It’s time to consider winter enterprise options with updated forecasts. Today we’ll review profitability outcomes for winter wheat and winter stocker operations, and revisit a few tools that can help you with fall decision-making.
Dates and Deadlines
9/20/2021 & 9/27/2021 – Five-State Beef Conference; Clayton, NM & Perryton, TX
9/24/2021 – Cattle on Feed
9/29/2021 – AgriLife Quickbooks Training; Vernon
What We’re Reading
USDA forecasts US corn, soybean, cotton production up from 2020 – Morning Ag Clips
Livestock owners must register their brands after Aug. 31 – AgriLife Today
New provisions of Texas Farm Animal Liability Act go into effect Sept. 1 – AgriLife Today
White House takes aim at higher meat prices – Feedstuffs Daily
Now that we’re approaching fall, it is time to update our price expectations for some winter enterprises. Each spring, AgriLife publishes district-level budgets to help plan for the upcoming crop year. By the time we reach fall, those expectations have changed, and this year is no different. So, today we’ll take a look at the profitability expectations for both winter wheat and winter stocker enterprises.
Winter Wheat
Since we published the AgriLife budgets in the spring, most of the grain complex has seen a runup in prices. Purchases from China, drought in the west, and reopening pressure from the COVID-19 pandemic drove corn, sorghum, soybeans, and wheat higher. Today, the July 2022 Kansas City Wheat contract opened at $6.88/bu. When we set prices in 2020 the value of July 2021 Kansas City Wheat contract was much closer to $5.25/bu.
At the same time, we’ve seen an uptick in the price of inputs. The price of herbicides, fertilizers, and fuel, not to mention wages have gone up, in some cases as much as 30%! If we combine the increased price of wheat and the increased price of inputs we have a different picture of profitability for harvest 2022 compared to 2021.
Return Over Variable Costs, $/Acre (No Grazing Income)
Winter Stocker Cattle, Leased Ground
We’ve had pricing moves similar to those in the grain complex in the livestock sector. The natural rhythm of the cattle cycle has taken its turn toward a smaller cow herd. As a result we’re seeing fewer calves for sale and therefore prices are trending higher. The drought in the west has had no small impact on prices for livestock either, as widescale culling is exacerbating the trend toward a smaller cattle herd.
At the time of publishing in the spring of this year, we had March 2021 Feeder Cattle prices pegged at approximately $1.55/lb. Since that time, we’ve seen an increase in the value of feeder cattle, with spring cattle prices forecast in the neighborhood of $1.65/lb. Similar to the inputs for the grain market, we’ve seen a simultaneous rise in the cost of inputs for beef. For example, the same drought that is causing cow liquidation in the West prevented a lot of important hay country from making a spring or summer crop. The June non-alfalfa all-hay price settled right at $143/ton compared to $128/ton in 2020.
Despite this cost inflation, the margins for winter stocker enterprises are forecast for positive returns into the upcoming season. In fact, the net change is an increase in value of almost $60/head.
Return Over Variable Costs, $/Head
Wheat and Stocker Combination
We’ve looked at the outcomes for ownership of wheat independently, in combination with grazing income on owned wheat, and for leasing ground from a farmer to run stockers. The final enterprise potential is ownership of wheat and ownership of cattle simultaneously, i.e. running your own calves on wheat you own.
If we assume that for the duration of the grazing period, each acre of wheat supports 500 lbs. of live weight, then we can assume that we can run something like 125 calves on a quarter section (150 acres). Returns from stocker calves pencil out to approximately $109/acre. Added to income from wheat, we find returns in the neighborhood of $180/acre.
Return Over Variable Costs, $/Acre (No Grazing Income)
