Even the worst-case scenarios that folks can conjure up regarding the impact of the U.S. resuming beef and cattle trade with the rest of the world offer little incentive to dive off the barn roof.
It's difficult to quantify the degree to which resumed export trade to Japan and others could boost fed-cattle prices. Likewise, it's tough to say how much renewed beef and cattle imports from Canada might soften prices — and how those impacts might differ if these events occur simultaneously or apart from one another.
But, noted beef industry economist Bill Helming of Olathe, KS, is inclined to believe supply and demand fundamentals will overwhelm such events.
“The demand curve for beef has shifted to the right for five years in a row; not consumption, but true demand. That means consumers have been willing to pay more for beef, whether there's more of it or less,” Helming explains.
Combine increasing domestic demand with the smallest total U.S. cattle inventory on record, according to USDA figures. Then, add the flattest cattle cycle on record in terms of beef cattle numbers, and the longest ongoing cyclical liquidation phase in history, and it's tough to bet against prices remaining historically high on average.
That's why Helming didn't believe that losing export markets to the BSE-infected cow in December would ravage the markets as many feared. That's also why he expects the resumption of international trade to have little impact, plus or minus, on U.S. feeder and fed cattle price.
More specifically, when Japan and the rest of the world begin importing U.S. beef again, Helming says, “My expectation is that it won't result in a huge price bounce. I'm inclined to think it could be worth an additional $2-$4/cwt. on a live fed basis, if the U.S.-Canadian border remains closed.”
Helming adds that this estimate assumes the rest of the world resumes U.S. imports at about the same time. If the resumption occurs on a piecemeal basis, then Helming believes the price bounce will be less.
Canada is trickier
Predicting the impact of reopening the border to trade with Canada is slightly tougher. For one thing, you're talking about importing feeder cattle and some fed cattle, in addition to beef that's currently allowed to cross the border.
For another, since many assume only cattle of a yet-to-be-determined minimum age will be allowed to cross the border, estimates of potential tonnage added to the market get fuzzy. One way or another though, such a move will increase domestic beef supplies.
“When we get to the point of importing feeder cattle from Canada as we have in the past, I believe it will dampen U.S. feeder cattle prices $2-$4/cwt. (basis 700-800 lbs.), maybe only $1-$3,” Helming says.
Different variations on when and how international trade resumes will likely impact prices to different degrees. For instance, if two-way trade with Canada resumes at the same time the rest of the world begins re-importing U.S. beef, Helming believes you'll see the impact on feeder prices mentioned above, along with a bounce in fed cattle prices of $1-$3/cwt.
If international export markets open to the U.S. first, then he expects the $2-$4/cwt. bounce in fed prices mentioned earlier. Conversely, open the Canadian border before international export markets open to the U.S., and Helming says fed-cattle prices could lose $1-$2/cwt., along with feeder cattle declining $2-$4/cwt.
One thing seems certain — barring some other calamity, the international markets will open again. It's just a matter of when.
“I believe science and reason will ultimately win out,” Helming says. “I think the fact the U.S. is doing significantly more BSE testing is very positive. It gives domestic and international customers even more confidence in U.S. beef, which is, unequivocally, the safest in the world.”
Helming believes that borders will reopen by early next year at the latest.
Likewise, the historically favorable alignment of supply and demand fundamentals makes it clear the market should be able to absorb the impact of international trade resumption. Enough so, at least, that there is little price impact one way or the other.
That doesn't mean triple-digit prices for fed cattle will be the norm. It says that the price levels achieved and sustained since late last summer are a trend rather than a blip on the screen.
“I continue to believe we are at a new price plateau where fed cattle will average $80-$100/cwt. on an annual basis for the next seven to 10 years,” Helming says.
Alliance, animal ID and feeds info
Looking for info on value-based cattle marketing alliances, the ins and outs of animal ID, or the nutritional composition of feeds commonly fed to cattle? BEEF has it.
The industry's most up-date-listings of the nation's top value-based marketing alliances are available in the August issue of BEEF magazine. You can also find them on the opening page at www.beef-mag.com.
If you're looking for hardware, software or services in the cattle ID area, look no further than www.beefstockerusa.org. Click on “Survey of RFID companies” on the opening page for a comprehensive, interactive listing of all the suppliers of radio-frequency ID hardware, software and services. You'll also find pricing worksheets for designing a system.
Meanwhile, you can find the nutritional composition of almost 300 feedstuffs commonly fed to cattle and sheep at www.beef-mag.com. On the opening page, click on “Producer's Library” from the black bar at the top of the opening page, then scroll down and click on the “Feed Composition Guide.”
You might also want to bookmark BEEF magazine's management reference Web site: www.beefcowcalf.com. The is dedicated exclusively to cow-calf production and management information, and includes links to more than 2,000 fact sheets and research papers prepared by North America's top researchers and animal scientists.