News and views on stocker segment issues from BEEF magazine.
September 12, 2005 A PRIMEDIA Property
Learn How To Become A Low-Cost Producer

Katrina Brought Some Needed Rain, Too

Calculating Stocker Profit Potential

Spreading The Risk This Fall

USDA Database Ruling Changes The ID Landscape

Cattle Markets Weather Katrina

KSU Stocker Conference This Week

Feeders And Fed Cattle Prices Are Up

Questions & Comments

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Production Efficiency
Learn How To Become A Low-Cost Producer
Learn how to become an efficient low-cost cattle producer by attending the Jim Gerrish Hands-On Management-Intensive Grazing School. Set for Sept. 27-30 at North Star Land & Cattle in Winona, TX, the workshop will cover such topics as year-round grazing, contract grazing, fertility management, grazing-cell design, pasture finishing, balancing animal demand and forage supply, managing for a variable stocking rate, pasture improvement, fence and water development, marketing strategies, and much more.

The workshop faculty includes: Jim Gerrish, former lead pasture researcher at the University of Missouri's Forage Systems Research Center in Linneus; John Sattler and Doug Behm of North Star Land & Cattle; Gerald Evers, Texas A&M University-Overton professor of forage management; and fence builder and cowhand Ian Gerrish.

The program begins at 8:30 a.m., Sept. 27, and winds up at 3 p.m., Sept. 30. For more info, a full agenda, or to register, visit: and click on "Grazing Schools;" or email or call 208/876-4067.

Weather And Crops
Katrina Brought Some Needed Rain, Too
The force and destruction wrought by Hurricane Katrina dominated the crop and weather picture for the week ending Sept. 4. Folks along the Gulf Coast -- primarily Louisiana, Mississippi and parts of Alabama -- were battered by one of the strongest hurricanes to ever come ashore in the U.S.

For many in those areas, sadly, life will never be the same. As always seems to be the case in ag, though, there were beneficiaries of the climatic misfortune.

Specifically, the eastern Corn Belt and Ohio Valley picked up some needed moisture as the storm spawned heavy rains clear up to New England.

For the week ending Sept. 4, according to the National Agricultural Statistics Service:
  • 96% of the corn was at or beyond dough stage, 11% ahead of last year and 3% ahead of normal. The crop is at maturity on 20% of the corn acreage, which is 4% ahead of last year but 2% behind the five-year average. 51% is reported to be in good or excellent condition, compared to 69% last year.
  • 15% of the soybeans are dropping leaves, 1% ahead of last year and even with the five-year average. Progress is ahead of normal in the Southeast, but lagging behind usual in much of the Corn Belt and Great Plains. Just over half the crop (54%) is reported to be in good or excellent condition, compared to 62% last year.
  • 90% of the barley is in the bin, compared to 75% in 2004 and 85% for the five-year average.
  • Sorghum advanced to 96% -- 5% ahead of last year and 3% ahead of normal; 47% of the crop is reported to be in good or excellent condition, compared to 64% last year.
  • Pasture and range conditions held basically steady with last week as 34% rated as good or excellent, compared to 51% last year; 66% is rated fair or better, compared to 77% last year.
  • On the other end, 34% is rated as poor or very poor, compared to 23% last year.
States ranking at least 40% of their pastures and rangelands as poor or very poor include: Arizona (44%); Arkansas (68%); California (85%); Illinois (56%); Iowa (40%); Louisiana (48%); Missouri (59%); Pennsylvania (62%); and Wisconsin (42%).

On the other end of the spectrum, states reporting half or more of their pasture and range in good or excellent condition: Alabama (79%); Florida (55%); Georgia (78%); Maine (73%); Maryland (51%); Nevada (88%); North Carolina (64%); North Dakota (62%); South Carolina (71%); and Utah (77%).


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Calculating Stocker Profit Potential
"Buy 'em right. Feed 'em right. Sell 'em right." That's the advice most stocker operators grew up with, says Walt Prevatt, Auburn University Extension economist. And it holds true today, though he explains a more detailed version using contemporary lingo would be: "Identify and buy under-valued stockers. Minimize health problems and death loss. Provide high quality, low cost feed. Achieve reasonable weight gains of at least 300 lbs. Market them as feeders for their full value."

There's plenty of ways to skin this proverbial cat, too. But there are only a handful of methods to determine the potential profitability of skinning the cat a particular way. That's what Prevatt shared with producers attending the recent triennial stocker conference at Auburn.

First, there's the typical enterprise-analysis approach where you can account for all of the details, plug in specifics and see whether you'd be buying a profit or a loss. An interactive electronic worksheet for this is available at

Next, Prevatt shared a breakeven calculator (available at the same site) that lets you input in-weight, days stockered, anticipated daily gain, death loss, shrink and desired profit per head. Then you can input and figure breakevens for three different purchase costs and three different cost-of-gain levels all at once.

Another electronic worksheet at the site calculates the maximum price you can afford to pay for a stocker. You input the information above, plus interest rate, futures price for feeder cattle and the basis. In a single shot, you can then solve for the maximum purchase price based on three levels of cost of gain and three desired profit levels at the same time.

Prevatt also walked stockers through the approach of calculating and using the expected cash market price of stockers (basis + futures) in order to set and accept a price objective.

Bottom line, it's well worth checking out the Web site and playing around with the worksheets. You'll also find Prevatt's presentation from the conference there, as well.

Spreading The Risk This Fall
What's a stocker to do with calf prices higher than the moon's sun, freight cost on the rise and the futures market without hedge opportunity?

"Buy some early, take others in on gain and let someone else carry part of the risk." That's what Derrell Peel, Oklahoma State University Extension livestock economist, has been suggesting to area operators.

"Stocker cattle scare me this fall. We're in the same position we were in last fall, except fed cattle are already losing money instead of us anticipating they'd lose money," Peel says. "Calves at $1.50 work when you can sell them as feeders at $1.18, but they don't work if they bring $1.02 or $1.03. That's how vulnerable feeder prices could be after January 1."

Peel had the same concerns last fall. Sure enough, feeder prices went down, but then they rebounded counter-seasonally. Sooner or later, even tight supplies can't overcome raw fundamentals, though.

"The Canadian situation with BSE really bought us 18 months of invulnerability to market shocks, and we've spent most of it... The feeder markets have been oblivious to the realities of those for fed cattle and meat," Peel says.

He points out seven-weight steers the first of September were $31/cwt. higher than the January and February fed-cattle contracts they would be hedged against if the incongruous economics made hedging possible.

"We've really been bulletproof up to now, but there will come a day of reckoning," Peel says. "I do think the industry has achieved a new and higher price plane, but you can't get around the fundamental reality that sooner or later the feeder and fed cattle markets have to start running together again."

USDA Database Ruling Changes The ID Landscape
"We are gratified by the growing support for an animal identification system, with over 100,000 premises now registered," said Secretary of Agriculture Mike Johanns Aug. 30. "We are eager to work closely with industry as they develop and maintain databases that contain animal movement information. After hearing the confidentiality concerns of producers, we envision a system that allows these databases to feed a single, privately held animal-tracking repository that we can access."

Just like that, USDA did a complete about-face on its previously stated intention to make the database for the National Animal Identification System (NAIS) the sole domain of government.

Allowing private industry to build and maintain the NAIS database -- something some producer groups such as the National Cattlemen's Beef Association have been pushing for -- may be a key step in pushing the stalled NAIS effort forward. At least it begins answering some producers' questions regarding how to exploit the market potential of mandatory ID without replicating a proprietary database maintained by government.

Perhaps signaling as much (or maybe just coincidentally), within a week of the announcement, AgInfoLink, a leading animal traceability service firm, purchased Animal Permanent Electronic Identification System (APEIS), another animal traceability service company begun in 1991. That's the first significant visible jockeying among animal ID players in more than a year.

USDA says it will host a meeting this fall to clarify its expectations for the private tracking system, including user requirements and system specifications. Of course, the industry is still waiting for USDA to release final NAIS rules, which many expected months ago. So, the immovable object may be emerging from the hibernation of politics and indecision, but the pace is still more sluggish than an earthworm in a blizzard.


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Special Report
Cattle Markets Weather Katrina
Hurricane Katrina. The biggest natural disaster in U.S. history --untold lives lost and more than an estimated $25 billion of insured losses and counting.

Hurricane Katrina. The biggest displacement of U.S. citizens since the Civil War -- more than a million evacuated one way or the other with no jobs or homes to return to.

All that, and there should be little, if any, impact on the cattle market. In fact, damage incurred by the hurricane is actually favorable to cattle prices in the short term.

The irony of disasters. Obviously, the storm wrought tremendous ag sector damage. In early estimates, the American Farm Bureau (AFB) pegs it at $2 billion. So far, it appears the ag sectors hit hardest directly are dairy, poultry, sugarcane and cotton. While there were some beef and dairy cattle lost -- a high percentage of these in certain parishes, according to reports -- their cash value may pale compared to the rivers of milk dairy producers had to dump because of lost power.

Likewise, while some poultry were lost, it was the temporary closure of processing facilities and lost product -- frozen inventory sweltering without electricity -- that rang the cash register earliest. Tyson Foods for example, estimated its loss last week at $10-$20 million, including live-bird inventory, temporary closure of processing in Mississippi, and loss of frozen products stored in Louisiana and Mississippi.

As for crops, cotton and cane farmers were as worried about the quality they would find in their field after damaging winds and rain as they were about the actual quantity.

Really, the primary short-term economic threat to ag was the disruption of grain export service in the lower Mississippi and in the Port of New Orleans, where AFB says 60% of all domestic corn and soybean exports originate. Within a week of the disaster, though, USDA reported operational capacity of the elevators and floating rigs for loading grain from river barges to ships was back to 63% capacity.

Moreover, many private analysts were predicting the soybean and corn crops to beat the already-buoyant forecasts of USDA, which could further depress prices of those commodities.

So, the worst thing a disruption in grain exports can do to cattle prices is help them. Likewise, any significant damage to the poultry industry would likely raise poultry prices, which would also benefit the cattle market.

Beware the toll on consumer demand. Longer term is where beef and cattle prices might be more vulnerable than many other commodities. That's due to the impact Katrina may ultimately have on consumer buying power.

Energy prices were already threatening the nation's economic growth before Katrina came along. Even if the Gulf refineries and infrastructure resume operations quickly and at capacity, there's no reason to believe consumers won't have to spend more money on gas, heating and cooling than a year ago.

Likewise, Hurricane Katrina will probably increase prices in other areas -- everything from construction supplies and services to insurance and business travel. That's in addition to the money the nation and communities are spending to accommodate the tragedy. These are funds that either drain other programs and services or must be recouped from the public in some way. In each case, that's more consumer money that won't be left for buying beef.

Moreover, when consumers do buy beef, they may be paying more for it since rising fuel costs impact the production side of the business, too.

Incidentally, fuel prices rise could have a dramatic impact on cattle prices, relative to the cost of freight, depending on how high they go. Mike Miller, Cattle-Fax director of research and development, says the cost of freight has increased by a third during the past 18 months.

Not long ago, folks could get all the cattle hauled they wanted from the Southeast to the Central Plains for $2.50/loaded mile. Now, there are reports it's taking $3. Increase the cost of freight per loaded mile by 50-75 cents, and Miller says it reduces feeder cattle prices $3-$5/cwt. You're also talking about erosion in basis for cattle producers in that region.

It's not that the cattle market should unravel anytime soon, but Katrina's impacts have the potential to accelerate the transition from the high side of the price cycle to the declining side.

KSU Stocker Conference This Week
You still have a few days to get to Manhattan, KS, for the annual Kansas State University Stocker Conference, Sept. 15. On tap this year:
  • "Traceability and the Brand Premise: Making Stocker Operations Fit in the Equation," presented by Leann Saunders, IMI Global.
  • "Tomorrow's Stocker Program: Will Pre-Conditioning Fit?" presented by John Butler, Merial, Ltd.
  • "Legal Issues Facing Stocker Operations," presented by Allie Devine, Kansas Livestock Association.
  • "Dealing with Weight Variation -- The Swine Industry Perspective," presented by Mike Tokach, Kansas State University (KSU).
  • "Strategic Use of Antibiotics in Stocker Operations," presented by Mike Apley, DVM, KSU.
The conference, sponsored this year by Merial, begins with registration at 9:30 a.m., at the Holiday Inn-Holidome in Manhattan. It concludes that day with a tour of KSU's new Beef Stocker Unit facilities, followed by a barbeque.

Registration is $30 at the door. To learn more, call 785-532-1267.


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Feeders And Fed Cattle Prices Are Up
A robust national economy is a wondrous thing! At least in the short run, both the Chicago Board and Wall Street seemed to shrug off worries about inflated oil prices and Hurricane recovery by the end of last week.

Between declines in the grain markets and a move forward in the fed market, feeder cattle sold steady to $2 higher last week, with calves picking up $2-$5 in some areas; that in a week shortened by the Labor Day festivities. Fed cattle were mostly $2-$3 higher at $82-$83, led by sales in the Southern Plains at mostly $84-$84.50.

Longer term, there's plenty of reason for caution on the demand side, though (see "Cattle Markets Weather Katrina" in this issue). And, it could be the optimism in the financial markets will turn back south as the realities of damaged oil and shipping infrastructure in the Gulf become more clear.

For the week ending Friday, Ag Marketing Service analysts report, "Sale barns are gearing up for the expected usual fall increased movement of feeders. However, recent rains that breathed new life into the pastures and lower feed costs may entice producers to hold out a little longer."

The summary below reflects the week ended Sept. 9 for Medium and Large 1 -- 500- to 550-lb., 600- to 650-lb., and 700- to 750-lb. heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:

Summary Table
State Volume Steers Heifers
Calf Weight 500-550 lbs. 600-650 lbs. 700-750 lbs. 500-550 lbs. 600-650 lbs. 700-750 lbs.
TX 19,400 $118.75 $110.42 $103.90 $115.38 $109.83 $106.484
MO 16,100 $132.78 $128.31 $122.65 $123.34 $120.44 $117.824
KY* 15,200 $116-126 $110-120 $100-1105 $108-118 $99-1093 $94-1035
OK 14,400 $128.13 $121.56 $115.59 $116.46 $108.21 $109.01
AL 13,200 $118-124 $112-1182 ** $110-117 $100-1103 **
IA 9,400 $136.82 $130.064 $122.87 $124.28 $120.50 $111.51
GA* 8,700 $108-126 $100-117 $95-109 $103-118 $94-115.25 $90-1074
TN* 7,700 $118.73 $113.93 $107.31 $111.91 $107.10 $96.86
WY 7,300 $136.81 $120.26 $115.15 6 $121.41 $118.474 $113.50
LA* 7,200 $111-121 $106-1162 ** $107-116 $105-1152 **
AR 6,600 $120.42 $111.62 $106.68 $112.77 $106.08 $105.00
KS 4,400 $139.87 $128.85 $119.44 $119.392 $114.33 $110.92
Carolinas* 3,800 $106-122 $97-1133 $89-1065 $97-115 $93-1073 $85-97 5
VA 3,600 $121.89 $113.47 $109.90 $111.91 $108.54 $101.32
CO 3,400 ** $115.254 ** ** ** $108.87
NE 3,100 ** ** $117.887 ** ** $112.276
MS* 2,700 $111-1201 $100-1143 ** $105-1151 $97-1053 **
Dakotas 2,400 $133.47 $129.58 $120.67 ** $120.96 $114.186
WA* 1,800 $123.58 $113.19 ** $109.95 $104.55 **
MT* 1,200 $118.12* ** ** $117.36 ** **
NM 1,000 ** ** $109.58* ** $107.564* **

* Plus 2
** None reported at this weight or near weight
*** Steers and bulls
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.

Questions & Comments
Please send questions to:

Wes Ishmael, Contributing Editor, BEEF Stocker Trends, at

Joe Roybal, Editor, BEEF magazine, at


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