In last Friday's report, cattle on feed as of the first of March in the seven major states was up 8% while the total for all states was up only 6%. Placements during February were up 6% in the seven states but up only 3% for all states.

Projected marketings for March and May are well above last year while April, June, and July are only slightly above last year. Even though there is plenty of time to place cattle against August, early estimates show a decline in available supplies by then. This trend in projected available supplies of fed cattle indicates that the low in fed steer prices will occur in May or June.

Cow slaughter is currently running about 6% over the five-year average but about 4% under last year. This year cow slaughter should follow the normal seasonal pattern rather than the counter seasonal trend of last year. As a result, cow slaughter will trend lower through June before the seasonal increase in August.

Unless a severe drought develops this summer, cow slaughter should stay well below 1996 levels. Today's chart shows projected cow slaughter through August at 7% over the five-year average. At this rate of cow slaughter each week, total beef production will decline from 1996 levels by five million pounds some weeks to fifteen million pounds in other weeks.

Considering that in July of 1996 fed prices were mostly $65 and $67 in August, why won't prices this year be at least equal to those? What About Prices Next Week?

Considering the expected slaughter reductions, most packers already have all of next week's kill. With formulas and contracts coming the first week of April, the packer will not be interested in buying cattle until Wednesday or Thursday next week. Bids will probably start at $65 with trade at $66 in Texas and perhaps as low as $65 the following week.

Prices could rebound slightly in April as fed sales increase due to retailers finishing their buying for the last half of April features. After that, expect fed prices to fall again as burdensome supplies take away the cattle feeders' bargaining position. Lows could be in the $63 area.

March 21, 1997
David Hales and Tom Horton
Hales Cattle Letter
P.O. Box 1623, Amarillo, Texas

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