If it is a group of heifers, then the neighbor’s two bulls think they should be courting the girls, and the list goes on.

Griffith andrew
Associate Professor / Agricultural and Resource Economics / University of Tennessee

If the production woes aren’t enough risk and work to make a fellow feel like someone kicked his dog, then the marketing aspect of stocker production will do the trick. The market can be predictable, but recent history leans more toward the market being unpredictable.

The unpredictable resulted in stocker producers experiencing extreme peaks and valleys from 2014 through 2016 as it relates to cattle prices and profitability.

Many stocker producers experienced $300 to $600 per head profits while the market was escalating the last six months of 2013 and all of 2014. Profit margins remained positive through the first half of 2015 but declined quickly with the precipitous decline in feeder cattle prices the back half of 2015.

The largest losses in the stocker business were experienced in the third and fourth quarters of 2015 as well as large losses coming through much of 2016. The losses during the price decline were as large as the profits when prices increased.


The present

Production for 2017 is in full swing as many producers have already purchased calves for spring and summer grazing in many regions of the country. Producers are asking themselves if those calves are going to be profitable. Many producers are looking even further down the road as they consider margins for stocker production through 2017 and 2018.

There are already a couple of highlights for 2017: First, the purchase value of calves has declined significantly from 2014 to 2015, resulting in reduced capital outlay per animal. Reduced calf values may also provide producers the opportunity to purchase more animals in 2017 than in the previous three years.

Second is reserved for stocker producers purchasing calves in the fall of 2016 with the intention or marketing them the first quarter of 2017. Calf values were in a tailspin in the fall of 2016, which provided producers with an opportunity to purchase calves at low values and later market them at profitable price levels.

The future

Positive profit margins in the stocker cattle business look obtainable for 2017. The most important part to being profitable in the stocker cattle business is “getting the cattle bought right.” Many producers purchase calves in March and April, which is when calf prices tend to be seasonally highest.

There is no way to know if calf prices for the spring have peaked until the time has passed. However, the upside potential is small, and there is a good possibility the top has been set. Marketing spring-purchased calves from late July through early September should result in positive returns.

Producers should begin thinking about fall purchases. Calf prices may not decline to levels witnessed in the fall of 2016, but the market will offer a good purchasing opportunity. The expectation is for cattle prices to decline into 2018, but traditional profit margins are expected to return in 2017 and 2018.

Stocker producers tend to be creatures of habit when it comes to purchasing and growing calves. Producers tend to purchase the same grade, weight and sex of calves at the same time every year as well as market a certain weight at the same time every year.

Producers need to make changes and remain as fluid as the calf and feeder cattle market. Cattle markets are constantly changing, which means purchasing and marketing plans must have the ability to change.

From the standpoint of improving stocker margins, producers should spend time evaluating the markets. Oftentimes, the market offers animals for sale that are undervalued. Sometimes it is a certain weight class that is undervalued, while other times it may be the bull calves or heifers that are undervalued.

A good example is the fall of 2016, when 600- to 700-pound animals were undervalued, and cattle ranging from 600 to 850 pounds were selling for essentially the same price.

The last thought is for producers to consider using some from of price risk management tool. There are several alternatives available, such as futures, options, livestock risk protection insurance and forward contracting. There is a cost to using these tools, but they will limit losses if prices were to take a tumble.  end mark

Andrew Griffith