The cattle market held extremely steady during May. Choice fed steers in the Amarillo feedlot area didn't vary much over a dollar throughout the month. They began June at about $66 cwt., with little resistance.

Feeder cattle prices also were fairly level in May. Heavyweight animals, however, were scarce and quotations on them in the Southern Plains were difficult to obtain. During a few of the weeks, there were not even enough 6- to 7-weight feeders to get prices on them.

USDA Sees Delayed Expansion Here are some excerpts from the latest Livestock, Dairy and Poultry Situation Outlook released by USDA on May 25.

"Cattle inventories have been declining since 1996. In the short run, liquidation adds to beef supplies through slaughter of female stock - cows and heifers - while reducing future supplies.

"First-quarter slaughter and feedlot statistics strongly suggest that herd expansion will be delayed until more heifers are bred in the year 2000. Beef supply increases will be offset to some extent by larger beef exports. However, production won't decline and prices won't strengthen until late 1999 and the start of herd rebuilding.

"Increased competition for a reduced slaughter inventory will lead to stronger cattle prices, with larger increases for female stock and stocker-feeder cattle. Fed cattle price gains will be held down by the very large and expanding supplies of competing meats."

The USDA's predictions on the longer run future are illustrated by these paraphrased comments:

Projected per capita beef consumption levels during 1999 appear to be down about 1 to 2 lbs. from the 1998 peak. Most of the decline should come in the second half of this year. By the year 2000, beef supply reductions suggest per capita beef consumption will be down to 63 lbs., the lowest since the early 1990s.

Retail Choice beef prices in the first quarter of this year averaged $2.77/lb. and may end up averaging about 4 cents higher than last year. Choice beef retail prices are expected to be about $2.86/lb. in the year 2000.

Fed cattle prices averaged $61.48/cwt. in 1998 and will likely average $64-66 this year. Prices are expected to range in the mid-$60s for the rest of the year but may average near $70 late in 1999. Further supply reductions will be necessary in 2000 before prices can move into the $70s.

Yearling feeder cattle prices are likely to average in the mid-$70s for the rest of this year. That's nearly $15 above 1996 when high grain and droughts triggered heavy liquidation costs.

On-Feed Numbers Fell Cattle and calves on feed for the U.S. slaughter market on May 1, 1999, in feedlots with capacities of 1,000 head or more totaled 10.02 million head. That was 3% above a year ago but 4% less than the month-earlier figure.

States recording the largest percentage gains were Colorado, Iowa, South Dakota, New Mexico and Nebraska. Kansas and Oklahoma actually had fewer cattle on feed than a year ago.

Fed cattle marketings in April reached 1.9 million head, up 3% from a year ago and slightly under the previous month. Almost every state recorded exceptionally large gains over a year ago with South Dakota, California and Colorado leading the pack.

Numbers of cattle and calves placed on feed was again the most significant statistic in the report. In April, placements were 1.7 million head, up 5% above a year ago. While this was down from the March level, it still represents the fourth month of higher-than-a-year-ago levels and the largest April placements in recent records.

With January up 11%, February up 20% and March up 18%, the 5% increase in April - while less critical - could still foretell major beef supply problems later this year.

As expected, the number of available heavier feeders has been declining sharply. Thus, the number of cattle and calves placed on feed by weight groups has shifted toward the lighter weights.

Calves weighing less than 600 lbs. were up 22% from a year ago. The 600- to 699-lb. class was up 11%, and the number of feeders 700-799 lbs. stayed the same as a year earlier. The heaviest weight feeders, those 800 lbs. or more, were down 1% below last April.

The "Other Disappearance" category of the cattle on feed data represents death losses, movements from feedlots to pastures, and shipments to other feedlots for further feeding. This April figure of 104,000 represents a 13% increase over a year ago and 46% more than in March. The largest gains came in Kansas, Iowa, Nebraska, South Dakota and Washington.

The Market Outlook Interpreting the likely beef supply situation later this year is difficult. USDA is expecting beef production to remain near above-year-earlier levels through midsummer, then decline 2-4% below a year earlier in the second half of the year. Thus, their forecasts anticipate a gain in fed cattle prices of about $1 to 3/cwt. in the second half of the year over the first.

My analysis focuses on the extremely large feedlot placements of January through April, which seem to signal fairly heavy fed cattle marketings 6-8 months down the road. If this does happen as expected, it may be difficult to even hold fed cattle prices at their current levels much beyond the summer months.

Feeder cattle and calves will still remain in a favorable position. Feedlot breakeven levels are moving up only slightly, providing a continued strong demand for replacements. Available supplies of calves, on the other hand, are staying quite tight. Returns to cattle feeders have moved back into the black and the situation remains bullish. Feeder prices should continue strong.