The cattle market held quite steady in September. Fed Choice steers in the Amarillo area held in the mid $60 range, about $2/cwt. below the year ago level. The trend appears to be even wider in the months ahead.

Feeder cattle and calf prices slipped somewhat in September, reflecting the poor pasture and range conditions caused by the drought in the South and West. Early weaning of calves and cheap grain prices forced many feeders into feedlots, substantially reducing supplies. Large numbers of lightweight calves have been imported from Mexico to supplement the declining supplies.

Cattle Feeding Is Up Over 1999 Cattle and calves on feed in U.S. feedlots with capacities of 1,000 head or more totaled 10.4 million head on Sept. 1. That's 9% above a year ago and 15% higher than September 1998.

Marketings of fed cattle in August reached 2.2 million head, 7% higher than a year ago. Some of the smaller feeding states like Arizona and New Mexico were up substantially percentage wise, while Texas only increased 12%.

Placements of cattle and calves into feedlots in August totaled 2.4 million head. That was up only slightly from 1999 but 18% higher than in 1998. Texas recorded the largest absolute gain in placements with 110,000 head, a 3% rise. South Dakota was up 67%, but a gain of only 19,000 head.

Feeder cattle and calf placements by weights in August were quite different from a year ago. Lightweight calves increased substantially while heavier weights were down sharply. Numbers of calves weighing less than 600 lbs. were 573,000 head; 600-699 lbs. were 504,000 head; 700-799 lbs. were 691,000 head; and animals 800 lbs. and more reached 672,000 head.

Texas is the major producer of beef calves for the feeding industry. Of all the cattle and calves placed on feed in August, 26% were in Texas.

The distribution by weight classifications is even more revealing. While 40% of lightweight calves (those less than 600 lbs.) placed on feed in the U.S. were in Texas, only 10% of animals 800 lbs. or more moved into Texas feedlots. Unfortunately, we can't say only Texas calves moved into these feedlots since other feeding states are also major users of Texas calves.

Long-Run Outlook The U.S. cattle inventory decline appears to be continuing, at least through 2001. Large numbers of heifers are being placed on feed rather than being retained for the breeding herd. Drought has forced many of these heifers into feedlots, and that will add to beef supplies next year.

Beef production will likely set another record in 2000 due to higher slaughter weights and larger numbers in feedlots. Production in the first half of 2001 continues to be revised upward and is now estimated to be about 2-3% below a year earlier. Fed cattle marketings are not likely to decline much until the second half of 2001, allowing production to then fall 5-9% under this year.

Pork competition, as we move into the new year, may not be much of a problem. The U.S. hogs and pigs inventory on Sept. 1 totaled 60.2 million head. That's 1% below a year ago and 1% above June 2000. The market hog inventory was estimated at 53.9 million head - 1% below last year.

Short-Run Outlook The fed cattle market is headed for a continuing slow erosion but with no major weakness as we move into the fall and winter months. Meanwhile, the feeder cattle market will be almost entirely dependent on weather conditions.

If the drought does not end, and it may be already beyond that point, stocker grazing operations will be minimal, heifer retention will be worse, and steer and heifer calf movement into feedlots will accelerate. That, plus poor returns at the feedlot level, will weaken demand for these animals. If a rancher can get a fall delivery contract at close to current prices, it probably pays to commit.