030912 U.S. Beef Enjoys Bull Market

Surging consumer demand for beef and a ban on Canadian livestock are fueling a bull market for U.S. cattle that is improving business in ranching towns, fattening meatpacker profits and creating headaches for restaurateurs trying to shield diners from higher prices, Friday's Wall Street Journal reported.

Cattle prices have hit records this month, and the momentum is such that they will probably stay lofty enough to keep ranchers profitable for a couple of years. In Iowa, meatpackers last week paid a record 90.72 cents a pound for fattened steers, up 38% from what they paid a year earlier.

"It's the best time for ranchers I can remember in 40 years," said Ernie Davis, an economist at Texas A&M University in College Station.

The boom is a huge lift for the U.S. farm economy, which is recovering from a five-year recession. Ranching is agriculture's largest sector, generating about $41 billion this year, or 20% of the farm economy's total revenue. And the beef rally is a big reason the Agriculture Department earlier this month raised its forecast of this year's farm income. It now expects net farm income to climb 49% in 2003 to $52.6 billion, which would be the highest level since 1996.

The cattle boom will hit home for ranchers in the next several weeks, when most calves are weaned and sold to the businesses that will fatten them on grain. For many producers, selling cattle will never have been so profitable.

The biggest impact from this market change is being felt in the Great Plains, the region most dependent on ranching. In the area supervised by the Federal Reserve Bank of Kansas City, Mo., which includes all or parts of seven states, ranching generates two-thirds of farm revenue. The profitability of ranching is increasing the value of grazing land, which is in turn increasing both the asset value and credit-worthiness of ranchers in the region.

Wall Street Journal Staff Reporters Scott Kilman and Patricia Callahan contributed to this article.

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