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April 14, 2005 Market Advisor: Cow Prices Exhibit Seasonal and Cyclical Strength
Market cow prices are averaging 25 percent higher than at this time a year ago, and 35 percent to 40 percent higher than the five-year average. Reduced supplies of domestic and imported cow beef and continued strong demand are the major reasons behind the price increase. So far in 2005, U.S. cow slaughter is down more than 4 percent from last year and down more than 18 percent from 2003. The reduced cow slaughter reflects a cyclically smaller beef cowherd and much improved moisture conditions in most of the United States, except in parts of the northern Plains and Pacific Northwest. U.S. cow numbers declined for eight consecutive years, 1996 through 2003. Most cyclical liquidation phases last four, but the additional four years of liquidation were due to dry weather conditions in several beef cattle-producing regions in the United States. Improved moisture conditions and strong feeder calf prices in 2004 led to the first year of cyclical herd rebuilding, with U.S. beef cow numbers rising approximately 194,000 head. The cow slaughter was down about 14 percent last year, and will continue at cyclically low levels this year, as interest in herd rebuilding continues. Imports of beef similar to cow beef, were down sharply in early 2005. Shipments from Australia, the leading supplier of processing-grade beef to the United States, were down dramatically from last year. Several reasons, such as the declining value of the U.S. dollar, herd rebuilding in Australia after several drought years, and increased Australian beef shipments to Japan and other southeast Asian countries that are not accepting U.S. beef, may have contributed to the sharp decline. Canada historically exported about 200,000 cows to the United States for slaughter each year. That number rose to 372,294 in 2002 because of drought conditions in Saskatchewan and Alberta. Cow imports from Canada declined to 136,131 head in 2003 because the United States banned cattle from Canada after May 20, when Canadian health officials announced a cow was diagnosed with bovine spongiform encephalopathy. No cattle were allowed in to the United States from Canada in 2004, and the ban remains in effect this year. Canadian beef from cattle more than 30 months old also has not been allowed in the United States since May 2003. Later this year, the USDA may issue a proposed rule for comment, which could allow more than 30-month-old cows and beef into the United States, but it likely would not take effect until 2006 or later. The demand for cow beef continues to be strong in 2005. Wholesale prices for fresh, 90 percent lean, boneless processing beef and beef trimmings are up close to 15 percent from last year and about 45 percent more than the five-year average. Hamburgers have been a longtime favorite in American meals, and low-carb diets are helping stimulate demand. Affluent baby boomers are demanding higher quality hamburgers, and food retailers have responded with menu items such as $6 burgers and branded beef burgers. Some white tablecloth restaurants even are offering $20 hamburgers on their menus. Cow prices exhibit a very strong seasonal pattern. Prices begin in January at slightly below the average for the year. Prices increase to above-average levels into February and continue increasing to peak levels in March and April at more than 5 percent above the annual average. A slight decline to 4 percent above the average takes place in May and continues close to that level through July. In August, the normal seasonal decline begins, with prices still 3 percent above the average. Prices fall to 2 percent below average in September, with a further decline to 7 percent below in October. The seasonal low usually occurs in November, when prices are 12 percent below average and 16 percent below summer levels. The seasonal recovery begins in December, but prices are still 6 percent below the average. In 2005, cow prices have been exhibiting the normal seasonal strength that usually occurs this time of the year. Prices are likely to follow the normal seasonal pattern through the rest of the year, but at cyclically high levels. Bred cow and cow-calf pair prices are also at cyclically high levels and will be at near-record levels through the year. Geographic areas with ample rainfall and good grazing conditions will exhibit an especially strong demand for replacement females. ### Source:
Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu |
Market Advisor: |
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North Dakota State University |
