Slaughter Cattle Supplies
To Build In Coming Months

STILLWATER, Okla. — USDA’s October cattle on feed report suggests that fed cattle supplies will build in the next three to four months, as many analysts expected.

"Fed cattle prices are likely to experience continued pressure and move toward the mid-$60 range by year's end," said Derrell Peel, Oklahoma Cooperative Extension Service livestock marketing specialist.

Also, there are indications that a more typical calf market pattern is emerging this year compared to a year ago. It appears that a higher proportion of 1996 calves are being marketed this fall, along with an unusually large number of residual 1995 calves.

"This sets up the possibility that fed cattle supplies will bulge in the first half of 1997, with fed cattle prices struggling during this period," Peel said. "However, the second half of 1997 may experience tighter fed cattle supplies and allow for the start of a sustained turnaround in prices."

Declining feed prices also suggest that feeder cattle prices should begin increasing relative to fed cattle prices. However, most analysts do not expect this to happen quickly.

"Uncertain and volatile fed prices in the next six to eight months, along with an industry trend toward caution in regards to feed prices, likely will keep feeder prices discounted," Peel said.

Peel predicted that it may take another year before feeder cattle prices begin a sustained upward trend.

Large calf marketings and soft wheat pasture demand have kept stocker and feeder prices flat in Oklahoma.

"Early hopes for wheat pasture were not met because of planting delays in late September and early October," Peel said. "Most of the wheat is planted now; it may make decent wheat pasture if Oklahoma gets unusually good fall weather."

For this winter, Peel's general recommendation for cow-calf producers is to keep culling cows and using ranch forage and feed resources to retain stockers.

"The small discount on heavier weight feeders makes stocker gain more valuable," he said. "If price spreads start to widen back to more typical levels, it will be because of an increase in feeder prices."

In either case, Peel recommends that price risk management tools be used to keep risk to an acceptable level.

By culling now, cow-calf producers will be positioned to rebuild their cow herds in terms of both numbers and productivity during the next 12 to 14 months. "The strategy is to have the maximum number of young, productive cows in the herd for the next cyclical peak in four to six years," Peel said. Beef cow slaughter was up 22 percent in the third quarter of 1996, continuing the strong pace experienced during the first half of this year. However, Peel said liquidation needs to occur throughout most of 1997 to generate a solid cyclical bottom in the market.