Beef Market Advisor

Friday, December 26, 2003

For an early analysis of the U.S. BSE announcement impact on market prices, see Dr. Mintert's, Kansas State University, price analysis at

http://www.agmanager.info/livestock/marketing/outlook/newsletters/BSEImpactonCattlePr12.26.03.htm

posted by Dr. Harlan Hughes 6:24 PM [edit]

To:Harlan G Hughes

Sent: Thursday, December 25, 2003 5:49 PM

Subject: US bse cow

What is the most likely effects (short and long term)?your mad cow will have on us Canadian ranchers?

Harlan's Answer:

As you might guess, it is not clear what the impact is going to be. One can only speculate at this time.

We know that the Futures Market is locked into limits down right now so the market is reacting quite strongly. I have not yet heard what is happening with cash sales at the U.S. salebarns.

?We have lost our beef export trade which is about 10% of our production. I am estimating that is at least a 16% drop in beef prices. We will also have some consumer reaction so that will be added to the export drop. I am suggesting that U.S. prices immediately dropped ?20%.? Where?prices ?will go from there?depends on the U.S. consumer reaction.

?U.S. prices should not drop like Canada's did because we only export 10% of our production vs 60% export for Canada. I expect Canadian prices to stay related directly to the U.S. price in both the short-run and long-run.

Hamburger accounts for 49% of U.S. beef consumption and I expect its consumption will fall the most. I fully expect no Canadian cull cows to enter the U.S. for several years as a result of the Canadian BSE discovery. Cull cows in the U.S. will come under added pressure as hamburger demand decreases as a result of the U.S. BSE discovery.

?In the short run I expect the U.S. BSE to also impact Canadian over all beef prices through a lower export price on deboned beef from less than 30 months of age. I have heard no discussion on what this might do to the border opening date for live animals less than 30 months of age. I do expect, however, that some in the U.S. will push for the border to not open to Canadian live animals while U.S. prices are depressed from our own?domestic supply of feeder cattle now after the U.S. discovery of BSE. U.S. feedlots are projected to go slow with any refilling in these uncertain times. They probably will wait and see how the sale of current cattle on feed goes before they refill.

?In the long-run, I would expect Canadian prices to average less as the?U.S. price averages less. The costs of marketing cattle in both Canada and the U.S. has to now be higher due to BSE in both countries. For example, more testing will be done. This added cost will be reflected in lower over all long-run live cattle prices in North America.

?It is basically to early yet to see any clear indications on the overall implications of the BSE discovery in the U.S. I know, however, that it is going to have a serious financial impact on the North American beef industry.

I hope that one of the good things that comes out of all of this is that we move to a North American focus on beef production rather than a U.S. or Canadian focus.



posted by Dr. Harlan Hughes 6:21 PM [edit]


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