Beef Magazine is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Placement figures are Worrisome

The fed cattle market showed a little more improvement in March. Choice Amarillo slaughter steers ended the month about $2/cwt. higher than in February.Feeder cattle and calves continued to record modest but steady gains throughout the month. Heavier weight feeders received some slight price weakness while lighter calves were still recording good gains.Let's Talk About Trends Several recent trends

The fed cattle market showed a little more improvement in March. Choice Amarillo slaughter steers ended the month about $2/cwt. higher than in February.

Feeder cattle and calves continued to record modest but steady gains throughout the month. Heavier weight feeders received some slight price weakness while lighter calves were still recording good gains.

Let's Talk About Trends Several recent trends in the cattle and beef industry may be negatively influencing its survival. These can be classified into three broad areas: federal beef grades, demand changes and industry concentration. All these may, in fact, be interrelated. This month let's look at beef grades.

The USDA grades for beef were established to provide uniform terminology for price reporting. This not only helped producers and the trade but also offered an unbiased evaluation of the various supplies of beef available.

In the early 1950s, several research studies concluded that there was both a higher degree of consumer acceptability and less quality variability in beef cuts as you moved up in the federal grades. This information, plus the fact that the consist of the cattle population was changing, inspired the government to make some adjustments in the individual quality grades to make them a little more consumer oriented.

The general goal of the U.S. beef industry since that time has been to produce high quality beef for our consumers. Since these early days, the target for most of the industry was USDA Choice.

The fact this grade was provided by an unbiased federal grader and had a high degree of acceptability by the consumer convinced most retailers to jump on the Choice beef band wagon. This Choice grade became so popular that the federal grades have been altered almost every 10 years in order to allow more beef into the higher grades. Unfortunately, because of these many changes, retailers and consumers began to lose some confidence in them.

For example, a carcass which would only grade Commercial in the early '50s could now grade Choice. These changes also diminished the reliability of the grades for price reporting.

Further complicating the grade issue was a misinterpretation of some later national research done on consumer beef demands. While the studies did say "some consumers want leaner beef," the result was generally publicized as "consumers want leaner beef." This altered the target concept for many cattle producers.

Imports of exotic breeds became common, primarily because they yielded leaner and larger beef carcasses. Of course, producers also realized the new breeds would provide a larger calf to sell, more weight having always been a desired goal for cattlemen.

Even though such lean beef created some dissatisfaction among their customers, retailers soon discovered that the system was even more profitable for them. Retailers could obtain it much more cheaply, but had to lower retail cut prices to customers only slightly to move it. The result has been that while almost every major retailer previously handled only Choice beef, many have since shifted to Select or ungraded beef.

The ultimate result is quite significant. In 1990, almost 90% of federally graded quality beef was graded USDA Choice. Last year, less than 60% reached that grade.

U.S. beef exports have been rising rapidly and reached a record 2.3 billion pounds in 1998. This gain is due primarily to an increased preference for U.S. grain-fed beef. Thus, a large proportion of the Choice beef available is sent overseas.

The slaughter weights of U.S. cattle have been moving upward for the last several years, probably due primarily to new breeds in the industry. Last year, the average slaughter weight of cattle reached a record 723 lbs./carcass compared to the 1990 average of 686 lbs. This has, therefore, added much more tonnage to our beef production figures.

Consider this quote from USDA's latest Livestock, Dairy and Poultry Situation and Outlook:

"The beef market is being increasingly segmented with the highest quality cuts entering the export and hotel-restaurant market and the remainder competing against ever larger supplies of competing meats at ever lower relative prices. Beef supplies will be tightest over the next couple of years for high quality beef, with some less desirable cuts now being sold at retail being pulled into these more lucrative markets. The end result is likely to be a more variable, less desirable retail beef selection."

This whole grade issue, therefore, has had a strong impact upon our U.S. consumer demand for beef. We now give them less Choice beef, more lower quality beef, reduced consistency and reliability - all at higher prices.

Cattle Feeding Cattle and calves on feed for the U.S. slaughter market in feedlots with capacities of 1,000 head or more totaled 10.4 million head on March 1. That's up slightly from the year-ago level.

Marketings of fed cattle in February reached 1.82 million head, 1% below last year. Some states - Arizona, Iowa, Nebraska, Washington and South Dakota - recorded substantial gains.

Placements of cattle and calves into feedlots in February reached 1.79 million head, up a huge 20% over a year earlier. Together with the 11% gain in January, it could mean big supply problems for fed cattle later in the year.

Iowa, California, South Dakota, Texas and Washington all had placement gains of over 26%. Only two states - Arizona and New Mexico - recorded lower placements.

Placements weighing less than 600 lbs. totaled 333,000 head; those 600-699 lbs. were 492,000 head; 700-799 lbs. totaled 596,000 head; and the 800 lbs. or greater class totaled 367,000 head. That means every weight group was up significantly from last year and the lightest group recorded a 54% gain.

Looking Down The Road The fed cattle market should continue to move upward through the spring months and probably into early summer. Unfortunately, the large feedlot placements of January and February could cause a problem by mid summer. That will bring heavy marketings just at the time we normally have some seasonal price weakness.

The feeder cattle and calf market will reflect the fed cattle price gains this spring. Improved feedlot profits and reduced feeder calf availability should allow prices to hold at the better levels for most of the summer.