U.S. cattle futures prices fell for a fifth straight session on Wednesday after the first U.S. case of deadly mad cow disease was revealed last week, but livestock analysts said the market was stabilizing.
Signs that beef packing plants were dipping back into the market to buy live cattle in the U.S. Plains fed some positive sentiment. But the loss of the $3.2 billion annual export market for U.S. beef -- about 10 percent of U.S. beef production -- still hung over U.S. prices.
Live cattle for February delivery at the Chicago Mercantile Exchange closed 2.650 cents per pound lower at 73.525 cents after bouncing back from a late decline of 5.00 cents a pound, the daily trading limit allowed by the exchange.
Prices have fallen nearly 20 percent over five days of trading since Dec. 23, when the U.S. Agriculture Department announced the first U.S. case of mad cow disease in a Holstein dairy cow in Washington state.
The case has rocked the $27 billion U.S. cattle industry, the largest single sector of U.S. agriculture.
"I really didn't think we would be down this far," said analyst Dan Vaught at brokerage A.G. Edwards and Sons in St. Louis, Missouri.
"I assume some of the weakness in the futures came in reaction to the losses in the wholesale beef market. We had some pretty significant losses there," he said.
Beef prices tumbled on Tuesday because beef destined for export markets was being diverted into domestic markets, driving down prices, analysts said.
CLEARING THE PIPELINE
"Beef companies are just scrambling to clear the pipeline of that product," said Ann Barnhardt, analyst with HedgersEdge.com, a livestock industry advisory firm.
South Korea, Japan, Mexico and more than two dozen other world customers have stopped buying U.S. beef since the mad cow diagnosis was made public last week.
The National Cattlemen's Beef Association (NCBA) said on Tuesday said that there were 44,000 tonnes of U.S. beef in transit to the top six U.S. export markets at the time of the ban, valued at $350 million.
"NCBA has called on the Bush Administration to make reestablishing beef exports its number one trade priority, and it should lend all its resources to ensure that the market disruption from this BSE incident is minimal," NCBA said.
The U.S. government on Tuesday announced a sweeping set of measures to tighten regulations on the cattle industry and boost consumer confidence in U.S. beef at home and abroad.
The U.S. Agriculture Department placed an immediate ban on use of downer cattle -- animals unable to walk on their own at the slaughter plant -- as food for humans. Other measures included speeded-up testing of suspect cattle and a national identification system to track cattle from birth to slaughter.
"It doesn't seem to have had much persuasive influence on the market," Vaught said of the USDA's moves.
Barnhardt said the USDA must hunt down the herdmates of the infected Holstein cow, which was slaughtered on Dec. 9.
She said that if none of the cows in the herd test positive, "this should be the worst of it."
After the USDA measures, feedlot sources in the U.S. Plains said that about 4,500 head of cattle were sold to beef plant buyers late Tuesday in Kansas at $75 to $76 per 100 pounds, or $2 to $3 lower than light sales last Friday.
Feedlot sources said cattle traded $1 lower at $74 to $75 in Texas on Wednesday, which added some pressure to futures. Cash cattle were trading at $92 before the mad cow case.
The stirring of the cash cattle market was encouraging, especially at prices above current futures, analysts said.
Most feedlots appeared to be holding out for $80.
"I think anything at $80 or above will be regarded as a victory for the feedlot industry," Vaught said.
The free-fall in cattle prices in the past week provided an ironic end to a year when U.S. cattle traded at record highs of as much as $116 by October. That followed the U.S. ban on Canadian cattle imports due to Canada's own case of the brain-wasting disease in an Alberta cow that was announced on May 20.