U.S. cattle futures traded on the Chicago Mercantile Exchange rose for the first time in six sessions Friday after falling about 20 percent on news of the first case of the deadly mad cow disease in the United States.
But traders and analysts say cancelled beef exports are keeping supplies plentiful and could stand in the way of further gains.
The steadier tone to the cattle market came as beef plants began small purchases of slaughter cattle after standing back from the market since news a Washington state dairy cow was diagnosed with mad cow disease Dec. 23.
The case has rocked the $27 billion cattle industry, the single largest sector of U.S. agriculture. More than two dozen nations have halted U.S. beef imports, which account for about 10 percent of annual production and $3.2 billion in sales.
At the Chicago Mercantile Exchange, live cattle for February delivery rose 0.275 cent a pound Friday to 73.800. That contract had closed at 90.675 cents Dec. 23, before the mad cow news.
"I think it's going be volatile. I wouldn't say that this is the turn and we are going higher. I think this is more reflecting the volatility," said Jim Robb, economist with the Denver-based Livestock Marketing Information Center (LMIC).
"If you drop anything from a significantly high level it will bounce," said Dan Vaught, livestock analyst with broker A.G. Edwards and Sons. "The losses we have seen through Wednesday were largely news driven."
But Vaught pointed to continued weakness in U.S. domestic prices for wholesale beef, which fell ednesday and are down about 10 percent since news of the mad cow case.
"I think the market will be weak next week because of the sliding wholesale beef prices," Vaught said.
Wholesale U.S. beef prices have been plummeting because meat destined for export markets has been diverted into domestic channels, increasing supplies and pressuring prices.
The U.S. Meat Export Federation (USMEF) said Wednesday that the Bush administration should take immediate steps to ensure that 1,800 to 2,000 containers of U.S. beef products in transit when the beef import bans hit would find a home.
"These containers of highly perishable product are being held hostage on the high seas because our trading partners closed their borders," USMEF President Philip Seng said.
The U.S. Agriculture Department is trying to convince overseas buyers to restore trading. Two of the top markets, Japan and South Korea, have said it is too early to talk about resuming trade, a USDA official told Reuters Friday.
Restaurant chains like McDonalds Corp. have said that consumer demand for beef appeared to be holding steady amid the scare over mad cow disease, or bovine spongiform encephalaphy (BSE), a fatal disease caused by misshaped proteins called prions that can be spread by eating contaminated meat.
"We have not seen any clear fundamental decline in consumer demand for beef," Robb said.
Beef-eating Bush
President Bush said Thursday that U.S. Agriculture Department (USDA) officials were taking the right steps to make sure American beef is safe.
"I ate beef today and I will continue to eat beef," Bush told reporters at his Texas ranch.
USDA on Tuesday announced new safeguards, including a ban on use of "downer" cattle -- those too sick or injured to walk -- in human food. The ban was previously opposed by both the White House and the livestock industry.
On Friday, USDA officials, who have said the infected cow had been imported from Canada, said that three U.S. cattle herds were under quarantine as investigators try to locate animals that may have eaten the same feed as the infected cow.
USDA has been trying to find 81 animals believed to have been imported from Canada with the infected cow in 2001.
USDA said it will hold a meeting Monday with industry officials to discuss how the government will start testing downer cattle for mad cow disease. More testing will have to be done at U.S. rendering plants and possibly on farms, USDA Chief Veterinarian Ron DeHaven told reporters.
"Providing some financial incentive ... is one of many" options under discussion, DeHaven said. "Right now, all options are on the table."
