U.S. cattle prices tumbled in the Chicago markets on Monday after the U.S. Agriculture Department (search) slashed its estimate for 2004 beef exports by 90 percent after the first U.S. case of deadly mad cow disease (search).

"I think reality finally dawned on the CME cattle floor that the export markets will not reopen in weeks or even months," said Ann Barnhardt, livestock analyst with Colorado-based HedgersEdge.com.

At the Chicago Mercantile Exchange (search), live cattle futures for February delivery closed 1.225 cents lower at 74.700 cents per pound.

That is down 18 percent since the U.S. Agriculture Department on Dec. 23 announced the first case of mad cow disease in the United States in a Holstein dairy cow in Washington state.

The news rocked the $27 billion industry, despite findings that the infected cow came from Canada and signs that U.S. consumer demand for beef has remained fairly strong.

The problem is the large hole in demand caused by the overnight loss of the huge export market for U.S. beef.

More than two dozen importers of U.S. beef, led by Japan and Mexico, immediately shut off U.S. beef imports, jolting an industry that had sales of $3.2 billion in 2003.

Prior to the bans, the U.S. was exporting about 10 percent of its beef, or nearly 2.6 billion pounds a year. But on Monday, the USDA in its monthly agricultural supply/demand report put 2004 beef exports at a mere 220 million pounds.

Cattle prices trended higher in the past week in part on hopes that deals might be reached soon with Japan and Mexico to lift their bans on beef. But Japan and Mexico have so far kept their borders closed to U.S. beef.

USDA on Monday appeared to acknowledge that normal cross-border trade in U.S. beef will not resume soon.

It cut its 2004 beef export outlook to the bone and reduced its estimate for 2004 cattle prices to a range of $72 to $78 per 100 pounds from the previous estimate of $84 to $91.

The mad cow crisis has hit hard those cattle producers whose market-ready cattle in feedyards need to be sold now. Beef plants have been slow to buy without the export demand.

"The beef packer is buying (cattle) hand-to-mouth. The packer is in a better bargaining position then he has been in many, many weeks," said Don Roose, analyst at U.S. Commodities Inc.

Last week, two big packers, Cargill's Excel Corp. unit and Tyson Foods Inc., announced beef plant layoffs tied to the loss of beef exports.

Beef plants normally slaughter more than 600,000 cattle a week. Last week's slaughter dropped to 567,000 head.

So the wild card for beef prices is the revival of exports.

"Given the fact that the Japanese are willing to talk and that the Mexican authorities are willing to talk, I think that shows promise that we will be able to come to some sort of resolution with them much more quickly," said Chris Hurt, agricultural economist at Purdue University.

He expects some exports to resume within six months.