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Demand growth for beef has stalled

Bill

Well-known member
NCBA: US Cattle Herd Growth Could Slow In 2007

NASHVILLE, Tenn. (Dow Jones)--A combination of high corn prices and continued dry weather patterns could slow the growth in the U.S. cattle herd in 2007 and could stretch out the entire rebuilding phase of the cattle cycle, market economists said Thursday.

The economists all were part of the Cattle-Fax Outlook Seminar at this year's National Cattlemen's Beef Association annual convention here, and said it could be a tough year for cattle feeders this year, and the margins of cow/calf operators and stockers could thin as well. Cattle-Fax is a private market consulting firm.

Cattle feeders suffered losses in 2006, and the structure of the industry makes it very difficult to pass the added costs on to consumers, the economists said. As a result, the added costs will be passed back to the original producers of the cattle in the form of lower prices.

Moisture conditions have improved in major parts of the West and in the southern Plains, at least in the short term, said Randy Blach, executive vice president of the group. However, long-term weather forecasts hint at a return of drought conditions, so grass and feed grains could be expensive again this year, which would cut into profits.

The sharply higher corn prices the cattle industry dealt with this year are a long-term phenomenon, Blach said. They are demand driven because of increased need for ethanol production and are not supply driven, as they would be if producers had shifted acreage or suffered crop production losses, he said.

Because the higher prices are demand driven, they are more resilient to declines, Blach said, and cattle producers can count on a new level of feed costs when compared with previous years.

Export markets for U.S. beef are rebounding, Blach said, and forecasts out through the end of the decade show sales growth. However, the U.S. needs access to these markets.

Brett Stuart, Cattle-Fax economist, said in his portion of the presentation, that 7% growth in U.S. beef exports to open markets, which excludes Japan, South Korea, China and Russia ,from their 2004 low "says we regain fairly quickly, once we get access."

In addition, the U.S. and export markets appear to be demanding high-quality beef, Blach said. Studies show price growth in choice and prime retail markets but weakness in select markets.

But the mixed results in retail markets shows demand growth for beef has stalled, Blach said. Growth will be limited for the next few years, as well, he said.

Source: Lester Aldrich; Dow Jones Newswires; 913-322-5179; [email protected]
 
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