The market gave up a dollar or two early in September but regained it later in the month. Choice fed slaughter cattle in the Amarillo area began October in the $57-58/cwt. range, up almost $2 from the September starting level.
Feeder cattle and calves recorded a price pattern similar to the feds. But, the volatility was even greater - prices moving almost $3 in both directions.
September finally brought some rains for Texas and the Southwest. This radically altered the cattle situation and cattlemen's attitudes. Grazing is again a viable alternative although the growing season is soon drawing to a close. Many hay producers have been able to get in just one more cutting. That, plus cheap Midwest feed grains, could make feeding cows and slaughter cattle a lot less expensive this winter.
A large proportion of this year's calf crop has been sold early. That could make the typical excessive October-November sales period considerably lighter in feeder calf marketings. The reduced supplies and prospects of cheaper feed should help feeder prices.
While the demand for beef is continuing to drop, additional quantities of competing meats, primarily pork and chicken, are also not helping the cattle situation. Even though the situation is looking better, producers aren't out of the woods.
Cattle Feeding Cattle and calves on feed for the slaughter market in U.S. feedlots with capacities of 1,000 head or more totaled 9.02 million head on Sept. 1, 1998. That's a 1% decline from a year ago but the first drop in the last four months.
The leading percentage gains in cattle on feed were recorded in South Dakota, Oklahoma and Texas. In contrast, the principal decreases were in Iowa, Colorado, Nebraska and Kansas. Other states in the survey are also substantially lower.
Fed-cattle marketings in August were 1.94 million head, 4% below a year ago. A few states - South Dakota, California, Nebraska and Washington - actually recorded substantial increases in marketings. The year-to-year relationship between fed-cattle marketings and commercial slaughter during the month was affected by an increase in cattle imports from Canada that moved directly to slaughter.
Forecast equations project sharply reduced fed-cattle marketings in the next calendar quarter. Weekly feedlot sales in the Texas Panhandle area, however, do not suggest this is the case.
Numbers of cattle and calves placed on feed in commercial feedlots in August reached 2.03 million head. This is a 16% decrease from a year ago. The only states reporting larger placements were South Dakota and California. Seasonally, placements did increase 5% from a month earlier. Gains were recorded in other states - Nebraska, Iowa, South Dakota, Idaho and Oklahoma.
Feeders placed on feed by weight groups in August were almost exactly the same, proportionally, as a year ago. August did, however, record the highest proportion of the heaviest weight feeders since September of last year. It also had the highest proportion of the lightest weight feeders placed on feed since January.
USDA Outlook USDA's latest outlook report for 1999 predicts the following:
* Record high average slaughter weights and continued beef herd liquidation of both cows and heifers this spring and summer have pushed this year's beef production to near-record levels resulting in weak cattle prices. But 1999 will mark a dramatic change with sharply curtailed feeder cattle supplies and a large decline in beef production.
* Improved fall forage conditions in the Southern Plains and much of the Southeast remain critical to ending the liquidation phase of the present cattle cycle, which has lasted longer than expected.
* Fed-cattle prices likely hit their lows this summer, averaging a little below $60/cwt. in July and August. Prices will remain under pressure through mid-fall, but expectations of reduced production by late fall (and throughout the next several years) should cause fourth-quarter prices to reach the low to mid-$60s, up from nearly $60 this summer. Fed cattle prices are expected to rise to the low- to mid-$70's in 1999.
Likely Year-End Directions Most indications suggest fed-cattle marketings will drift lower in the October-December period. That should allow some moderate price improvement in fed cattle as we move through year's end.
The drought conditions plaguing the Southwest will probably eliminate any competition from grass-fat, yearling-type slaughter cattle this fall. There may still be some heavy cow liquidation, however, from areas not receiving the recent rains.
Other competing meats will also remain a real problem. Major reductions in beef production in 1999 can only lead to further price increases.
Feeder cattle and calves are bound to have an improved price picture despite traditional fall weakness. Limited feeder supplies, reduced feed costs and a more bullish outlook for 1999 should translate into a much better feeder-fed price premiums for the next several months.
At this point, the new year appears to be an excellent one for ranchers - but that's what we thought about this past year.