041192 Higher Prices Boost Beef Producers' Income

Monte Vista, CO - High cattle prices and high beef prices in the last year means there is more money in the beef business and "that bodes well for those in the cow/calf business" producers were told yesterday during the 2004 Southern Rocky Mountain Forage and Livestock Conference in Monte Vista. "Everybody is getting used to higher prices," said Mike Miller of CattleFax, a cattle marketing information service in Denver. Miller presented a session on the cattle and beef situation during the conference.

"We expect 2005, 2006, 2007 and 2008 to be good years," said Miller. "Cow/calf producers are in the driver's seat. Everybody wants what you have."

Producers should look for calf prices to hover in the $90/cwt. range, during this period, Miller speculated.

In the nearer term, the threat of BSE, or mad cow disease, will continue to influence the industry. Since a cow in Washington state tested positive for the disease in 2003, the only market the U.S. has been able to export to is Mexico.

An agreement in the works with Japan may open that market for U.S. beef in the first quarter of 2005, Miller speculated. Japan is historically the largest overseas market for U.S. beef. Resumption of beef trade with Japan should be a boost to market.

An agreement with South Korea - America's third largest trading partner - is also in the works, Miller noted.

Expect domestic beef production to increase as trade normalizes, Miller said. Exports account for ten percent of U.S. beef production, according to Miller. He estimated that border closures to beef cost cause by single incident of BSE cost U.S. cattlemen $120-$150 per fed animal.

U.S. cattlemen have been closely watching the Canadian border in anticipation that the U.S. Department of Agriculture will authorize resumption of the live cattle imports from Canada. According to Miller, USDA is considering a rule to resume those imports and he said he expects a decision within 60 days.

"It's going to impact the market in some degree," he said. "Our market is going to deteriorate a little."

He said the biggest impact to the U.S. market from opening the Canadian border will come when the feeder cattle brought in to U.S. feedlots are ready for marketing later in the year.

While some agriculture groups are opposed to reopening the Canadian border to live cattle imports, Miller said he expects the USDA to reopen the border. That could mean as many 300,000 head of feeder cattle imported to the U.S. from Canada, according to Miller.

By comparison, the U.S. imports about 1.1 million head of feeder cattle from Mexico. He said combined U.S. and Canadian cattle numbers should break the 1997 level of just below 39 million head.

Much of the Canadian live imports should be cull cows that can replace lean meat imported from Australia and New Zealand that is mixed with fat trimmed from heavy U.S. carcasses and made into hamburger, according to Miller.

While they are not eating more beef, consumers are spending more on beef - $62 billion in 2003. Americans eat 65-68 pounds of beef annually.

A growing national economy and the Atkins Diet have contributed to improved demand for beef. That means cattlemen can produce more beef and still get a higher price.

"Higher retail prices means everyone can afford to spend more," Miller said. "That is more for the retailer, packer, feeder, and producer."

Don't' expect retail to lower their price. "One thing retailers hate to do is lower price," Miller said.

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