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The Cattle Business -- Fall 1998 Feeder Cattle Market in Review

Livestock Update, January 1999

Bill R. McKinnon, Extension Animal Scientist, Marketing, Animal and Poultry Sciences, Virginia Tech

The fall 1998 feeder cattle marketing season was a major disappointment from early year expectations for many in the cattle business. Cattle feeders faced heavy losses during all of 1998. Every time it appeared that the fed cattle market would stage a maintained rally in the low $60's with momentum toward the mid-$60s the market would retreat below $60.

The fed cattle market was under the pressure of record total meat supplies. The pork industry had expanded in a effort to meet expected foreign demand. The expansion was further fueled by cheap feed prices. The low cost feed situation also encouraged cattle feeders to hold cattle to heavier weights which resulted in larger than expected beef supplies. Both the pork and beef industries had counted on the export market to absorb larger production levels. The collapse of the economies in the Pacific Rim and former Soviet Union countries resulted in dramatically reduced export demand for beef, pork, and meat byproducts. At the same time, domestic demand was swamped with huge supplies of meat and poultry.

The dry summer and fall seasons in Virginia meant reduced forage supplies. Limited fall grazing prospects and forage availability resulted in fewer cow/calf operations backgrounding their own calves and dwindling demand for lightweight calves by backgrounders.

It is useful to review the fall market to evaluate the effectiveness of the individual's marketing program and study the messages signaled by the market. The table below presents weighted averages for L&M1 cattle sold through special graded sales from September through December.

Table 1. Fall 1998 Special Graded Sales Results L&M1 Feeder Cattle
Weight Price $/cwt.$/Head   WeightsPrice $/cwt.$/Head
400-499 lb.$78.64$354400-499 lb.$62.84$283
500-599 lb.$73.52$404500-599 lb.$62.05$341
600-699 lb.$67.79$441600-699 lb.$59.35$386
700-799 lb.$64.99$487700-799 lb.$58.84$441
800-899 lb.$61.96$527800-899 lb.$55.47$471
900-999 lb.$59.74$568    

During some periods of the fall and particularly in a few sales this fall the price per pound margin between 5-weight and 6-weight steers seemed especially wide. The wide margin at times between the 5 and 6-weight steers tended to result in only a few extra dollars for an additional 100 pounds of calf. The market may continue to periodically signal the need to background the heavier calf at least for a short period of time.

The graph below also illustrates the typical mid-October price slump we notice with calf prices. Typically, during October the larger calf runs coupled with a limited supply of trucks puts pressure on the feeder cattle market.

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