June 1, 2022
Here’s a look at 5 headlines that appear to be at the top of everyone’s mind this week.
New processing plant in South Dakota
Ground has been broken for a new facility for the West River beef industry. A new processing plant will be going up in Hot Springs. It will create seven new jobs and provide ranchers with a local option to put their product to market. Dakota Territory Beef will be able to process 25 cattle a week. It plans to pay ranchers a premium of 12 cents over the board for the following Monday for their cattle. The partner’s United Ranchers Cooperative hopes to set an example for future processing plants across the country.
Ractopamine use questioned again
2. Ractopamine is back in the news again. It’s a feed additive for pigs and beef cattle.
It is used by livestock producers to enhance or increase muscle mass and improve feed efficiency in animals. Because it adds lean muscle to animals prepared for market, it is also popular when feeding show animals to increase their chance of a top placement.
U.S. Food and Drug Administration has reviewed many studies designed to establish the safety of ractopamine. FDA determined that meat from animals fed ractopamine is safe for human consumption when fed to pigs and cattle according to manufacturer recommendations. Because ractopamine is metabolized and cleared rapidly from muscle (meat), the product can be fed right up to time of harvest.
FDA conducted studies to ensure pork fed ractopamine was safe for human consumption and have established an acceptable daily intake (ADI). Although meat from animals with ractopamine is safe for human consumption, some global markets, including China and European Union require that all beef and pork sold there be free of the drug, or from animals never fed the product. How do they justify this position?
First, although ractopamine is cleared rapidly from muscle, it accumulates in greater amounts and persists longer in specific types of tissue, including liver, lungs, kidneys, eyes and hair. These tissues typically are not eaten by U.S. consumers, but may be in other markets, including China. Secondly, the zero-tolerance policy for ractopamine in China and EU has been influenced by consumer safety events that occurred several years ago in China and Portugal, involving serious illness caused in people who consumed meat from animals fed a different molecule called clenbuterol. In many countries, including the U.S., clenbuterol is not approved for feeding to meat animals.
Some U.S. meat packers have stopped accepting ractopamine-supplemented pigs for processing? Economics have played a key role. Because China and EU have become increasingly important export markets for U.S pork, many large meat packers in the U.S. stopped processing ractopamine-fed pigs beginning in late 2019 and early 2020 to help preserve access to those markets.
FDA has established and actively enforces safe limits for use of ractopamine in pigs and cattle. When used according to label directions, meat products from animals fed this additive are safe for human consumption.
Source: Michigan State University Extension
FMD outbreak in Indonesia
The outbreak occurred during Lebaran, a national holiday during which many Indonesians travel across the country.
Ross Ainsworth has worked as a vet in northern Australia for decades and is currently based in Bali. He says it could arrive in Bali very soon.
Dr Ainsworth said if FMD was found in Bali, the risk of Australian tourists encountering infected animals was very high.
"It would be very easy for tourists to come across cattle and there is potential for tourists to become infected simply by walking around tourist areas," he said. "If they then go home with some infected material, say some saliva on their shoes, then they are risking the disease entering Australia, so it's pretty scary."
An FMD outbreak in Australia could cost the livestock sector $100 billion, according to the Cattle Council.
Dr. Ainsworth believes flights from Bali to Darwin last month pose the biggest risk because FMD can only survive outside a host animal for a short period and the journey only takes about three hours.
New tool to help manage risk
4. Jennifer Ifft knows that farmers and ranchers face risk each day, so finding strategies to mitigate risk is necessary to be successful.
Ifft, an associate professor of agricultural economics at Kansas State University, has released a nine-part series and historic performance decision aid about price risk management considerations and strategies for cow-calf producers.
She said those that will benefit from the series include cow-calf producers with limited experience hedging and producers who are interested in learning more about Livestock Risk Protection (LRP), including stockers, feedlot operators and cow-calf producers with hedging experience.
“In today’s volatile commodity markets, price risk management is as important as ever,” Ifft said. “Cow-calf producers historically have had limited options for formal price risk management.
“LRP is a livestock insurance product that has been available for two decades, but recent policy changes make it more affordable to producers. LRP makes payments when national prices drop below the producer-selected coverage price.”
She said the risk management series will help cow-calf producers assess whether LRP is a good fit for their operation, or learn more.
Ifft said the series is designed to provide a gradual introduction to LRP. She said cow-calf producers — especially small and midsize operations — may have limited experience with hedging, which is similar to LRP.
“The series begins with key price risk management concepts and practices before presenting policy details. The series concludes with a discussion of how LRP would have performed historically for Kansas cow-calf producers,” she said.
“LRP is very similar to a put option [which gives an option buyer the right to sell at a predetermined price] but is more affordable and small-producer friendly,” Ifft said. “A producer can enroll anywhere from 1 to 6,000 head of cattle [feeder or fed] in a single policy [endorsement] and premiums are not due until the end of the coverage period [usually after cattle would be sold].”
Ifft added that LRP is designed to replace the income that is lost due to unexpected price declines.
She noted that like other federal crop and livestock insurance products, LRP is designed so the producer comes out ahead in the long run. Producers are more likely than not to receive more in payouts than they pay in premiums in the long run, she said.
Increasing costs are pressuring cow-calf cost of production
5. In working with cow-calf producers and discussing unit cost of production, labor and equipment costs are often the second largest expense category identified after grazed and harvested feed. Expenses related to labor and equipment have increased dramatically over the last several years and especially in the last 18 months. Competition for labor is high and those with the necessary work ethic and skills frequently find industries outside of agriculture offering wages and benefits difficult to compete with and be profitable. New and used equipment costs have skyrocketed along with repair and maintenance costs. Fuel and oil prices have increased dramatically as well, significantly increasing the costs for daily operations of equipment.
These circumstances are challenging many ranch owners and managers to evaluate their production systems. Commercial cow-calf production systems that require significant inputs of labor and equipment per cow are increasingly unprofitable. Either more cows need to be run per unit of labor and equipment or total labor and equipment costs must be reduced for the current number of cows on the ranch. Both scenarios may require a significant shift in the type of production system that is in place.
As you think about your ranch’s current cow-calf production system, if the existing trend for labor and equipment costs should continue, how will your system fair? As equipment needs to be replaced to support the existing system, will you be able to afford it? What changes to the existing cow-calf production system would be required to position the ranch to not only survive, but thrive in an environment where equipment and labor costs are high?
There is not a recipe or prescription for operating a profitable commercial cow-calf operation. Frequently a cow-calf operation’s resources are quite unique along with the goals and skills of the owners and operators. However, there are business principles that apply universally across all ranch operations. Labor and equipment costs per cow unit must be managed and controlled if a cow-calf operation is to be profitable.
Source: University of Nebraska-Lincoln
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