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GIPSA Rule Will Benefit All Cattle Producers

By R-CALF USA CEO Bill Bullard

People in the cattle industry understand that the price of all beef cattle, regardless of their weight, is predicated on the expected future value of the cattle when they're ready for slaughter. Thus, all cattle producers have a vested interest in ensuring that fed cattle are sold into a fully competitive market. Let’s look at how the proposed GIPSA (Grain Inspection, Packers and Stockyards Administration) competition rule (the proposed GIPSA rule) will impact the competitiveness of the fed-cattle market.

First, a little background: Fed cattle are sold in the cash market either on a live-weight basis, carcass-weight basis, or on a grid-valuation basis (grade and yield). The price received for cattle sold on a live-weight basis becomes the base price for cash cattle sold on a carcass-weight basis, which is based on the animal’s dressing percentage, as well as those cash cattle sold on a grid-valuation basis, where grade and yield premiums/discounts are added to or subtracted from the live weight price.

Most fed cattle in the cash cattle market are sold either on a live-weight basis or carcass-weight basis, with only a small volume sold on a grid valuation basis. In fact, the average volume of cattle sold under a negotiated grid in the three major fed-cattle marketing regions in 2009 was only about 6%.

Collectively, these marketing options are considered the cash market, but it's the live-weight cash market that establishes the base price for all cash-market transactions. In addition, the price discovered in the live-weight cash market also establishes the base price for the entire forward-pricing market, which includes forward contracts, formula contracts and marketing agreements.

In recent years, feeders have shifted out of the live-weight cash market for various reasons, including:

  • They feared not having timely access to the market (timely access to the slaughtering plant);
  • They weren't rewarded for quality;
  • They weren't making an adequate profit;
  • They couldn't get financing without a forward contract;
  • The packers would only purchase under a grid system or a forward-type contract;
  • They were concerned that the live-weight cash market was overly prone to manipulation.

As a result, the entire cash market has shrunk to below 40%.

Because many feeders now avoid the live-weight cash market, the live-weight cash market has become too thin to reflect a competitive price, and the market is becoming increasingly filled with average-quality cattle.

So, the problem today is that the too-thin cash market with increasing numbers of average-quality cattle is setting the base price for all cattle, regardless of how they are marketed. Even the highly regarded U.S. Premium Beef (USPB) Market Grid uses USDA’s KS/TX/OK weekly average price as the base price it pays for cattle. USPB then bases its premiums and discounts on the average performance of cattle that National Beef Packing Co. (USPB’s packing plant) purchases in the cash market, not including any USPB cattle.

This is the core problem R-CALF USA is working to address. And, this is where R-CALF USA departs from the packers and their allied trade associations like the National Cattlemen’s Beef Association, the American Meat Institute and the National Meat Association. These groups don’t even recognize or acknowledge that it’s a problem to have the base price for all fed cattle determined by a too-thin cash market that is increasingly filled with average-quality cattle.

This explains why the reforms R-CALF USA seeks are so controversial. Opponents to the proposed GIPSA rule don’t even agree there is a problem to be fixed and they want to continue down the same path we are on, which happens to be the same doomed path already trodden by the U.S. hog industry that resulted in the exodus of 90% of all U.S. hog operations in just the past few decades.

Because the packers and their trade associations don’t agree with R-CALF USA that there even is a problem, there’s absolutely no chance that the two sides will agree on an appropriate solution.

Cattle producers must decide.

R-CALF USA’s solution to the problem is to first address the reasons so many feeders are exiting the live-weight cash market to prevent that market from shrinking any further and to re-establish it as an attractive market that feeders may voluntarily decide to re-enter.

To accomplish this goal we must first:
  • Stop packers from restricting timely access to the marketplace;
  • Stop packers from using deceptive practices to coerce individual feeders to exit the live-weight cash market;
  • Stop packers from paying preferential prices to their preferred feeders that are not based on either quality or market characteristics (a practice that keeps the cash market price artificially low);
  • Stop packers from procuring cattle from other packers who are not cattle feeders (By purchasing cattle from other packers, packers avoid creating demand in the cash cattle market.);
  • Stop packers from jointly buying cattle in order to reduce the number of bids for cattle (when multiple packers join together to hire one cattle buyer, competition is eliminated.).

These are the reforms the proposed GIPSA rule will help accomplish, and this is why R-CALF USA strongly supports it. The proposed GIPSA rule will not limit, restrict or prohibit grid pricing, premiums or discounts, value-based marketing, or any legitimate form of alternative marketing agreements.

The packers and their allies are misleading the industry by claiming the proposed GIPSA rule would harm cattle producers because packers would no longer pay premiums for higher-quality fed cattle, which would then translate to only average prices for all cattle regardless of quality, including even lighter feeder calves of higher quality. That’s a distraction strategy on their part. The packers, along with their allied trade associations, have initiated an aggressive campaign to convince everyone to focus on their outrageous claim that the proposed rule would eliminate market-based pricing programs. Nothing could be further from the truth! There is no language in the proposed GIPSA rule that would, in any way, limit, restrict or prohibit the use of legitimate alternative marketing arrangements for cattle.

Instead, the proposed GIPSA rule will help restore the integrity of the live-weight cash cattle market, and doing so will prevent further shrinkage of that market, as well as possibly attracting more feeders into that market.

The choices we have today with the proposed GIPSA rule are: Do we begin taking steps to correct this problem right now? Or, do we wait until the cash cattle market shrinks to less than 8% as it has in the near-totally integrated hog industry, or perhaps to nearly zero percent as it has in the totally integrated poultry industry?

The choice belongs to cattle producers. It is theirs and theirs alone to make.
-- R-CALF USA CEO Bill Bullard

How To Make Your Ranch More Profitable

Want to know how you can make your ranch more profitable? The answer is benchmarking, a powerful tool designed to help ranchers identify key management areas for increasing their ranch profit.

Benchmarking involves comparing your herd’s production and economic factors against those of benchmark herds to identify your ranch business’s strengths and weaknesses. You can then capitalize on the identified strengths while working to remove the weaknesses, one at a time. As each business weakness is removed, total ranch profit tends to go up.

Figure 1 presents the results of my benchmark analysis of a Northern Plains beef cowherd. I compared the performance of a study herd with the 2009 averages of 119 Northern Plains Benchmark (ND FBM) herds. Benchmarks are provided on both a per-cow basis and on per-cwt.-of-calf-produced basis.

The measures where the study herd beat the average of the benchmark herds are the study herd’s business strengths. Those measures where the benchmark herds’ average beat the study herd are its potential weaknesses – the areas that need added management attention.

The first review of a benchmark study should focus on identifying the study herd’s business strengths. In the case of the study herd presented in Figure 1, three strengths stand out:

  • Total livestock costs (Figure 2) matched the economic efficiency of the benchmark herds.
  • Total overhead costs (Figure 3) almost met the economic efficiency of the benchmark herds.
  • Replacement cost (females and bulls) (line 32 in Figure 1) beat the economic efficiency of the benchmark herds.

These three business strengths need to be capitalized on in future years.

The second review of a benchmark study herd’s data should focus on identifying possible weaknesses.

For example, in Figure 1, gross income averaged $628/cow for the benchmark herds and $575/cow for the study herd – a $53/cow deficit for the study herd.

Meanwhile, the study herd racked up total annual costs of $689/cow – $46/cow more than the $643/cow average cost for the benchmark cows. Figure 1 suggests that most of the difference is attributable to winter feed costs.

Economic net returns were -$114/cow for the study herd, and -$15/cow for the benchmark herds – a difference of $99. Thus, the study herd generated $53/cow lower gross income and had $46/cow higher production costs than the benchmark herds. This accounts for the $99/cow difference in net income.

My research over the years suggests that a powerful measure of economic efficiency is unit cost of producing a cwt. of calf (UCOP). UCOP combines physical production, market prices and production costs into one single economic efficiency measure.

In this study, UCOP was $101 for the benchmark herds, and $116 for the study herd. Clearly, this study herd isn’t as economically efficient as the benchmark herds.

Since the foundation of economic efficiency is based on production efficiency, let’s benchmark the production efficiency of this study herd (Figure 4).

  • The first key production measure in Figure 4 is line 6 – weaning percentage of females exposed. It’s calculated at 85.3% for the study herd and 88.6% for the benchmark herds.
  • The second key production measure is line 10 – pounds weaned per female exposed. It’s calculated at 468 lbs. for the study herd and 504 lbs. for the benchmark herds.

In both cases, the calculated numbers suggest that the production efficiency of the study herd lags that of the benchmark herds. In fact, a detailed study of Figure 4 suggests two possible production weaknesses for this study herd.

  • The 13% calf death loss for the study herd helps explain the lower pounds weaned per female exposed. That, in turn, helps explain the lower gross income per cow. In actuality, one particular winter storm accounted for most of the calf death loss. It’s still a business weakness, but there’s little that can be done about it.
  • The second production weakness is the higher tons of hay equivalent fed/cow, which helps explain the higher production costs (Figure 5). Since feed cost/cow is the single, highest-cost production item (UCOP column in Figure 1), this ranch manager should focus his first year’s management attention on his winter-feeding program.

The data on winter forage fed is presented in Figure 5. I converted the total dry matter consumed from all forages to tons of hay equivalent (based on 10% moisture). The benchmark herds consumed 3.37 tons/cow of hay equivalents, while the study herd consumed 4.15 tons.

The key question is why the benchmark herd managers can feed less per cow than the study herd manager? Is the difference due to the ration quality, a matter of cow size, or some other factor?

Benchmarking only identifies the business weaknesses; it is management’s role to determine how to eliminate the weakness. But I would recommend that this study herd manager begin by utilizing the services of a nutritionist to explore the advantages of feed testing, ration balancing and least-cost ration formulation during the winter-feeding program.

An annual benchmarking analysis is a key management action for increasing your beef cow profits over the next few years. Try it! It’s really not that hard.

Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or [email protected].

There Are No Cure-All Health Products

Sometimes I get to see some interesting things being tried in cattle. And, while there have been some significant advances in products we put through a needle, I’m still not aware of the miracle preventive or cure.

The truth is that when we try out some of these practices or products in the field, it just isn’t possible to tell whether any change we might see is due to the product or to variation in the cattle or their environment. That’s why we should always look to well-designed, properly conducted clinical trials to guide our decisions.

Sometimes I wonder if some of the things being tried are due to an underlying anxiety that we are missing something. There is a secret vaccine anxiety pattern which is very common this time of year. After all, there has to be a vaccine out there that will suddenly shut off disease like a water tap.

But, just like many things in life, the secret is to do the common things uncommonly well. Work with your vet to decide on vaccines that are reputable (safe and consistent) and include the antigens appropriate for the challenge you will face.

In reality, the only vaccine secrets are a good quality vaccine for the antigens you’re being challenged with, protecting vaccine quality during storage and administration, and planning out the timing. If it’s a modified-live vaccine, be sure you haven’t used a cleaning solution in your syringes or injection systems that could inactivate the vaccine. Then, work out the administration timing that best fits your production system and stick to it.

While some vaccines may outperform others in comparison trials, in my opinion, the difference in vaccines for many of our diseases pales in comparison to the importance of doing these steps correctly.

For example, I’m still waiting for clinical trials demonstrating the efficacy of any Mycoplasma bovis vaccine in cattle. I am aware of a bovine pneumonia challenge model where an M. bovis bacterin made the lung damage worse. As a last point on this subject, there can be a big difference in the efficacy and safety of a federally licensed engineered vaccine, and simply growing up the bug, killing it, and putting it in an adjuvant.

The anxious antibiotic search (the pharmacologic “holy grail”) is another psychological malady that strikes livestock producers this time of year. This often doesn’t just involve the search for a new antibiotic, but the search for the secret combination of products. And then, of course, there’s the hunt for some kind of additional drug to put with the antibiotic(s) to make it even better.

I remain stunned in amazement at some of the concoctions and programs that can be foisted on the industry. The simple fact is that we await any clinical proof that more than one antibiotic at a time improves response in respiratory disease and many other bacterial diseases of cattle. We also await proof that adding other drugs to the therapy improves long-term recovery rates of cattle with infectious disease.

I know. We’ve all heard the testimonials. But whenever I help set up a program or treat my own cattle, it’s just one antibiotic and a tag.
Just like for the vaccines, the only real secret for successful therapy is to use a reputable, effective antibiotic coupled with protecting the integrity of the drug, dosing it right, and getting it into the animal early in the disease. Then, monitor the cattle for response and involve your veterinarian in setting the time at which to decide if the animal needs additional therapy.

It really is this simple to rid yourself of the anxiety of missing the cure-all product. Stick to the basics, get with your vet, manage the environment and nutrition, and use a really sharp pencil to figure the true value of cattle that are less likely to give you a disease challenge.
If you can’t be sure of the potential benefit of a product or practice, why risk the harm?

Mike Apley, DVM, PhD, is a professor in clinical sciences at Kansas State University in Manhattan.

Meat Matters

Beef Exports Are Vital

Some people claim exports aren’t vital to the U.S. beef industry. What nonsense.

The past 18 months have emphatically proved how valuable they are. Just as reduced export tonnage and revenues in 2009 depressed wholesale beef and live-cattle prices, significantly larger exports this year are doing the opposite. In fact, exports of both cuts and variety meats have been a key market driver for several months and will be the rest of the year.

That’s extremely important to cattle prices because domestic demand remains weak in the face of continued high unemployment and a sluggish economy. Domestic demand was down 1.7% in the second quarter vs. the same quarter last year, says analyst Andrew Gottschalk, HedgersEdge.com. But beef exports were up 21.7% in the quarter vs. last year. So overall demand in the quarter was up 8.3%, he says.

Export data the first seven months of the year is much improved over 2009. Total volume at 588,000 metric tons was up 15% and total value was up 25% at more than $2.9 billion. That’s where the big demand improvement shows up, more tonnage and even more sales dollars.

In addition, exports represented nearly 9% of total weekly beef sales during the first seven months. That’s well above the five-year average of 5% and even higher than 2003 pre-BSE levels.

It’s safe to assume that 2010 total exports could maintain that 9%. In early September, USDA forecast 2010 exports to be up 17% on 2009. But analysts regard this as too low. Exports seasonally tend to increase through year-end and a similar pattern is expected this year, Gottschalk says.

Exports to Asia are likely to continue to increase, according to exporters. Exports to Japan are up 25% in volume and value. South Korea is buying a lot more U.S. beef and is close behind Japan, our third-biggest export market after Mexico and Canada. Korea in the first seven months of 2010 took 63,189 metric tons of U.S. beef, worth $291 million, and up 122% and 162%, respectively, on 2009.

Remember when some Koreans protested violently in the streets of Seoul and disparaged the safety of U.S. beef? Well, exporters and the U.S. Meat Export Federation did a fantastic job in response and in repositioning U.S. beef initially at the foodservice level (hence all those short ribs going to restaurant chains). Another factor is that Koreans love beef, and their economy is the strongest in Asia. No wonder Koreans are buying more and more U.S. beef.

Conversely, beef imports are well down on last year (12% in the first seven months). That’s because Australian imports are down sharply, thanks largely to the strength of Australia’s dollar against the U.S. greenback. Australia’s imports from July 2009 to June 2010 fell 25% to 210,514 metric tons from the year before, the lowest to the U.S. since 1996-97.

From January to June 2010, Aussie shipments were down 40%. They picked up in July but are declining again on a year-on-year basis. Aussie imports for calendar 2010 are expected to be in the low 200,000 metric tons and might be eclipsed by imports from New Zealand.

All this has a big impact on total available beef supplies in the U.S. Beef production year to date is down 0.5%. With exports up and imports down, total supplies are tighter than expected. Second-quarter supplies were down 3.8% from the previous year; and perhaps even more in the third and fourth quarters.

USDA forecasts disappearance to be 59 lbs./person this year, vs. 61.1 in 2009, and 57.8 in 2011. This decline means wholesale beef prices will trend higher, raising cattle prices higher, as well. Who knows how high prices might go if export demand gets even stronger.

Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattle
buyersweekly.com
). Catch his weekly market roundup at beefmagazine.com every Friday afternoon.

Profit Prospects For Stockers Look Good This Winter

“It scares me anytime I put together a stocker budget and see much of a profit. Because if I account for all the opportunity costs, there usually isn’t much profit,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.

But when Peel works through a winter stocker budget, that’s exactly what he sees – a potential for significant profit.

Consider stocker value of gain, defined as the gross sale price of a head of cattle minus the gross purchase price, divided by the pounds of gain. By that measure, and because of the current and atypically narrow price rollback between weight classes, stocker value of gain in September was running $80-$90/cwt. for cattle weighing from about 400 lbs. to 900 lbs. (basis Large and Medium #1 steers, Oklahoma City).

Peel explains part of the lofty level has to do with generally high cattle prices across the board, buoyed by tight supplies. It also has to do with what he terms permanently higher corn prices.

“Stocker value of gain is the mirror image of feedlot cost of gain,” Peel explains.

For the three decades before the commodity bubble two years ago, corn prices hovered tightly in the range of $2-$2.50/bu. Subsequent cost of gain at the feedlot of roughly $30-$50/cwt. meant stocker value of gain was capped at the same level.

Now and into the future, because of global shift to higher grain prices, forage-based gains have relatively more value. In fact, the stocker sector – already an essential cog in the industry wheel – becomes relatively more important.

Incidentally, winter stocker programs this year appear to have extra potential, according to Peel. In September, he was estimating the marginal cost of wheat pasture production at 30-40¢/lb. of gain, depending on stocking rate and rate of gain. Logic suggests renting wheat pasture in the High Plains this fall might run 40-50¢.

Really, for the first time, cattle producers in general, and stocker producers specifically, have the opportunity to exploit the ability of cattle to transform forage into edible, high-quality protein. Higher corn prices will negatively impact the pork and poultry industries more than beef over the long haul. At the same time, Peel points out that the increasing value of forage-based gains adds to beef’s cost competitiveness with those competing proteins.
There are no slam-dunks, but along with the current profit potential, higher value of stocker gain offers two key risk management tools.

First, Peel explains the high value of stocker gain across such a wide range of weights allows production flexibility, which can mitigate short-term price volatility. In other words, profit potential exists about equally for stockering lighter calves or heavier ones, for turning sets of calves quicker or holding them longer.

Second, time is on the stocker operator’s side. By and large, dwindling cattle supplies relative to at least constant consumer beef demand suggest that cattle purchased today will sell into a higher market tomorrow.

Peel cautions producers to work through budgets carefully, and to plan ahead.

“There are two ways to mess up a positive margin,” he says. “Buying calves without locking up the sales price and locking in the sales price before buying cattle in the spot market or through a forward contract.”

By the same token, a psychological risk in the current market environment, with prices and equity requirements so high, is hesitating too long.

Peel relates the conversation a stocker pal of his had with the banker, who wanted to know what the plan was if it didn’t rain.

“I may go broke because it doesn’t rain,” said Peel’s friend. “But I’ll never go broke because I was scared to buy calves.”

In other words, Peel says, “You can’t be afraid to play the game and expect to win.”

Readers Surveyed On Proposed GIPSA Rules

Historically, beef producers have been known for being a little too tied to tradition. Of course, traditions can be formed both short and long term; in the case of cattle marketing, it appears BEEF readers, according to an exclusive survey, prefer the status quo of value-based marketing.

Since the Grain Inspection, Packers and Stockyards Administration (GIPSA) publication of a proposed rule on livestock competition in June, the U.S. livestock industry has been awhirl on whether the intention to restructure livestock marketing in the U.S. is a good or bad idea. An online poll on beef
magazine.com in August showed a consistent 80% majority against the proposed GIPSA rule throughout most of the poll’s month-long run.

So, we decided to see if a survey of BEEF readers would corroborate that result. In early September, we sent an electronic survey to more than 16,000 BEEF readers. Over the course of five days, we received a total of 730 usable surveys in response, an effective response rate of 4.4%. Here is what those readers told us.

Heavy cow-calf presence

Among all respondents, the vast majority (75%) consisted of cow-calf producers, while stocker/backgrounders made up 12.7% of respondents, and feeders 10.5% (Figure 1).

As a general group, 78% of respondents said they believe that current marketing practices in the beef industry are positive for beef producers (Figure 5). By production segment, 77.5% of cow-calf producers said they believe that current marketing practices in the beef industry are positive for beef producers (Figure 10), while 82.4% of stocker/backgrounders did so, and 77.3% of feeders.

When broken out by percentage of income based on cattle (Figure 17, page 34), those respondents who indicated that cattle constituted 25% or less of their household income favored current marketing practices by 76.4% to 23.6%; those whose cattle income constituted 26-50% of their household income favored current marketing practices by a margin of 80.2% to 19.8%; respondents claiming cattle income as making up 51-75% of their household income favored current marketing practices by 80.3% to 19.7%; and those with cattle income of 76-100% of their household income preferred current marketing practices by 76.3% to 23.7%.

When analyzed by those who had actually read the GIPSA rule, the results were similar to the other crosstabs (Figure 9). Among respondents who said they had read the rule, 83.4% believed that current marketing practices in the beef industry are positive for beef producers vs. 16.6% who believed they were not positive. Among those who hadn’t read the proposed rule, 75.7% believed that current marketing practices in the beef industry are positive for beef producers vs. 24.3% who saw them as negative for the beef industry.

Scott Grau, BEEF research manager, says the overall survey results indicate that “the more informed readers are about the proposed GIPSA rule, the more pessimistic they tend to be about it.”

Grau added, however, that he was surprised – given all the media and industry interest in the rule and its potential effects – that while 68.1% of total respondents indicated they were aware of GIPSA having submitted the proposed rule (Figure 6), only 31.1% said they’d actually read the specific rule from gipsa.usda.gov or another source (Figure 7).

“Though much of this rule is aimed at the poultry and swine sectors, the rule stands to dramatically impact the beef industry. It’s important that producers educate themselves on this rule and its implications to their operation, and relay those concerns – good or bad – to USDA before the Nov. 22 comment period ends,” Grau says.

Marketing habits

Among all respondents, 54.4% reported that they typically market their calves through local auctions (Figure 3), while 33.2% sell direct to an order buyer or feedyard, 18.2% market calves via video auction, 11.6% via special feeder-calf sales, and 3.9% in graded auctions.

Almost 63% of the 621 respondents who typically market calves said they had received market premiums for those calves (Figure not shown). Preconditioning was the most mentioned by 48.7% of those respondents followed by 32.5% for source verification, 32.1% for age verification, 16.7% for “natural,” 15.1% for breed eligibility, 13.9% for non-hormone treated.

Of total respondents, only 24.8% participated directly in a quality systems assessment (QSA) or process-verified program (PVP) to verify market attributes in their calves; 75.2% did not (Figure 4).

Among those who didn’t believe that current marketing practices in the beef industry are positive for beef producers, the top rationale was concern over the number of packers relative to the industry, which was mentioned by 76% of those voting no (Figure not shown). Packer ownership was cited by 67.5% of respondents voting no, followed by market access in certain parts of the country (49.4%), captive supplies (48.1%), number of cattle selling outside the cash market (44.8%), and lack of legal recourse in packer/producer conflicts (37.7%).

When asked whether they favored the GIPSA rule (Figure 8), the majority of all respondents were uncertain (52.4%), while 4.9% said that – from their understanding of the rule – they favored the measure, while 42.7% said no.

“While a majority of respondents are still uncertain about how they feel about the GIPSA rule, the results of this survey indicate that of those who have made up their minds, the vast majority (almost 90%) do not favor the measure,” Grau says.

Of those in favor of the GIPSA rule (Figure not shown), the largest number of respondents (61.8%) believe the measure will reduce packer ownership, reduce captive supplies (55.9%), increase the availability in legal recourse in packer/producer conflicts (52.9%), increase market access in certain parts of the country (47.1%), reduce the number of cattle selling outside the cash market (41.2%), and increase the number of packers (29.4%).

“It’s not the perfect solution, but it’s a start,” wrote one respondent who favors the rule. “Packer ownership and captive supply are the problems.”

Conversely, among those not in favor of the GIPSA rule (Figure not shown), 86.5% believe it will hinder the industry’s progress in value-based marketing, 85.2% say it will allow the government to define how producers market their cattle, 79.8% say the rule restricts industry competitiveness, both domestically and globally, and 75.1% say the rule puts lawmaking in the hands of regulators. In addition, 70.7% say the GIPSA rule will decrease the industry ability to provide consumers with what they’re asking for, while 70.4% say the measure would encourage frivolous lawsuits.

“Anything the government is involved with is inefficient, so why invite them into bed with us?” asked one opponent of the rule. Another called it “another more blatant attempt to socialize American agriculture.”

Those respondents who derive a larger percentage of their household income from the cattle business tend to dabble more in value-based marketing, results show (Figure 16). Those with cattle receipts comprising 76-100% of their total income led all income groups in receiving premiums for preconditioning, age and source verification, natural, breed eligibility and non-hormone treated. They were also more likely to participate in QSA and PVP programs to verify market attributes of their calves.

Interestingly, however, this group led all other income groups in concern about the number of packers relative to the industry, and the number of cattle selling outside the cash market. This group also had the highest score for having read the proposed GIPSA rule (41.7%) vs. 30.2% for the group deriving 51-75% of its total income from cattle, 27.3% for the 26-50% group and 26% for the 1-25% group (Figure 19).
Of those respondents who had read the GIPSA rule, support for current marketing practices in the beef industry was highest among the stocker/backgrounding segment (Figure 10) where 82.4% were in support. Among cow-calf respondents, 77.5% of those who had read the GIPSA rule supported current marketing practices, while 77.3% of feedlot respondents did. The biggest concern among all three sectors was the number of packers relative to the industry. Packer ownership of cattle ranked second.

Some GIPSA Rule Basics
Published June 22 in the Federal Register, the measure is open for public comment until Nov. 22. You can see the full rule at www.gipsa.usda.gov. As the rule pertains to the cattle industry, the GIPSA rule essentially:

  • Defines the terms for forward contract, marketing agreement, production contract, competitive injury, and likelihood of competitive injury.
  • Would require a packer to maintain written records that provide justification for differential pricing or any deviation from standard price or contract terms offered to livestock producers.
  • Provides examples of conduct that would be considered an unfair, unjustly discriminatory and deceptive practice or device to provide more clarity and allow improved enforcement under the Packers & Stockyards Act. USDA maintains that an unfair practice can be proven without proof of predatory intent, competitive injury, or likelihood of competitive injury.
  • Establishes criteria the USDA Secretary may consider in determining if an undue or unreasonable preference or advantage, or an undue or unreasonable prejudice or disadvantage has occurred under the Act.
  • Requires that dealers who operate as packer buyers only purchase livestock for the packer that identifies that dealer as its packer buyer. Packers would be prohibited from purchasing, acquiring, or receiving livestock from another packer or another packer’s affiliated company.
  • Would require packers to provide GIPSA with sample copies of contracts within 10 business days of entering into the agreement with a grower or producer.
  • Provides the criteria the USDA Secretary may consider when determining whether the arbitration process provided in a contract provides a meaningful and fair opportunity for the livestock producer to participate fully in the arbitration process.

The deadline for public comment on the proposed GIPSA rule is Nov. 22. Submit comments at [email protected]; by mail to Tess Butler, GIPSA, USDA, 1400 Independence Avenue, SW, Room 1643-S, Washington, DC 20250-3604; or by fax to 202-690-2173.

Beef Tech

Yamaha is “best of the best”

Yamaha Motor Corp., U.S.A., Grizzly 450 4x4 utility ATV is a mid-level machine that features Electric Power Steering (EPS) Ultramatic® automatic transmission with the centrifugal clutch system; On-Command® 2WD, 4WD and 4WD with full diff-lock; a lighter, one-piece frame with four-wheel independent suspension; all-wheel engine braking; and an all-new sealed wet brake (shown at right) that is unaffected by mud and water and features virtually no maintenance. All these features are carried in a mid-level chassis, with a one-piece frame and independent rear suspension, while a 421-cc, 4-stroke engine can handle more than 250 lbs. of rack capacity and 1,322 lbs. in towing.

Available in Hunter Green, Steel Blue and Realtree® AP™ HD camo, the 2011 Grizzly 450 EPS recently received Field & Stream magazine’s “Best of the Best” award, giving Yamaha a clean sweep for its power steering models. This includes the 2007 Grizzly 700 EPS, 2009 Grizzly 550 EPS and now 2011 Grizzly 450 EPS, all of which have all been named “Best of the Best” since Yamaha introduced power steering to the ATV world in 2006.

For more information on Yamaha, visit www.yamaha-
motor.com
.

Compact HID spotlight

Said to be comparable to the brightness of high-intensity beams on high-end automobile headlights, just in the palm of your hand, the Stanley High Intensity Discharge (HID) Spotlight emits up to 2,000 lumens and is up to six times brighter than other spotlights. The spotlight reaches peak brightness in about 10 seconds yet is compact and lightweight. Operating off a rechargeable battery or detachable 12-volt DC power cord, the unit recharges in less than two hours.

New respiratory vaccine

Pfizer Animal Health introduces INFORCE™ 3, a three-way intranasal cattle vaccine against bovine respiratory syncytial virus (BRSV) that is also labeled to aid in prevention of infectious bovine rhinotracheitis (IBR) and parainfluenza type 3 (PI3). Pfizer says its efficacy studies found that all calves vaccinated with INFORCE 3 survived a severe BRSV challenge in which 95% of unvaccinated controls died.

INFORCE 3-vaccinated calves also showed fewer lung lesions and reduced viral shedding, while helping prevent respiratory disease caused by IBR and PI3, and
reduce IBR and PI3 viral shedding.

INFORCE 3 provides protection in a 2-mL intranasal dose, with 1 mL given in each nostril. Available in 1-, 10-, 25- and 50-dose vial sizes, the product is safe for cattle of all ages, including pregnant females and newborn calves.
For more information, call 800-733-5500 or visit www.PfizerAH.com.

Spread-A-Bale®

The St. George Company introduces its award-winning Spread-A-Bale® to the North American market. Spread-A-Bale® makes spreading straw for livestock bedding easy, cost-effective and safe. The front-end loading attachment loads large square bales in three minutes and spreads in less than one.

For more information call 1-800-461-4299 or visit www.thestgeorgeco.com.

T-MAX utility tractors

McCormick USA introduces a utility tractor line designed to meet the needs of material handling and general farming. The T-MAX Series features three models – the T90 MAX, T100 MAX and T110 MAX. The series, which offer 83-102 engine (70.5 to 86.5 PTO) horsepower, features a four-cylinder Perkins 1104D Tier 3 compliant diesel engine. The T90 MAX features a turbocharged 83-hp engine while the T100 MAX and T110 MAX (92.5 and 102 hp, respectively) use a turbocharged after-cooled engine.

The line’s synchromesh transmission boasts four speeds in three ranges. Additional flexibility is attained with a power shuttle transmission that provides 36 forward and 12 reverse speeds and allows the operator to change direction (forward to reverse) via a lever integrated into the steering column, without using the clutch pedal.

For more information, visit www.mccormickusa.com.

Bale bed series

Harper Industries introduces its next generation of Bale Bed, the latest innovation in feeding and hauling hay with your truck. Offering classic DewEze durability, the 600 & 700 Series Bale Beds feature solid dummy arms, standard receiver hitch with D-rings, dual lift cylinders and Gatorhyde coating on the deck surface. The new series features a redesigned headache rack, LED lights in the rear tailgate and a new arm paint color.
For more information, call 800-835-1042 or visit www.deweze.com.

New grinder mixer

Art’s Way Manufacturing, Inc. introduces its next generation of grinder mixers. The Model 6520 features the largest tank in the industry (165 bu.); fully self-contained hydraulics; discharge augers driven by hydraulic orbit motors; a high-capacity, 10-in. diameter hydraulic-driven discharge system; remote-controlled auger positioning, tank discharge and operation; and double hammers in the hammermill for a more consistent grind and less power requirements.

For more information, call 830-669-2466 or visit www.artsway-mfg.com.

Snowblower line

HitchDoc’s line of industrial grade two-stage snowblowers consists of single-, double- and triple-auger models equipped with large deep fans and exclusive tiger teeth augers to handle the toughest conditions. Other features include a hydraulic spout rotator, adjustable deflector, high-strength corner bracing, heavy-duty polyurethane idler wheels, hitch stand, adjustable skid shoes, heavy-duty PTO-driven gear box and 3-pt. mount design.

For more information, call 800-446-8222 or visit http://www.hitchdoc.com.

GIPSA rule will fuel activist lawsuits

America’s 1.18 million practicing attorneys could realize a new lode of prospecting opportunity with implementation of the proposed Grain Inspection, Packers & Stockyards Administration (GIPSA) rule on livestock marketing. Among the folks making that estimation is no less than the head of GIPSA itself, J. Dudley Butler.

It’s just a few sentences captured in an audio clip of remarks he made before the Organization for Competitive Markets about a year ago. But, Butler, the former plaintiff’s attorney, made the remarks not as a representative of his law firm but as head of GIPSA.

“When you have a term like ‘unfair, unreasonable or undue prejudice,’ that’s a plaintiff lawyer’s dream,” Butler says in the clip. “We can get in front of a jury with that. We won’t get thrown out on what we call summary judgment because that’s a jury question.”

A big area of concern with the proposed rule has been fears over the ease with which antitrust lawsuits could seemingly be brought against packers for breach of contract, cases that under current rules would be handled in state courts. Some fear that the threat of pervasive litigation will spell the end of value-based marketing and thrust the U.S. beef industry back to a commodity market.

Among those who see such potential is Allie Devine, vice president and general counsel for the Kansas Livestock Association.

“In this proposed regulation, there is a lessening of the standards of what it takes to make a case, either by the government or by civil suits. The lessening of the standards is what opens the doors to trial lawyers,” Devine says.

“This is a pervasive invasion of government into private contractual relations in a way that we have not seen in this industry or in other sectors of the economy,” she says.

It doesn’t take much contemplation to foresee the potential – beyond well-meaning producers – for more of the unbridled litigation that has become such a popular tool of anti-meat groups.

Consider that the Humane Society of the U.S., for instance, with its annual budget of $130 million/year maintains a staff of more than a dozen lawyers, as well as more than 1,000 pro bono attorneys. Their self-professed job is to conduct “precedent-setting legal campaigns” on behalf of animals in state and federal courts and serve as the primary line of defense against legal attacks on legislative measures they don’t agree with.

But the potential reach of the law goes much further than just livestock production, Devine says.
“This rule shifts agriculture over into a new realm of regulatory framework that isn’t matched in any other industry. If this becomes the precedent for antitrust law, we have some serious concerns about how other industries in the U.S. will function,” she says.

Start Cattle On Feed Faster

A new Food and Drug Administration (FDA) approval of an old feed ingredient allowed researchers to get feedlot cattle on top finisher ration faster and improved overall feedlot operational efficiency by reducing manure production.

Kansas State University beef feedlot researchers were able to transition feedlot steers from the starter ration to the final finisher ration in 10 days compared to a more traditional 21 days with the aid of Rumensin® fed at the new dose of 44 g/ton of ration dry matter (DM). Recently the FDA approved an expanded dosing range for Rumensin, allowing cattle feeders to feed up to a maximum of 44.4 g/ton of ration DM. The previously allowed maximum dose was 33.3 g/ton of ration DM.

The research compared starting yearling steers on a traditional four-ration, step-up program with diet changes occurring on days 6, 11, 16 and 21 days on feed vs. an accelerated step-up with changes made on days 4, 6, 8 and 10 days on feed.

Rumensin was fed at 30.0 vs. 40.0 g/ton of ration DM in the two step-up programs beginning on day one and throughout the entire 153-day feeding trial. The final ration contained 7% wheat straw, 58% dry-rolled corn, 30% wet distillers grains and 5% supplement, dry matter basis.

Steers started on the 10-day accelerated step-up program had identical feedlot performance and carcass traits, as did the steers started on the traditional 21-day step-up program. Total roughage consumption of steers started on the accelerated step-up program and fed 40 g/ton Rumensin was 59 lbs./head less over the entire feeding period than for steers started on the 30 g/ton Rumensin-traditional step-up program. The researchers calculated that this level of reduction in roughage consumption would equate to an annual reduction of about 3,000 tons of manure production in a 10,000-head feedyard.

Over the entire feeding period, steers fed Rumensin at 44 g/ton converted feed to gain 2.3% more efficiently than steers fed 33 g/ton of Rumensin. Daily gain and carcass weight weren’t different between the two Rumensin levels. Steers fed the higher level consumed 3.5% less feed – the expected response in cattle being fed Rumensin.

Meanwhile, Oklahoma State University feedlot researchers concluded that feedlot cattle can be adapted to the finishing diet by using a daily combination of the starter and finishing rations, thus eliminating step-up rations.

The researchers compared a traditional step-up program of five rations with a two-ration step-up program comprised of feeding differing proportions of the starter and finishing ration over a 28-day diet adaptation period.

The starter ration for both programs contained 70% concentrate fed for 7 days. The final finisher ration contained 94% concentrate. The three step rations of the traditional step-up program contained 76, 82 and 88% concentrate, respectively; and when fed, each was fed for 7 days. All rations contained Rumensin at 30 g/ton of ration DM; all cattle were fed twice daily.

Beginning on day 8, cattle in the two-ration step-up program were fed the daily feed call based on a predetermined schedule that decreased the proportion of the 70% concentrate starter diet fed in the a.m. feeding by about 5%, and increased the proportion of the 94% concentrate finisher diet fed in the p.m. feeding by about 5%. All cattle were fed the 94% finisher from day 29 until slaughter.

Feedlot performance and carcass traits were not different in cattle stepped-up by the different ration adaptation programs. Elimination of step-up rations will improve feedlot operational efficiencies. A two-ration step-up program may require some additional bunk management, the researchers note.

Read the full reports at http://
amarillo.tamu.edu/library/files/
ted_mccollum_publications/
2010PNC%20Proceedings%20final.pdf
– pages 112 and 99.

Scott B. Laudert, Ph.D., is a beef cattle technical consultant and former Kansas State University Extension livestock specialist based in Woodland Park, CO. Contact him at 719-660-4473.