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Corn Prices Running Counter To Global Supply Outlook

So far, prospects of a near-record corn crop are impacting prices more than estimated reductions in world and domestic grain supplies.

According to Darrel Good, University of Illinois Extension economist, "The price structure changed over the past few weeks as the market worried about a late harvest and a harvest that could get stretched out due to a period of wet weather. There are also some who believe USDA's September production forecast overstates the potential size of the 2006 crop, pointing to an implied high average ear weight in that report and reports of lower-than-expected yields in some areas."

Additionally, Good explains, "Crop condition ratings (60% in good or excellent condition as of Sept. 17) don't point to a yield as high as the 154.7 bu. forecast by USDA, even though actual yields have exceeded yields projected by crop ratings for the past seven years. It is rare, but not unprecedented, for the production estimate in January after harvest to be below the September forecast following an increase in the forecast from August to September. Over the past 35 years, that scenario occurred three times (1973, 1974 and 1990). There were only eight years in total over the past 35 that the January corn production estimate was below the September forecast by a meaningful amount."

You can find Good's complete "Weekly Outlook" at: www.farmdoc.uiuc.edu/marketing/weekly/pdf/092506.pdf

For the week ending Sept. 24, according to National Ag Statistics Service (NASS).

  • Corn -- Maturation is at 75% , 1% ahead of last year, and 8% ahead of normal. 13% is harvested , which is 4% behind last year and 2% behind the five-year average. 61% is rated Good or better , compared to 52% last year.
  • Soybeans -- 70% of the acreage was at or beyond dropping leaves , 10% behind last year but 1% ahead of the average. Growers have harvested 9% of the crop , compared to 17% at this time last year and 12% for the average. 62% is rated Good or better ; 55% was at the same time last year.
  • Winter wheat -- 36% of the crop is sown , 2% less than the same time last year and 3% less than average. Planting was most advanced in Colorado at 70%. 10% of the crop has emerged , compared to 11% last year and 14% for average. Emergence was most advanced in Colorado and Washington at 23% and 20%, respectively.
  • Sorghum -- 85% was at or beyond turning color , 3% behind last year and 3% off the normal pace. 53% is mature , compared to 52% last year and 57% for average. 34% has been harvested , compared to 30% last year, but the same as average. 33% is rated Good or better , compared to 48% last year.
  • Pasture -- 30% is rated Good or Excellent , compared to 29% last year. 22% is rated Poor and 19% is ranked Very Poor , compared to 24% and 14% respectively at the same time last year.
States with the worst pasture conditions -- at least 40% of the acreage rated poor or worse -- include: Alabama (60%); Arizona (52%); Arkansas (41%); California (77%); Kansas (43%); Mississippi (49%); Missouri (54%); Montana (44%); Nebraska (46%); Nevada (63%); North Dakota (58%); Oklahoma (63%); Oregon (54%); South Dakota (46%); Texas (69%); and Wyoming (66%).

States with the lushest pasture conditions -- at least 40% rated good or better -- include: Florida (75%); Illinois (57%); Indiana (71%); Iowa (66%); Kentucky (69%); Maine (85%); Michigan (49%); New Mexico (66%); New York (59%); North Carolina (60%); Ohio (66%); Pennsylvania (55%); South Carolina (50%); Utah (43%); Virginia (47%); Washington (46%); West Virginia (59%); and Wisconsin (57%).

National Stocker Award Winners Named

Hughes Cattle Co. of Bartlesville, OK -- owned and operated by John and Robert Hughes -- has been named National Stocker Award (NSA) winner for 2006.

When BEEF magazine established the NSA program -- sponsored by Elanco Animal Health -- the idea was fairly simple: identify and recognize the top stocker operators in the nation, and showcase what enables them to thrive in this high-risk business. Easier said than done.

An evaluation committee representing private industry and academics, along with specialists in stocker health, stocker nutrition and stocker economics, sifted through nominees from 15 states.

Competition was divided into three categories: Backgrounding/drylot stocker (feed-based), Fall/winter stockering (forage-based), and Summer stockering (forage-based). A single winner was chosen in each category, and then the overall NSA winner was selected from these finalists.

The Hughes operation -- John bought his first stockers in 1958 -- was named winner of the Summer category en route to the overall title. From the very beginning, this operation has focused on grass production first and foremost to increase carrying capacity. The operation remains grounded in commonsense basics but also continues to innovate, as with a unique pilot study they're conducting with a livestock market owner and feedlot: each entity shares equal ownership in cattle then divvies any profit or loss equally at the end.

Triple Heart Ranch at Wanette, OK, was the finalist in the Backgrounding/drylot category. Besides providing custom backgrounding for others, along with running some of their own cattle, owners, Brock and Shelia Karges have pioneered a service to help cow-calf producers realize added value from providing additional animal health assurance.

Doug Rogers, who owns and operates D&H Cattle Co. at Collins, MS, was named the finalist in the Fall/winter stockering category. He chose the stocker business because he saw more business opportunity in it than with any of the enticing corporate offers that came his way after graduating from West Point and business school. He uses lightweight calves and aggressive health management as a hedge in the marketplace.

As overall winners, Hughes Cattle Company will receive $10,000 cash from Elanco Animal Health, along with an expenses-paid trip to the 2007 National Cattlemen's Association Convention.

Triple Heart and D&H each receive a $2,500 cash prize from Elanco.

You can read about the NSA winners in the October issue of BEEF. As well, the profiles will appear in the next few issues of Stocker Trends.

Cattle on Feed Smashes Record

As many market analysts predicted, Friday's Cattle on Feed Report was a whopper: 11 million head as of Sept. 1. That's 10% larger than the same time in 2004 and 2005. It's the largest Sept. 1 inventory since the series began in 1996.

Also unsurprisingly, August placements were huge: 15% more than a year ago and 9% more than in 2004. In fact, 67% more cattle lighter than 600 lbs. were placed compared to a year ago.

Last week's monthly "World Agricultural Supply and Demand Estimates" raised the estimated average annual Choice fed-steer price slightly from a month earlier: $85-$86 compared to $82-$84 in the August report. The estimated average price for the fourth quarter is $85-$89.

"The cattle price forecast is raised from last month as the slower pace of fed cattle marketings is supporting prices at higher than expected levels," explains the report.

Shorter term, last week the USDA's Economic Research Service reported, "Recent rains in the Southern Plains have improved prospects for winter pastures, which could mean reduced beef cow slaughter. Seasonal increases in cow slaughter will likely be reduced as much culling has already occurred, along with early weaning, due to drought. Improving grazing prospects, particularly for small grain pasture, will provide increased competition for relatively low feeder cattle supplies, at least in the near term.

Reduced cow slaughter should provide support for cow prices, and increased competition should provide support for feeder cattle prices."

Overall, the futures market for cattle suffered significantly last week, while feeder cattle sold $5 lower compared to the prior week -- steer and heifer calves were $3-$6 lower. Yet, by Friday afternoon, fed cattle sales gained 50 cents at $88.50 to $89.50.

The summary below reflects the week ended Sept. 22 for Medium and Large 1 -- 500- to 550-lb., 600- to 650-lb., and 700- to 750-lb. feeder heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:

Summary Table
State Volume Steers Heifers
Calf Weight 500-550 lbs. 600-650 lbs. 700-750 lbs. 500-550 lbs. 600-650 lbs. 700-750 lbs.
MO 36,400 $134.06 $124.64 $121.14 $119.95 $116.08 $110.90
OK 35,300 $129.37 $124.50 $122.794 $118.06 $114.36 $109.75
TX 32,500 $120.53 $112.35 $108.90 $113.13 $107.01 $102.56
KY* 26,900 $118-128 $107-117 $104-1145 $106-116 $99-1093 $93-1045
AL 17,800 $117-126 $108-117 $107-1144 $108-115 $100-107 $93-1005
Dakotas 16,300
South Dakota
North Dakota

$140.88
$131.53

$134.742
$127.89

$118.33
$118.50

$130.43
$122.05

$125.042
$115.042

$115.426
$106.294
TN* 14,400 $118.49 $110.53 $104.18 $107.73 $101.41 $97.25
NE 13,500 $138.34 $127.62 $123.07 $125.22 $120.73 $117.47
AR 12,400 $118.45 $112.16 $107.77 $109.93 103.85 $105.194
GA*(***) 10,800 $103-124 $98-115 $91-106 $100-116 $89-110.50 $88-994
FL* 10,500 $96-17 $94-106 $89-196 $95-109 $86-99 $80-964
MS* 9,400 $110-1201 $100-110 $97-1004 $100-1101 $90-100 $85-904
WY* 9,100 $131.58 $117.924 $121.47 $119.27 $117.73 $113.92
KS 6,700 $133.72 $120.50 $116.07 $121.73 $109.79 $110.12
IA 6,500 $136.34 $132.52 $128.754 $127.62 $1218.28 $112.19
CO 6,300 $131.23 $120.86 $115.854 $119.43 $110.85 $112.564
LAND 6,300 $107-124 $102-1172 ** $100-123 $98-1162 **
Carolinas* 5,500 $107-124.50 $99-116.503 $92-108.505 $99-114 $88-1083 $85-102.505
VA 5,400 $122.15 $115.42 $108.40 $106.68 $104.84 $98.61
NM 2,800 $118.92 $109.92 ** $114.96 $100.97 **
WA* 2,400 $122.37 $111.43 $106.816 $110.99 $103.60 $103.424

* Plus 2
** None reported at this weight or near weight
(***) Steers and bulls
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.

Global Grain Supplies Decline

Corn producers have done it again, producing a near-record corn crop, but that doesn't mean prices won't be inching up.

According to last week's "Livestock, Dairy and Poultry Outlook Report" from the Economic Research Service (ERS), the 2006-2007 corn price is expected to average $2.15/bu. to $2.55/bu., up from $1.99/bu. for 2005-2006; it was $2.06/bu. two years ago.

Besides increasing demand, growing price has something to do with decreased global production. ERS analysts note both global coarse grain production and global coarse grain ending stock estimates have been lowered -- reduced production in the European Union, former Soviet Union, Canada and Australia.

For that matter, last week's report also lowers domestic ending corn stocks to 1.22 billion bu.

Soybean meal production is projected at 42,035 thousand short tons, up 2.5% from last year and up 3% from 2004/05. Soybean meal prices are expected to average $147.50 to $177.50 per short ton, down from $173.50 in 2005/06 and $182.89 in 2004/05.

For the week ending Sept. 17, according to National Agricultural Statistics Service (NASS):

  • Corn -- 96% is at or beyond the Dent Stage, compared to 97% last year and 90% for the five-year average. Maturation is at 52%, 2% behind last year, but 3% ahead of normal. 9% is harvested, which is 1% behind last year and the five-year average. 61% is rated Good or better, compared to 52% last year.
  • Soybeans -- 48% of the acreage was at or beyond dropping leaves, 12% behind last year and 1% behind the average. Growers have harvested 6% of the crop, compared to 7% at this time last year and 5% for the average. 61% is rated Good or better; 53% was at the same time last year.
  • Winter wheat -- 19% of the crop is sown, 5% less than the same time last year and 4% less than average. Planting was behind in most states, delayed by either soggy field conditions or lack of soil moisture.
  • Sorghum -- 81% was at or beyond turning color, the same as last year and the norm. 45% is mature, compared to 42% last year and 47% for average. 33% is rated Good or better, compared to 48% last year.
  • Pasture -- 27% is rated Good or Excellent, compared to 30% last year. 23% is rated Poor and 22% is ranked Very Poor, compared to 23% and 14% respectively at the same time last year.


States with the worst pasture conditions -- at least 40% of the acreage rated poor or worse -- include: Alabama (66%); Arizona (53%); Arkansas (46%); California (72%); Kansas (42%); Mississippi (60%); Missouri (59%); Montana (48%); Nebraska (53%); Nevada (60%); North Dakota (62%); Oklahoma (65%); Oregon (54%); South Dakota (50%); Texas (75%); and Wyoming (68%).

States with the lushest pasture conditions -- at least 40% rated good or better -- include: Florida (65%); Illinois (52%); Indiana (65%); Iowa (68%); Kentucky (66%); Maine (83%); Michigan (55%); New Mexico (67%); New York (62%); North Carolina (58%); Ohio (64%); Pennsylvania (50%); South Carolina (52%); Virginia (41%); Washington (41%); West Virginia (59%); and Wisconsin (56%).

Drought Can Change Parasite Considerations

It may be drier than a teetotaler's liquor chest in some part of the world, but drought conditions can actually increase the challenge of parasites, says Dave Sparks, DVM, Oklahoma Cooperative Extension Service food animal quality and health specialist. In a recent issue of Oklahoma State University's Cow Calf Corner, Sparks says normal late-summer forage height means parasites are often a minimal challenge this time of year. He explains about 80% of parasite larvae reside on the lower 2 in. on a forage plant; most can't crawl higher than 4-5in.

"If your animals are grazing 1- 2 1/2- in.-tall forage, they may be getting large numbers of infective larvae, even though it's dry. You can help to alleviate the problem by watching your animals graze," Sparks says. "Try to avoid this danger zone if possible and/or modify your de-worming program to fit the conditions."

Added Bulk Extends Wet Distillers Grain Storage

Anyone utilizing wet distiller's grains (WDG) already knows the challenges of spoilage borne by the high moisture content. What researchers are beginning to demonstrate though, is the added shelf-life that can be had by mixing dry, bulky feeds with the byproduct.

For example, University of Nebraska (UNL) researchers tried mixing in grass hay, alfalfa hay or wheat straw. According to a recent UNL report, mixing in grass hay (15%), alfalfa hay (22.5%) or wheat straw (12.5%) -- all on a dry matter basis -- proved to be the minimum level that allowed for successful bagging at 300 lbs./square inch.

For bunker storage, researchers found 40% of grass hay mixed with WDG was firm enough for packing; 25-32% for wheat straw.

There may be 2-3 in. of spoilage at the top, but everything else appears fine says Galen Erickson, UNL nutritionist.

"Other fiber sources would presumably work but we chose these three because of their availability this time of year," says Erickson, who worked on the project with fellow UNL nutrition researcher, Terry Klopfenstein.

You can find more details of the project, including work with mixing WDG with Dried Distillers Grains, and mixing corn gluten with WDG at: ianrnews.unl.edu/static/0606270.shtml.

Senate Approves Mandatory Price Reporting

Pending approval by President Bush, the livestock industry will once again be privy to mandatory livestock price reporting (MLPR). That's due to the Senate's unanimous consent last week to approve a bill (H.R. 3408) to reauthorize the Mandatory Price Reporting Act of 1999.

As you may recall, the price reporting act expired last fall. The House of Representatives approved the bill for reauthorization a year ago, but it has languished in the Senate until now.

"This reporting process is important to U.S. cattle ranchers, and since the mandatory law expired last fall, we have been working diligently to urge its renewal," explains Mike John, National Cattlemen's Beef Association president. "Making price reporting practices mandatory by law assures cattle producers are getting the marketing information they need about their beef products."

Though MLPR has been missing in action for the past 12 months, causing confusion and wonderment in some cases, for many it hasn't been much of an issue.

As an example, last winter, Jeff Stolle, vice president of marketing for Nebraska Cattlemen, noted the vast majority of folks reporting pricing information under the mandatory system had continued to do so on a voluntary basis.

"The data appears to be flowing as it did," Stolle said. "I haven't noticed any shift in volumes given the available supply of cattle. There haven't been any major week-to-week changes on the formula and contract side."

At the time, we reported in BEEF magazine (February 2006) that another reason losing mandatory reporting seemed so benign might be that it never revealed the packer skullduggery many MLPR proponents thought it would.

According to an Economic Research Service report issued last fall, "It appears that, for cattle of similar quality, prices in negotiated spot market transactions closely track prices for cattle sold under contracts. In other words, producers selling under contract do not seem to realize a significant price advantage." That's based on MLPR accounting for more than 90% of all cattle sales by early 2002, compared to an estimated 60% accounted for by the voluntary system just before MLPR was implemented.

Of course, ever since the system requiring packers to report sales transactions went into effect (2001) the level of captive supplies that folks were so concerned about has declined.

Clem Ward, Oklahoma State University Extension economist and a longtime analyst of concentration, consolidation and captive supplies, put together a comprehensive analysis of the impact of MLPR on captive supplies. In it, he explains annual average captive supplies controlled by the four largest packers ranged from 17.5% to 24.9% between 1988 when the Grain Inspection, Packers and Stockyards Administration (GIPSA) began requiring packers to report captive supplies, and 1998. Using a different and incomparable technique, for 1999 to 2001 GIPSA reported the range at 32.4% to 42.9%.

Based on MLPR during its first three years -- April 2001 to April 2004 -- negotiated pricing averaged 46.1%, followed by formula pricing at 43.3%, packer-owned cattle at 7.1%, and forward-contracting at 3.5%.

While some speculate MLPR actually caused a shift back to more cash transactions, market fundamentals are the more likely cause. About the time the law went into effect, supplies started to dwindle, demand began to climb and prices followed suit. In other words, there has been less incentive for sellers to lock up prices and market access.

Once approved by President Bush, MLPR would be reauthorized until Sept. 10, 2010.

A Few Things I've Learned

This week, I received an email that asked the question, "Have you learned anything, yet?" The great answer of "everything I needed to know I learned in kindergarten" has been taken, but the question made me step back and think. The following are a few things I've learned:

  • Avoid the purveyors of doom. They're wrong 99.9% of the time; even when they're right, they're wrong about why they were right. There's a stark difference between those who look at obstacles with a realistic approach and those who almost root for failure.
  • Those governed by a scarcity perspective of the world are incapable of greatness. Interact and align yourself with people who believe in enlarging the pie, not trying to expand their share by cutting someone else's slice down.
  • More than anything else, the willingness to embrace and adapt to change is what separates winners from losers.
  • Be selective when evaluating business opportunities. Anyone proposing a business model essentially unchanged from others, with the exception that they're going to do it right and will capture revenues others aren't, is naïve or unethical. The people who have survived in ag are pretty good at what they do, and the competition is fierce. Business models that are bold, innovative and involve some risk are the ones that have a chance.
  • Be willing to laugh. Start with a smile.
  • God, family, career. We all say it; we all want to live it. The rewards are almost impossible to quantify, but it's one of the most difficult things in the world to pull off.
  • Today is all we have. We learn from the past, but we live in the present. Today is what ultimately shapes our past and future.
  • We're lucky to be born American, at this time, and to have this occupation; 99% of the world is envious, and they have a right to be.
  • We're in the beef business. Occasionally you'll hear someone say they raise grass, or that they're in the cattle business, implying their focus isn't the ultimate consumer; or they view their operation in the context of closed system. This is a false construct doomed to fail.
  • We all tend to take ourselves too seriously, everything seems so important, and what we think is important/serious rarely is. It doesn't mean we don't live life with passion, but today's crisis is usually nothing but a memory tomorrow.
  • Those who say they don't want a wife, dog or horse, never had a good one. In each case, nothing is better than a good one, nothing more indifferent than an average one, and nothing more miserable than a bad one.
  • Thank God for John Wayne, at least for what he symbolized with the American cowboy. The cowboy ethos inspires all of us to be better people, and it's largely responsible for us prevailing against our financially and numerically superior opponents.
  • Industry involvement is critical. Our industry organizations saved us when BSE hit, and they're fighting every day on so many fronts. Yet, we tend to forget how important they are.
  • A position based on emotion and not fact is one that can't be changed. And anyone who opposes it, will be classified as the enemy. It leads to dogmatic, almost faith-based positions.
  • Competition is brutal; it's also the pressure that can create diamonds. It doesn't work to spend your time trying to eliminate competition. Spend your time trying to compete more effectively.
  • Genetics are like schoolteachers. They almost always deliver more value than what they cost.
-- Troy Marshall

USDA Releases Final Farm Bill Analysis Paper

The last of five analyses on key factors that will affect future growth in U.S. ag has been released by USDA. "Strengthening the Foundation for Future Growth in U.S. Ag" discusses international trade issues, research and development, protection from pests and diseases and challenges in preparing the next generation of farmers.

"This paper looks at the evolution of the ag marketplace and the strategies that farmers have used to meet emerging challenges," USDA Secretary Mike Johanns says. "As we discuss a new farm bill, we must consider how best to support future growth in ag. This analysis highlights opportunities to do so by improving our global competitiveness, making research and ag-protection programs more effective and facilitating the transition of farms to the farmers of tomorrow."

You can read all five papers at www.usda.gov/farmbill.
-- Joe Roybal

Producers Voice Their Farm-Bill Preferences

In a Farm Foundation survey of 15,000 producers in 27 states, producers ranked renewable energy, enhancing opportunities for small and beginning farmers, and assuring a safe and affordable food supply as their top three goals for the next farm bill. Producers also indicated that bio-energy production and food-safety programs should receive new or additional funding.

When asked which existing programs should continue to receive funding, producers ranked disaster assistance and crop insurance at the top, followed by working land conservation programs, marketing loans, direct payments and countercyclical payments. Medium and large-size operations placed a higher priority on the safety net, while smaller operations placed a higher priority on working land conservation programs.

Other key findings included:

  • Payment limits enjoy support among all categories of farms, but support is greater among small farms than large farms.
  • Producers surveyed in seven states favor a fruit and vegetable support program but not necessarily one modeled on traditional commodity programs. Instead, they prioritize disaster assistance, crop insurance and block grants for state programs.
  • Respondents support technical and financial assistance to address conservation goals, particularly water quality and soil erosion control measures. Producers value continued support for the Conservation Reserve Program and the Conservation Security Program.
  • Respondents support free-trade negotiations and expanded trade opportunities. However, they also favor comprehensive negotiations that include food safety, labor and conservation issues. They favor negotiations that focus on domestic policy goals ahead of trade policy goals.
  • Producers favor country-of-origin labeling and prefer mandatory labeling over voluntary. Producers support mandatory animal ID programs. They also favor BSE testing, with preference for voluntary guidelines for testing by industry rather than government-mandated programs.
  • When asked about the expected future transition of their farm or ranch, more than half expect the transition to a family member.
  • Producers surveyed in three states supported ag credit programs, putting the highest priority on beginning farmer programs.
See the complete survey at www.farmfoundation.org.
-- P. Scott Shearer, Washington, D.C., correspondent