January 12, 2004

 

 

US Beef Markets Stabilizing

 

The U.S. cash cattle and boxed beef markets appear to be stabilizing following the discovery of mad cow disease that has wreaked havoc in the industry.

 

From a quote of $151.08 per hundredweight on Dec. 23, light choice boxed beef prices fell to $127.99 at the close of business on Thursday. However, they turned higher Friday, breaking a string of 16 consecutive days with lower prices.

 

Cash cattle traded at mostly $92.00 live and $148.00 dressed on Dec. 23 then fell to $74.00 live and $119.00 to $120.00 earlier this week. Live cattle prices rallied to mostly $76.00 with a few at $77.00 late in the week while dressed prices firmed up as well with some at $125.00 on Friday.

 

The major negative force affecting beef and cattle prices resulting from the BSE finding so far has been the temporary closure of most U.S. export markets for beef.

 

The U.S. Department of Agriculture in its latest supply-demand report for meat released Dec. 11 projected 2003 beef exports at 2.584 billion pounds, representing nearly 9.8% of the nation's production.

 

Market analysts and industry sources said the loss of the export sales forced beef packers to immediately halt shipments destined for most of the export markets, take product back that had already been shipped and to search out domestic customers for the beef.

 

That's an enormous undertaking - to turn millions of pounds of beef that were being produced to meet export customers' specifications and funnel it all back through domestic channels, sources said. While there is still work to be done in this regard, it appears that much of the surplus has been sold or committed for sales, the sources said.

 

However, in an effort to get out from under the mountain of beef suddenly pushed back upon them, packers sharply reduced slaughter rates this week following lighter kills the past two weeks due to the holidays.

 

Some sources predict that once packers clear the beef that was previously slated for export and bring inventories of fresh production to manageable levels, then perhaps the plants can push slaughter rates back to up at least 90% or more of a year ago. They reason that if America's consumers continue to have confidence in U.S. beef, as has been indicated thus far, then once the initial wave of beef supplies is sold, packers will likely need to step kills back up some.

 

Certainly some industry sources whose livelihoods are at stake breathed a sigh of relief when they saw that USDA's boxed beef prices had turned higher on Friday afternoon's report.

 

While there is still much uncertainty and additional fact-finding to be done concerning the whereabouts of the other cattle imported from Canada with the BSE-infected cow as well as efforts by USDA and industry to prevent any additional cases of the disease, the worst may be over from the U.S. first case of BSE, sources said.

 

U.S. cattle slaughter for the week was estimated at 567,000 head, compared with 439,000 a week ago and 664,000 a year ago.

 

Hog slaughter this week was estimated at 2.005 million head, compared with 1.794 million last week and 1.928 million a year ago.

 

This week's combined meat production - for beef and veal, pork and lamb/mutton - was estimated at 829.1 million pounds, versus last week's 690.5 million and the year-ago figure of 897.3 million pounds.

 

Broiler slaughter this week was estimated at 158.145 million head, compared with 134.816 million a week ago and 152.541 million a year ago.