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   from the issue of January 15, 2004

  Mad-cow disease scare hasn’t hurt demand for beef, says livestock specialist

Cattle prices same as this time last year


News of the first U.S. case of bovine spongiform encephalopathy sent cattle markets plunging, but U.S. consumer confidence could be preventing further drops in cattle prices, an NU livestock marketing specialist said.

If domestic consumer beef demand holds steady, fed cattle prices are likely to trade in the mid- to upper $70-per-hundredweight range during the first quarter of 2004, said Darrell Mark, livestock marketing specialist in NU’s Institute of Agriculture and Natural Resources.

Before the BSE case was reported in Washington on Dec. 23, live cattle prices were at $91 per hundredweight. They have initially stabilized around the $75 range as many countries closed their borders to U.S. beef, Mark said.

However, even after the price drop, fed cattle prices remain about where they were at the beginning of 2003, he said.

“The drop in prices was a hit on historically high cattle prices,” Mark said. “If we would have taken this hit last year, prices would have dropped down to $60. The good news, if there is any, is that the price decline we’ve seen started from historically high price levels.”

Also, U.S. consumer demand doesn’t appear to be dropping off.

“The USDA and the beef industry have been proactive in getting information out there and doing a good, aggressive job of assuring consumers that beef remains safe to eat,” Mark said. Each 1 percent decrease in consumer demand of beef means about a 1.5 percent drop in price.

In 2002, U.S. beef exports of 2.45 billion pounds, valued at more than $2.5 billion, accounted for about 9 percent of U.S. commercial beef production.

The 15 percent decline in fed cattle prices stemmed from the loss of more than 40 U.S. beef export customers, including the No. 1 buyer, Japan, Mark said.

“It appears the price decline as a result of the export markets is roughly equivalent to the actual price decrease observed in the past two weeks,” Mark said. “This indicates the market has not significantly discounted beef and cattle prices in expectation of a decline in domestic beef demand. This is good news since domestic demand accounts for nearly 90 percent of U.S. beef production.”

When BSE turned up in Canada last year and halted that nation’s exports, Canadian cattle prices dropped substantially more because Canada exports between 50 and 60 percent of its domestic beef supply, Mark said.

The loss of export markets due to BSE “had a much bigger impact in Canada,” he said. “In the U.S., we’re looking to increase domestic supply by 10 percent, in Canada they had to add 50 to 60 percent.”

Unfortunately, beef export markets may not be fully restored for months, he said. Producers can expect increased price volatility as the market reacts to mixed signals of border re-openings.

Also, a modest price decline in the first and second quarter of 2004 was likely to occur based on increasing slaughter numbers and heavier carcass weights projected for the first and second quarter, Mark added. This increase in beef production was not changed as a result of the BSE case, so that pressure on prices still could be expected. This impact also could be worse if cattle sales slow and carcass weights grow as a result of producers holding back cattle in anticipation of recovery.

Depending on the status of regaining export business, second quarter fed cattle prices are expected to be in the upper $60 per hundredweight to lower $70s.



Journalist to kick off King week events
Lecture to address how U.S. relates to the world
Roadwork to change traffic flow on campus
Cattle prices same as this time last year
Lectures on natural resources, water issues begin Jan. 21