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Buying Added Stocker Value

Depending on who’s running the abacus, purchase price drives profit opportunity in the stocker business. But, the price paid is still relative to the health risk and gain potential.

That’s one reason last year’s National Stocker Survey revealed that only 24% of stocker operators base their procurement strategy on buying cattle below market average in order to straighten out someone else’s mistakes. Instead, 65% of those surveyed indicate they buy on average; 11% pay prices that tend to be above average.

For instance, demand continues to increase for preconditioned calves, even as the volume of qualifying calves increases.

A recent study sponsored by Pfizer Animal Health (PAH) indicates that in 2008 producers received the highest premiums since 1995 for VAC-45 and VAC-PreCon calves, and the second highest premium on VAC-34.

VAC-45 calves earned $8.20/cwt. premium, VAC-PreCon calves earned $9.36/cwt. premium ,and VAC-34 calves earned a $3.57/cwt. premium over similar non-weaned, non-viral vaccinated calves.

The research was conducted by Michael E. King, and considered 3,741 lots of cattle (465,754 head) that sold through seven Superior Livestock Auction video sales in 2008.

Likewise, researchers at Montana State University (MSU) found that weaning was worth $17.64/head in sales price compared to un-weaned calves. Vaccinations added $14.81/head, compared to unvaccinated calves. That was the average on 68,665 Montana steers and heifers weighing an average of 588 lbs. which sold through Superior Livestock Video sales in June and July 2007. Keep in mind 88% sold as either VAC-34 (76%) or VAC-45 weaned calves (12%). The average lot size was 116 head. Cattle in the July sale brought $16.51/head more on average than those selling in the June sale.

The reason buyers continue to see more value in these calves is undeniable. In another third-party study conducted on behalf of PAH, un-weaned, un-vaccinated calves (control) were compared with calves receiving the PAH WeanVAC® program (WeanVAC), and to calves that were the product of other industry preconditioning programs (OHP). Bottom line, OHP calves returned an average of $11.36/head more profit than the control group; WeanVAC calves returned $33.71/head more on average than the control group. The additional profit came with fewer days on feed, more feed intake and gain, higher USDA quality grades and a higher percentage qualifying for Certified Angus Beef.

Though still among the minority of buyers, some stockers now buy preconditioned calves exclusively. For some, the decision is based on health cost through the stocker phase. For others, it means being able to run more cattle without adding manpower.

Arguably, the identification and certification that often accompany preconditioned programs have helped establish and maintain a market premium. It becomes easier to qualify the same cattle for other value-added options, be they domestic all-natural programs, the international Non-Hormone Treated Cattle market, or other beef export programs.

According to an Iowa State University study, calves with certified vaccination claims and weaned at least 30 days received $2.75/cwt. more than calves with uncertified claims (the seller’s word) of vaccinations and at least 30 days of weaning. Premium for the certified calves was $6.15/cwt.; it was $3.40/cwt. for the uncertified calves.

Canada Files COOL Suit

The Canadian government will proceed with a dispute settlement process through the World Trade Organization (WTO) stemming from mandatory Country of Origin Labeling (COOL).

You can’t blame them.

The Mexican government will likely follow suit.

You can’t blame them either.

“The U.S. COOL requirements are so onerous that they affect the ability of our cattle and hog exporters to compete fairly in the U.S. market,” said Stockwell Day, Asia-Pacific Gateway minister of international trade. “That is why our government has no choice but to request a WTO panel. This request demonstrates our ongoing commitment to resolving this issue and defending the interests of Canadian producers.”

Meanwhile, a statement from the National Cattlemen’s Beef Association (NCBA) says: “Canada’s decision to move forward with their complaint against U.S. COOL regulations is unfortunate, due to the potential retaliatory action that could be taken against U.S. beef. Since COOL was first proposed, we’ve continued to have concerns about its potential implications on our relationship with our top two trading partners – not to mention its impact on domestic feeder cattle markets at our borders to the North and South.

“The U.S. imports and adds value to Mexican and Canadian livestock through our feedlots, processing and infrastructure; and we export this value-added finished product back to Mexican and Canadian consumers. Any disruptions to either of these markets will have a significant economic impact on our industry. Unfortunately, it’s becoming clear that COOL has damaged these critically important trading relationships, and is not putting any additional money into the pockets of cattlemen.”

Canada and Mexico are the top-two U.S. trading partners, together accounting for 59% of total U.S. beef, beef variety meat and processed beef product export revenues last year.

Canada’s request for a panel comes after two rounds of WTO consultations with the U.S. failed to resolve the issue. Panels are the next step in the WTO’s dispute settlement process.

Canada initially requested WTO consultations with the U.S. on COOL in December 2008, as it believed the measures were creating undue trade restrictions, to the detriment of Canadian exporters. At that time, U.S. provisions were being implemented based on the interim final rule. The final rule was published in the Federal Register on Jan. 15, 2009, and implemented on March 16.

In order to gain a better understanding of COOL’s effects on the entire beef chain, NCBA has asked USDA to reinstate a joint Agricultural Marketing Service/Economic Research Service study – “Economic Analysis of Country of Origin Implementation Costs for Producers and Processors in the Beef, Pork and Lamb Industries” – that was to be completed in cooperation with the Livestock Marketing Information Center. The 2010 Agriculture Appropriations Bill did not direct USDA to reinstate the funding for this purpose.

Greeley Turns Cattle Manure Into Energy

Talk about turning a bad thing into an asset.

It stinks in Greeley. Literally. For half a century, the place just smells of manure all over because of the thousands of cattle raised in the outskirts.

But now things are taking an interesting turn as this very fact presents a chance at making big bucks.

Investors line up to support a planned clean energy park in Greeley. This project aims to convert the methane gas from the piles and piles of manure into power to be used for a cheese factory as well as other businesses.

JBS is in the process of testing a new technology that heats the manure of the cattle and turning it into energy. JBS runs two of the largest feed yards and also the local slaughterhouse.

Wash. Offers Payments for Wolf Kills of Livestock

Hoping to ease Washington ranchers' concern about gray wolves, the state Department of Fish and Wildlife is proposing what may be the most generous compensation in the West for livestock losses to the newly returned predators.

Under the preferred plan out of five alternatives in a 249-page draft environmental impact statement released last week, a livestock producer would be entitled to the full value of livestock considered likely prey that are killed by wolves on grazing sites of at least 100 acres and half the full value on smaller sites.

For animals considered less likely prey, compensation would be double the full value of the animal on larger grazing sites and the full value on smaller sites, writes the Associated Press.

The proposal defines livestock as cattle, pigs, horses, mules, sheep, llamas, goats, guarding animals and herding dogs. The plan, which is subject to approval and funding by the Legislature, could cost an estimated $4,000 in 2010, rising to $25,000 in 2015 as the wolf population grows.

"Wolves need two things," state agency spokeswoman Madonna Luers told The Wenatchee World. "They don't need land-use restrictions. They just need a healthy prey base and human tolerance, so to build that, we need to reach out to the industry that is most directly impacted by this, and that is the livestock industry."

To read the entire article, link here.

Has the Livestock Cycle Bottomed?

It appears we are likely to be witnessing an environment of rising inflation going forward, and there is a significant risk this will be accompanied by rising interest rates.

Surely, the United States and most of Europe, with their weakening economies and fiscal crises, cannot afford higher rates.

But they may just have no choice. Waning investor demand for Treasuries - recent 30-year Treasury auctions have been exceptionally weak - on the back of rising inflation expectations and escalating budget deficits (the US budget deficit has more than tripled this year) may simply force governments to offer more attractive terms to investors on their debt.

What investors should do in such an environment of rising inflation and interest rates is avoid being indebted since interest payments would rise in line with higher interest rates.

Also property prices could come under pressure. Investors must also limit or avoid exposure to long-term bonds - the asset class most vulnerable to rising interest rates and inflation.

To read the entire article, link here.

Corn Projected Higher

Corn production this year is 8% higher than a year ago (13 billion bu.), and only 0.2% less than 2007’s record crop, according to USDA’s most recent “Crop Production” report. Corn yield is expected to average 164.2 bu./acre, 10.3 bu. above last year. If realized, this yield will be the highest on record.

According to the most recent “World Agricultural Supply and Demand Estimates” (WASDE), corn ending stocks for 2009-10 are projected 37 million bu. higher and just below the revised estimate for the 2008-09 marketing year. The 2009-10 marketing-year average farm price projection is unchanged at $3.05-$3.65/bu.

Soybean production remains on target for a record-high year, forecast at 3.25 billion bu. by USDA, 10% more than 2008. Based on Oct. 1 conditions, soybean yields are expected to average 42.4 bu./acre, 2.7% more than 2008. If realized, this will be the third-highest yield on record. Growers are expected to harvest 76.6 million acres of soybeans, which is the largest area on record.

WASDE projects soybean and soybean meal prices lower for 2009-10. The U.S. season-average soybean price range is projected at $8-$10/bu., down 10¢ on both ends of the range. The soybean meal price is projected at $245-$305/short ton, down $5 on both ends of the range. The soybean oil price range is projected at 32-36¢/lb., unchanged from last month.

For the week ending Oct. 10, according to the National Agricultural Statistics Service:

Corn – 74% of the acreage has reached maturity, 10% behind last year and 18% behind the five-year average. Crop development to maturity was behind normal in all estimating states except North Carolina where maturity was complete. 13% is harvested, 7% less than a year ago and 22% behind average – more than two weeks. Harvest was slow throughout much of the Corn Belt as cool temperatures and continued rainfall kept moisture levels in mature corn higher than normal. 70% is reported Good to Excellent, 8% more than a year ago.

Soybeans – Leaf drop had occurred on 89% of the nation’s acreage, 1% behind last year and 5% behind average. The most significant delays remained in Mississippi where leaf drop was more than three weeks behind normal. 23% has been harvested, 26% behind last year and 34% behind average. Harvest delays of 16 points or more were evident in all estimating states except Kansas and North Carolina where progress was 7 points and 1 point behind normal, respectively. 65% is rated as Good to Excellent, which is 2% more than at the same time last year. Soybean stands in the Delta states of Arkansas and Mississippi continued to deteriorate as most fields remained saturated.

Winter wheat – 64% has been seeded, which is 5 points behind last year and the average. Despite a rapid seeding pace in Ohio during the week, overall progress fell to 14 points behind normal. Elsewhere, significant delays were evident in the eastern Corn Belt and Missouri where winter wheat will be seeded after the late harvest of double-cropped soybeans. 39% has emerged, 3% behind last year, and 1% behind normal.

Sorghum – Sorghum coloring has reached 93% complete, 1% ahead of last year, but 3 points behind the five-year average. 64% has reached maturity, 2% behind last year and 12% behind the average. Despite active crop development to maturity in Illinois and Nebraska, overall delays of 20 points or more remained. 37% is in the bin, 6% less than last year and 12% less than average. The harvest pace remained slow in Texas as producers waited for the crop in the High Plains to fully mature. 48% is rated Good to Excellent, 7% less than the same time a year ago.

Pasture – 48% of the nation’s pasture and range is still rated as Good or Excellent this fall, 10% more than at the same time last year. 22% is rated Poor or Very Poor, compared to 30% a year ago.

States with the worst pasture conditions – at least 40% of the acreage rated Poor or worse – include: Arizona (69%); California (90%); Montana (48%); New Mexico (42%); and Oregon (54%).

The lushest conditions – at least 40% rated Good or better – exist in: Alabama (75%); Arkansas (68%); Colorado (54%); Florida (70%); Georgia (59%); Idaho (50%); Illinois (69%); Indiana (58%); Iowa (58%); Kansas (65%); Kentucky (80%); Louisiana (44%); Maine (56%); Maryland (67%); Michigan (46%); Minnesota (41%); Mississippi (52%); Missouri (76%); Nebraska (70%); New York (50%); North Carolina (62%); North Dakota (54%); Ohio (60%); Oklahoma (57%); Pennsylvania (59%); South Carolina (48%); South Dakota (61%); Tennessee (79%); Utah (47%); Virginia (44%); West Virginia (43%); and Wyoming (49%).

Prices Improve; Market Remains Fragile

By the end of last week, feeder and stocker cattle traded mostly steady to $2 higher after losing ground earlier in the week, according to the Agricultural Marketing Service (AMS).

Plus, fed cattle ended the week on the highest note in better than a month, with live cattle in the Texas Panhandle bringing $2 more than the previous week at mostly $84. Fed-cattle prices also advanced $2 in Colorado ($83) and Nebraska ($82-$83); they were $1.50 higher in Kansas at $83.

Of course, all that positive news occurred mostly before this month’s “Cattle on Feed” report was issued Friday. Most analysts expected higher September placements and weren’t surprised to see them at 105% of last year.

Mostly, though, the positive news occurred ahead of USDA announcing further testing of some hogs for possible infection with Pandemic H1N1 Influenza (see “USDA Testing Pigs For Pandemic H1N1 Influenza”). If the tests come back positive – even if they’re negative, depending on how long it takes to find that out – last week’s market bulls may opt to concentrate upon ongoing negative news.

For instance, analysts at the Livestock Marketing Information Center (LMIC) pointed out last week that for the first three quarters of 2009, Choice cutout boxed-beef values averaged $141.46/cwt., more than $13/cwt. less than last year’s average of $154.61/cwt. However, that’s only $1.70/cwt. less than the 2003-2007 average.

“In particular, consumer demand for middle meats has been rather lackluster, which has been a drag on the overall Choice cutout value as these items account for the largest value share of the total cutout value,” LMIC analysts explain. “In terms of beef, the rib primal has suffered the most on a value basis, down more than $18/cwt. so far this year, compared to the same nine-month period last year, while the loin primal was down over $15/cwt. In contrast, the values of the end meats have been relatively strong, with the brisket primal $5/cwt. higher so far this year while the chuck and flank primals have averaged only $11/ cwt. less than a year ago. Overall, consumers have shifted to lower valued beef items.”

Likewise, the analysts who provide the Daily Livestock Report for CME Group said last week, “The fact of the matter is that U.S. per-capita beef consumption in 2010 is currently expected to be 60.1 lbs./person (retail weight), compared to 69.1 lbs. in 1999, a decline of 13%. Pork consumption in 2010 is now forecast to be 47.1 lbs. per person, 12% lower than where it was back in 1999. The only meat protein that’s shown some growth in per-capita consumption is chicken, with per capita consumption in 2010 expected to be 81.7 lbs. per person, 5% higher than in 1999.

“…The unfortunate fact is that per-capita consumption did not decline simply because of the recession, although the recession accelerated the fall. Rather, U.S. consumers have steadily reduced the amount of beef and pork they consume in the past decade. One could point to a number of culprits for this, from strong export markets, to higher producer costs, to food safety concerns, etc.”

Writing in Friday’s Cow-Calf Corner newsletter, Derrell Peel, Oklahoma State University Extension livestock marketing specialist, explained, “Heavy feeder-cattle prices continue to be limited by very weak fed-cattle and boxed-beef price, and there is no sign of improvement in consumer beef demand. The latest trade numbers confirm that beef exports weakened in August under the weight of cheap competing meats. The December corn futures price rallied by roughly $0.70/bu. from the early September lows despite USDA’s confirmation of a 13+ billion-bu. corn crop this year. However, the corn market rally appears to have topped out in the last few days.”

The summary below reflects the week ended Oct. 16 for Medium and Large 1 – 500- to 550-lb., 600- to 650-lb. (calves), 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.
Dakotas 40,900
SD
ND

$106.42
$100.92

$93.58
$99.12

$94.22
$94.417

$92.84
$87.38

$87.93
$85.71

$88.86
$89.37
OK 29,900 $106.44 $95.67 $94.95 $90.53 $90.17 $87.72
MO 20,200 $99.42 $95.15 $96.85 $87.28 $92.64 $88.05
TX 19,100 $97.94 $92.91 $91.58 $89.46 $81.58 $82.83
KY* 17,000 $91.98 $86.23 $88.68 $81.64 $82.68 $81.32
NE 15,900 $106.48 $99.90 $98.88 $94.43 $92.85 $92.54
AL 10,400 $91.94 $86.79 $83.57 $79.11 $75.75 $74.744
NM 9,700 $97.45 $91.02 $88.83 $87.91 $80.72 $79.00
CO 9,500 $103.16 $94.04 $91.03 $92.44 $87.06 $87.57
MT 7,900 $98.36 $95.092 $90.67 $89.33 $83.25 $85.24
FL* 7,500 $76-90 $71-82 $73-77 $70-78 $65-70 $66-71
WY 7,400 $105.20 $96.14 $94.316 $93.06 $92.894 $88.27
GA* 6,700 $82-102 $80-89 $73-80 $72-85 $68-81 $68-69
IA 6,300 $103.72 $95.50 $100.03 $90.86 $88.94 $94.51
TN* 6,000 $90.37 $84.47 $82.02 $78.09 $73.92 $72.69
MS* 5,900 $85-95 $78-993 ** $75-821 $70-813 $72-775
Carolinas 5,800 $80-92.50 $72-84 $68-79.50 $65-80.50 $63-77 $60-75
VA 5,200 $89.67 $84.68 $80.99 $73.87 $73.89 $70.76
AR 5,000 $95.77 $89.48 $88.594 $83.10 $80.85 $80.044
KS 4,500 $97.532 $97.52 $94.09 $92.85 $88.384 $85.09
LA* 4,400 $82-100 $74-88 $73-854 $78-94 $76-85 $73-814
WA* 3,600 $84.95 $83.25 $85.24 $77.742 $75.75 **

* Plus 2
** None reported of the same quality at this weight or near weight
(***) Steers and bulls
(?) As reported, but questionable
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.

Introducing College Aggies Online

collegeaggiesonline212×184x72dpi.png I'm so excited to tell you about a new program that just launched last week! This program is called College Aggies Online, and it is a joint venture of the Animal Agriculture Alliance (AAA) and American National CattleWomen, Inc. (ANCW) that will connect college students from across the country who are interested in promoting agriculture by sharing their story. Participants will receive training and instructions from industry professionals and will enjoy access to a private forum (accessible at http://aggiesonline.ning.com) to post information about current and emerging issues facing farmers and ranchers. The online community will provide resources to students on key issues to help them better use tools such as YouTube, Facebook and Twitter to share agriculture’s story with the public. Get involved and join College Aggies Online, today!

bsj.jpg ANCW member Barbara Jackson (Ariz.) is helping to spearhead this effort, and she is excited to get young people involved in this project. Her passion and enthusiasm for this project is contagious, and she can’t wait to get others on board. Agriculture clubs from all universities with an agricultural academic program are invited to sign up for the program, and in the first weeks of advertising the program, 65 young people had already registered to participate. Once signed up, each member receives an individual account, where they can customize their homepage and upload information. Student groups will earn points by posting blogs, photos and videos to the forum and by participating in online outreach activities. Efforts will be awarded with fun prizes, scholarships and incentives. I had the opportunity to interview Jackson while we were attending the National Beef Ambassador Contest last week, and you can listen to my podcast with her below. If you are a college student, or if you know of kids that would be great for this program, please get involved to make a difference. Your voice truly matters.

BEEF Daily Quick Fact: Eighty-nine percent of America’s consumers enjoy beef on a regular basis, making beef America’s Favorite Food. (Iowa Beef Industry Council)

Cargill Meat Solutions Recalls Beef Tongues

A Cargill Meat Solutions plant in Milwaukee is voluntarily recalling over 5,500 pounds of beef tongues because the tonsils may not have been completely removed, writes the Associated Press for the Chicago Tribune.

U.S. Department of Agriculture's Food Safety and Inspection Service says tonsils need to be removed because the tissue could contain the infective agent in cattle with mad cow disease.

Removing the tonsils minimizes potential human exposure; there's no indication these cattle were infected.

To read the entire article, link here.

Analysis of Issue 2

It’s not the casino gambling issue, but it is the issue that’s most near and dear to Madison County farmers.

Issue 2 is a creation of the Ohio Farm Bureau Federation, the Ohio Pork Producers Council and some other livestock and sportsmen’s organizations to regulate the care and treatment of farm animals in the state. It amends the Ohio Constitution to set standards for livestock and poultry care by establishing a 12-member board to make sure those standards are met.

The Ohio Livestock Care Care Standards Board will consist of 10 gubernatorial appointees and one appointee each from the Ohio House of Representatives and the Ohio Senate. The state’s agriculture director will serve as chairman.

The board’s make up is defined in the ballot language. It will include three family farmers, two veterinarians (one being the state veterinarian), a representative of a local humane society, a food safety expert, two representatives of statewide farm organizations, the dean of an Ohio agricultural college and two consumer representatives. All members must be Ohio residents.

To read the entire article, link here.