The reasons for the comeback are clear, Hurt said. The world economy continues to recover, feed prices are lower, red meat supplies are down, exports are strong, and retail beef prices have been low. Now the question is, can it last?

Beef production in the United States so far this year has been down 1 percent. A somewhat higher rate of slaughter has been more than offset by lower cattle weights.

In the first two months of 2010, U.S. beef exports were up 24 percent. At the same time, U.S. beef imports from competitors like Australia, New Zealand, and Brazil were down 23 percent.  The result of modestly smaller U.S. production with such strong exports and reduced imports is that beef supplies per person in the United States during the first quarter were down about 5 percent. Similar data for pork reveal a 6 percent reduction.

Retail beef prices in the first quarter averaged $4.23 per pound, which was down 10 cents per pound from a year earlier. Lower beef prices help to stimulate consumers to buy more beef. Hurt said one of the reasons live cattle prices are so much stronger is because retailers had not yet moved their retail prices higher.

In the first quarter, as retail prices were down 10 cents per pound, retail margins dropped by 20 cents per pound. “This means that retailers primarily absorbed the higher wholesale beef prices at the expense of their own margins,” Hurt said. “In essence, this creates a period of seemingly strong demand because retail prices do not move up as quickly as wholesale prices.”

Calf prices have increased about 25 percent since December as a result of much higher finished cattle prices and lower feed prices. Midwest cash corn prices were near $4 per bushel late last fall, but are now below $3.50 per bushel. Soybean meal prices have been about $35 per ton cheaper this April compared to last December. Bright production prospects for the 2010 crops have also strengthened the desire to buy calves and feeder cattle.

Most important is the question of whether these strong prices continue. Hurt said the answer is yes, but not as strong as is being experienced this spring.

“Per capita beef production should be down about 2 to 3 percent for the rest of the year, but the smallest of those supplies is expected this spring,” Hurt said. “The economic recovery continues to grow momentum in the United States, and that is likely to continue, although unemployment rates will be slow to drop. On the negative side of the ledger, higher retail beef prices will cut into consumption by this summer and fall.”

Hurt said it’s great to be able to say the cattle industry is back.

Read the full release from the University of Illinois.