May 6, 2004

U.S. Cattle Prices Rebound To Near Pre-BSE Levels

In a surprising move, beef packers on Tuesday rushed to buy cattle and paid the highest prices for steers and heifers since the pre-mad cow days of last December. More than 100,000 cattle traded from Nebraska to Texas on Tuesday at mostly $90.00 to $91.00 per cwt, which is up $3.00 to $4.00 from sales a week ago.

Those prices are the highest since $92.00 traded in late December right before the United States reported its first case of mad cow disease.

"I thought we would make another run at $90.00, but I didn't think it would be this week," said Jim Robb, agriculture economist at the Livestock Market Information Center.

The $90.00 to $91.00 returned profits of about $50 to $100 per head to cattle producers.

Cattle prices have sped higher the past two weeks largely due to domestic demand for beef and tight supplies of market-ready cattle, livestock analysts said.

The popularity of high-protein diets, such as the Atkins plans, have increased consumption of beef and other meats. Also, the onset of spring has consumers buying steaks and hamburgers for backyard grills.

Cattle supplies are tight because feedlots have rushed to sell in the past month fearing prices would be lower later this spring. That rush to sell cattle has pared supplies.

The strong domestic demand has pushed wholesale beef prices sharply higher and has beef companies such as Tyson Foods Inc., Cargill Inc.'s Excel unit, and Swift and Co. earning sizable profits on beef, industry sources said.

"The meat is moving out the door and the packers are making money," said Robb.

On average beef plants early this week earned profits of about $35.00 for each steer and heifer they processed, according to HedgersEdge.com. The domestic beef demand has offset the loss of exports.

After the mad cow case in late December, overseas buyers immediately banned U.S. beef and many of those markets remain closed. At that time the United States was exporting about 10 percent of its beef production.

"You have to look at domestic demand, it is better than anybody ever thought it would be," said Ann Barnhardt, livestock analyst with HedgersEgde.com.

Cattle prices have increased about $6.00 per hundredweight during the past two weeks and analysts are cautious about predicting how much higher the market will go.

"I don't think we will add another $5.00 to the cattle market, but we could," said LMIC's Robb.