While the cattle market seems to have survived the Y2K bug, cattle prices did drift slightly lower in December.

The main cause was probably the combination of holidays and vacations affecting the beef business. Choice fed slaughter steers in the Amarillo feedlot area were able to kick off the year 2000 in the $68 to $68.50/cwt. range.

To a lesser degree, heavier 600- to 700-lb. MF #1 feeder steers also slipped about $1 in December, yielding a monthly average of close to $80/cwt. Price quotations on these kinds were still quite scarce, so weekly data was very hard to locate.

Cattle Feeding Increasing The number of cattle and calves on feed in the larger U.S. commercial feedlots on Dec. 1 was 11.75 million head, a 6% gain from a year ago and one of the highest levels in several years. Major increases in absolute numbers were reported in Nebraska, Kansas and Texas, which are also the principal cattle feeding states.

Fed cattle marketings in November reached 1.8 million head, a 5% increase that's also the largest November marketing level in many years. Not all states recorded gains but the leading ones were again Nebraska, Texas and Kansas.

Numbers of cattle and calves placed on feed in November were 2.17 million head. That was 5% above November 1998 but below the 1997 figure. Major increases were reported in Texas, South Dakota, Arizona and Nebraska. Some states, like Colorado, actually had lower numbers placed on feed than a year ago.

During November, placements of cattle and calves weighing less than 600 lbs. totaled 766,000 head. The 600- to 699-lb. class had 657,000 head, the 700- to 799-lb. class recorded 416,000 head and the 800-lb. and greater group totaled 331,000 head. Each class represented a gain over a year ago, except the 700- to 799-lb. class, which was actually 6% lower.

It now appears, at least from preliminary data, that the demand for beef improved somewhat as we moved through 1999. Retail prices for Choice beef rose in October and then again in November. At that point, prices were 7% higher than a year ago. These higher prices occurred even with the larger fed marketings reported in these months.

Exports of U. S. beef from January through October of this past year were up a strong 7%, which certainly helped the price situation. Surprisingly, however, beef imports were also up a strong 10%, which certainly did not help.

The cattle feeding industry seems convinced that the current profit margins will continue. December's 5% increase in placements represents the fourth month of such gains and could conceivably cause some oversupply problems in the next few months. It should be noted that the 5% larger marketings of December may have helped weaken fed cattle prices at year's end, although there were several other factors that also contributed.

Fed cattle prices will probably hold firm at current levels and may show some gains in the first quarter and on into the spring. By the latter part of the second quarter, however, those larger placements of six months earlier may weigh heavily on the market.

The bright spot will be in the feeder cattle and calf market. Short supplies, cheap feed grains, lower Mexican calf imports and continued bullishness among feedlots will keep feeder prices high.

More than likely, prices this spring will not only exceed 1999 levels but could easily go above the 1998 figures. While these projected higher feeder prices will be great for ranchers and stocker operators, they could cause feedlots some real problems by substantially increasing their breakeven costs.