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Losing exports hurts cattle prices, but highlights domestic market, analyst says

Domestic consumption of U.S. beef just became more
important, Scott Brown, a University of Missouri livestock analyst said, according to a press release.

While speaking to a group of Missouri catttlemen on Monday night, Brown said he is cautiously optimistic about the beef price outlook for
the year ahead, although beef supply is growing and export to Japan
remains in doubt.

He spoke after Japan announced it was again closing the borders to
imported U.S. beef, after trade had just been reopened. "The strength of U.S. domestic demand on the price outlook can't be
overlooked," Brown said. "On the positive side, the U.S. population
continues to grow to 360 million people, creating potential beef eaters."

The MU Food and Agricultural Policy Research Institute (FAPRI) projects
the United States will produce nearly 83 billion pounds of beef, pork
and chicken in 2006, up from 79 billion pounds in 2004.

"That's over 3 billion more pounds of meat," Brown said. "Exports are
likely to go up only 600 million pounds this year."

The cattle cycle turned to the herd-building phase in 2004, after eight
years in decline. As more cattle are added to the herd, more beef
supplies will put downward pressure on prices for the next eight years,
Brown said.

While prices will soften, the year ahead looks good Brown said. Based on
the current FAPRI baseline, feeder cattle will not match the record
setting prices of 2005, but the average will break below $115 per
hundredweight by mid-2006.

Feeder cattle set a record-breaking average of $126 per hundred in the
second quarter of 2005.

"Remember, the season average price from 2000 to 2003 was $92.80 per
hundred, which seemed a good price at the time," Brown said.

The FAPRI projection on slaughter-cattle price in fourth quarter 2006 is
$77 per hundred at Nebraska feedlots.

"Prices for boxed beef paid by grocery stores continue in the range of
$150 to $155 per hundredweight," Brown said. "Packers can afford to
continue to pay good prices for cattle."

In addition to declining cattle prices, producers face rising costs.
"Several things outside of agriculture will affect the outlook," Brown
said. "Interest rates, fuel and fertilizer costs, and other expenses
will continue to rise."

Looking at exports, Brown pointed out that Japan imported 1 billion
pounds of beef a year from 1995 to 2001. Those imports dropped to zero
after a case of mad cow disease was found in the United States.

Meanwhile, Mexico is importing more U.S. beef at an average rate of
35,000 pounds per month. Those sales are projected to increase.

"There were real concerns about NAFTA (North American Free Trade
Agreement) opening the borders," Brown said. "But that is beginning to
pay off for us."

Korea has reopened markets to U.S. beef. At peak they were buying 600
million pounds a year. "The latest news from Japan of re-closing their
borders to beef may give Korea cause to reconsider," he added.

Brown said that a Korean graduate student at FAPRI said that newspapers
from his country were giving no indication of any cutbacks as news from
Japan began to spread.

"Export markets continue to be important to U.S. producers, but don't
lose sight of the fact that we consume more than 90 percent of our beef
here," Brown said. "Any trimming of our domestic consumption would have
serious impact."

Keeping U.S. consumers satisfied with beef must remain a priority.

Brown asked for a show of hands of producers taking part in programs
that track beef cattle, providing age-and-source verification. A few
hands went up.

"Those programs, such as QSA (Quality Systems Assessment from the
"Missouri Department of Agriculture, will be vital in expanding the
export markets," Brown said. "Just buck up and take part. ""I urge you to start keeping better records on when those calves are
born.".

Under new rules agreed upon in reopening trade, Japan required beef
animals to be verified as less than 20 month of age.

Domestic consumption of U.S. beef just became more important, Scott Brown, a University of Missouri livestock analyst said, according to a press release.

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