Times they are changing for the stocker industry

Gone are the days when cattle market data was only accessible on the radio, bag phones were the only option outside of a landline and every day’s work was witnessed from the saddle of a bomb-proof Quarter Horse. The stocker feeder industry has undergone an evolution in the last 30 years, but with changes also come opportunities.

The National Cattlemen’s Beef Association reports in 2019 there are 913,246 total cattle and calf operations in the United States. NCBA indicates 727,906 of those are beef farms and ranches, 26,586 are engaged in cattle feedlot production and 64,098 are dairy operations.

“In the last 10 to 15 years, a lot of our smaller stocker operators have gone out of business or converted back to just running cow-calf pairs,” said Paul Beck, associate professor and Extension researcher of animal science at Oklahoma State University.

According to the U.S. Department of Agriculture, a little more than a third of beef cow-calf operations retain ownership of calves after weaning and continue grazing or backgrounding the calves for 30 to 90 days before selling.

NCBA also reports 14.4 million cattle are on feed in 2019, an increase of 2% from 2018, on 30,320 feedlots dotting the U.S. Most feeder operations are considered small; 81.3% have a capacity of 1,000 head or less. In contrast, the USDA reports lots with 1,000 head or more capacity compose less than 5% of total feedlots, but market 80 to 90% of fed cattle. Feedlots with 32,000 head or more of capacity market around 40% of fed cattle.

These statistics indicate the industry continues to shift toward a small number of very large, vertically integrated and specialized feedlots, and on the other side of the spectrum, a large number of small feeder operations are still holding a place in the industry.

Then and now

Many outward changes in the stocker industry are easy to point out, like relying on horses less and less in favor of side by sides or four-wheelers. However, producers like Jim Alford know the long hours and hard work involved in the stocker feeder business will never change, no matter what mode of transportation or technology is introduced. Alford, of Lewisville, Arkansas, has been in and around the cattle business pretty much his entire life; however, he has specialized in stockers.

“Cow-calf just seemed too easy and I always like a challenge,” Alford said.

Alford makes his living from a 7,000 to 8,000 head a year stocker operation. Now that he has been in the stocker business for many years, he realizes how it has changed but also stayed the same over the course of time. One such change has been the way news affect cattle markets.

“We’re moment to moment on news and markets today,” Alford said. “When things happen today it is already worldwide news and that often affects markets quickly.”

To Alford another obvious change over the last 30 years had been the availability of good laborers.

“If you have someone who wants to work, so many of them have drug problems,” he said. “It’s hard to find responsible people and the people worth having can probably find a job with better benefits and less hard labor.”

Alford cites the opioid epidemic as a major reason for the challenges he has finding good employees. Alford also showed concern for the pharmaceutical side of owning and managing cattle. He says it seems like every year there is a new health crisis in the cattle industry and a new drug to treat it, however, the proposed miracle medicine does not always keep illness at bay.

“Because of continued issues of health of these animal, even though we’ve had improved vaccine technology and antibiotics over the last 30 years, we still have a huge problem with health of lighter weight stocker cattle that is tied to continued stress, lack of preconditioning by cow-calf producers and co-mingling,” Beck explained.

Beck says part of the animal health issues revolve around animals being transported from farther away to large feedlots. This problem will probably continue for feedlots because of the changes in size of large lots and their need for cattle to fill capacity.

Risky business

“The stocker industry is the ultimate in the margin industry,” Beck said. “As far as entrance barriers, young farmers and ranchers can get into it cheaper than buying a cow herd, but the returns are very volatile.”

The quick changing markets Alford mentioned often make the stocker business even more unpredictable. Robert Armbruster, of Kiowa, Kansas, agreed the precarious market shifts have been a change he noticed over time. Armbruster, retired since 2015, started in the cattle business in the early 1980s buying cattle at auctions, then later became an independent order buyer for a few years, but most of his career was spent as a buyer for Cargill Cattle Feeders in Oklahoma and southern Kansas.

“We started to see wide swings in the market—not just over a month, but even over a week and a day,” Armbruster explained. “You could see values of your cattle change maybe $40 or $50 a head in a day’s time, whether it be on the futures or cash market.”

Additionally, Armbruster says the total number of dollars that are involved in a stocker operation, particularly in terms of initial cost of the animal, have risen.

“In the 90s a load of 500-pound calves would cost $35,000 to $45,000 and now they’re costing $90,000 to $100,000,” Armbruster said. “The amount of dollars it takes to be invested in the business has just skyrocketed.”

And with the changes in market instability and increase in finances involved, stocker feeder producers have had to adapt their understanding of what could be at risk financially.

However, Beck says the risk has to be managed on the finance side and the production side.

“If those types of things aren’t in place, it can be extremely high risk,” Beck said. “Along with high reward, there’s always the risk of complete financial loss—especially when we get into health and high death loss. Those can come together to create a very volatile industry.”

Filling holes in the market

Beck and Armbruster say part of the way small stocker feeder producers can stay profitable is to find gaps in the market, fill in niches and utilize value-added programs.

“I think the other thing that has evolved over the last 20 to 25 years is an increase in different ways to market stocker cattle such as value-added programs,” Armbruster said. “Whether it be a breed program like Certified Angus Beef or Beef Quality Assurance, buyers will realize what kind of producer you are and it gives the small producer more outlets they didn’t have access to before, plus the same opportunities as other big producers.”

Because the number of small cow-calf producers has increased over the last few years, more opportunities have opened up for small stocker feeders to take on those cattle and prepare them for the large feedlots.

“The large feed lots don’t seem to have the desire to handle these mismanaged cattle or put together lots of cattle and keep them healthy and profitable,” Beck explained. “There’s more benefit to the customer of the stocker operator to buy these cattle that have been backgrounded and grouped together. In any market, there’s an underpriced hole where a smaller operation can fit in and gain from adding those values to cattle.”

Change is inevitable, but if smaller stocker operators continue to take on new roles, they will always be a necessary piece of the stocker industry pie.

“There’s always going to be room for the smaller stocker operators if they can remain flexible in the types of cattle they buy,” Beck said. “If they can identify holes in the market and value adding opportunities.”

Cattlemen must utilize every development and marketing opportunity the industry has gained, but also remember the lessons learned from the back of a horse and combine the past and present to adapt to the future of the stocker feeder industry.

“I really feel that we’ve still got a bright future for the stocker industry,” Beck said. “I think it’s a really nice starting point for a young producer to get into agriculture.”

Lacey Newlin can be reached at [email protected].