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Steady feeder prices ahead

The cattle market moved down in July with fed cattle losing $3/cwt. Choice Amarillo slaughter steer prices dipped into the $50s toward the final weeks but held at $59.Feeder cattle and calves also gave up some firmness in line with the feds. The price weakness for feeders was about the same, but the heavier feeders were able to hang on to prices somewhat better than lightweights.Price Reporting The

The cattle market moved down in July with fed cattle losing $3/cwt. Choice Amarillo slaughter steer prices dipped into the $50s toward the final weeks but held at $59.

Feeder cattle and calves also gave up some firmness in line with the feds. The price weakness for feeders was about the same, but the heavier feeders were able to hang on to prices somewhat better than lightweights.

Price Reporting The Senate Ag Appropriation Bill offered in mid-July would require mandatory price reporting on sales of cattle and beef products. The price-discovery provision would set up a three-year pilot project requiring any buyer, seller or marketer to report sales of livestock and meat to the USDA. Currently, most transactions are private and reporters obtain only voluntary price information.

Both the American Meat Institute and the National Cattlemen's Beef Association lobbied against the reporting proposal as an unfair intrusion into private business. They argued that most live cattle and boxed beef prices are reported publicly now.

In a related move, the Senate agreed that beef and lamb should be labeled as domestic or imported. Currently, these products are designated by their country of origin when entering the U.S. Once processed, however, there's no such labeling requirement.

Most cattlemen would probably favor both of these new regulations. The expanded price reporting seems logical because it would gather a lot more information than is now available.

Ironically, livestock price reporting has been severely curtailed in recent years by USDA and state governments to save money. As a result, many industry organizations have picked up this service and now either sell it or include it as a perk to their membership.

Such a change, therefore, would require a greatly altered attitude on the part of both the organizations and the government. If it does fly, you can expect a considerably larger amount of additional money being spent on price reporting and a much greater government involvement in a business that prides itself on being independent.

The question of labeling imported meat is another story. While it sounds great, remember there are many American consumers who eagerly seek out foreign products to buy. This labeling effort could backfire.

USDA released its mid-year cattle inventory in July. The report indicates a 2% decline in the number of cattle and calves on farms and ranches in the U.S., compared to a year ago. The 107-million-head total was 2 million less than last July and is the second year of lower numbers.

While the January 1 inventory is traditionally used to determine the phase of the cattle cycle, this latest data suggests another year of liquidation. Beef cows fell 2%, while heifers held as replacements dropped 6%. This indicates a substantially reduced breeding herd in 1999.

The calf crop for 1998 is estimated at 37.9 million head, down 2% from last year. Actually, that statistic is only 800,000 head smaller than a year ago. In comparison, the 1997 calf crop was down slightly over 1 million head. Even though expectations are to produce 2% fewer calves in the second half of 1998, Texas drought conditions may cut even deeper into the calf crop.

Cattle Feeding The July 1 cattle feeding report recorded 9.2 million head of cattle and calves on feed in the U.S. in feedlots with capacities of 1,000 head or more. That's a 2% gain over a year ago but 6% less than the month-earlier level. The largest state gain was reported in Texas with a 9% increase. Oklahoma gained 7% and Nebraska 4%.

June fed-cattle marketings were 2 million head, almost exactly the same as a year ago and up slightly from the month earlier. (Note that the marketings figure for May in the table of last month's column had an error. The 1997 level should have been 2.06 million and the 1998 level was 1.95 million, representing a 5% decline.)

Forecast equations predict marketings to be near the 2 million-head level for July, then drop sharply. Projections for August and September are 1.8 million head. This should be very encouraging for the fed market.

Cattle and calves placed on feed in June were 1.6 million head, up 8% from a year ago but down 23% from a month earlier. The largest gain was in Texas - a 16% increase. Nebraska rose 9%.

The June placements were primarily heavier weight feeders. Each weight grouping was larger than a year ago except the lightest class - less than 600 lbs. This same relationship existed when comparing the weight group placements to the month-earlier levels.

The 800-lb.-or-more weight group rose 28% from a year ago. Texas reported a 92% increase in such heavy weight feeders placed on feed in June.

Feedlots continue to emphasize heavier weight animals in their placements. The result is heavier weight finished cattle. The average slaughter weight of cattle in the Texas-Oklahoma Panhandle rose to 1,184 lbs. in mid-July, 23 lbs. more than a year ago.

What's Next The projected decrease in feedlot marketings for the next few months could help fed-cattle prices. It should at least stop a further weakness in the market and may even allow some price strength.

The drought situation in Texas is not likely to cause any short-run supply problems. It may force some early ranch sales and, therefore, might affect cow beef slaughter. The impact upon feedlot sales, however, should be minimal. In the long run, the extra movement of heifers into feedlots will likely cause some increased fed-beef supplies.

Three things may weigh heavily upon the fall feeder market:

* Continued feedlot losses will likely decrease replacement demand just when larger sales of calves are under way.

* A lack of real strength in fed cattle will make it difficult to get feedlots too excited about refilling pens.

* While feedlot breakevens are dropping, they still remain in the high $60/cwt. levels, limiting profits unless fed-cattle prices strengthen substantially ..

In contrast, certain factors are reducing the number of available feeder animals. The 1998 calf crop is estimated to be off 2% and could be lower due to drought in Texas. Fall calf movement may be further reduced by early sales due to drought. That would not only reduce numbers but could force calves into the lighter weight classifications.

Altogether, these factors should allow feeder prices to maintain their current levels into the fall. That would be quite different from the seasonal pattern traditionally displayed by feeders, and it could be quite favorable to ranchers.