The cattle market remained steady in April. Choice Amarillo slaughter steers moved up $1 and stayed there. The feeder cattle and calf market also held at a consistent level. There was, however, some significant price weakness late in the month.
Major Industry Trends Despite millions of dollars in promotion - beef demand still appears to be slipping. This may seem like an illogical result, but we must remember advertising and promotion cannot help some products.
Some commodities just won't succeed or recover from slumps. This may be due to health concerns, color, taste, price, appearance or competition. Remember the Edsel, adding machines, station wagons, classic Coke, hand held calculators?
The real problem with beef demand is its difficulty to be measured. Demand is the schedule of the quantities taken from the market at different price levels. Usually this is more understandable if the schedule is graphically presented as a curve. A combination of quantities and prices can still be on the same demand curve.
With cars, pencils, computers and similar manufactured products, the job of discovering "quantity" is quite easy. Just check with the manufacturer to find out production. Beef is more difficult.
We estimate the quantity of beef taken from the market through a very complicated procedure. First, an estimate of the number of cattle slaughtered in the U.S. is obtained from meat inspectors across the nation. This figure is multiplied by an estimate of the average slaughter weight of cattle at some selected plants.
After removing an estimate of the quantity of beef exported and adding the estimated amount of beef imported, we arrive at total domestic production. This figure is then adjusted to represent a retail weight basis.
For per capita consumption, this beef production figure is divided by an estimate of U.S. human population (which is only statistically estimated every five years). The end result is an estimated per capita consumption of beef.
Unfortunately, that's only half of the equation. The beef retail price used to be estimated by means of a complicated but accurate formula involving several large food retailers and their weekly sales information.
The series was gradually abbreviated because of increasing costs. By the early 1980s it had seen major adjustments, primarily because it was collected by a new agency and also due to major changes in the types of beef cuts sold (more boneless cuts).
In order to save more money, such price information was replaced by a small sample system. The data now has some serious regional and sales volume problems.
Beef cuts do not bring the same prices in New York as in Amarillo. Having little to do with the nearness to production, it depends more on consumer desires and income levels. The quantities sold in these two areas are vastly different just because of the numbers of people living there.
Price information still concentrates on USDA Choice, which made up 90% of production in 1990. Today, it's under 60%. In addition, most of this beef is exported or sold through the hotel, restaurant and institutional trade. It's not accounted for through retail price levels.
Given these changes and the difficulty of getting at the data precludes any solid conclusions about the changes in the demand for beef since the early 1980s. Beef demand statistics are not only hard to get but almost impossible to correctly interpret.
Cattle Inventory The Jan. 1, 1999 Cattle and Calf Inventory showed total numbers down slightly, indicating further herd liquidation.
More interesting was the distribution of the U.S. beef cow herd. Six states - Texas, Missouri, Nebraska, Oklahoma, South Dakota and Kansas - accounted for 43% of the nation's beef herd. Only four others - Montana, Iowa, Kentucky and Tennessee - had 1 million head or more.
Cattle and calves on feed in feedlots of 1,000 head or more totaled 10.38 million head on April 1 - up 3% from a year ago but slightly below April 1, 1997. The inventory included 6.28 million steers and steer calves and 4.05 million heifers and heifer calves. Fed cattle marketings from these feedlots in March totaled 1.98 million head, 5% above 1998.
March placements reached 2.02 million head - up 18% above 1998 and 3% above 1997. This huge increase was preceded by a 20% larger February level and another 11% gain in January. These statistics strongly warn of a substantially increased marketing output about six months down the road.
While indicators still point toward price improvement for feds this spring and early summer, time seems to be running out. The market may do no better than hold its own.
Moving into mid-summer, some of those larger January-February placements may haunt us by bringing increased marketings. It would occur during a typical summer seasonal weakness, and could be tough to cope with and still maintain a decent market.
The feeder market will likely hold the improved price levels through most of the summer. Any weakness in feds will reduce feeder strength. But with feedlots in the black, expectations still remain optimistic.