Brink said if cow-calf producers can find ways to keep their cattle for longer periods to add weight, the market will be inclined to reward them in the coming year.

“Owning cattle longer always tends to benefit when the market is going up,” said Brink.

The current dynamic of high feed prices is rewarding stockers and growers, and penalizing feeders, Brink said. With feed prices high, stockers have bought more calves in fall and winter, then sell them as yearlings with heavier weights in summer, leading to a 10-year run of profitability.

“Not just a little profitability, but some extremely good times,” Brink said.

The higher weights for yearlings brings their prices more in line with calves, and a flatter price curve between calves and yearlings is very beneficial, to the stocker operator, and very beneficial for anyone seeking to add weight to lighter weight calves.”

Adding to that, stockers also have seen “the advent of more byproduct feeds” and helped winter more effectively with less money. Brink said that may explain why the number of stockers over the past six years has gone up, while other beef operation numbers are declining.

Doing some figure estimates using March feeder cattle futures, Brink said a producer could make money with very little risk by taking a five-weight yearling to 750 pounds, “You’re going to be paid over a dollar a pound for every pound you put on those calves. That’s the bottom line in taking a calf to a yearling.

“Is that economical? As long as you have a cost of gain something significantly below $1. If you have any feed at all, there’s a profit opportunity.”

Meanwhile, cost of gain for feedlots continues to rise, Brink explained. That means feedlots in the coming year will struggle for inventory as more stockers and cow-calf operations keep calves. Had the Texas drought not pushed more lightweight cattle into feedyards, he said, the feedyard inventory would have been worse.

In years ahead producers should expect to see even fewer calves and lightweight cattle headed to the feedlots.

These trends will also mean “more challenges in terms of programs that will tie back to the ranch,” Brink said. “The more yearlings we place, the more yearlings come off stocker operations, the harder it is to tie back to ranch of origin.”

Premiums for age-source verification may grow less valuable, Brink said, if Japan goes to a 30-month and under import program for beef, as expected in 2012. But that premium loss will be compensated by more volume sales to Japan.

If producers do try to keep lightweight calves for longer periods, Brink said they should recognize when they’ve been kept too long.

“Unless he’s a high performing steer, if you’re taking one of those steers over 900 pounds, you start to see heavier weight discounts. On a heifer you can certainly back that up another 100 pounds.”

Producers would be wise to take advantage of the lightweight cattle reward while they can, Brink said. But eventually the industry will have to reverse that course.

“We can’t all be in the stocker industry. We need to have somebody who is willing to run a beef cow, especially when we have more demand than supply. Those economics are not sustainable, we cannot keep shrinking the factory.”

PHOTO:
More operations may be inclined to keep their calves on grass and place them in the feedlot as yearlings, according to JBS Five Rivers feedlot's Tom Brink.