April 7, 2000

Look for record prices on 500 to 600 lb. calves between now and year 2001. Not only that, prices for those calves and for 7- and 8-weights should remain strong for the next three years. Unfortunately, the light’s not shining quite so bright for cattle feeders.

Those were the prognostications of cattle economic guru Ernie Davis recently at the Texas and Southwestern Cattle Raisers Association annual meeting, noting the last time a record price was set for lightweight calves was in 1991.

The Extension economist said increased beef demand and a reduced cowherd inventory have set the stage for good times again in the cow/calf sector. Beef cow inventory is down to 33.5 million head from 35.2 million in 1996. The calf crop in 2000 is estimated at 38.5 million head.

"So that’s back where we really need to be as far as the total calf crop in the U.S.," Davis said.

Beef cattle replacements, at 5.5 million head, show no retention in breeding heifers—yet.

"And as long as our pastures stay as dry as they are, I don’t expect that to happen," Davis noted. "Even if we hold back heifers this year in 2000 and start trying to expand these herds, it will be another two years before they go back into the cowherd. So the calf crop is going to remain low in the U.S. for at least the next couple of years and probably three."

Through February, on the weekly cash market in Texas, 5- and 6-weight steers averaged nearly $94, compared to $83 last year and $79 the year before. For the year, Davis predicted an average of $92. "And you’re going to see highs here well over $100 per hundredweight on these 5- and 6-weight calves," he said, adding the limiting factor could be drought in the Midwest causing higher corn prices.

The economist said 7- and 8-weight steers through the first two months of the year stood at an average of over $88, a big jump over $73.69 this time last year. He predicted an $82 average this year on feeders.

"So we’re starting out the year strong with cattle," Davis said. "We’re probably not going to have this downturn like we had in ’98; more flat like we had in ’99."

This increase in cattle prices is a welcome relief to ranchers who have battled drought four out of the past five years.

"We’re looking at the best cattle market we’ve seen in 20 years," Curtis Burlin, owner of the Navasota Livestock Auction Co., told the Texas Cooperative Extension. "If we can get these calves sold for what we’re getting now, it will sure help out a lot. I sold 27 calves here Saturday that averaged $511 a head net. It’s a pleasure to hand a man a check now and he looks back and smiles. In years past, you could almost see tears coming out of their eyes."

Unfortunately, the rosy calf and feeder outlook doesn’t paint quite so well for cattle feeders.

Cattle on feed in the seven major feeding states on Feb. 1 totaled 9.89 million head, 11 percent above last year at this time. These higher placements are primarily due to drought.

"So we’ve got large numbers of cattle out there that have to come into the market between now and the end of summer. Because of that, even though with the improved demand we’ve got and all, we’re going to be lucky to maintain those fat cattle prices in the high $60s throughout the summer," Davis predicted. "It will probably slip into the mid-$60s. But it has the potential, if the feedlots lose their currentness, of dropping $10 below where it traded March 13, and then it traded just a little over $71 per hundredweight."

Feedlots will be challenged by high calf prices and a potential short corn crop, if a predicted drought for the Midwest comes through.