040217 U.S. Beef Production Expected to Decline

Grand Island, NE - Tight cattle supplies and the loss of foreign markets are putting the hurt on U.S. meatpackers, said Jim Robb, director of the Livestock Market Information Center.

"Since the fourth quarter of 2003, we have had very tight cattle supplies of market-ready cattle in the United States," Robb said earlier this week at the 2004 Nebraska Beef Feedlot Roundtable, which was held in Grand Island.

"Packers have been under some rather big pressure for several months," he said. "When you put the BSE (bovine spongiform encephalopathy) situation on top of that, they have reacted in terms of laying off workers."

Robb said the loss of meat product exports, especially to Japan, has also created labor concerns among packers, as many of those items are more highly processed than those products aimed at the domestic market and call for additional workers.

The Canadian situation is also impacting domestic beef processors, said Dillon Feuz, a UNL Extension economist based in Scottsbluff, who also spoke Tuesday at the roundtable.

Last year, a dairy cow in Canada tested positive for BSE. Imports of both Canadian-processed beef products and live cattle were banned in the United States. Late last year, the U.S. lifted its ban on processed beef products coming in from Canada, but continued to ban live cattle imports into the country.

Feuz said the impact on U.S. beef processors of live Canadian cattle varies from plant to plant. For Swift & Co., 6% to 8% of its annual kill is cattle from Canada.

Feuz said the loss of export markets and the lack of access to live cattle from Canada only further tightens supplies for U.S. beef processors.

"One of the ways processors have to manage that is to basically shut their factory down or a portion of it for some time period to deal with it," Feuz said. "So they are just responding to an overall tight supply. The best way to manage their costs is not to incur those costs if they don't have the product to sell."

Robb said Nebraska is a major cattle-feeding state and the longer-term picture has cattle numbers in the state eventually coming back to a more normal balance.

"But fundamentally over the next couple of years we are going to be looking at tighter cattle supplies," Robb said.

On Friday, the Nebraska Agricultural Statistics Service reported that state feedlots with capacities of 1,000 or more head contained 2.28 million cattle on feed on Feb. 1,up 3% from last year but slightly below Feb. 1, 2002.

But placements during January totaled 380,000 head, down 21% from 2003 and 22% below 2002.

Fed cattle marketings for the month of January totaled 360,000 head, down 8% from last year and 11% below January two years ago.

Other disappearance during January totaled 20,000 head, compared with 10,000 head during January 2003 and 25,000 head during January 2002.

Nationwide, cattle and calves on feed for slaughter in the United States at feedlots with capacity of 1,000 or more head totaled 11.1 million head on Feb. 1, 4% above Feb. 1, 2003, but 4% below Feb. 1, 2002.

Placements in feedlots during January totaled 1.75 million, 16% below 2003 and 20% below 2002.

Marketings of fed cattle during January totaled 1.78 million, down 10% from 2003 and down 14% from 2002.

Other disappearance totaled 94,000 during January, 25% above 2003 and 6% above 2002.

The USDA also reported Friday that beef production during January nationwide, at 1.92 billion pounds, was 16% below the previous year. Cattle slaughter totaled 2.57 million head, down 14% from January 2003. The average live weight was 1,249 pounds, down 19 pounds from January a year ago.

In Nebraska, the number of cattle slaughtered during January was 519,200 head, which was down from 641,600 head a year before.

On Friday, the U.S. Department of Agriculture reported that U.S. beef production is expected to drop 3% this year to nearly 25.4 billion pounds.

According to USDA analyst Joel Green, conditions will not be favorable for producers to retain replacement heifers, so cattle liquidations could continue for a ninth year.

The USDA is predicting fed cattle prices to average in the mid-$70s this year.

Feuz said the continued loss of export markets will not only continue to hurt packing plants and dampen prices, but will also have a ripple effect that could impact calf prices this fall.

"If we can open up the Mexican border sometime this spring or early summer and then perhaps get into some of the overseas markets by late fall, then I think that will reduce that pressure," Feuz said.

Source: The Grand Island Independent

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