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The Honolulu Advertiser
Posted on: Saturday, December 27, 2003

Plummeting prices send U.S. beef farmers reeling

By Rob Kaiser
Chicago Tribune

Until this week, Ken Haas appeared to have perfectly timed his family farm's conversion two years ago from dairy to beef cattle. While milk prices slipped, beef prices soared amid a perfect storm for cattle ranchers of escalating demand and supply shortages.

The report this week of mad-cow disease in the United States ended a booming market for cattle raisers and sent slaughter prices for cattle into free fall.

Associated Press

Then a cow in Washington stumbled.

"I was looking forward to next year," said Haas, who has 120 beef cows at his farm in northwestern Illinois. "I don't know what's going to happen here now."

America's first diagnosis of mad-cow disease has given cattle ranchers a nasty case of whiplash. The long-suffering beef industry enjoyed a surge in demand this year and, with several factors curtailing supply, prices went through the roof. A year ago, farmers like Haas could get $900 for a 1,300-pound Black Angus a year ago; earlier this month they pocketed $1,400 for the same animal.

Many farmers unloaded their cattle as the prices escalated, often sending them to market before they were fully fattened, but those remaining are unlikely to fetch anything close to those high prices.

"It's going to hurt us big time," said Don Kautz, who raises cattle in Hanover, Ill., near the Haas farm.

What makes the latest setback particularly jarring is that it comes on the heels of such a profitable period for beef cattle farmers.

Demand was boosted by the popularity of the high-protein Atkins diet, along with a promotional push by the beef industry and new convenience products, such as precooked pot roasts. Meanwhile, beef supplies dwindled as imports from Canada were blocked following a mad-cow scare in that country and droughts in the western United States and other parts of the country thinned herds.

So far, farmers have been unable to measure the mad-cow fallout. In the two days of trading since the discovery, beef futures at the Chicago Mercantile Exchange have immediately dropped to market limits.

"Nobody has a number right now," Kautz said. "No one has a clue. Maybe next week we'll sort things out. Somebody has to buy something sometime."

The cattle producers are cautiously optimistic that Americans, as well as officials in other counties who have banned U.S. beef imports, will soon view mad cow as a very distant threat. Of course, a second discovery of the disease would throw the beef markets into even greater turmoil.

Vernon Schiller, who raises cattle in McHenry and serves on the Illinois Cattlemen's Association board of governors, said he is concerned the public's reaction could have a chilling effect on the economy. Given the uncertainty, farmers are likely to hold off on buying new tractors, pickup trucks or other equipment.

Indeed, shares of farm-equipment makers such as Deere and Co., as well as meat packagers and restaurants, have suffered since the discovery.

"It shows the fragility of agriculture," said Maralee Johnson, executive vice president of the Illinois Beef Association. "It depends on so many variables that are out of our control."

For now, many farmers like Haas are just waiting for any aftershocks.

Haas cashed in on the high prices by selling 75 cows since the summer. But, he still has 20 cows that will be ready for market next month.

"I'll probably just keep them all until the scare goes through," Haas said. "Hopefully prices will moderate back."