The fed-cattle market for the next few months appears poised to follow typical seasonal trends with prices headed lower through the summer and rebounding by fall. What remain to be seen are the effects of some unpredictable demand factors, such as consumer concerns over animal-disease issues or the slowing economy.

Live-cattle prices and wholesale beef values have held up well through the spring months, supported by lighter slaughter weights and higher hide and offal values. The long, cold and wet winter hurt feedyard performance and delayed spring marketings, contributing to lower slaughter numbers through the early spring.

The downside is that feedyard inventories remain high as the market enters a period that typically features slower demand and lower prices. The April cattle-on-feed report lists total feedyard numbers as of April 1 at 11.52 million head, up 3 percent from April 1, 2000, and 11 percent above April 1, 1999. Placements into feedyards continue to decline, however, with March placements totaling 1.85 million head, 9 percent below 2000 and 1999 levels.

Marketings during March, at 1.93 million head, exceeded placements during the same period, following a trend for gradually declining inventories. But at 6 percent below that for March 2000, the marketing figure is a cause for concern. Supplies of market-ready cattle are likely to increase significantly during May, June and July, driving prices lower. And if feedyard marketings become uncurrent during this period, slaughter weights could again trend higher, further contributing to overall beef supplies.

For the first quarter of 2001, dressed weights averaged 9 pounds below the same period last year, counter to the longer-term trend toward heavier weights. The combination of lower slaughter numbers and lighter weights reduced first-quarter beef supplies more than 7 percent, compared to the same period in 2000.

Shorter supplies have supported beef prices and also the value of hide and offal, an important component in determining live-cattle prices. The Livestock Marketing Information Center estimated in mid-April that higher drop credit accounted for a $2 increase in live prices over one year earlier. Hides represent the largest portion of the byproduct value, and shorter supplies coupled with strong demand for leather goods drove wholesale hide prices to $95 per hundredweight, according to LMIC. That figure was about $20 per hundredweight higher than during March 2000 and $26 per hundredweight above March 1999. Just like beef prices, hide values are likely to drop off with larger supplies and could drop off more if demand slips significantly.

Based on projected supplies, cattle feeders can expect seasonal declines in live-cattle prices this summer. Demand issues could add further uncertainty to the market, and producers should manage their risk accordingly. The opportunity to hedge at least some cattle at or above break-even levels probably is a sound strategy during a period of such uncertain demand.