The cattle market finally recorded some solid strength during March. Choice slaughter cattle in the Amarillo feedlot area rose about $3 before the end of the month and started April in the low $70s. Feeder cattle and calves weakened early in the month but then showed strength in the final days of March with MF #1, 600- to 700-lb. feeder steers recording prices in the low $90 range.
Cattle and calves on feed for the U.S. slaughter market in feedlots with capacities of 1,000 head or more totaled 11.33 million head on March 1. This is up 9% from the 10.42 million on feed a year ago. The major gains were recorded in Kansas, Texas and Nebraska, which accounted for 73% of the increase.
Fed cattle marketings in February were 2.05 million head, a 12% gain over last February. The largest increases were in Kansas, Nebraska and Texas, with the Kansas gain being three times as much.
Placements of cattle and calves into feedlots in February amounted to 1.88 million head. Only two states, Kansas and Texas, showed more placements than a year ago and they were small gains. Even though the total figure was up 4%, only the lightest and the heaviest placed on feed weight groups were larger than a year ago.
Is Beef Demand Up? It bothers me to see so much emphasis recently on the "improved beef demand picture." Those who do such analyses know that to measure demand, it takes two things - per capita consumption and retail prices. Unfortunately, it is easy to misuse these figures unless you know exactly how they are collected and what they really mean.
Per capita beef consumption is computed by taking beef production, adjusting for imports and exports, and dividing by the population. An increase in production then, as we have recently had because of more cattle feeding, simply means more total beef is being produced. If more beef consumption is sold at higher prices, this means demand is improving.
These demand analyses, however, are traditionally done, not with total beef, but rather with USDA Choice grade beef. Unfortunately, the amount of Choice beef produced has not been increasing.
In 1990, about 90% of all beef graded reached the Choice grade. Now, the figure is below 50%. On top of that, more of our exported beef is of the higher grades, usually Choice. This indicates Americans may be consuming less Choice beef each year.
Retail beef prices used to measure demand have always been those for the Choice grade, collected from large retail chain supermarkets. Due to difficulties in obtaining such beef in recent years, many retailers have shifted to handling "Select" or "no roll" beef. It is now hard to find Choice beef prices. While we do have an "all beef" retail price being reported, the data has not been available for years as has the other.
Since, we must compare Choice beef consumption with good Choice beef retail prices for any true demand analysis to be done - it may be hard to do. It would be nice if we could say - beef demand is rising. All we can really say now is - it may be.
What's Ahead? The fed cattle market appears to be heading upwards slightly for at least another month or so. As late summer approaches, however, the large feedlot placements recorded over the last several months will materialize and bring forth some substantial feedlot marketings. It will be hard to maintain a very firm market under these circumstances.
Adding to the problem will be larger competing supplies of pork and broilers. At this point, it also seems reasonable to expect a slowdown in the nation's economic growth, particularly as we move through the second half of 2000.
The feeder cattle and calf market still looks good through the summer and into the fall. Some weakness may occur as fed prices slack off but the degree may be quite minor. A combination of this year's great returns, on top of last year's, should convince many ranchers to expand their breeding herds.
In the short run, that could mean even less available feeders for feedlots during this and next year as heifers are held back for breeding.