Ranchers wait for BSE scare to blow over

By Christine Souza

Some California beef producers have agreed to err on the side of caution and wait to buy or sell livestock until the market has recovered. This decision comes after bovine spongiform encephalopathy was discovered in the state of Washington last month.

"We thought if there are people who absolutely have to sell we can help them merchandise those the best that we can, but for the bulk of the people we thought it would be best to wait until this thing settles a bit," said Jim Warren, president and owner of 101 Livestock in Aromas, which sells cattle. "We think by the end of the month the market will come back and that would be in everybody's best interest."

The 101 Livestock market in Aromas will remain closed until Jan. 27, which will be its first sale of the year. It is one of several livestock auctions that have elected to close temporarily in hopes that prices will stabilize.

"It didn't make any sense for people to bring cattle here expecting to receive $1.20 (per pound) for a 500-pound steer and only get 90 cents," Warren said. "If the reality is that all they are going to be worth is 90 cents so be it, but I feel that the market will rebound. We should get back most of what we lost by the end of the month providing that we get this mess cleaned up without anymore flare-ups. So that is why we did what we did."

Prices for cattle have varied throughout the state. In some areas, Warren said, the price has been reported to be $10 less than what producers received before the announcement by the U.S. Department of Agriculture that a Holstein cow was infected with BSE. In other areas, the price is $25 less. Warren has spread the word to other auction yards in hopes that they will follow his lead and close their doors to help increase the price ranchers receive for beef.

California Cattlemen's Association Executive Vice President Ben Higgins has heard from several livestock markets that plan to cancel auctions until the end of the month or in early February. Higgins believes this is a positive step for the industry and reflects the belief that the unsettled period will be short-lived.

Max Olvera, manager of Cattlemen's Livestock Market in Galt, said he would not even consider closing his livestock auction.

"Closing the auction is really not an option in the valley," Olvera said. "It just depends on where the auction is located. Some markets are more seasonal than others and are located in areas where there are not a lot of cattle moving. There's cattle moving all of the time in our area and up and down the valley."

About 2,000 cattle typically move through the Cattlemen's Livestock Market at the first post-holiday auction. However, last Wednesday Olvera's auction sold only 525 head.

"The market has been so strong throughout the fall that a lot of folks have already sold their cattle, so sales were already slim when BSE was discovered," Olvera said. "That being said, we are still seeing slaughter cows come to town, the dairy butcher cows, the beef open cows and the cull cows. I've watched a few of the other sales in California during the holidays and our market has basically dropped about 10 cents per pound, which is not bad. I thought it would be 30 or 40 percent and we haven't got hit that bad."

Last week's results at the Western Video Market, a satellite auction service which now sells nearly half a million cattle from 13 Western states each year, Olvera said, confirm that things are looking up for the industry.

"Depending on the weight of the cattle and where they were located, we saw prices that we were seeing before the BSE announcement. It was very encouraging," Olvera said. "The price for 400-pound steers went back up to between $1.25 and $1.35 at the video sale. They sold some 500-pound steers for $1.25, some seven weight steers for around 96 cents and they actually sold some 800-pound steers for over 90 cents."

According to USDA's Market News Service five-area weekly weighted average, the price for direct slaughter cattle steers is $72 to $78 per hundredweight. Last year, ranchers received a price of $75.50 per hundredweight. Prior to the BSE announcement, ranchers sold the steers for between $93 and $100 per hundredweight.

"I know our exports have been shut off but I think we can weather this," Olvera said. "This is really the first full week that anybody has had in terms of marketing due to the holidays.

Livestock broker Gaylor Wright of Oakdale, a member of the Stanislaus County Farm Bureau, attended the Cattlemen's Livestock Market last week, not as a buyer or seller, but as an observer.

"I ship cattle all over the United States. One customer in Iowa will start buying next week. I ship butcher cows to Nebraska, but Nebraska has a hold on buying cattle in five Western states including California. I've talked to people in the Midwest. Normally they buy 700 to 800 cows but they bought nine head," Wright said. "I am waiting to see what impact this is going to have on overall demand."

Colin Carter, professor of agricultural and resource economics at the University of California, Davis, indicated two factors are crucial for the U.S. beef industry to rebound: elimination of the U.S. beef import ban, and confidence in U.S. beef by consumers.

"U.S. is not as dependent on exports as Canada was, for example, so the impact in Canada was much larger. About 10 percent of our beef is exported. This beef will definitely back up in the domestic market, but I don't think we've seen the full impact of that yet," Carter said. "It will take several more weeks (for this to play out)."

A Japanese delegation visited the U.S. last week to participate in trade talks. In addition, USDA Under Secretaries J.B. Penn and William Hawks met last week with Mexican officials to discuss reopening the Mexican market to U.S. beef exports.

Late last month, USDA officials, during standard testing protocols, confirmed that a Washington state non-ambulatory dairy cow was infected with BSE. This initiated an immediate recall of 10,410 pounds of meat from a group of 20 animals slaughtered at the same Washington slaughter plant, as well as an official investigation. Last week, USDA depopulated 450 animals at a bull calf operation in Washington that included a calf born to the cow having BSE.

Meanwhile, Agriculture Secretary Ann Veneman announced additional safeguards to bolster the U.S. protection system against BSE and to further protect public health. This includes the ban of downer cows from the human food chain.

USDA also announced last week that DNA evidence helps verify that the BSE-infected cow originated from a dairy in Canada. The investigation by USDA is ongoing.

"We were finally catching up with the rest of the world in terms of actually being able to pay for our expenses and make a small profit. Now the beef producers in the United States are feeling the brunt of this," said Rancher Duane Martin of Ione and member of the San Joaquin County Farm Bureau. "I just hope everything turns out OK so that I can still stay in business. From the producer to the slaughterhouses to the shipping industry, this is going to be a major hit to the industry and will cost in the billions of dollars."

California's beef industry is valued at $1.35 billion and the state exports about $160 million in beef and beef products.