Farm Progress

Cattlemen get some positive news

Farm Press Staff

May 5, 2004

3 Min Read

After several weeks of declining prices, the news has been mostly positive for cattle producers during April, with sale barns and both wholesale and retail markets reporting higher prices.

Whether or not recent price increases can be sustained depends on the economy, says Economist John Anderson with Mississippi State University in Starkville, Miss. “Every extra dollar that a consumer spends on gas is a dollar that can no longer be spent on something else. Higher gas prices eat into a consumer's disposable income, and a reduction in disposable income affects the consumption of everything else — including meat. Beef demand in particular should be expected to be somewhat sensitive to changes in disposable income since a relatively large proportion of beef is consumed away from home,” he says. “The bottom line is that with higher pork and poultry production almost assured, continued strong demand will be very important to cattle and beef as well as other livestock and meat markets this year.”

At auctions around the country, cattle prices have been steady to higher in the last few weeks. In both Arkansas and Mississippi, auction barns were reporting stronger prices with stockers and feeders both selling for $2 per pound more than just a week prior. At an Oklahoma City auction, feeders steers were $1 higher, and feeder heifers were $1 to $3 higher. In West Plains, Mo., heavier calves were steady to about $1 higher, and at Bluegrass Stockyards in Lexington, Ky., stocker calves were steady, and feeders were $2 to $3 higher, Anderson says.

USDA's April 16 Cattle on Feed Report was generally better than expected, according to Anderson. The average pre-report estimate was for beef marketings to be up 7.9 percent from 2003, but they surpassed that expectation, coming in at 9 percent,” he says. “Overall, the latest COF report appears quite positive with placements a good deal lower than expected, marketings a good deal higher than expected, and on feed numbers running just even with last year after a couple of months of running above the previous year.”

In more good news, Mexico recently resumed imports of certain classes of tallow (fatty tissue) and variety meats from the United States. According to USDA, this latest action by the Mexicans restores about 74 percent of the Mexican market for U.S. beef, tallow, and beef by-products.

Wholesale beef prices are building on recent increases, although sales volume is light, Anderson says. On April 16, the 750-900 pound choice boxed beef cutout value was $164.85, up $7.37 from a week earlier, and the 750-900 pound select boxed beef cutout value was $145.00, an increase of $4.09 from the week before. The spread between choice and select cuts of beef has increased to almost $20 per hundredweight, he says.

On the retail side, USDA figures put the March 2004 average retail value of Choice beef at $3.97 per pound, which is 11 percent higher than it was in March 2003. During the same period, production was down 7 percent over last year's figures. Beef production is projected to be down 4 percent for the year due to smaller numbers of cattle and lighter slaughter weights.

“The increase in price is somewhat higher than would be expected from this amount of reduction of production,” Anderson says. “This is evidence of a year-to-year improvement in beef demand. It is probably worth noting, however, that retail prices have declined since last November, when the Choice retail price reached $4.32 per pound.

Anderson says, “It is very significant that meat prices, including beef prices, have remained quite strong in spite of production increases for pork and poultry. The ability to increase prices as volume also increases is an indication of demand strength. Unfortunately, demand can be quite fickle, influenced as it is by consumer attitudes and opinions. It appears that a significant factor supporting demand in the meat complex is the popularity and widespread acceptance of high-protein diets such as the Atkins and South Beach diets. How long such diets will remain popular is anybody's guess.”

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