How solid is the recovery?
The U.S. cattle herd is rebounding from last year’s crash much more quickly than expected.
If historical trends were repeated, cattle prices would gradually build to a cyclical peak in about three years, followed by a peak in cattle numbers in four to five years.
According to a United States Department of Agriculture survey released last week, the total number of American cattle and calves as of July 1 is down. The herd stands at 108.8 million, down from 112 million a year earlier and 113 million on July 1, 1995.
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But liquidation of the herd appears to have stopped thanks to good prices.
Cow slaughter continues to run below a year earlier. For the week ending July 5, beef cow slaughter was down a little over 19 percent.
But Darrell Peel, Oklahoma State University livestock marketing specialist, thinks the road to expansion might be a bumpy one.
He said this could be a bubble of a recovery with cattle prices strengthening into 1998, but then bursting with perhaps a more severe liquidation to follow.
He advises caution in rebuilding herds, at least until it is more clearly known how quickly the herd is growing. Caution is particularly advised if a producer is considering borrowing money to buy cows.
Things might be a little uncertain for North American cattle producers, but they are a lot better than in Europe. In fact, a European Commission report says the situation there could be bleak for five years.
Beef consumption has been gradually dropping in Europe as it has in North America. But because of the fear of BSE, average per capita consumption of beef and veal plunged seven percent in just one year from 20 kilograms a year in 1995 to 18.6 kg in 1996.
That meant a total drop in consumption of 500,000 tonnes in the community. The British slaughter scheme reduced production by 300,000 tonnes – not enough to offset the drop in consumption.
Because the EU buys beef to remove surpluses and support prices, the stockpile in storage is about 600,000 tonnes and the commission expects that to grow to 1.5 million tonnes by 2005.
That’s a big pile of beef and international trade agreements limit the amount that can be exported under subsidies.
Canada and the U.S. recently won a trade dispute over Europe’s policy of stopping imports of beef treated with hormones. It is not surprising that the Europeans are appealing the decision, given the pile of beef they are already sitting on.
