Cattle producers are watchful of Japan and Canada

Issue Date: February 23, 2005

By Robyn Rominger

Yolo County cattleman Fred Manas may expand his herd in the future.

Strong demand for beef by American consumers has boosted sales for California cattle producers. But international developments involving Canada and Japan could significantly alter the outlook for 2005.

Consumer demand for beef in the United States rose almost 8 percent in 2004, said Nelson Curry, chairman of the Cattlemen's Beef Board. Demand has increased by 25 percent since 1998, when beef began reversing a 20-year decline in consumption.

Ben Higgins, executive vice president of the Sacramento-based California Cattlemen's Association, said U.S. consumer spending on beef is higher than ever, reaching $71.6 billion in 2004, up from $46.3 billion in 1994.

According to Cattle-Fax, a cattle business information company, per capita beef spending increased more than $27 to $241 per person during 2004, a record annual increase. Per capita beef consumption in the United States increased 2.1 pounds to 66.6 pounds.

The consumer demand has supported continued strength in cattle markets. According to the latest U.S. Department of Agriculture report, the average price of a live, slaughter-ready steer is about $89 per hundred pounds.

Higgins said that in the fall of 2002, the price for a 1,200-pound, slaughter-ready steer ranged from $65-$70 per hundredweight.

What is the price outlook for 2005?

"While there are questions surrounding what levels prices will be in 2005, most forecasts predict profitability for cow-calf producers," Higgins said.

Domestic demand has buoyed the beef business despite a sharp drop in exports during 2004. Japan and 49 other countries stopped buying U.S. beef in late 2003, after a Canadian-born Holstein cow that had been sold to a Washington state dairy was confirmed to have the cattle disease bovine spongiform encephalopathy.

The United States, for its part, suspended imports of beef and live animals from Canada in May 2003, after discovery of an Angus beef cow infected with BSE.

Though Japan and other nations continue to bar U.S. beef, the United States has announced plans to resume imports of Canadian beef and animals.

In January, the USDA announced that Canadian live cattle imports into the United States will resume on March 7. Only animals younger than 30 months of age will be permitted. The USDA also plans to allow imports of Canadian beef at that time, also from animals younger than 30 months.

Cattle producers throughout the United States are concerned about the potential economic impact.

"Efforts to resume importation of cattle and beef from Canada are premature until such time as our export markets can serve to offset the economic impact of these additional beef supplies," said CCA President Mark Nelson of Wilton.

U.S. Secretary of Agriculture Mike Johanns said he has made resuming beef exports to Japan and other countries a top priority.

Higgins said the United States has regained about one-third of its export volume.

The California Beef Council, along with the California Cattlemen's Association, has been working to promote Golden State beef in overseas markets. Last fall, the Sacramento-based council participated in Gov. Arnold Schwarzenegger's trade mission to Japan. The council is also affiliated with the U.S. Meat Export Federation, a Denver-based trade association that is working to expand export markets for U.S. beef.

"When the Japanese market reopens, there will be an aggressive effort to help U.S. beef regain the market share that's been lost to Australia and to pork," said Holly Foster, the council's public relations director. "A lot of that will be funded through check-off dollars and coordinated by the U.S. Meat Export Federation."

In the meantime, cattle ranchers benefit from American consumers' renewed interest in beef.

"There are a number of factors that come together to produce this level of spending," Higgins said.

One factor is the popularity of the Atkins diet and other high-protein diets.

"The Atkins diet has certainly played a role, but I hate to give the Atkins diet too much credit because I think there is something bigger and broader taking place," Higgins said. "One of the most significant contributors is a general perception change. In the 1980s, we saw a tremendous decline in demand due to a perception that beef was something that was high in fat. Now consumers regard beef as a high-protein, nutrient-rich food, something that can be and, in fact, should be part of a healthy diet. That has made a tremendous difference in this level of consumer spending."

Another factor is the success in marketing value-added beef products such as microwaveable pot roast, he said.

While cattle prices continue to be relatively high, there are producers who are trying to capitalize on niche markets in order to sustain profitability in the future.

Yolo County cattleman Fred Manas of Double Bar O Angus Ranch direct-markets natural beef.

"The last two years, we have been making money in the cattle business," Manas said. "I'm selling cattle live weight this year at $1.10 a pound. Last year I was selling them for 95 cents."

Manas raises about 100 Angus cows near Lake Berryessa, and may expand his herd to up to 250 head. In addition, he and some partners plan to open a meat cutting-and-wrapping facility in Winters. The plan is to have a USDA-certified facility, which will allow his customers to sell their meat to restaurants and other markets.

(Editor's note: A report on the potential impact of the lifting of the ban on Canadian cattle shipments to the United States will appear in next week's Ag Alert.)

(Robyn Rominger is a reporter for Ag Alert. She may be contacted at rrominger@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item. Top