Economist Sees Decline in Cattle Prices
June 14, 2005Contact Information:
Contacts: Dr. Tom Troxel, 501-671-2188. Dr. Keith Lusby, 479-575-3745
By Howell MeddersU of A Division of Agriculture
479-575-5647 / hmedders@uark.edu
FAYETTEVILLE, Ark. --- Record high cattle prices paid to producers are likely to come down soon, but it might take longer for consumers to see lower prices in the supermarket, according to Dr. Mike Sands, an economist with a consulting company that provides beef market analysis services.
Sands, from Informa Economics in Memphis, was one of five nationally recognized experts at a marketing and genetics symposium June 9-10 sponsored by the University of Arkansas department of animal science.
Beef producers in Arkansas and nationwide are enjoying record prices because of high demand and relatively tight supplies. Sands said rising prices have led producers to hold cattle off the market to build up their herds, which will soon result in many more calves in the supply chain. That will likely bring prices down, Sands said.
However, he added, retailers are reluctant to lower prices in the stores, partly because of uncertainty about the effects of pending court action regarding beef and cattle imports from Canada.
In March, the USDA was enjoined from expanding beef and live cattle trade with Canada, which was restricted after a cow in Washington state with so-called "mad-cow" disease was traced to Canada.
A new round of litigation over the USDA's appeal of the injunction might again raise public fears about the health risks of beef, which could reduce demand. The litigation also could result in continued restrictions on trade with Canada, Sands said.
High energy costs and other pressure on consumer buying power are other factors that could dampen demand for beef, he said.
Any economic benefit to cattle farmers and ranchers from the ban on live cattle from Canada is only temporary, Sands said.
The disruption of trade with Canada is causing major long-term damage to the U.S. beef industry, he said. Packers in the U.S. have lost an important source of live cattle from Canada. Meanwhile, Canadian packers have a surplus supply and are exporting boxed beef to the U.S. and other markets at low prices.
"We are creating a very strong beef export industry in Canada," Sands said, which has the potential to take export markets away from the United States.