Distributed 11/06/03

Louisiana cattle producers are excited about the market news that beef cattle prices recently hit record high prices for fat cattle, feeder cattle and calves.

"Cattle prices hit record high prices in the week of October 13-17, and they have remained volatile since," said LSU AgCenter economist Dr. Ken Wegenhoft.

The record high prices and volatile beef market are caused by several factors, he said. The gradual decline in cattle numbers over the past few years, Canadian and Japanese BSE outbreaks, low corn prices, a growing demand for beef and the desire by growers to place cattle on winter pastures are a few reasons for the market situation, according to Wegenhoft.

There has been a decline in the number of cattle being produced in the United States since 1996. As a result, the 2003 U.S. calf crop is expected to be the smallest in some time.

In addition, total U.S. beef production peaked in 2002 and has been declining each quarter of 2003. On a per capita basis, the decline during the third quarter of 2003 was very significant, according to Wegenhoft.

"As the beef supply goes down, the price goes up," said Wegenhoft, continuing, "And this is good news for the $284 million beef industry in Louisiana.

The U.S. Department of Agriculture and Louisiana Department of Agriculture and Forestry’s Market News Summary of 13 Louisiana auctions for the week ending Oct. 24 indicated steers weighing 450-500 pounds sold for 99 cents to $1.08 per pound, and 500-550-pound steers sold for 93 cents to $1.03 per pound. Feeder heifers weighing 450-500 pounds sold for 91-99 cents per pound, and the 500-550 pound range was at 87-97 cents per pound.

The discovery of Bovine Spongiform Encephalopathy – mad cow disease – last May in Canada closed the borders to the countries that purchase their beef, including the United States. Before that time, Canada and the United States had a strong cross-border trade, which amounted to about 83 percent of the Canadian exports.

Those trade restrictions caused many of the other countries that previously purchased Canadian beef to purchase beef from the United States.

In addition, the recent discovery of BSE in Japan in an animal younger than 30 months caused additional concern about importing Canadian beef under this age.

But on Oct. 31, the USDA issued a proposed rule to allow live cattle imports from Canada. The proposed rule has a 60-day comment period.

Such fluctuating news on the importation of Canadian beef and cattle has contributed to the volatile market conditions, according to experts.

"The record high corn yield and lower corn price forecast encourages feedlots and farmers to purchase more cattle and market the grain through the cattle," said Wegenhoft.

Winter wheat producers also were optimistic about the wheat crop and were expected to purchase more cattle to graze the winter pastures. But continued dry weather conditions may dampen the early enthusiasm – although moisture conditions in northern Texas, Oklahoma, southern Kansas and eastern New Mexico may be influencing the current market for calves.

The demand for beef has been improving since 1999. This is very important, because the improved demand has provided the underlying support for higher prices, Wegenhoft said. But so far retail meat prices have not changed as much as fat cattle and calf prices – although more select grade cattle are being offered than before, he said.

The continued uncertainty in the market is causing price swings that are not normally seen, the LSU AgCenter economist said. Even though the current futures market is forecasting a price decline next summer, supply will be down, and, if demand stays good, calf prices will be favorable for several years into the future, the experts said.

"Cattlemen should study factors affecting the market and prepare to make adjustments in their operations as the market changes," Wegenhoft advised.

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Contact: Ken Wegenhoft at (225) 578-2266 or wegenhoft@agcenter.lsu.edu
Writer: John Chaney at (318) 473-6605 or jchaney@agcenter.lsu.edu