January 7, 2004 | By: Haven Miller
LEXINGTON, Ky.

Amidst the current uncertainty due to some countries banning U.S. beef, prices for slaughter cattle and wholesale beef have backed off from recent record highs. Cattle now are selling near prices of a year ago, which is still about $10 per cwt. (hundredweight) higher than price levels in mid-2002.

Exactly what impact the situation has on Kentucky producers depends on the type of enterprise they have.

“It’s very hard now for a cattle backgrounder who bought cattle a few months ago and has been looking to get those cattle sold, and they are in the most precarious position,” said Lee Meyer, Extension livestock marketing specialist in the University of Kentucky College of Agriculture. “But most of our Kentucky producers are cow-calf operators who normally don’t sell cattle this time of year, and so it’s a normal business operation for them to sit back now, wait and watch what happens.”

Meyer said because some countries have temporarily closed their doors to U.S. beef, domestic supplies will increase.  This could have a 14 percent to 18 percent negative impact on slaughter cattle prices, which would drop them to the mid $70s per cwt.

Feeder cattle prices traditionally follow anticipated slaughter cattle prices.  Futures prices for the coming summer dropped by $5 per cwt. as of Jan. 5.  The predicted feeder cattle impact is a $10 per cwt. negative impact for 700 to 800 lb. feeders, with a greater impact on lighter calves.  Feeder cattle markets still are uncertain, but appear to be settling at levels around $5 to $10 per cwt. lower than mid-December.

On the consumer side, U.S. research and the previous Canadian BSE experience suggest there will not be a huge consumer response, and initial U.S. retail market surveys seem to support this analysis.  Beef consumption could actually rise this year, and if retail prices follow wholesale trends consumers may respond to bargain prices by increasing their purchases.

“Unfortunately, price benefits tend to be a win-lose situation in terms of consumer bargains versus producer profits, but when it comes to increased attention to product quality and food safety, then that’s where the win-win situation lies and it’s good for everyone.”

Meyer said because international trade embargoes have caused the greatest negative price impact on beef, reopening doors to U.S. exports will be the most important factor in price recovery.

 

Contact: 

Source: Lee Meyer, 859-257-7272, ext. 228