Released: June 14, 2001

Slaughter Cattle Prices Seen Slipping, Then Rebounding By Fall

MANHATTAN, Kan. – Government data recently confirmed what many cattle feeders already suspected, that the number of cattle on feed in U.S. feedlots continues to run relatively large – to the tune of 11.17 million head as of May 1.

Oftentimes such burgeoning supplies pull down prices, but price pressure the past few months has been partly tempered by lower weights, a Kansas State University agricultural economist said.

However, that’s changing somewhat.

“The inventory of cattle on feed is still very large by historical standards,” said James Mintert, livestock marketing specialist with K-State Research and Extension. The number of cattle in U.S. feedlots on May 1 was 2.1 percent larger than a year earlier, and 12 percent larger than the five-year average.

Meanwhile, cash slaughter cattle prices in western Kansas slipped to $75.80 per hundredweight (cwt) in early June from $77.63 the last week in May, and may fall further – to the $72 to $74 range by late June or early July, he said.

“The large on-feed inventory indicates steer and heifer slaughter will remain large during the rest of June and July,” Mintert said. “The recent increase in steer and heifer slaughter has been partially offset by the fact that fed cattle weights were still below a year ago. However, weights could start to climb during June. If that happens, weekly beef production will rise above last year’s level and lead to a decline in slaughter cattle prices.”

Prices could even dip below $72 if cattle feeders hold back marketings and push cattle to even heavier weights, he added.

The good news for cattle feeders is that slaughter cattle supplies could start to tighten by mid-summer, as the impact of declining placements in late winter and spring leads to smaller steer and heifer slaughter. When slaughter supplies begin to tighten, prices will strengthen, the economist said.

Cattle feeders will have some say over how fast prices recover, Mintert added. If they delay marketings because of softer prices this summer, the extra days on feed could push weights higher than would otherwise have been the case. That would slow a price recovery.

“Long term, tight supplies of replacement cattle mean that cattle slaughter and beef production will remain well below a year ago this fall, which should help push prices back up into the mid- to upper $70s,” he said. And prices are expected to remain strong with a spring 2002 price peak above $80 likely, according to Mintert.

That level should mean at least modest profits for cattle feeders, said Extension agricultural economist Rodney Jones. Using traditional cattle finishing budgets for 750-pound steers and 650-pound heifers, he estimated break-even levels for cattle expected to finish in about October, in the $74- to $74.50-per-cwt range.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by:
Mary Lou Peter, Communications Specialist
mlpeter@oznet.ksu.edu
K-State Research& Extension News