U.S. Cattle Price Analysis -- Source Livestock Monitor, 28 Jan 2004, Livestock Market Information Project, Denver, Co
In the Southern Plains, Choice slaughter steers fell into the mid-70s per cwt. following the discovery of BSE. In mid-January, slaughter steer prices jumped reaching $85.68 per cwt. for the week ending January 24th. The sudden run-up in prices was largely supported by large year-to-year declines in cattle slaughter. For the first three weeks of January, weekly cattle slaughter totaled 1.8 million head, about 6 percent or 112 thousand head below the respective period last year and 13 percent smaller than the prior five-year average. The lack of slaughter cattle numbers coupled with cattle weights still running slightly below a year ago (about 17 pounds lower on average) caused the short-term beef supply to be 8 to 10 percent below a year ago.
The recent run-up in fed cattle prices is not expected to continue as slaughter levels resume to more normal levels and the short-term run-up in demand slips off. In addition, cattle weights appear to be increasing to near year ago levels, especially in the Southern Plains, which will further add to the available supply of beef. Weekly live steer and heifer weights reported for the Texas-Oklahoma region have been increasing, in that region, steer and heifer weights for recent weeks were down only 3 pounds from last year. As slaughter numbers return to more normal levels and average weights continue to climb, the beef supply will rise. These factors combined with the added supply of beef (8 to 9 percent of production) that is not currently being exported and lower byproduct values, will likely tend to erode fed cattle prices.
posted by Dr. Harlan Hughes 4:45 PM
Trends . . . WEEKLY CATTLE BYPRODUCT VALUES SLIP -- Source: Livestock Monitor, Livestock Marketing Information Project, Denver , 28 Jan 2004
The byproduct value, also known as the drop, is the value of non-meat items such as hides, tallow, internal organs, and meat scraps. Market demand and supply conditions in the export market are key drivers behind the byproduct value. Prior to December 23, 2003, the byproduct value reported by USDA-AMS was well above a year ago in response to the limited U.S. supply of cattle, improved demand in foreign markets, and a smaller supply of beef byproducts in the international market in response to the BSE case in Canada last year.
In 2003, the steer byproduct value averaged $8.57 per cwt. (on a live steer basis), about 15 percent above 2002's. The weekly cow byproduct value averaged slightly lower at $8.08 per cwt., an 18 percent yearly increase. Since the discovery of BSE in the U.S., weekly steer and cow byproduct values have modestly declined on a daily and weekly basis. For the week ending December 27th, the weekly steer byproduct value was $10.48 per cwt., four weeks later (week ending January 24th) the byproduct was at $8.82 per cwt. That was a 16 percent or $1.66 per cwt. decline with expectations that the byproduct value could decline further.
USDA-AMS also reports the weekly cow byproduct value and variety cuts. Since the discovery of BSE, the weekly cow drop value has declined about one dollar per cwt. per week. At the end of December, the weekly cow byproduct value was at $9.47 per cwt., by week ending January 24th, the weekly drop had fallen $2.34 per cwt. or 25 percent. The slaughter cow byproducts market will see the most impact from international border restrictions and new USDA regulations during 2004.
posted by Dr. Harlan Hughes 4:42 PM
USDA Announced an International BSE Review Team
USDA also announced an international review team began their work last week to assess the scope and thoroughness of the epidemiological investigation in the U.S. The USDA previously stated once the investigation is complete, the agency will determine the best approach to take in regard to collecting additional public comment on the proposed rule for importing live cattle and bone-in beef into the U.S. from regions that are minimal risk for BSE. Under international guidelines, Canada qualifies as a Minimal Risk region.
posted by Dr. Harlan Hughes 1:26 PM
Cattle Industry Analysis by Jim Mintert, Kansas State Univeristy Jan 19, 2004
A dramatic reduction in U.S. per capita beef supplies (net of imports and exports) helped set the stage for this fall’s wild ride in the cattle markets. Preliminary estimates of per capita beef supplies available to U.S. consumers this fall indicate they were about 8 to 8.5% smaller than last year. Moreover, the dramatic reduction in U.S. cattle slaughter (-7.3% vs. a year ago) this fall compared, and lighter cattle weights (steer weights down 3.3% vs. fall 2002), not only helped pushed boxed beef prices higher, it led to narrower price spreads, as packers competed aggressively for sufficient cattle volume to keep plants operating efficiently. Strong consumer demand for beef also contributed to this fall’s price strength, although it’s clear that the supply effect was larger than the demand effect. The result was a Kansas slaughter steer fall quarter price average of about $98/cwt., 40% higher than last year.
But it looks like the tightest supplies, and highest prices, are behind us. For example, federally inspected cattle slaughter the last two weeks averaged 3.7% below a year ago. In contrast, slaughter during the four prior weeks averaged 10% smaller than in 2002. Moreover, dressed steer weights in recent weeks have been increasing, contra-seasonally, as recent slow marketing rates mean cattle are being marketed with more days on feed and, hence, heavier weights.
posted by Dr. Harlan Hughes 6:30 PM
First Hand Observations From North Of The Border
I have been spending a lot of time in Canada during August 2003 and January 2004 working with ranchers in the Western Provinces. Whill they have been impacted with BSE, I think the 20+ percent increase in the Canadian dollar has done them more damage than BSE -- now that the border is open to deboned beef from less than 30 months of age. The interesting point is that BSE is getting all the blame and not the changing value of the Canadian dollar.
I spoke to about 1200 beef cow producers in January and many had not thought through the serious impact of the Canadian dollar appreciating. As the Ca $ goes up, Canadian beef prices go down.
I believe that the dollar goes and cycles (in both countries and as does both country's economies) and they are in for a phase of a strong Canadian dollar and weak beef prices. A lot of this is driven by the weakening U.S. dollar. I fully expect the U.S. dollar to continue to decrease due to our current Government Policies.
Canadians enjoyed strong beef prices all during the 1990s due to their weakening Canadian dollar. It appears that the Canadian dollar has now turned on them and Canadian beef producers are in for some tough years in the beef business.
Mouthing Animals To Determine Age
I heard a lot of Canadian producer complaints from the mouthing of animals teeth todetermine age. It turns out that that is not a very good way to determine age of animals. While it works on the average, it appears to have a large variation from animal to animal. Many ranchers who know the age of their animals received large discounts because the teeth indicated older animals. Now I read that the U.S. is going to use mouthing of animals to determine age. I think we are in for a lot of complaints in the U.S. also.
posted by Dr. Harlan Hughes 11:24 AM