Today, an update of Texas High Plains stocker cattle budgets with new market values and considerations for managing calves for increased value.
Dates & Deadlines
10/5/2022 – Mitchell County Farm Tour, Colorado City
10/5/2022 – TSCRA Educational Event, Victoria
10/6/2022 – TSCRA Educational Event, Mt. Pleasant
10/11/2022 – Northeast Panhandle Beef Conference, Lipscomb
What We’re Reading
Texas A&M AgriLife to lead historic investment in Texas’ efforts to become ‘climate-smart’ – AgriLife Today
Ag groups welcome agreement to avoid rail strike – Beef
Is this a good time to buy farmland? – Southwest Farm Press
USDA forecasts U.S. corn, soybean, and cotton production down from 2021 – Morning Ag Clips
Fall Update of Winter Stocker Budgets
Late each winter the Department of Agricultural Economics extension faculty develops representative regional budgets for the twelve Texas A&M AgriLife Extension districts. For several of those districts, changes in the markets for wheat and winter stocker cattle warrant budget updates in the fall. Updated forecasts are meant to help producers and decision makers evaluate their expectations for calf and wheat outcomes, two markets whose timing are out of sync with the summer crop cycle. This week we review updated stocker budget expectations and a few management opportunities that add value to stocker calves.
2022 (Fall) Estimated Costs and Returns per Animal Winter Stocker Calf Budget Panhandle Extension District – 1
The updated budget represents expected costs and returns for calves bought at 400 lbs. and sold 120 days later at 610 lbs. A few key assumptions are built into this budget. The first is that wheat pasture will be available; the ongoing drought and poor subsoil moisture wheat is being planted into means wheat pasture may be more difficult to find than during an average year. The second major assumptions are the time on pasture and ADG. The ADG included is roughly 1.75 lbs./day, with calves on pasture roughly 120 days. It is possible that calves will be on pasture shorter or longer depending on the availability of wheat. Though this budget forecasts profits for stocker calves on wheat, the relative value of corn in comparison to wheat may dictate more profit from wheat harvest and placing calves on feed.
In addition to assumptions regarding the production system, we need to forecast prices. The price of 4-weight calves was taken from a weighted average of Texas High Plains auction prices reported by USDA AMS. As of the week September 12-16, the weighted average price of #1-#2 4-weight calves was $2.04/lb., approximately $0.15/lb. higher than the previous forecast set in our District 1 budgets. The slide has also condensed since the previous forecasts were established. Considering the January ’23 and March ’23 Feeder Cattle contracts as of close on Friday, September 16th, and assuming a stable slide from now to the spring, the expected price for 6-weight feeder calves in the new budgets is $194.78/cwt. That means the slide between 4-wt. and 6-wt. calves has condensed to roughly $0.10/lb. compared to $0.25/lb. in the previous version of the budgets.
Adding Value to Feeder Calves
In the current market, marked by rapidly rising prices and very little forage availability, it is important to optimize production and to add the most value possible to the limited pounds that will be available for sale.
Consider the case of implants. The ROI of implants is, historically speaking, almost always positive. You might assume an additional weaned calf weight of approximately 3-5%, roughly 18 lbs. on a 4-weight calf. With prices at $2.05/lb., that 18 lbs. yields roughly $36.90/head. If implants cost $2-$4 per head, every dollar invested in them yields $9 to $18. That is increasing the profit per head, but also the profit per pound of forage you have; a limited resource this year. Remember that unless you are in a verified and audited program and/or are marketing calves to the EU, it is unlikely that you will see premiums for NHTC calves. Simply leaving them un-implanted and taking them to the sale does not guarantee the NHTC premium, or even qualification.
Other management tools have the potential to further increase the value of calves. Last week unweaned calves sold at a discount of $22.50/head compared to weaned calves. Bulls sold at a (staggering) discount of $157/head compared to steers. Horned calves sold at a discount of $13.50/head compared to de-horned calves.
Consider the case of Calf 1, an implanted, castrated, de-horned, weaned calves compared to Calf 2 that was not implanted, is intact, has horns, and is unweaned. Though the premiums and discounts aren’t necessarily 100% additive (some of the values are likely to overlap), it is very possible that Calf 1 may sell for $150/head than Calf 2.
Consider that, of that roughly $150 difference in value, only $36.90 was attributed to increased weight. The value in stocker cattle is in ‘straightening the pen out’ with other management activities. We frequently hear that producers don’t have the equipment to undertake these activities. However, at these values, the difference in the value of a single calf is enough to pay the wage of single day laborer, and in this market squeezing out those pennies will return dividends.