Storms May Force Cattle Prep Prices Up
Sunday, January 7, 2007; 1:11 PM
DENVER -- Feedlot operators still reeling from storms that pounded prime cattle ranges in the central United States likely will pay more to prep cattle for market in the weeks ahead.
How much more _ and for how long _ can prove a complicated estimate based on a variety of factors such as the animal losses from the storms, the weather and supplies. Most industry economists believe, however, it will have little effect on beef prices at the grocery store because retailers can manage supplies adequately and prices remain fairly consistent.
"For a cattle producer, it's a big deal if you're within that feeding area. The cost of production is going up," Cattle Fax analyst Kevin Good said. "For the consumer, the price of beef isn't going to change much."
The back-to-back holiday storms sent blowing snow into huge drifts that stranded thousands of animals on open range in the Oklahoma Panhandle, Kansas, southeastern Colorado and parts of Nebraska _ representing at least one-half of the nation's cattle feeding areas. A similar storm in 1997 killed 30,000 cattle in Colorado.
The affected herds in Colorado represent about $1.8 billion worth of cattle including breeding cows that will produce calves for next year's supply, Colorado State University agriculture extension agent Leonard Pruett said.
Estimates of losses on ranges were at least 3,500 head in Colorado, but could go higher when deaths in feedlots are calculated, said Pruett, who is in southeastern Colorado. Kansas Gov. Kathleen Sebelius has put the loss in her state at 1,000 head.
As ranchers and feedlot operators try to get operations back to normal, there already have been short-term disruptions in supplies in Colorado, Nebraska and Texas, but they shouldn't linger, Colorado State agricultural economist Stephen Koontz said.
"In the long run, it's not going to seriously change the number of cattle out there or impact demand," he said. Koontz said the biggest disruption will be among feedlot operators who will have to feed cattle more to get the animals up to market weight, which will cost more.
While the number of cattle herds dwindled during lean years in which a drought has dried the rangeland, leaving less grass available to feed cattle. The industry has been in the midst of rebuilding, which means fewer animals are available for feedlots, creating stronger prices for calves and tighter margins for feedlot operators who, in turn, sell products to meat-processing plants, Koontz said.
"For the rancher this probably doesn't have that much of an impact. The key impact of these storms is on the feedlot," he said. "When you have that kind of death loss in a feedlot, that is severe economic impact. There's really no way to manage that risk."
To compound that, the cattle trapped by snow and ice can become dehydrated and hungry, which means a vast majority will lose weight they typically carry when they reach feedlots, said economist Gregg Doud of the Denver-based National Cattlemen's Beef Association, an industry trade group.
"Instead of cattle putting on weight, it'll take all the feed to maintain the cattle," Doud said.
The price of cattle heading from the feedlot to the packing plant will increase by about 5 percent in the near term, according to Doud and Cattle Fax's Good. Fed cattle prices were about 4.5 percent higher Friday, from $85 per hundredweight to $89 to $90 per hundredweight, Doud said.
"If the weather straightens up over the next three or four weeks, then they'll recover some of that," Doud said.
Economists said it is too early to tell if retail prices will be affected but most don't believe it will be a significant change, if any, because retailers have the ability to manage inventories more easily in the $79.5 billion retail beef industry.
"I would predict it's going to be very tiny (change) at the grocery store meat case," Doud said.
At Denver-based Coleman Natural Foods, Chairman Mel Coleman isn't sure yet what effect his natural meat business will feel from the storm that hit six of the feedlots and some of the ranchers who raise cattle for the company. They have moved some cattle around to adjust to supply problems.
"Our prices to our customers are not going to be affected probably in the short term," he said. "It might affect us a little bit as we get into the longer term, six to 12 months, depending on how much loss there is."
As a third storm hit the region on Friday, John Wubbenhorst's feedlot operation in Minden, Neb., was still operating on seven generators because of a power outage, a situation he expects to continue for several weeks.
He didn't lose many of his 12,500 animals during the holiday storms, but he said he will have to pay more to put weight on the cattle. He isn't sure yet how much the storm damages will cost him.
"It's going to cost a bunch of money," said Wubbenhorst. "This is something I've never seen in my life and I'm 65. It's sure going to hurt. Anytime you get a disaster, it's going to cost money."
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