It seems that every summer we hear the term “weather market” in reference to the cattle outlook. This year, the term might mean more than usual. 

Even if farmers turn in a big corn crop, as expected, grain prices are likely to remain well above the $2 range of recent years. But corn isn’t the only issue. Forage supplies could play a major role in feeding trends and cattle values through the rest of this year.

High cost of gain during the finishing period likely will encourage owners to keep calves on forage longer and send them to feedyards at heavier weights. Evidence of this trend already has appeared in USDA’s Cattle on Feed reports, with placements of lightweight cattle dropping off noticeably last win-ter and into this spring. Consequently, May placements exceeded those during May 2006 by 13 per-cent, with cattle in the heavier weight classes accounting for all of the increase. Placements of cattle weighing 700 to 799 pounds increased 29 percent, and those over 800 pounds increased 21 percent over last year.

Fed-cattle prices, averaging over $90 per hundredweight through this spring, helped feeders justify placing some lighter cattle. Prices have declined seasonally since June, though, and feedlots could become more reluctant to take in long-term residents until the outlook improves.
 
So, while market trends suggest shorter feeding periods, weather will help determine how many calves can stay on forage and for how long. If drought pushes lightweight calves into feedyards this summer or fall, their value could decline significantly compared with the past few years.
 
Regional on-feed numbers continue to reflect the impact of grain prices and the availability of lower-priced distillers’ grains in the Corn Belt. As of June 1, feedyard inventories were up 10.6 percent in Iowa, 10.3 percent in South Dakota and 8 percent in Nebraska compared with the same date last year. Inventories in Kansas, Texas and Oklahoma, meanwhile, were below those of one year earlier.

Boxed-beef prices during June dropped by more than $15 per hundredweight, pressuring fed-cattle prices into the mid $80s. USDA’s June 22 Cattle on Feed report didn’t help, with U.S. inventories up 1 percent, placements up 13 percent and marketings down 3 percent compared with one year earlier. Large placements of heavier cattle could signal larger slaughter numbers this fall, and with carcass weights beginning to inch upward, beef supplies could somewhat limit the strength of any price rally this fall.

Domestic demand generally has held up well this year, but appears to be suffering somewhat, recently, due to higher food and energy prices pressuring consumer budgets.
 
Fed-cattle prices should improve, though, creeping back to the $90 range later this summer and into the mid $90s for the fourth quarter.