate since the end of 2022. Spring has officially arrived in the Commonwealth, which always brings questions about stocker profitability. Kenny Burdine, Extension Professors, Livestock Marketing, University of Kentucky
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