WINTER GRAZING PROSPECTS
By Terrel Platt CattleFax Analyst
MARKET UPDATE
As the fall calf run gets underway , calf prices have moved seasonally lower with the average price of a 550-lb steer calf averaging around $ 285 / cwt . Prices are well below the record highs noted in the spot and video markets through the summer which averaged near $ 325 / cwt . The seasonal decrease was expediated by the four- to six-week break in the cattle futures complex from early August to mid- September which put pressure on feeder and calf values .
Futures have staged a solid recovery , and supply of calves this fall is expected to reflect the reduction in the calf crop in the last several years which should provide a layer of support . Additionally , as weaned calves begin to make up a larger portion of the supply , prices should find additional support on stronger demand .
Although calf values are expected to be supported near current levels , producers have
$/ Head
$ 275 $ 250 $ 225 $ 200 $ 175 $ 150 $ 125 $ 100 $ 75 $ 50 $ 25 $ - $( 25 ) $( 50 ) $( 75 ) $( 100 )
Source : CattleFax
the choice of marketing cattle across the next two to three months but may want to evaluate the potential for adding revenue by extending ownership via backgrounding or winter grazing . The past three years have resulted in an average net margin increase of $ 159 / head as cost of gain values remained manageable and feeder cattle prices moved cyclically higher . However , current calf prices relative to the feeder cattle index are historically high with calves holding a 17 % premium compared to a long-run average of 10 %. This indicates that
despite the recent decline in calf prices , calves are still relatively expensive to feeder prices . Furthermore , basis has remained positive against the March feeder cattle futures contract which is a notable contrast to both 2022 and 2023 when futures were pricing in a premium for March marketings .
The lack of premium structure in the spring feeders is a function of the deferred live cattle futures as they continue to look towards cash leadership . If deferred live cattle continue to trade at a discount to the spot cash fed market , upside on spring feeder contracts may remain limited between $ 240 to $ 250 .
Even so , the projected margin for winter grazing is around $ 88 / head assuming a $ 0.90 / lb cost of gain when taking a 500-lb steer to 750 lbs at a $ 245 sales price . While this margin is narrower than the past few years , it still may be a worthwhile option for producers to consider .
Bottom Line : The current market structure suggests winter grazing and backgrounding likely offer positive returns this year , although narrower than recent years . Given the volatility in the futures complex has yet to abate , producers should also consider risk management strategies if electing to retain calves through the winter .
Stocker Cattle Profitability Winter Grazing Program
Year
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