050444 Strong Domestic Beef Demand Keeps Cattle Prices Strong

Lincoln, NE - United States consumers continue to eat beef, keeping prices of fed cattle relatively strong, University of Nebraska agricultu al economists say.

Beef demand increased by about 8 percent to 10 percent in 2004, even though Americans paid a higher price for that beef compared to 2003, said Dillon Feuz, agriculture marketing specialist at the university's Panhandle Research and Extension Center at Scottsbluff.

United States per capita consumption of beef in 1997 was nearly identical to per capita consumption in 2004 which allows for some direct comparisons of prices in 2004 and 1997, since quantity is unchanged, Feuz said.

In 1997, the inflation-adjusted price for all fresh beef was $264.51 per hundredweight. In 2004, the inflation-adjusted price was $334.82 per hundredweight - an increase of 26.5 percent.

In 1997, fed cattle in Nebraska sold for $66.27 per hundredweight. In 2004, the average was $84.91 per hundredweight. When these prices are adjusted for inflation, prices were $69.45 and $78.66 for 1997 and 2004, respectively.

Without any increase in beef demand, the average price in 2004 likely would have been $75 per hundredweight - $10 per hundredweight less than it actually was, Feuz said. That $10 - or $125 per head - is the impact of increased beef demand since 1997.

"The reason why a producer can sell steer calves for $125 per hundredweight rather than $100 per hundredweight is due to the increase in retail beef demand," Feuz said.

However, beef demand could be a big wild card for the rest of 2005, said Darrell Mark, university livestock marketing specialist.

"Beef is part of the healthy menu choices again," Mark said. "We hope it stays steady in 2005 with 2004 levels. What we need to ask ourselves is will consumers keep eating beef and at higher prices?"

Mark said producers can expect a lot of volatility in the markets with current trade uncertainty around the globe.

On the positive side, trade could be restored with Japan soon. Before the BSE discovery in Washington in late 2003, Japan accounted for 37 percent of United States exports in 2003.

"If trade is restored, it may not be restored to that level right away, but when trade is restored we should see nearly a 5 percent to 6 percent price response of $4.50 to $5.50 per hundredweight increase in cattle prices," Mark said.

"It will take a while to get back to 2003 levels, but when Japan comes back online South Korea may follow," he said. South Korea accounted for another 23 percent of the export market in 2003.

As for the drought, cattle inventory has gone down the last eight years due to producers reducing their herds. Supplies of cattle have started to grow again and this should continue unless the drought persists through 2005.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com