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Articles from 2006 In October


Creating Value -- It Makes One Wonder...

There's a lot of talk about the added value for age- and source-verified cattle and about near record discounts being levied against bawling calves. Certainly, there is value in pre-conditioning, in AI bred heifers, etc... But, with the number of cattle being offered with these added benefits growing dramatically one has to wonder if the discounts are reflective of actual economic differences. Or, are they just a reflection of the growing divide we're seeing in the marketplace, between the professional marketers/cattlemen and the commodity producers?

Pre-conditioning, freeze branding, age and source verification, etc. speaks more to which side of this divide you reside on than perhaps anything else and is seen as an indicator of a whole host of management value, or lack of value.
-- Troy Marshall

International Livestock Congress Set For Denver

Each year the International Stockman's Educational Foundation (ISEF) sponsors the International Livestock Congress. The focus of the congress is to identify key issues that affect the world production of livestock and meat. Each year, experts are invited to present current and relevant information to the congress. This year the Congress will be on Jan. 9, 2007 in Denver during the National Western Livestock Show.

The theme of the congress is to understand from meat company leaders on the market signals that need to be heard by the cattle production sector. The audience will be comprised of purebred, commercial and feedlot producers.

During the afternoon session, the participants will be provided more "hands-on" information on some of the market signals discussed in the morning session.

Check out the ISEF web site at www.theisef.com and learn more about the programs and services of the ISEF.
-- Clint Peck

Special Session Highlights Value-Added Producers

One of the highlights of BEEF magazine's upcoming BEEF Quality Summit, Nov. 14-15 in Oklahoma City, is a special Tuesday twilight session featuring a panel of producers who will share how they're being paid for the quality they produce in their cattle. This series of first-person presentations will be followed by Q&A and offers attendees of the meeting at Oklahoma City's Clarion Hotel the chance to quiz these value-added market leaders.

Included on the panel are: Wayne Cockrell, Carter Ranch, Oakwood, TX; Ted Davis, Morgan Davis International, Macomb, OK; Barb Downey, Downey Ranch, Wamego, KS; Mary Ann Kniebel, Kniebel Farms, White City, KS; and Dan Schoenfelder, Rainbow's End Ranch, Elfrida, AZ, and Bastrop, TX.

Check out the bios on these summit speakers and others, including the top beef execs of McDonald's, Outback Steakhouse and WalMart at www.beefconference.com. Just click on "speaker lineup."
-- Joe Roybal

Western FMD Eradication Centers In South America

While much was made of the economic and social impact caused by the outbreak of foot-and-mouth disease (FMD) in England in 2001, much less was heard about FMD outbreaks in Argentina and Uruguay during the same period. But South America is home to the world's largest share of cattle, which makes it the greatest potential reservoir of FMD virus.

During last week's U.S. Animal Health Association meeting in Minneapolis, Phil Bradshaw, an Illinois pork producer and the North American Private Sector Representative to the Inter-American Group for the Eradication of FMD, reported on the initiative to eliminate FMD from the Western Hemisphere.

The goal is to eradicate FMD from the Americas (with vaccine usage permitted in South America) by the end of 2009. Bradshaw said it's a formidable challenge, requiring at least 90% of all South American cattle to be vaccinated. He said the primary problems are commitment and administration.

Among the most contagious viruses known to man, FMD was last seen in the U.S. in 1929, in Canada in 1952, and in Mexico in 1954. In 1981, Chili was declared free of FMD without vaccination and, in 1994, Uruguay achieved the same status, but lost it in 2001.

Reported infections in South America have ranged from greater than 4,300 in 2001 (mostly in Argentina and Uruguay) to 78 in 2005 (in Brazil, Colombia, Ecuador and Venezuela). Peru reported 26 cases in 2004 but none in 2005 or 2001-2003.

Bolivia and Paraguay haven't reported any cases during the 2004-2005 period though infection was reported before then. Bradshaw said that because surveillance quality may not be good, there are undoubtedly more cases than those recorded.
-- USAHA release

Mandatory Price Reporting On Temporary Hold

USDA's Market News has confirmed that the re-implementation Mandatory Livestock Price Reporting (MPR) will take several more months. Despite the prior regulation, due to the time-lapse caused by congressional delays, USDA must start again from scratch.

Reimplementation steps include conducting an economic impact, clearance through various channels of USDA and OMB, and then propose the rules in the Federal Register for comment (most of the rules will be unchanged). Comments must then be analyzed before issuing a final regulation. In the meantime, voluntary reporting will continue.

The legislation was re-authorized through 2010, so if it takes until late 2007 to get the new rule in place the actual life of MPR will be only three years.
-- Clint Peck

EU Seeks To Define "Veal" By Production

The European Union's (EU) executive branch, the European Commission, is proposing to redefine the concept of "veal" to better communicate to consumers what it is they're actually buying.

In the EU, many countries produce milk-fed veal calves, which are harvested at under eight months of age. However, in Spain, the Netherlands and Denmark, there's also a kind of veal that's grain-fed and harvested between 10 and 12 months of age. There's a EUR2 to EUR2.50/kilo difference in price, ex-slaughterhouse, for the different meats, yet they're both currently labeled as "veal."

The new proposal, which must be approved by the council of ag ministers from all 25 EU countries, will continue to categorize the milk-fed calves as veal while the cereal-fed calves will be classified as beef. All imported calf-meat will be classified using the same new system.
-- Meghan Sapp in Brussels, Belgium

October Sees Record Cattle-On-Feed Inventory

Darrell Mark, University of Nebraska ag economist, reports at www.lmic.info that the Oct. 1 cattle-on-feed inventory was record large compared to previous Octobers. At 11.385 million head, the on-feed inventory was 8.6% higher than Oct. 1, 2005. He cites drought-induced early movement of Southern Plains calves into feedlots for the record large on-feed inventories.

Overall, net placements were down 5.8% last month. This resulted from a decrease in placements weighing more than 600 lbs. of 283,000 head or 15.8%. However, placements of steer and heifer calves weighing less than 600 lbs. were up 160,000 head or 28.3%.

In recent months, yearling placements have declined relative to year-ago levels due to short supplies of heavier feeder cattle outside of feedyards (they were placed earlier in the year). The continued increase in lightweight calf placements in recent months are a result of at least three factors, he writes:

  • Drought-stressed pastures in the Northern Plains and Western states likely prompted early weaning.
  • Feeder-calf prices have fallen at least 8% (basis Nebraska) in the past month due to softer fed-cattle prices and much higher corn prices. Given the outlook for fed-cattle and corn prices, feeder-cattle prices may not improve, so some producers are taking advantage of current prices by selling calves now.
  • Cattle feeders may be trying to take advantage of feedstuffs that may be cheaper than corn in some local markets and that are more suitable for growing-calf rations than for finishing diets. For example, placements in South Dakota were up 25% in September where hay prices are $50-75/ton less than in Texas were placements dropped 10%.
"Clearly, the rapid rise in the corn market of nearly $1/bu. in the past month (basis Omaha, NE) negatively impacts feeding margins. Breakeven prices increase about $4-6/cwt for a calf-finishing operation from such a change in corn price," Mark writes.

The availability of distillers grains has insulated some areas from these corn-price shocks, he says. Though many plants price distillers grains in a fixed relationship to corn, continued rapid increase in ethanol and distillers grain production may weaken this relationship, making distillers grains even more price competitive relative to corn.

Feedyards in close proximity to ample distillers grains products can more competitively substitute distillers grains plus solubles for corn, and cattle-on-feed inventory numbers seem to reflect this, he says. Cattle-on-feed inventories are up significantly in leading ethanol-production states: Nebraska (+14%), Iowa (+12%), and South Dakota (+31%).
-- Livestock Marketing Information Center

Cattle Prices Weathering The Storm... Sort Of

"We're producing about 25-million lbs. of beef/week more than last year," says Randy Blach, Cattle-Fax executive VP. That's the equivalent of the 5-6% increased production expected and seen through September of this year. "Normally that kind of increased production would equate to about a $5 change (decrease) in fed-cattle prices. We're down about $2. I think that underscores the importance of trade," he adds.

Blach is alluding to the fact that while exports are yet to retrieve all the market share lost in the wake of BSE, the net import/export picture is brighter than a year ago.

In offering perspective to participants at the annual meeting of the Texas Cattle Feeders Association, Blach explained, "Herd expansion has slowed, not stopped." He expects the Jan. 1 numbers to show a 1% increase in cow numbers, compared to the 2-3% increase most market analysts expected at the beginning of 2006. While it's true cow slaughter through September was 17% more than the previous year, Blach emphasizes the cow-slaughter level is the third-smallest in the past three decades.

Also, while domestic consumer demand has been down for the previous six quarters, Blach notes demand for Choice and higher-grading beef continues to increase.

The primary wild card for cattle prices is corn.

According to Blach, the Corn Stocks to Use Ratio for the year is expected to be 8.3%, marking only the fifth time since 1960 that the ratio dipped below 10%. That's a key reason corn prices rocketed ahead during the past month rather than taking a typical seasonal dip. Of course, the Oct. 1 USDA corn estimate added fuel to the fire -- down 2% from the September estimate at 10.9 billion bu.

"The market will be on pins and needles," Blach says. "This isn't a short-term spike (corn prices). There won't be a correction overnight." He explains increasing the cost of corn about 50¢/bu., typically decreases the price of feeders about $6/cwt. and the price of calves about $7/cwt.

Expanding ethanol production obviously plays into the short and longer trends in corn prices. For perspective, Blach says the percentage of corn used for ethanol production this year will be about 14%; it ran about 11% the previous three years. Corn usage for ethanol is projected at 19% next year. If all the proposed ethanol currently being considered are built, that rate could multiply exponentially.

Shorter term, corn's weight on calf and feeder prices is becoming more pronounced.

"Calf prices have been steadily losing ground for a full six weeks, basically since the spring calf crop started hitting the midwestern auctions early this fall," say analysts for USDA's Ag Marketing Service (AMS). "Losses have been most severe on the fleshy unweaned calves that lack their vaccinations, while the market for pre-conditioned calves and yearlings was able to stave off the bulk of the pressure.

"However, the last three weeks of sharply higher CBOT grain prices have taken their toll on yearling feeders; even the fanciest longtime-weaned calves with multiple series of shots are not immune to the market pressure that $3/bu. corn has brought. The sudden surge in the corn market was not expected (especially right during harvest) and has caused cattle feeders to refigure their cost-of-gains," AMS reporters write.

According to AMS, "Steer and heifer calves sold $1-$5 lower last week, with instances as much as $8 lower on unweaned offerings weighing over 500 lbs. "
-- Wes Ishmael, BEEF Stocker Trends

Tight Hay Supplies Point To Higher Prices

The Oct. 19 USDA Livestock, Dairy and Poultry Outlook report shows U.S. hay supplies are likely to be fairly tight and expensive this winter, particularly if a more-normal winter develops following last year's mild one. Hay production was forecast at 147 million tons this year, down 2.4% from the 2005 total. May 1 hay stocks were down 23%, and dry conditions in many areas forced hay feeding this past summer.

The September farm price of other hay averaged $93/ton, up from $78.90 a year ago. The alfalfa hay price averaged $112/ton, up from $106 in September 2005.

The report says pasture conditions continue a modest recovery, but favorable temperatures and moisture are still needed to accumulate much-needed growth for winter grazing. Wheat and other small grain pasture grazing potential are still very uncertain, as they were last fall, although recent moisture will help.
-- eHay Weekly