June 21, 2005 (The Editor’s Desk is updated each business day.)

Fluctuations in beef and cattle producer prices

Producer prices for beef and veal rose 16.3 percent in October 2003, the largest monthly gain since April 1975. October slaughter cattle prices exhibited the largest monthly gain since January 1974, rising 20.4 percent.

Changes in beef and veal prices and slaughter cattle prices, Producer Price Index, January 2003 to January 2004
[Chart data—TXT]

The October 2003 gains, while more substantial than earlier movements throughout the year, were not complete anomalies in 2003. Prices for beef and veal generally advanced in prior months, moving up as much as 7.3 percent in June. Likewise, 2003 prices for slaughter cattle posted several noticeable gains, increasing 9.1 percent in January, 5.7 percent in August, and 11.4 percent in September.

Previous liquidation and Canada’s Mad Cow Disease, steady demand, feed prices, and slaughter weights appear to have been factors. On May 20, 2003, Canadian beef imports were banned by several countries, including the United States, because of the discovery of an animal afflicted with Mad Cow Disease. Imports were restricted at a time when the U.S. cattle inventory was already low due to years of liquidation.

U.S. per capita beef consumption remained relatively steady throughout most of 2003. Favorable feed prices helped to keep operating costs down, which encouraged production of fed beef.

Lastly, reduced cattle weights contributed to 2003’s tight processed beef supply. In an effort to maintain beef production levels, producers pushed animals through production more quickly than usual, slaughtering cattle at lower-than-normal weights.

These data on beef and cattle producer price movements are from the Producer Price Indexes program. To learn more, see "Factors affecting beef and cattle producer prices movements" by Marta Norton, Monthly Labor Review, May 2005.