SAN ANTONIO, Texas Ñ The United States did not fully appreciate the value of export markets until they were gone.
“Until we don’t have access to it we really don’t have an appreciation for it,” said Randy Blach, executive vice-president of Cattlefax.
In its annual outlook the American market analysis firm said the events of 2004 could have a significant impact on the future of the beef industry.
A single case of BSE in an imported dairy cow cut off sales to lucrative markets like Japan. This embargo knocked $14 US per hundredweight off the value of a fed steer because there was suddenly no place to sell offal products.
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Even when markets reopen to U.S. beef, it will take time for the U.S. to regain the lost values, said Blach at the National Cattlemen’s Beef Association market outlook seminar on Feb. 3 in San Antonio.
Analysts expect Japan will reopen its market in the second quarter of this year. The U.S. could expect to regain 60 percent of the five-year average export level. That amounts to about 350 million pounds.
The export problems occurred at the tail end of an eight year reduction of the American herd. The normal contraction portion of the cattle cycle was extended because of drought and poor market prices. The result was that 2004 saw the smallest slaughter since the early 1990s.
Total slaughter was off by 2.5 million head in 2004, causing the lowest beef production since 1993 at a time when demand was high. Consequently, prices reached an all time high for all classes of cattle.
But the rebuilding stage of the cycle appears to have begun. U.S. cattle inventory as of Jan. 1 reached 95.8 million head, up one percent from Jan. 1 2004. Increases are occurring because fewer heifers went to feedlots and fewer cows were slaughtered last year.
“We believe they are out in the country,” said analyst Dave Webber.
Heifer calves born this year are likely to be bred next year and increase the beef cow inventory that stands at 33 million head.
As the drought area in the west shrinks, more grazing land should open and ranchers could start restocking.
“There is a lot of grazing recovery that is needed before that can happen,” said Webber.
The strong domestic demand for beef is expected to continue in 2005.
Price outlooks indicate the profits enjoyed in the last two years should hold. The market has moved to a new and higher trading ranges, said Cattlefax analyst Kevin Good.
The past 20 months were the most profitable for the feeding sector in more than 30 years. More than $5 billion has been earned and feedlots have built a lot of equity.
However, feeders could lose money this year because of the high price of buying replacements.
Good forecasted that fed cattle will trade for an average of $84 per cwt. over the year, although the timing of the Canadian and Japanese border openings could change predictions somewhat. He also forecasted that 750 pound steers will be worth an average of $102 per cwt. and 550 pounders could sell for an average of $120.
Butcher cows should sell for around $50 per cwt., but the kill is likely to be small again this year.
