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Texas Agriculture Archive

February 7, 2003

Beef prices headed north

Continued strong demand for beef and the first drop in annual production in 20 years should provide some relief for U.S. cattle producers in 2003, according to a noted agricultural economist.

Dr. Michael Sands, vice president of the Sparks Companies, a Memphis, Tenn.-based market research firm, told Farm Bureau members attending the AFBF annual convention that he expects beef production to decline about 3 percent this year, after reaching record levels in 2002.

At the same time, Sands said, consumer demand continues to grow, which should boost returns for cattle producers by 4 cents to 5 cents per pound—a 6 percent to 7 percent increase that could mean the difference between a small profit and continued losses.

"The best thing that can be said for 2002 is it's over," Sands said. "We're looking at a lot of positive signs going into 2003."

In addition to lower production and strong demand, including a rebound in U.S. beef exports, Sands said pork and poultry production also appear to be trending lower for 2003, which should also help keep prices above the break-even point for beef producers.

Declining beef production should also help pork producers, although Sands was less optimistic that 2003 would see a turnaround in the pork industry, which has seen several years of low prices.

"There will be some improvement, but that's not saying much," Sands said.

Although Sands said he expects U.S. pork exports to increase, particularly to Mexico, Japan and South Korea, he also expects imports to rise, especially from Canada, where the industry has been expanding rapidly.

Sands also cautioned that favorable trends for beef producers could change in a hurry because of world events.

"I would argue that 2003 should be much better for all segments of the livestock industry, including beef, pork and poultry, but 2002 proved again that we are not immune to outside factors," Sands said, pointing to foreign trade decisions restricting U.S. meat imports and the continuing effects of the 9-11 terrorist attacks two years ago.

Poultry producers, in particular, were hurt the last couple of years by disruptions in trade. Nearly 20 percent of U.S.-grown broilers, including nearly 50 percent of the dark meat, are exported.

"When the export markets shut down, you have to find a home for all that poultry," Sands said. "The struggles that poultry growers have faced over the past two and a half years are a new experience."