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Feb 10, 2005
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Beef prices, supply both up
Of The Gazette Staff

Growth in demand since 1999 has produced the largest net beef supplies in United States history and the highest prices for cattle and beef at the same time.

"Who would have predicted that?" asked Randy Blach just short of a yell Thursday morning to an overflow crowd for beef producers at the Holiday Inn Grand Montana Trade Center.

Breakfast was over, and the opening session of the Beef Improvement Federation's 37th annual symposium was getting revved up by an industry cheerleader who spent 45 minutes reviewing the past decade and why he was a bit incredulous at the financial position in which producers find themselves.

Record prices

In 2005, U.S. consumers will find 28 billion pounds of beef in the meat case and will spend about $72 billion for it. Over the past two years, calves, feeders and fed cattle all hit record or near-record prices.

While the cattle cycle has crested, cow-calf producers can still enjoy good profit margins by "watching the nuts and bolts" of management, said Blach, executive vice president of Cattle-Fax.

And if Japan returns to importing U.S. beef, watch out.

"That huge sucking sound will be what it takes to fill the (demand) pipeline," he said.

Without using notes, Blach regaled his audience with numerous analytical charts and comments to show how good it has been in the marketplace during the 21st century and why returns will remain good if producers pay attention to business.

Cycles in demand

While calf prices have peaked at just shy of a $1.35 a pound, that does not mean they will "fall out of bed in the near future," Blach said.

The last peak in 1993 was around $1 a pound. The traditional cattle cycle takes about a decade - as the number of cattle in the national herd goes down, prices go up. As prices go up, cattlemen tend to increase their herds, which cause prices to trend down. That causes cattlemen to reduce the number of animals, which then forces prices to increase.

The current cycle has lasted three or four years longer with drought being a major factor in keeping the U.S. cattle inventory lower, Blach said.

He said the current cycle was different than the two previous in that this cycle experienced a real growth in demand. That has increased 25 percent to 30 percent since 1999, he said.

The primary beneficiaries of this increase have been the cow-calf producers, such as the majority of the ranchers in Montana and Wyoming.

About the only negative factor in the recent good news was the loss of the U.S. beef export market.

On Dec. 23, 2003, a dairy cow in Washington state was found with bovine spongiform encephalopathy, or mad cow disease. Despite the fact the cow was born in Canada, virtually all U.S. customers overseas closed their borders to U.S. beef.

The effect was dramatic.

"Imports and exports must be fixed quickly," Blach said. "We need to be able to trade."

The net value of the beef and variety meat trade went from $1.25 billion on the plus side in 2003 to almost $2.25 billion on the minus side, a swing of $4 billion in one year.

"Look, we need lean beef to come into this country or we can give the market back to pork and poultry," he said.

After his presentation, Blach refused to be drawn into the debate about what Japan will do now that a U.S.-born cow was recently identified with BSE. Japan has indicated it will return to the U.S. beef market, but refuses to say when. Now, Japan may use the indigenous case of BSE as an excuse to resume buying U.S. quality cuts.

"That is speculation," he said.

"We cannot generate value increases in our markets unless we get back to exporting," Blach said. "It is essential in the long term."

The BFI's four-day visit to Billings has attracted a record number of registrants. More than 700 had signed in before Thursday's general session.
Off topic note:
Alabama's own Jimmy Holliman is President of the "Beef Improvement Federation" this year. Congrats to Jimmy.
Japan may use the indigenous case of BSE as an excuse to resume buying U.S. quality cuts.

After Japan takes the quality cuts what happens to the rest of the animal?
Tam, I'm pretty sure it is safe to say that those other cuts won't be thrown away! My guess is they will go into the normal trade channels, just as they did during the Japanese trade previous to BSE.

Tam said:
Japan may use the indigenous case of BSE as an excuse to resume buying U.S. quality cuts.

After Japan takes the quality cuts what happens to the rest of the animal?

They only take a portion of the high value cuts. The real beenfit is in edible offal product which you or I do not eat.
Thank You MRJ and Agman, This is what I thought but another poster on here which will remain nameless says the the BSE tested beef will only go to Japan and the US consumers will not be seeing any of it. So I just wanted to get the scoop. Next question the meat that stays in the US will it also be labeled BSE tested as the stuff leaving for Japan will be? And if it is labeled will the US consumer be decieved into think the Beef is BSE FREE just like they are into thinking USDA inspected means US Beef?

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