August 17, 2004

 

 

Fewer Cattle In US Could Raise Prices

Fewer US cattle are being placed in feedlots, which could mean higher cattle prices for farmers and higher beef prices for consumers.

 

"A really low cattle inventory, coupled with high prices, means there's a good underlying demand for beef," said Doug Conti, commodity broker at Midwest Market Solutions in Yankton. "I expect (commodity) prices to continue to be high, at least above the past five-year average."

 

The U.S. Department of Agriculture says the national cattle inventory is at 103.6 million head, which is a 31-year low. The agency says 33.5 million of them are beef cattle.

 

Feeder cattle prices are averaging $1.17 per pound for a 775-pound steer, and fat cattle prices are about $85 per 100 pounds, big increases over last year.

 

The higher prices should hit consumers by early next year.

 

"Less beef will probably be available about six months from now," said Matt Diersen, Extension economist at the South Dakota State University in Brookings. "If there's less beef around, this will drive up (grocery store) prices."

 

The prices that farmers get and grocery stores charge depend on the current situation continuing, and that cannot be predicted, Diersen said.

 

Supplies are short because of the western U.S. drought, which has forced many ranchers to sell off part or all of their herds. With fewer cows in a herd, the fewer calves are produced and sold. As the drought eases, ranchers are able to increase calf production.

 

Moreover, the United States is not importing as much beef as it needs to match the demand.

 

Demand remains high because of beef promotions in restaurants and grocery stores. Since pork and poultry prices are also high, meat-loving consumers do not have low-cost options.

 

More consumers have turned to high-protein diets, and meat purchases have increased with the popularity of the Atkins, South Beach and other diets.

 

"Of course, things could change, but I think this (situation) will continue," Diersen said. "Demand for beef is very high right now. While this will increase prices in the short run, the low supply is will sustain them.

 

"That we're at a 31-year low is something to note because of all these different factors of supply and demand coming together. But we're in the middle of normal ups and downs. It is nothing unusual that prices are relatively high."