As the U.S. beef industry continues to rebound after its first case of mad cow disease, there seems to be good news for producers. Strong prices are forecast for 2004, but they will not return to the record levels seen a year ago.
“Prices are less than what we originally forecasted, revised down from $11 to $14 per hundred weight for each weight class,” said Dr. Ernie Davis, Texas Cooperative Extension livestock marketing economist.
“But when you look at prices, you'll see they are relatively high. It may rebound better than we thought.”
Short cattle inventories, coupled with continued strong consumer demand in spite of the recent U.S. mad cow discovery in Washington, continue to be a few of the big drivers of the current beef market. Trade with Mexico is likely to resume in the next 30 days for live cattle less than 30 months of age, Davis said.
“We're not going to regain the Japanese market until we find those 80 cows that came from Canada. We've still got about 61 more of those cattle to go.”
Davis presented his 2004 beef market outlook to attendees at the 42nd Blackland Income Growth Conference recently. Seasonal prices will remain strong through the year, he said.
“We may have a pattern like we had last year. When we open up those foreign markets after the first half of the year and start shipping to Japan and Mexico, we're not going to have that many cattle on feed. We could have a similar price scenario this year.”
Current factors affecting the market include the implications of mad cow disease, the impact of drought since 1996, domestic demand and food safety. The U.S. case of mad cow disease in December started a chain reaction of countries banning U.S. beef.
Davis said prior to that, the beef market was feeling the effects of Canada's own case of mad cow disease.
“We already had a ban on Canadian cattle, and throughout 2003, we still have continued herd liquidation. We've had that liquidation since 1996. It will be interesting to see in 2004 if we have moisture and range conditions to expand that herd or not.”
He noted many producers chose to sell heifers from their calf crop and take advantage of the high prices.
“When you're getting $500 or more for that heifer, it's hard to save her,” he said.
Ranchers either choose to save heifers from a calf crop for replacement cows or send them to market. Drought has been another factor contributing to the market.
“Somewhere in the United States in beef cattle production country we've had drought since 1996,” Davis said, and that has contributed to the nation's liquidation of beef herds.
Davis said beef producers experienced record prices due to lower beef supplies because of liquidation and smaller herds, and with the ban on the Canadian market, it reduced fresh meat supplies some 8 percent to 10 percent.
“And when the borders closed to Canadian beef, the United States was the only country available to supply large quantities of good quality beef. There were fewer imports and more exports.”
Consumer demand also contributed to high prices in 2003, Davis said, noting beef consumption in 2003 increased by 5 percent.
“That's the most in any single year for beef,” he said.
Fed cattle prices went from $93 per hundredweight to $75 per hundredweight immediately after mad cow disease was confirmed last month. Davis said those prices have rebounded to the mid-$80 per hundredweight range.
He praised the efforts of U.S. surveillance. He said when Canada reported its first case of mad cow disease in May 2003, the cow was slaughtered in January 2003.
“Our cow was brought to market Dec. 9 and confirmed on Dec. 23. Our safety net works well,” he said. Other factors affecting the current beef market include a slight increase in the price of corn, but Davis said it still remains relatively cheap and will not influence markets extensively.
Davis said there have been no clear signs of cattle producers rebuilding their inventories.
“This has been a 14-year cattle cycle, the longest we've ever had,” he said. “In 1995, cattle and calves peaked at 113 million and went down to 103.9 million in 2003. There has been continued liquidation. We don't have any indication yet that producers are planning to expand their herds.”