Beef Supplies Remain Tight: The market this past winter was complicated by poor weather conditions holding down feedlot gains and the court injunction. First-quarter production was down 2 percent from the low levels of a year ago and down almost 9 percent from first quarter 2003. Steer and heifer slaughter declined over 3 percent, while cow slaughter was down nearly 6 percent. Commercial slaughter weights were record high last fall, but are going to average about 3 pounds under the 2002 record of 758 pounds dressed weight during the first quarter.

In both years, cow slaughter comprised 16.3 to 16.5 percent of commercial slaughter. Commercial dressed weights are up about 14 pounds from the low levels last year.

The female retention phase of the cattle cycle is holding down cow slaughter and feeder cattle supplies remain very tight with last years calf crop down nearly 1 percent from a year earlier and the lowest since 1951. With reduced cow slaughter and 3 percent more beef heifers expected to calve this year, the calf crop is expected to begin a cyclical rise, but the rise begins from decades- low levels which will continue to hold down beef supplies through at least 2007. The additional beef that enters the U.S. market when the border opens will be assimilated within a year of the border's fully opening. The United States will still be at the initial stages of herd expansion and Canadian reaction to expansion may be very guarded, at least for the first few years as producers rebuild their financial base and adjust to new trading rules. Both countries will have more feedlot and slaughter capacity than cattle, and cyclical firm adjustments due to low cattle inventories will continue as both sectors compete strongly for the available inventory.

Beef production in the second quarter is expected to rise from the low winter quarter levels as feeding conditions improve and fed cattle marketings rise. In addition, slaughter weights are expected to average well above those of a year ago, and likely above the 2002 record of 746 pounds. As the border reopens in the second half of the year, production is expected to rise 6 to 7 percent above the low year earlier levels. Most of the year-to-year increases due to the border's opening are expected to be worked through the market by mid 2006. USDA will release its 2006 forecasts in May.

Retail Prices Rise With Tight Supplies: Retail prices for Choice beef are again rising. Prices averaged about $408 at the beginning of the year and rose to $4.13 in February. As the supply tightness continues, retail prices are likely to rise seasonally through spring. In 2001 and 2002 retail beef prices were about 25 percent above pork prices; in 2003, with the ban on Canadian beef, the ratio moved up to 40 percent. In 2004 and so far in 2005 the ratio has risen to 45 percent. The high beef price and uncertain supply situation is increasingly making both pork and broiler meat relatively attractive. Beef demand and prices remain strong, but relatively lower prices for competing meats will force adjustments as end users turn to competing meats at more consistent supply levels as well as lower relative prices.

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