Plummeting beef prices was a predictable fallout from the discovery of a Holstein cow with Mad Cow disease in Washington state just before Christmas. A ban on U.S. beef imports by many nations was another not-surprising high price cattlemen are being forced to pay for the discovery of the cow with bovine spongiform encephalopathy (BSE).
The fall of those dominoes was a no-brainer. However, there are a lot of dominoes still standing in other important beef and dairy-dependent segments of agriculture everyone is watching to see which way they fall. The alfalfa hay, cottonseed and grain markets are obvious ones.
Right now forage farmers are nervous. The consequences of the discovery of the first Mad Cow Disease in the U.S. has yet to be felt there.
“This thing could go one of two ways,” said Rick Staas of the San Joaquin Valley Hay Growers, Tracy, Calif. Cattlemen and dairies could start dumping beef cattle and cull cows, meaning lower demand for hay, cottonseed and grain.
On the other hand, cattlemen could hold animals longer, hoping to ride out the storm. They may have considerable cash to ride it out. Prices had been so profitable before Mad Cow was discovered that cattle feeders had been shipping steers to market at lighter weights than normal and still making a good profit.
Before the Mad Cow crisis hit, beef prices were at record levels. Live steer and weekly cutout values were almost double a year ago when the BSE-find announcement was made. No one expected prices to remain at record levels forever before Mad Cow was verified in the U.S. for the first time, however, the Mad Cow find sent them into a free fall rather than a gradual decline.
Cull dairy cattle in the Central San Joaquin Valley were bringing top dollar, $75 to $100 per hundredweight, just before Christmas to meet holiday demand, and day-old dairy calves were bringing $150 to $200 per head. Prices plummeted for both at Christmas-time after the Dec. 22 announcement from USDA. Sixty to 70 percent of cattle in California feedlots are Holsteins.
Gains from holding
“If cattlemen decide to hold cattle longer to weather the storm, that could have a positive impact on the hay market because they will buy more hay,” said Staas. The same could be true for all feedstuffs like corn and cottonseed.
“I think most of them are thinking that way — wait until this blows over,” he added. The wait, he said, is nerve-wracking.
Before the BSE find, dairymen were coming out of a 15-month slump in milk prices, and sales of springer heifers were increasing and at record prices.
That may slow down.
Staas expects dairymen to be “very cautious” about buying replacement animals. “You may see them play it close to the vest and hold on to what they have for awhile.” That could reduce the milk supplies and bolster prices more.
Hay prices were expected to improve this spring along with the improved milk prices. Any boost in milk prices could only bolster hay prices more.
“Another big unknown is the impact of the Mad Cow on the Atkins diet,” said Staas. Some are predicting that that one sick Washington cow will quickly wean people off the diet high in beef to lose weight.
Staas is not so sure. Like many others, he knows several who have successfully lost considerable weight on Atkins. He is not convinced they are willing to give it up for one sick cow.
e-mail: [email protected]