The Stocker Industry

1. The Stocker Industry

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

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

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

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

6. Beef Production and Marketing System MARKETING PRODUCTION

8. 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

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

10. Regional Cattle and Meat Flows Cattle Flow Meat Flow

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

12. What is the Stocker Industry?

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

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

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

17. Southern Plains Feeder Share

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

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

20. Regional Stocker Cattle Production Fall Scattered Mixed Summer Winter

21. 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%

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. Regional Stocker Ratio, January 1, 2002

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

25. Seasonal Price Pattern

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

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

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

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

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

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

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

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

35. 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

36. Feeder and Fed Steer Prices,1992-2001

37. 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

38. 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

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

40. 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

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

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

43. Steer Price/Weight Relationship:Cyclical Effects

44. Steer Price/Weight Relationship:Seasonal Effects

45. Stocker Budget Breakdown

46. Stocker Breakeven Dynamics

47. Stocker Price and BreakevenOver Time

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

49. Summary • Stocker industry plays a vital role in the cattle industry • Southern Plains winter wheat pasture grazing plays a unique role