By Brad Haire
University of Georgia
The prices U.S. farmers get for beef cattle dropped sharply
after the report of a deadly cattle disease last winter. But
only five months later, prices are high. The cattle business,
more than anything else, is about supply and demand and
timing.
U.S. cattle prices dropped about 16 cents per pound right after
the report of a single case of bovine spongiform encephalopathy,
known widely as mad cow disease, in Washington State late last
year.
“The case of BSE shocked the market a bit, but only for a short
while,” said Curt Lacy, a livestock economist with the
University of Georgia Extension Service. “Prices have since
rebounded.”
Higher
Prices are actually higher now than they were in the same month
last year.
Cattlemen are getting about 92 cents per pound for animals that
weigh 1,100 pounds. Around this time last year, they were
getting 78 cents for the same size. Prices peaked at $1.09 per
pound in mid-October.
Georgia cattlemen now are getting about $1.05 per pound for 500-
to 600-pound cattle. They got about 85 cents per pound around
this time last year.
Very few cattle are slaughtered in Georgia. They’re shipped at a
lower weight to the Midwest and the Plains to be fed and
slaughtered in facilities there.
Timing
If the BSE scare had happened several years ago, it may have had
a bigger and longer impact on beef cattle prices, Lacy said. The
U.S. cattle herd is low right now. This means that the beef
supply is low.
The U.S. cattle industry has a rhythm. Cattle prices and herd
size fluctuate in a cycle that usually starts and finishes every
10 years or so.
It can be complicated to understand completely. But simply put,
when the supply of beef is higher than demand, the price of
slaughtered cattle goes down. When this price goes down, the
price for calves goes down. To maintain an income with less
overhead, cattlemen begin to liquidate herds until the beef
supply is less than demand and prices go up.
When prices begin to rise, they stop liquidating and begin to
rebuild herds.
The current cycle started in 1990 when cattlemen began to build
herds. It should have long finished. The herd size began to
decline around 1996 when prices tanked.
But extended drought periods since then have parched pastures
all over the country and kept cattlemen from rebuilding herd
sizes. The cycle won’t be complete until they do.
None of this happens overnight. The biology of cows plays a big
role in the cycle.
If cattlemen began today holding back cattle from market and
buying cattle to rebuild herds, Lacy said, it would still take
about three years before the effects were felt in the market. A
rebuild would initially spike prices even higher.
There is some indication that the rebuilding has started, he
said.
Demand
Demand is high for U.S. beef despite bans in Japan and countries
in South America. (Mexico has started buying U.S. beef products
again.)
The beef that wasn’t bought by these countries remained in the
United States, increasing the supply. This would seem to lower
prices. But it hasn’t.
U.S. citizens like U.S. beef and eat about 90 percent of the
total production. The United States produced about 26 billion
pounds of beef in 2003.
Only 10 percent of the U.S. production goes to other countries.
Japan, the largest buyer, gets 3 percent.
The demand for U.S. beef began to decline in the early 1980s,
soon after health studies reported that too much red meat could
be bad for health. But with catchy commercial slogans and a more
healthful image, beef has regained a prominent place at the
table.
In 1980, the U.S. per-capita beef consumption was about 76
pounds a year. It has averaged around 66 pounds per year since
2000.
