The Oklahoma Stocker Industry

2. The Oklahoma Stocker Industry Derrell S. Peel Oklahoma State University

3. The Beef Industry • Demand • Marketing System • Production

4. Cattle and Beef Markets • Demand • What gets produced • How much gets produced • Who gets it

5. Cattle and Beef Markets • Marketing System • Moves products from “Gate to Plate” • Time, Place and Form functions • Storage (When) • Transportation (Where) • Processing (What Changes)

6. Cattle and Beef Markets • Production • How things get produced • What resources are used

7. Beef Production and Marketing System MARKETING PRODUCTION

9. U.S. Beef Cows By Region Percent of U.S. Total, 2002 NORTHEAST NORTHWEST NORTHERN ROCKIES 14.3 GREAT LAKES 4.1 NORTHERN PLAINS 2.2 1.0 6.9 MIDWEST 12.1 SOUTHERN ROCKIES APPALACHIAN SOUTHWEST 7.1 EASTERN SEABOARD GULF 3.9 SOUTHERN PLAINS 4.7 6.0 SOUTH 4.0 7.0 26.8 U.S. Total = 33,099,700 head

10. Regional Share of Beef Cows, January 1, 2002

11. Regional Cattle and Meat Flows Cattle Flow Meat Flow

12. Major Cattle Feeding States and Fed Cattle Slaughtering Plants (Four Largest Firms, 1998) IBP ConAgra Excel National Beef/Farmland 7 Major Cattle Feeding States

13. What is the Stocker Industry?

14. The U.S. Stocker Industry • A very important but poorly understood sector of the beef industry • geographically widespread • diverse production systems • hard to measure

15. Characteristics of Stocker Production • Animal Growth (versus fattening) • Use of Forages (versus concentrates) • Viable Enterprise • Time Required

17. Regional Share of Feeder SuppliesOutside of Feedlots, Jan. 1, 2002

18. Southern Plains Feeder Share

19. Diversity of Stocker Production • Grazing • Summer • Season Long/Early Intensive • Native Range/Tame Pasture • Crop Aftermath • Winter • Annual Cool Season • Perennial Cool Season

20. Diversity of Stocker Production • Semi-confinement • Put and Take • Creep Feeding • Dry Winter • Confinement • Harvested Forages

21. Regional Stocker Cattle Production Fall Scattered Mixed Summer Winter

22. California January 1 Stocker Ratio, 2002 Washington 44.1% Montana N Dakota 27.6% Oregon 63.1% 59.1% Idaho S Dakota Wyoming 56.4% 69.2% 42.1% Iowa Nebraska 96.0% Utah 89.0% Colorado 75.5% Kansas Mo 88.7% Ky 144.3% 78.6% 74.1% 68.84% New Mexico Tn Okla 75.0% 71.7% 123.5% Al Ga 77.4% Ar 69.3% Texas 64.3% 74.1% U.S. Ave., 75.2 % Florida 45.7%

23. California January 1 Stocker Ratio, 2002 Washington 44.1% Montana N Dakota 27.6% Oregon 63.1% 59.1% Idaho S Dakota Wyoming 56.4% 69.2% 42.1% Iowa Nebraska 96.0% Utah 89.0% Colorado 75.5% Kansas Mo 88.7% Ky 144.3% 78.6% 74.1% 68.84% New Mexico Tn Okla 75.0% 71.7% 123.5% Al Ga 77.4% Ar 69.3% Texas 64.3% 74.1% U.S. Ave., 75.2 % Florida 45.7%

24. Regional Stocker Ratio, January 1, 2002

25. Unique Role of Winter Stockers • Fall demand for wheat stockers helps offset seasonally large fall marketings of calves • Helps stabilize seasonal price patterns

26. Seasonal Price Pattern

27. What is the “Job” of the Stocker Industry? • Stocker gains are the cheapest beef cattle gains • Beef industry flexibility • Feed industry balance • Quality Improvement

28. The Production Role of Stockers • Utilize forages for cheap gain • Increase feeder cattle weight/age • Upgrade cattle quality

29. The Inventory Role of Stockers • Allocate feeder cattle supplies over time • seasonally • year-to-year • Provide variation in cattle slaughter age

30. Size of the Stocker Industry • On January 1, Stockers = 20% of cattle inventories • On July 1, Stockers = 8% of cattle inventories

31. U.S. Average Stocker Ratio,January 1, 2002

32. The Market-Balance Role of Stockers • Maintain economic balance between livestock, grain and forage markets • respond to economic shocks

34. The Stocker Industry Is The Beef Industry “Shock Absorber”

35. How Does The Stocker Industry Accomplish All These Things?

36. Stocker Economics: Price Levels and Price Spreads • Profit potential of stocker enterprise is determined buy/sell spreads • High prices = Large price spreads • Low prices = Small price spreads

37. Feeder and Fed Steer Prices,1992-2001

38. Value of Stocker GainMarch 1998 • 400-500 lb. steer price = $104.45 • Beginning value = $470.03/head • 700-800 lb. steer price = $75.81 • Ending value = $568.58 • Value of 300 lbs. gain = $98.55/head or $0.328/pound

39. Value of Stocker GainJuly 1998 • 400-500 lb. steer price = $77.98 • Beginning value = $350.91/head • 700-800 lb. steer price = $70.01 • Ending value = $525.08 • Value of 300 lbs. gain = $174.17/head or $0.581/pound

40. Sources of Profitability in the Stocker Industry • Selling Feed • Returns to forage • Management Services • Upgrading cattle quality • Speculation • Holding cattle over time

41. The Stocker Industry Dilemma • When prices are rising: • Buy/Sell margins widen • Trend is positive • When prices are falling: • Buy/Sell margins narrow • Trend is negative

42. Value of Gain(Based on 200 lbs of Gain)

43. Stocker Industry Adjustments • Change beginning weight • Intensity (rate of gain) • Length of time • Animal quality • Steers versus heifers

44. Steer Price/Weight Relationship:Cyclical Effects

45. Steer Price/Weight Relationship:Seasonal Effects

46. Stocker Budget Breakdown

47. Stocker Breakeven Dynamics

48. Stocker Price and BreakevenOver Time

49. Major Factors Affecting Stocker Profitability • Purchase Price • Time • Feed Cost • Animal Performance

50. Summary • Stocker industry plays a vital role in the cattle industry • Southern Plains winter wheat pasture grazing plays a unique role • Stocker production is especially important in Oklahoma