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Cattle market braces for long-term impact
MISSISSIPPI STATE -- The worst may not be over for cattle producers despite mid-January market rebounds from the Dec. 23 news of the nation's first case of mad cow disease.
After the discovery of one cow in Washington state with bovine spongiform encephalopathy, or mad cow disease, virtually all countries stopped accepting beef from the United States. Although domestic consumption changed very little, the loss of almost 10 percent of the beef market in exports is contributing to a build-up of supplies.
John Anderson, agricultural economist with Mississippi State University's Extension Service, said wholesale beef prices, which are closely related to the cattle market, improved during the first three weeks of January before dipping again at month's end. Prices dropped $10 per hundredweight during a 10-day period.
"Most people were surprised by how quickly the market recovered from the BSE report, but consumer demand was the key. The domestic market has remained strong," Anderson said. "Now the concern turns to how increasing supplies will impact the market in the coming months."
Cattle producers have been holding animals off the market and in feedlots longer. Not only will that result in larger numbers, but also in heavier slaughter weights.
"We have about 6 percent more cattle on feed than we did at this time last year. Eventually, they will go to the market and when they go, they'll be heavier," Anderson said.
Anderson said he looks for Mexico, the second-largest importer of U.S. beef, to open its doors first because it is accepting Canadian beef. The Washington BSE cow originated in Canada where one previous cow tested positive in May 2003.
In the U.S. Department of Agriculture's January Cattle Report, the all-cattle inventory was 96.1 million head, down 1 percent from 2003, indicating producers have not begun rebuilding the national herd. This is the smallest U.S. cow herd since 1959.
Anderson said market watchers had a lot to see in January. Fed cattle prices were $91 per hundredweight on Dec. 20, which was before the BSE report. Prices plummeted from the initial scare but bottomed out during the first week of January when fed cattle prices hit $74 per hundredweight and recovery began. The recovered prices again began to decline around the last week of January and first week of February.
"During the week ending Feb. 6, fed cattle prices were back to near $75 per hundredweight. Wholesale beef prices are also about as low as they have been since Dec. 23," Anderson said. "The weakness in those markets has not made much of an impact yet on the calf market, where most Mississippians sell. Calf prices have only dropped $2 to $3 in recent weeks. However, lower fed cattle and beef prices are likely to have a negative effect on the calf market in coming weeks."