Considering the volatility of the broader economy, cattle prices are holding up extraordinarily strong. Still, economic fears related to consumer beef demand helped take prices down a notch last week, especially in the South and Southwest.

Calf and feeder markets started out the week $2-$4 higher, building on the previous week's bullishness. By the end of the week, though, prices trended steady to $3 lower.

"The losses (steady to $2 lower) could mostly be segregated to the Deep South where local demand is only moderate due to a mostly dry summer, and orders for Southeastern crossbreds have suffered along with their traditional customers in the drought-ridden Southwest," say Agricultural Marketing Service (AMS) analysts. "Calf sales in the Midwest and Northern Plains were brisk (mostly $3-$5 higher) as backgrounders are less fearful of marketing these purchases during the late-fall run which normally causes supplies to outweigh demand. This fall's market outlook is lining up to be much better than usual with feedlot buyers paying premiums for out-front sales of cattle due to finish based off the April Board (which is trading around $10 over current price levels) and so much of the fall-run having already been sold in the driest areas (see ‘Drought Shifts Marketing Pattern’)."

Heading into this week, last Friday's Cattle on Feed report could add a bearish tone. Though higher July placements were expected, and likely part of the late-week price slide, placements were higher than most anticipated.

July placements (2.15 million head) are up 22% compared to a year ago, mostly cattle weighing less than 600 lbs. That's the highest July placement rate since the series began in 1996. The total inventory of cattle on feed Aug. 1 was 8% more than a year earlier at 10.6 million head.

July fed-cattle marketings of 1.91 million head were just a tick higher than last year and the second-lowest number marketed in July since the series began in 1996.

Looking further down the road, James Robb, Livestock Marketing Information Center (LMIC) director, pointed out in the August In the Cattle Markets, "The dominant factor influencing calf and yearling markets in 2012 will be grain prices. Crop year-ending corn stocks will only amount to a few weeks of usage in 2012. Grain prices are expected to remain volatile, causing potentially large price swings in calf and yearling prices."

Robb says forecasts call for a small increase in Southern Plains calf and yearling prices next year.

"Calf prices could post modest year-on-year declines during much of the first half of 2012. But in the second half of the year, prices could post annual gains," Robb says. "In fact, calf prices in the fall quarter of the year could eclipse 2011’s by several dollars per hundredweight."

Likewise, assuming a normal growing season, Robb says the weakest yearling prices could be in the first quarter of 2012. He says a very strong fed-cattle market should keep yearling prices above 2011 for the second half of the year. For the year, 700-800-lb. steers in the Southern Plains are forecast to average in the $129-$137/cwt. range, which would be slightly above 2011.

As for fed cattle, Robb says prices this year will average about 18% higher than last year. "Preliminary forecasts for 2012 put the slaughter steer price 5-8% above 2011. The strongest prices of the year are forecast to be in the second and fourth quarters, similar to the seasonal pattern of 2011. For the first time ever, quarterly average fed-cattle prices over $120 are possible," he says.

However, Robb also notes that "even with higher fed-cattle prices this fall, the red ink will continue on feedlot closeouts for at least the balance of 2011. Cattle feeders pocketed good profits during the first four months of the year, but as the second quarter progressed, seasonally lower fed cattle prices collided with surging feedstuff costs. Cost-of-gain in feedlots shot up to well over $100/cwt. Corn costs set record highs and caused rather volatile calf and yearling prices."

The summary below reflects the week ended Aug. 19 for Medium and Large 1 – 500- to 550-lb., 600- to 650-lb. (calves), and 700- to 750-lb. feeder heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:

Summary Table
State Volume Steers Heifers
Calf Weight 500-550 lbs. 600-650 lbs. 700-750 lbs. 500-550 lbs. 600-650 lbs. 700-750 lbs.
TX 32,700 $127.90 $128.29 $127.86 $123.07 $119.14 $115.93
OK 27,500 $142.70 $141.69 $138.61 $131.41 $129.48 $127.41
MO 21,400 $150.30 $143.97 $138.40 $134.52 $130.98 $125.57
KY* 20,200 $138.46 $131.42 $129.71 $126.80 $127.54 $123.25
AL 10,800 $132.11 $125.94 $121.85 $120.14 $115.95 $108.95
NE 10,500 $154.26 $147.46 $145.92 $145.21 $135.48 $132.14
AR 9,600 $135.21 $128.32 $125.884 $122.29 $117.62 $117.494
KS 9,600 $150.29 $145.13 $137.56 $138.14 $130.99 $126.90
GA*(***) 8,600 $114-135 $109-129 $109-118 $107-122 $103-118 $100-112
SD 7,700 $159.12 $143.12 $137.67 $131.18 $132.87 $130.91
FL* 7,300 $115-127 $115-125 $111-118 $110-121 $106-119 $105-107
Carolinas 6,700 $110-133 $110-127 $107-119 $104-126 $97-117 $92-110
MS* 5,700 $120-1301 $120-1283 $115-1255 $115-1251 $110-1203 $103-1165
IA 4,300 $149.452 $145.40 $146.13 ** $138.11 $129.99
NM 4,300 $140.56 ** ** $126.19 $126.82 **
VA 3,700 $136.132 $131.08 $118.88 $120.292 $115.56 $113.75
CO 1,800 ** $141.274 $135.476 ** ** $126.186
MT 1,500 ** ** $126.277 $129.142 ** $122.146

* Plus #2
** None reported of the same quality at this weight or near weight
(***) Steers and bulls
(?) As reported, but questionable
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.
8850-900 lbs.