“A strong rally in Feeder Cattle futures since late August offers improved winter stocker profit potential,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “At current levels, March Feeder futures would allow a 750 pound steer to be priced at roughly $150 per cwt. in Oklahoma. A 475 pound steer at today’s prices would have a March 1 breakeven of $130-$137 per cwt. at 750 pounds, depending on pasture and other costs. Such opportunities to price in winter stocker margins are rare and generally fleeting.”
Peel adds that the strength of current prices for spring Feeder Cattle contracts is difficult to justify from a fundamental perspective.
“Producers should act promptly if these futures price levels are attractive,” Peel says. “Remember that futures have been notoriously volatile in recent years and Feeder futures can move $11.25 per cwt in two days of limit moves. While no major cattle market weakness is foreseeable at this time, general expectations are for modestly lower cattle prices in 2018 on continued growth in cattle supplies and beef production. There is clearly more downside risk than upside potential from current levels.”