June 10, 2004

 

 

High Demand Fuels Robust Beef Prices In US

 

Five months after the first reported U.S. case of mad cow disease, beef prices are nearing record highs. Cattle ranchers are earning tidy profits and consumer demand for beef remains strong.

 

The unexpectedly strong U.S. beef cattle market is benefiting South Dakota ranchers who typically sell calves and yearlings in the fall and partially offsetting the continued drought in parts of the state.

 

Justin Stockill, executive director of the South Dakota Cattlemen's Association, said 600-pound animals that typically bring 90 cents to $1.10 a pound are selling for $1.25 to $1.40.

 

The national demand for beef this summer has driven up the price of slaughter cattle. That has also worked up the chain and bolstered prices for young cattle.

 

"You look at packing plants and they are only operating 32 hours a week now," Stockill said. "The demand is there. They just don't have the supply to be slaughtered now."

 

Bob Mack of Watertown, a South Dakota Stock Growers regional vice president, said it is a "terrific time" for cattle producers.

 

"It is probably the only bright spot in this drought that seems to be sustaining itself in the far western and southwestern parts of the state," he said. "The fact is that those producers who are required to reduce their herds (because of limited grass and water) are able to do it at some of the strongest prices in history.

 

"Everybody wishes they had more cattle right now," Mack said.

 

In an average year, 3 million animals go through South Dakota's 40 sale barns.

 

"It seems these high prices are bringing feeder cattle to town that normally do not show up until the fall," Mack said.

 

Ranchers benefited from strong beef prices last fall, when the Canadian border was closed to beef imports after a sick cow was discovered on a Washington farm last December.  It was later found to have originated in a Canadian herd. Despite analysts' predictions to the contrary, those prices have held up, Mack said.

 

"There were some predictions that fat cattle prices, especially, would soften in the latter half of May once retailers met most of their needs for the Memorial Day weekend," he said. "It appears that keeping the Canadian border closed and the excellent beef demand from U.S. consumers has actually caused cattle prices to move higher instead of lower."

 

Aside from the loss of some export markets such as Japan and South Korea, which continue to bar American beef products, the U.S. beef industry appears to have emerged from the mad cow episode virtually unscathed.

 

But some food policy experts are warning that the mad-cow scare may merely be in remission. They say that the beef industry is still engaging in risky production practices, and that the U.S. Department of Agriculture has been lax in enforcing its own requirements to safeguard the U.S. beef supply from the brain-wasting disease.

 

Even Agriculture Secretary Ann Veneman has warned that an expanded mad-cow testing and surveillance program, which officials began implementing this month, could well turn up new cases of the disease.

 

"We anticipate that we may find a few additional cows," Veneman told a Washington press conference last week. "And we are prepared for that."

 

Under the new system, USDA inspectors will test more than 200,000 head of cattle for bovine spongiform encephalopathy, or mad cow disease, a tenfold increase in current annual testing levels. Particular attention will be paid to older animals that are more susceptible.

 

Nevertheless, for the moment, the good times in the beef industry are still rolling.

 

"Domestic demand has been nothing short of astonishing," said Gregg Doud, chief economist for the National Cattlemen's Beef Association, the industry's main lobbying group. "Our first-quarter 2004 demand index numbers - a function of price and quantity - are up about 6 percent over 2003 and arguably the best in 10 years."

 

The combination of a persistent drought in the West, a steady reduction in the size of the overall U.S. cattle herd and increased demand for beef spurred by the popularity of high-protein diets has helped keep both demand and prices high, Doud said.

 

But Caroline Smith DeWaal, director of food safety at the Center for Science in the Public Interest, sounded a cautionary note.

 

"I don't think the beef industry is out of the woods yet," she said. "We certainly have to prepare for the possibility that there are additional cases of (mad cow) in the U.S. and that USDA will have to take enhanced actions to protect the human food chain."