economic impact of bse on the u.s. beef...

Impact of BSE Cattle-Fax

Economic Impact of BSE onthe

U.S. Beef Industry

Presented by:

Randy Blach9110 East Nichols AveCentennial, CO 80112

1-800-825-7525www.cattle-fax.com


90 91 92 93 94 95 96 97 98 99 00 01 02 03YEARS

707580859095

100105110115120125130135140

Billio

n Po

unds

World Beef Production

Source: UN-FAO

Australia

U.S.

S. America

EU

China

Canada

Other

RussiaIndia

Mexico

World Beef & Veal Production

Source: UN-FAO, 2003

18.2%

20.9%

12.0%

9.6%

2.1%

25.0%

3.5%

3.5%

2.5%2.5%

Australia

U.S.

S. AmericaEU

Canada

New Zealand

Other

World Beef Exports

29.3%

17.5%

15.5%

15.8%7.5%

6.8%

7.5% (Brazil, Argentina, Uruguay)Source: UN-FAO, 2001


US Beef Export vs. Import Summary

2002 Beef & BVM Exports2002 Beef Imports

2003 Beef & BVM Exports2003 Beef Imports

Net

2002 Exports-Imports ($1.38-$1.13/lb)2003 Exports-Imports ($1.66-$1.21/lb)

$3.2 billion$2.8 billion

$3.9 billion$2.6 billion

$0.25/lb$0.45/lb


1999

2000

2001

2002

2003

Beef TallowVarietyMeat Total

Value of Beef, Variety Meat and Tallow Exports($ billion)

2.724

2.987

2.633

2.586

3.150

0.557

0.628

0.772

0.619

0.712

0.372

0.261

0.237

0.343

0.374

3.653

3.876

3.642

3.548

4.236


J F M A M J J A S O N D J F M A M J J A S O N D J F M A545862667074788286909498

102106110114118

Daily Fed Market

2002

$/CWT

Source: Cattle-Fax

2003 2004

- Bse


Steer Hide, butt brandTallow, edibleTallow, packer bleachableTongues, Swiss #1 whiteCheek meat, trmdHead meatOxtail, selectedHearts, reg, bone outLips, unscaldedLivers, selected, gall offTripe, scalded, edibleTripe, honeycomb bleachedLungs, inedibleMeltsMeat and bone meal 50% blk/tonBlood meal, 85% blk/tonTotal

Hide and Offal Value 12/22/03$/head66.94

4.3413.6412.50

5.361.405.481.531.664.344.592.930.130.006.122.81

$133.75

4/20/04$/head

60.953.32

11.862.173.951.152.681.791.282.812.422.420.130.006.381.91

$105.19


Ban all mammalian blood and blood products from ruminant feeds

Ban poultry litter

Ban plate waste

Requires dedicated facilities or lines for feed mills and renderers that handle prohibited ruminant materials and ruminant feed

Increases feed mill and plant inspections in FY 2004.

New FDA Feed Rules

Downer Cow Rule Industry Impact

USDA estimate

Condemnation of 50,000 head

Average canner cow price2001-2003

Average cow live weight

Average value

Industry impact

Cost to Industry

195,000 hd

195,000 hd - 50,000 hd = 145,000 hd

$36.35 per cwt.

1020 lbs

1020 lbs * $0.3635 per lb = $371 per hd

145,000 hd * $371 per hd = $53.8 mi

$50 to $70 million


SkullBrainTrigeminal gangliaEyesTonsilsSpinal columnDorsal root gangliaDistal ileum

Specified Risk Materials (SRMs)

New Regulation

SRMs“Downers”Over 30 monthsAMRTesting

Total

1/25/04Cattle-FaxCost Estimate$100 million$50-70 million$17-73 million$15 million$1.2 million

$183-277 million($27-41/head)

Cost Summary4/7/2004FSISCost Estimate$63-64 million$36-71 million$$14-16 million$70 million

$183-221 million($27-33/head)


Impact on Production Programs

Grid pricing variables to change

Heiferette feeders expect major discounts

Grazing programs may need to be modified

Long term loss in variety meat value

Improved consistency of beef supply

Increased cost of doing business for the industry


J F M A M J J A S O N DMONTHS

550

575

600

625

650

675

700

725

750

775

800

20035-Yr Avg.2004

000

HEAD

Weekly Average Cattle Slaughter

Source: USDA Apr-Sep 2004 projected

J F M A M J J A S O N DMONTHS

420

440

460

480

500

520

540

560

580

MIL

LBS

5-yr avg20032004

Weekly Average Beef Production

Source: USDAApr-Sep 2004 projected


Summary

• Export markets add $14/cwt. to the value of fed cattle. Re-opening thesemarkets is critically important.

• New regulations will increase cost or decrease revenues by an estimated$27 to $41/hd.

• Uncertain how domestic market will absorb larger slaughter levels(especially chuck & trim).

• The changes to the industry are permanent. Added uncertainty andextreme volatility will be common.

economic impact of bse on the u.s. beef...

Documents