011032 Lower Beef Prices Possible With Cattle Glut

Wichita, KS - Consumers should find lower prices at their meat counters the rest of this year in the wake of a slowing economy that has created a glut in the nation's cattle markets, analysts said.

The same public uncertainty that has reduced air travel and tourism is also driving down demand for beef at hotels, restaurants and resorts. That's having a big impact on cattle prices, considering that half of the beef raised in this country is eaten outside the home, said James Mintert, Kansas State University extension economist.

Aggravating beef's downward spiral was the discovery last month of mad cow disease in Japan, the single biggest buyer of U.S. beef. Early trade reports suggest Japanese consumers are not buying either their own domestic beef or U.S. exports, Mintert said.

“It is a very nervous market -- people are very concerned where consumer demand for beef will be, even in the short run,” Mintert said.

Industry groups are urging consumers to take advantage of the low prices -- and eat more beef.

National Cattlemen's Beef Association, the trade and marketing organization for U.S. beef producers, has been urging consumers to keep watch for favorable beef prices as the market adjusts to current economic conditions.

The association has asked the government to buy more beef for its food service programs, while asking retailers to note the lower prices and pass on the savings.

“With ample beef supplies for the rest of 2001, we are encouraging supermarkets and restaurants to take advantage of lower prices now and pass those savings on to consumers,” said Chuck Lambert, the NCBA's chief economist.

The cattle market's sensitivity to current events was shown by the current anthrax scare.

The live cattle futures market for October closed at $68.55 per hundredweight Oct. 11. Four days later, it was down to $65.75 per hundredweight -- taking another sharp drop after President Bush announced that a letter sent to Senate Majority Leader Tom Daschle tested positive for anthrax.

Cattle prices have weakened since early September, Mintert said. Both cash and futures prices were down before the terrorist attacks, but the declines accelerated in later weeks.

Because of the lag time between cattle markets and slaughter, consumers usually don't see lower prices until months later.

Feedlots are responding to the low market prices by putting fewer cattle on feed, in an effort to reduce supplies and return prices to profitable levels.

Livestock now being put on feed at the nation's feedyards would typically be marketed in midwinter, late winter and even spring. Then, beef supplies would begin to tighten again, and prices could be expected to rise.

Prices now are so low that cattle producers are not making the break-even price in the mid-$70s per hundredweight, Mintert said. Recent cash prices have meant a loss of $60 to $80 a head for each animal sold, he said.

Nearly one in four steaks or hamburgers eaten by the American public comes from cattle fed in Kansas, and more than 22% of all cattle fed in the U.S. comes from Kansas. The state ranks first nationwide for commercial cattle processed each year -- 8.21 million head, according to government statistics.

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