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The Cattle Business: Industry Situation

Livestock Update, July 2000

Bill McKinnon, Extension Animal Scientist, Marketing, Virginia Tech

The June 1 USDA Cattle on Feed report continues to show huge numbers of cattle at the feedbunk. The relatively high prices paid for feeder cattle this spring moved large numbers of cattle from pasture to the feedlot. The on feed count was 9% ahead of last June and 13% higher than two years ago. The cattle on feed number was 14% larger than the average of the past five years in June. Placements of new cattle on feed during the month of May ran 12% above 1999 and 13% ahead of 1998.

June 1, 2000
Cattle on Feed Report
 1000 Head2000 as a % of
On Feed, June 19,7039,98710,932113109
Placements during May2,0332,0492,304113112
Marketings during May1,9611,9952,171111109
On Feed, May 19,72710,03210,914112109
May, 2000 had two more marketing days than 1999.

The industry has some major concerns about marketing the growing number of fed cattle scheduled to come to town during the summer months. The beef industry has benefited from a turnaround in beef demand that began in 1999. According to CattleFax, the retail beef price hit a record level of $3.09 per pound in May. Demand for beef can slump during mid-summer when higher temperatures reduce consumers' interest in grilling and hot meals. The pressure will be on cattle feeders to keep current in the face of negative returns while feedlot show lists grow.

The appetite for cattle by feed yards has fueled a torrid feeder cattle market since January. There are relatively fewer cattle outside of feedlots, especially in Virginia. What seemed to be a typical hot spring market spurred by grass fever has carried over into early summer. Several graded feeder cattle sales in the Valley and northern Virginia are still seeing over $1 per pound bids on 5- and even 6-weight steers. The strong prices have urged many fall calving cowherds to bring their calves to town early.

The current and fall feeder cattle market has benefited from weakness in the corn market. Long term weather forecasts in the spring predicted drought conditions through much of the Corn Belt. Widespread rains during late May and early June through all but the far western Corn Belt have given corn users the opportunities to begin locking in lower corn prices. December corn futures have dropped $.45 a bushel since early May. The prospects of cheaper corn in June helped the fall feeder cattle contracts break a down trend that began in January.

The late summer and fall months would appear set to offer Virginia feeder cattle producers some hope for strong prices. We know the number of yearlings on grass in spring was substantially smaller than earlier years. Stout prices along with near drought conditions in much of the southwestern region of Virginia will move many of those yearlings to market earlier than normal. With many of the fall born calves also changing hands this spring, there should be relatively smaller offerings of feeder cattle during the traditional fall marketing period. The dynamics of the feeder cattle market in Virginia during the next few months behooves producers to more carefully gather information before making any marketing decision.

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