The market is indicating that the highest and best use of forage is for calf production rather than forage-based stocker production. 
Derrell S. Peel, Oklahoma State University  
Shrinking cattle inventories in recent years leads to a wide range of impacts on the multi-sectored cattle industry.  Figure 1 shows the rising feeder prices and changes in price relationships that impact economic incentives of the various cattle production activities.  As feeder cattle prices have risen, the prices for lightweight animals have increased faster and more than heavy feeder cattle.  This has particular implications for stocker producers.
The cattle industry includes several production sectors, all of which contribute to the singular objective of producing slaughter-ready cattle.  Broadly speaking, the cow-calf sector is the primary sector producing the supply of calves for the entire industry.  At the other end, the feedlot sector ensures that cattle are finished with carcasses producing high-quality beef.  In between, the stocker (or backgrounding) sector consists of many varied and flexible activities and arbitrage that serve several different functions for the cattle industry. 
The stocker sector provides basic production value for the cattle industry.  Calves and lightweight feeder cattle are grown to increase size and weight prior to feedlot placement.  Stocker production also helps balance forage and feedgrain values. Cheaper forage-based stocker gains help keep the cattle industry competitive.  When grains are expensive relative to forage, more weight can be put on feeder cattle prior to feedlot production.  On the other hand, when cattle numbers are limited, feedlots can place lighter feeder cattle to help maintain feedlot inventory.  This is especially true when feedlot cost of gain is relatively low due to cheaper grain prices. From the cow-calf perspective, forage is used for calf production but can be used for stocker production. Retained stocker production is an option for forage use when calf prices are relatively low and the value of added gain on stockers is relatively higher.  Stocker production also plays an important role in spreading out cattle production seasonally and across years.
The current market is characterized by tight feeder cattle supplies and relatively low feedlot cost of gain.  The role of the stocker industry gets squeezed in this environment.  On the one hand, high calf prices are encouraging herd rebuilding and increased calf production.  In other words, the market is indicating that the highest and best use of forage is for calf production rather than forage-based stocker production.  On the other hand, low feedlot cost of gain and tight feeder supplies are encouraging feedlots to place animals sooner and at lighter weights, effectively bidding them away from stocker production.  Both of these influences are reflected in the wide spread in feeder prices from light to heavy (Figure 1), which means a large rollback and relatively low value of gain for stocker production.  Stocker production will still occur but the opportunities will be fewer and the margins will be trickier.  However, when heifer retention begins, feeder supplies will be further squeezed from a feedlot perspective, but many of those heifers will need a growing phase as part of their development for breeding and thus provide a stocker role.