Cattle and Calves

The cattle and beef industry begins with the cow-calf operation, which breeds the new calves. Most ranchers breed their herds of cows in summer, thus producing the new crop of calves in spring (the gestation period is about nine months). This allows the calves to be born during the milder weather of spring thus having ample forage available through the summer and early autumn. The calves are weaned from the mother after 6-8 months and most are then moved into the “stocker” operation. The calves usually spend the next 6-10 months in the stocker operation, growing to near full-sized by foraging for summer grass or winter wheat. When the cattle reach 600-800 pounds, they are typically sent to a feedlot and become “feeder cattle”. In the feedlot, the cattle are fed a special food mix to encourage rapid weight gain. The mix includes grain (corn, milo, or wheat), a protein supplement (soybean, cottonseed, or linseed meal), and roughage (alfalfa, silage, prairie hay, or an agricultural by-product such as sugar beet pulp). The animal is considered “finished” when it reaches full weight and is ready for slaughter, typically at around 1,200 pounds, which produces a dressed carcass of around 745 pounds. After reaching full weight, the cattle are sold for slaughter to a meat packing plant. The beef industry as a whole is estimated at billion. Futures on live cattle and feeder cattle are traded at the Chicago Mercantile Exchange.

Prices – Cattle prices rallied sharply through most of 2003, but then plunged in late December after a cow from a Washington state dairy farm was found to have mad cow disease. On the nearest futures chart, live cattle prices started 2003 at around 80 cents per pound, traded sideways in a choppy range between about 71-82 cents through July, and then rallied very sharply to an all-time record high of 104.25 cents/pound in November. Prices then plunged in late December by about 20% on the mad cow scare, finally closing the year mildly lower near 74 cents.

Cattle prices rallied in the July-December period on a combination of events including (1) the fact that mad cow disease was found in a cow in Alberta, Canada in May, thus leading to increased demand for US cattle exports after most nations banned Canadian beef, (2) drought and poor grain-growing conditions in some parts of the US which reduced cattle weights and herd sizes, (3) higher demand for choice cuts of beef with the increasing popularity of the high-protein Atkins and South Beach diets, and (4) low inventories as ranchers rushed their cattle to market to take advantage of high prices.

But when mad cow disease hit the US on December 23, cattle prices gave back all their gains of the year, and then some. As of the end of 2003, 43 nations had banned the import of US beef. However, US consumer demand for beef did not show much of a dent from the mad cow scare as government officials insisted there was no risk from eating US beef. As 2003 ended, US officials in January were scrambling to determine what type of inspection and rules would assure US consumers of beef’s safety and convince foreign countries to lift their ban on US beef.

Supply – The US is the world’s largest producer of beef and veal with an estimated 12.226 million metric tons of production, accounting for about 25% of world production, which totaled 49.789 million metric tons in 2003 (USDA). The other key producers in 2003 were Brazil (7.530 million metric tons), European Union (7.360 million metric tons), and China (6.020 million metric tons).

Demand – The US is by far the largest consumer of beef at 12.422 million metric tons in 2003, down slightly from 12.738 million in 2002. The USDA is forecasting US consumption to fall to 11.962 million metric tons in 2004 due in part to the mad cow disease scare. The other key consumers of beef are the European Union (7.598 million metric tons in 2003), Brazil (6.460 million metric tons), and China (6.007 million tons).

Trade – Despite the fact that the US is the world’s largest producer of beef, the US is a net importer of beef. The beef the US exports is typically grain-fed, high-quality choice cut meat, whereas imports are typically lower-quality grass-fed beef that is destined for processing into items such as ground beef. The key countries to which the US exports its beef are Japan, South Korea, Mexico, and Canada. The key countries from which the US imports beef are Australia, Canada, New Zealand, Argentina, and Brazil. US beef exports in 2003 were approximately 1.2 million tons (USDA), accounting for about 10% of production.