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Angus Productions Inc.

July 20, 2010
Tim Petry
Tim Petry

In the Cattle Markets

Cow prices remain strong.

Although cow prices have declined during the last couple of weeks, prices are still more than $10 per hundredweight (cwt.) higher than last year at this time and about $5 per cwt. higher than the 2004-2008 average. Weekly cow prices have been averaging several dollars above 2008, which was the previous record-high year. If that trend continues, 2010 may set a record for annual cow prices.

It is interesting that higher prices are occurring in spite of continuing high cow slaughter numbers. In the first half of 2010, total cow slaughter was up more than 4% from last year's elevated levels, and up about 20% from the 2004-2008 average. Beef cow slaughter was up about 13% over last year, but dairy cow slaughter was down about 5%.

Higher prices are being supported by strong demand for hamburger and lower imports of manufacturing grade beef. The "cheeseburger price war" among several fast-food chains promoting low-priced menu items during the economic downturn helped demand. And higher prices for competing meats, including chicken and pork, have also stimulated demand for hamburger. Prices for fresh, 72% lean, wholesale pork trim have increased from the very depressed 30¢ a pound last year at this time to greater than 80¢ now.

Imports of grinding beef from our leading suppliers (Australia, New Zealand and Uruguay) are off by double-digit percentage amounts. A decline in the value of the U.S. dollar, especially early in the year, relative to currencies in those countries where we get beef made our market less attractive and other markets more lucrative. Furthermore, economic recovery has been more rapid in some beef importing countries, which caused more beef to be shipped there instead of to the U.S.

Fresh, 90% lean, wholesale boneless beef prices are about $20 per cwt. higher than last year as retailers compete for product. Furthermore, prices for fresh, 50% lean wholesale beef have also increased as both the number and carcass weights of fed steers and heifers have declined, making less trim available. There is evidence that meat processors are grinding chucks from fed cattle to help satisfy demand for ground beef. Wholesale boneless two-piece chuck prices have increased more than $30 per cwt. from last year's depressed levels.

Looking ahead, total cow slaughter is usually seasonally low during the summer months. Several factors favor reduced beef cow slaughter the rest of this summer, which should be supportive to prices. First, overall grazing conditions in the U.S. for beef cattle are probably the best that they have been for several years. That, coupled with the heavy beef cow culling that occurred during the first half of 2010 and in the last couple years, and stronger calf prices point to reduced slaughter levels.

Dairy cow slaughter is also typically lower in summer months, but was elevated last year with dairy cow buyouts. Dairy prices are still struggling, and Cooperatives Working Together (CWT) recently announced the first herd retirement program for 2010. It is expected that approximately 34,000 dairy cows will be marketed during July and August from the CWT program. Last year, more than 200,000 dairy cows were sold for slaughter as the result of three CWT herd retirement programs.

comment on this storyThe bottom line is that cow prices should remain strong during the summer months. A major U.S. hamburger producer just announced a retail promotion campaign for hamburger in 1,500 retail grocery stores. The U.S. economy is still struggling with high unemployment and hamburger sells well in tougher economic times. Competing pork and chicken prices are expected to stay higher than last year.

However, the seasonal decline in cow prices usually begins in September with sharp declines into November as beef cow culling takes place. Although prices will likely be above last year's depressed levels, that seasonal decline can be expected again this year.



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