But, the retailers must also anticipate the amount of meat the consumer wants and attempt to purchase that amount from the  packer.  The packer who has meat in his cooler must sell it. If the packer sells the meat to the retailer, he must also replace it  with meat from the feedlot operator in order to keep his cooler full.  The packer and the retailer negotiate a price that they  are both willing to pay considering the amount of meat available from the feedlot and expected consumer demand anticipated by the retailer.

      How do feedlots price feeder cattle?  Feedlots price by first estimating demand at the packer level of the marketing channel.  Based on the feedlot’s view of expected demand for slaughter cattle, the expected supply of slaughter cattle and the resulting  packer quoted price, they determine what profit they can make on fat cattle. The expected fat cattle price is then adjusted for anticipated production costs and a profit margin to determine what price the feedlot can offer the stocker operator.

     Stocker producers have a limited production period of 120 to about 210 days. Thus, they also have to anticipate the demand for their feeder cattle at the end of this production period. Based on the expected demand for and supply of feeder cattle, the  stocker operator estimates a selling price for his cattle.  He then must allow for production costs and a profit margin in order  to know what to bid for stocker cattle.

     The beginning of the production cycle is at the cow-calf level. This is also the ending point of the price discovery process.  The cow-calf producer’s decision is to take or not to take the offered price. He is frequently referred to as the last rung in the marketing channel or the "price taker". Based on current market prices and future price expectations, the only decisions left  to the cow-calf producer are to sell his cattle today or wait until a future date.

Market Information
     Successful marketing requires the acquisition of information. Marketing cattle requires the producer to search out information  not only about market alternatives and price, but, also estimates of the supply and demand for beef. It is critical that  cattlemen obtain an understanding of this market information in order to make useful decisions.  Periodically, the USDA  releases supply and demand reports for beef, and other livestock and grain commodities that affect beef prices. The most  important beef reports are the Cattle on Feed Report and the Cattle Inventory Report.

Cattle On Feed Report
     The USDA cattle on feed monthly report estimates the number of cattle and calves on feed for the slaughter market for  feedlots with 1,000 one time capacity.  Items estimated on the full report include the number of cattle on feed, cattle placed  on feed, fed cattle marketed, and other disappearance each month. Cattle on feed are then separated into "kinds" (steer,  heifers and cow) on feed and then by sex and weight.  The report normally provides cattle on feed numbers for the last three  years.  It also reports the percentage change in cattle numbers from the previous two years to the present year.  First of the  month estimates of number of animals on feed are given, then animals placed marketed and other disappearances.

     This report provides an estimate of the short run supply and demand picture for beef in the U.S. The difference between the  monthly on feed numbers reflects whether or not the supply of finished cattle in feed yards is increasing or decreasing.  Over  the course of a few months this provides a good estimate of the ability of the economy to absorb beef supplies.  Placement  numbers also indicate the demand for feeder cattle. Larger placements generally indicate a strong demand for feeder cattle.   Marketing numbers suggest the level of demand for beef by packers and retailers.

Cattle Inventory Report
     The USDA cattle inventory report contains USDA’s semi-annual estimate of all cattle and calves, cows and heifers that have  calved--beef and milk cows, heifers 500 pounds and over--for beef or milk cow replacement and other, steers 500 pounds  and over, bulls 500 pounds and over, calves under 500 pounds and the current year calf crop.  The current year’s inventory  estimated as a percentage of the previous year’s estimate is also presented.

     USDA’s cattle inventory report helps cattlemen determine beef supply trends. The total cattle and heifer retention numbers  indicate the potential level of beef in the market channel over the next few years. They indicate cattlemen’s expectations  about profitability. Increasing heifer retention signals herd expansion due to producer expectations of increasing beef profits.  A combination of all of the numbers helps determine where the beef industry is in the cattle cycle.

 Market Price Seasonality
     Understanding the affect that seasonality has on beef prices also helps the cattle producer develop his marketing plan.  Most  marketing strategies are dependent upon the producer’s calving season.  This automatically makes the marketing decision  time oriented. Spring calves are sold in the fall and fall calves are sold in the spring.  Consequently, the producer’s calving  practice affects the prices that he is able to achieve each year.