The CME Feeder Cattle Price Index, which is a good barometer for 650-850 pound feeder steer prices in the U.S., has declined about $8 per hundredweight (cwt.) since peaking at $157.45 Feb. 14.

Likewise, September CME feeder cattle futures were trading at $163-$164/cwt. in early March and declined to $151-$152 in early April. In the second week of April, September futures rallied back up to the current $156-$157 range.

Local calf prices will likely vary depending on pasture and range conditions, which vary considerably across the U.S.

Parts of the Northern Plains are drier than last year at this time, while moisture conditions have improved considerably in some regions of the Southern Plains.

The most recent drought monitor showed extreme to exceptional drought in Western Texas/Eastern New Mexico and the Southeastern U.S. Moderate to severe drought is prevalent in the Southwest. Abnormally dry conditions in the Northern Plains were likely helped by widespread rains over the weekend.

Lower feeder cattle supplies should be supportive to prices. The 2011 calf crop was down 1 percent and estimated feeder cattle supplies outside of feedlots on January 1, 2012, were estimated to be down about 4 percent.

However, feeder cattle prices over the summer will be influenced by fed cattle prices and corn prices which have been volatile, and will likely continue to be volatile.

Since prices and moisture conditions are changing daily, carefully computing expected costs and returns is necessary to assess the prospects for grazing calves.

As an example, I looked at auction market prices in North Dakota for the second week of April. Prices for 550-600 pound feeder steers ranged from $166 to $184.50, with an average of about $180. Prices for 750-8 weight steers ranged from $139 to $154, with a $151 average.

So, the $15 to $20/cwt. ranges in prices for the individual market classes could also affect profitability substantially.

I have a Northern Plains example summer grazing budget spreadsheet on my website. There is both an example and a column for your expected costs and returns.

A PowerPoint presentation with charts showing current supply and demand factors affecting the market is available.

For discussion purposes, I used the average North Dakota 550 lb. steer price of $1.80 and the $151 price for 790 lb. steers. Given the example $100 pasture costs and additional $68 costs, the total cost of gain was $70/cwt. with about $35 per head projected profit.

What is the chance of receiving $151 for 790 lb. steers in the fall? September feeder cattle futures are trading at $156 to $157 and the September basis for average North Dakota auction market prices is about par. So, with prudent price risk management, summer grazing can be profitable.

For those of you in the Southern Plains, a co-author of this column, Dillon Feuz at Utah State University, has a stocker calculator available online. 

Tim Petry is a livestock economist North Dakota State University Extension Service. This originally was written for the "In the Cattle Markets" e-newsletter.