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Cow Prices Remain Strong

28 July 2010

US - Although cow prices have declined during the last couple of weeks, prices are still over $10/cwt higher than last year at this time and about $5/cwt higher than the 2004-08 average, says Tim Petry, Livestock Economist, North Dakota State University Extension Service.

Weekly cow prices have been averaging several dollars above 2008, which was the previous record high year. So, 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 over four per cent from last year's elevated levels, and up about 20 per cent from the 2004-08 average. Beef cow slaughter was up about 13 per cent over last year, but dairy cow slaughter was down about five per cent.

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, that have been 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 per cent lean, wholesale pork trim have increased from the very depressed 30 cents a pound last year at this time to over 80 cents 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 US 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 the US.

Fresh, 90 per cent lean wholesale boneless beef prices are about $20/cwt higher than last year as retailers compete for product. Furthermore, prices for fresh, 50 per cent lean wholesale beef have also increased as both the number and carcass weights of fed steers and heifers have declined making less trim available. And there is evidence that meat processors are grinding chucks from fed cattle to help satisfy demand for ground beef. Wholesale boneless 2-piece chuck prices have increased over $30 per hundredweight 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 US 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 the 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, over 200,000 dairy cows were sold for slaughter as the result of three CWT herd retirement programs.

The bottom line is that cow prices should remain strong during the summer months. A major US hamburger producer just announced a retail promotion campaign for hamburger in 1,500 retail grocery stores. The US economy is still struggling with high unemployment and hamburger sells well in tougher economic times. And 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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