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Articles from 2015 In October


Red meat production forecast record large

Red meat production forecast record large

Total U.S. red meat and poultry production is expected to be record large this year at 94.5 billion pounds, according to the Livestock Marketing Information Center (LMIC).

This year’s surge comes from the projected increases in pork production (7.5%) and broiler production (4.5%). Estimates call for 2.1% less beef production, the least since 1993.

“In 2016, record-large red meat and poultry output of about 96.6 billion pounds is forecast, up 2% to 2.5% year over year,” LMIC analysts say. “Current forecasts suggest year-over-year growth in output of all major meat and poultry categories. Still, on a per-person basis, disappearance will remain well below record levels; for 2016 likely in the range of 211 to 213 pounds per capita. That is a slight increase of 0.5 pounds for the year and small compared to 2015’s increase (up 9.6 pounds).”

Cattle Market Audio

Listen to the Weekly Cattle Market Wrap-Up NOW!
Click here to get the latest market update from USDA's Ed Czerwien. Listen here.

 

LMIC analysts explain the growing U.S. population and exports are the reasons domestic per capita consumption this year—estimated at 211.5 pounds—will fall short of previous records.

 

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Data supports aggressive herd expansion

Data supports aggressive herd expansion

Ongoing reductions in the ratio of heifers on feed to steers suggests herd expansion is continuing at an aggressive rate, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.

“The ratio of steers to heifers in feedlots since April of this year has reached levels not seen since the cyclical expansion in the early 1990s. The quarterly data on the breakdown of feedlot inventory only goes back to 1994,” says Peel. “Similar indications are shown by the ratio of steer to heifer slaughter, for which the data goes back much further. A 12- month moving average of the ratio of steer-to-heifer monthly slaughter for September is at the highest level since June, 1975.  The current ratio of steer to heifer slaughter exceeds levels that occurred in the cyclical expansion of the early 1990s as well as the truncated expansion in 2004-2005.”

Cattle Market Audio

Listen to the Weekly Cattle Market Wrap-Up NOW!
Click here to get the latest market update from USDA's Ed Czerwien. Listen here.

 

For further perspective, Peel explains the number of heifers on feed Oct. 1 were 7% fewer than a year earlier—the 13th consecutive quarter of year-to-year decreases going back to July 2012.

“This confirms not only that the industry is in the midst of herd expansion, but that it is a very aggressive herd expansion,” Peel says. “It is not clear how long this aggressive herd expansion will persist, or whether the recent market shakeup may have tempered expansion plans. How much herd expansion will occur and how fast it will happen are both moving targets that will be determined by both demand and supply factors in the coming months/years.”

 

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Buyers get choosier, preconditioned calves ring up the bids

Buyers get choosier, preconditioned calves ring up the bids

Steady to uneven might be the most appropriate description of cash cattle prices this week.

“Calves are starting to dominate receipts and prices were very uneven, trading in wide price trends in all areas with demand fairly inconsistent,” explained analysts with the Agricultural Marketing Service (AMS) on Friday. “Calves traded from steady to $5 per cwt higher to $5 lower with instances ranging from $10 lower to $10 higher depending, in many cases, on location and quality.  

“Most of the very attractive high-quality offerings sold generally steady with last week’s prices, however average-quality, non-vaccinated calves sold at huge discounts to preconditioned offerings,” explained the AMS reporter on hand for Tuesday’s auction at Miles City Livestock Commission in Montana. “As colder and volatile changing weather is starting to occur weekly, buyers were very reserved as they bid on non-vaccinated calves. Discounts reached $15 per cwt for like-quality calves at times.”

Feeder prices sold steady to firm this week with instances of $3 on either side of even.

“While price levels remain good and consistent for green-conditioned yearlings and strings of fancy and long-time weaned calves, the other side of the coin is against small consignments of mixed quality, mixed color and un-weaned, fleshy, bawling calves that sell far behind the former,” AMS analysts explain.  

Cash fed cattle trade also managed mostly steady prices at $138.00 to $138.50 per cwt on a live basis. Dressed sales in Nebraska were $2 higher at $210.

Although fed cattle prices are rebounding from recent lows, AMS analysts point out feeder cattle prices still challenge cattle feeders to place them with profit in mind.

“The market is still trying to find some steadiness after the enormous price fall then subsequent rebound,” AMS analysts say. “There is uneasiness due to large quantities of meat protein on hand (see “Red meat production forecast record large”) as this market tries to find out what it can or can’t support.”  

Wholesale beef values edged higher week to week. Choice boxed beef cutout value was $2.87 per cwt. higher at $220.04. Select was $1.17 higher at $212.07.

Volatility in the futures markets offered more uncertainty than support. After limit-up moves on Wednesday, both Feeder Cattle and Live Cattle gave back much of the gain by the end of trade on Friday.

Other than 65¢ lower at the very back, Live Cattle futures closed an average of $1.60 lower week to week ($1.30 to $1.77 lower).

Between recently expired spot Oct and newly minted away Oct, Feeder Cattle futures closed an average of $2.47 lower week to week ($1.95 to $2.72 lower).

Cattle markets dismiss WHO report

Early-week pressure in futures could be tied to position squaring from the recent run-up in prices and slight bearishness from the previous week’s monthly Cattle on Feed report.

For the time being, that eased concerns about how the market would respond to Monday’s much-criticized report from the World Health Organization’s International Agency for Research on Cancer (IARC). The report suggests that eating processed red meats are akin to smoking cigarettes when it comes to cancer risk. The same report also labeled red meat consumption with the second-highest carcinogenic risk classification.

Keep in mind, the IARC also classifies the air you breath as a carcinogen.

“Given the weak associations in human studies and lack of evidence in animal studies, it is hard to reconcile the committee’s vote,” says nutritional toxicologist James Coughlin, Ph.D., CFS. “Of more than 900 items IARC has reviewed, including coffee, sunlight and night shift work, they have found only one ‘probably’ does not cause cancer according to their classification system.”

Coughlin, a toxicologist with more than 40 years of experience in meat and cancer, is critical of the IARC review process due to the lack of transparency, selective inclusion or exclusion of studies and broad interpretation of study results that are inconsistent with the conclusions of the study authors.

“In my experience as an observer to an IARC working group, the process typically involves scientists who have previously published research on the substance being reviewed and may have a vested interest in defending their own research” Coughlin says. “In the case of red and processed meat, the overall scientific evidence simply does not support their conclusion.”

Suffice it to say that IARC’s findings run counter to wide-ranging scientific opinion. To their credit, consumers appear to be taking the report in stride (see this week’s BEEF Editor’s Blog for more).

Questions remain concerning heavyweight cattle

“Even though the latest Cattle on Feed report came in as expected, it gave some preliminary signs that feedlot marketing rates may be creeping up toward more normal levels,” say analysts with the Livestock Marketing Information Center (LMIC). “Normal marketing rates, plus another two months of dampened placements compared to a year ago, could set the stage for a larger-than-seasonal move up in fed cattle prices into the late winter and early spring of 2016.”

On the other hand, Andrew P. Griffith, agricultural economist at the University of Tennessee, points out in his weekly market comments that the most recent data (Oct. 17) pegs average steer carcass weights at 930 pounds, 32 pounds heavier than the same time a year earlier and a new record.

“It is likely carcass weights have continued to advance and will continue to advance the next several weeks as is the seasonal tendency,” Griffith explains. “This has some analysts questioning if the heavy carcasses were cleaned up in September since weights continue to advance, and thus questioning if prices are in for another decline. It is unlikely that all of the heavy cattle were marketed in such a short window, but the seasonal weight increase is probably the main driver right now.”

 

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Prepare cattle facilities now for winter

The days are growing short, calves are weaned, harvest is almost done and the first frost of winter will soon zap the nutritional value of pastures. In this in-between time, farmers and ranchers running cow-calf operations have the time and labor available to prepare their facilities for the long winter ahead. 

This effort goes well beyond properly and efficiently preparing hay and feed for cattle during the winter; it is also the time when many farmers and ranchers work to maintain and even upgrade cattle working equipment in preparation for spring calving, cattle inspection, and doctoring. 

Preparing for winter

With winter approaching, farmer and ranchers must now consider how to stretch their winter hay. Simply going with traditional hay rings can cost thousands of dollars per winter in wasted hay and labor, premature maintenance and replacement and even preventable livestock accidents.

“If you don’t mind throwing away about 30% of every bale, up to 50% depending on the cow, then maybe you don’t need a hay-saving feeder,” says Randy Williams, who owns a 286-acre registered Hereford cattle ranch near Fairland, Okla. that focuses on breeding bulls, with about 80 momma cows.

“Every time a cow drops half the hay in her mouth and stands on it, I lose money because she won’t put it back in her mouth. I was losing about $10 in hay every time I set out a round bale in my older hay feeders. That’s not counting lost time in maintenance and repair. I’ve had cows tear up some of my hay rings.”

To reduce hay use and equipment maintenance, Williams bought several Hay Monster feeders from GoBob Pipe and Steel, the supplier that first introduced “Hay Conserver” feeders about 10 years ago and has shipped over 10,000 such feeders across the U.S. 

Unlike traditional feeding rings, where cattle stand outside the feeder, tear the hay out, and let the excess fall from their mouths to be trampled and wasted, “Hay Conserver” feeders force cattle to place their heads through metal bars to get the hay.  Any feed the cows drop falls back into the feeder to be eaten later.

“I’m saving about $50 per cow every winter in lost hay alone with my Hay Monster feeders,” says Williams. “Since they’re made of such heavy duty pipe, they’ve required no maintenance and would be fine in any bull pen. I’m more efficient too since I don’t have to baby them; I can drop a bale in one without worrying about damage.”

For feeding grain or silage to cattle, ranchers and farmers sometimes use feed bunks or troughs with light tubular frames and plastic or thin gauge pans. But these often break or rust out prematurely.

“I had some troughs with plastic pans, but they don’t last because cows will step on them or calves jump across them,” says Williams. “They’ve got to be built strong because cattle will push hard to get the last bit of grain.”

Williams recently turned to a durable, high-volume “super bunk” model designed to feed cattle ground hay, silage or other high volume forage. To ensure that feed and supplements will not get trapped into square edges or corners and wasted, the sides of the trough are sloped inward toward the bottom. The bunk has skids and a tow bar for easy transport around the pasture.

“The 14 gauge plate steel will last and the high-volume, easy clean design makes feeding more efficient,” says Williams. 

Since Williams plans to build some bull pens next year, he is also considering a heavy-duty, “half pipe” metal feeding bunk as an efficient alternative to plastic or concrete pasture bunks. Constructed of a 20-foot metal pipe split in half, these feed bunks are plated to seal the ends, with metal legs welded underneath for durability. The product is also available by the foot for constructing long, fence line bunk systems.

These metal bunks feature a 5/16-3/8 in. thick trough, making them virtually indestructible and impervious to rusting out despite harsh winter conditions. At a little over 1,000 pounds, they are too heavy for cattle to move, but easy enough for the farmer. 

“When we start taking bulls up to 22 months, for safety I don’t want to get in the pens with them,” says Williams. “We plan to feed them over the fence with GoBob Forever bunk line feeders, which should last decades.”

Preparing for spring

Now is the peak time for farmers and ranchers to build, add to, or improve their cattle corrals and working facilities – where cattle are branded, de-horned, vaccinated, doctored, or sorted – before winter sets in. But merely settling for standard cattle working equipment without considering if better options exist can be costly.

When cattle working equipment is required, until recently a rancher’s only choice was costly, portable lightweight, bolt together units or very expensive custom made units built on site. But permanent custom units that improve cattle working safety and efficiency are now available at an affordable price.

For instance, GoBob’s adjustable cattle alley is constructed from all new schedule 40 pipe so it is heavy, built to last, and comes complete with four gates, though gate size and number can be customized. 

While traditional alleys are 20 feet long, the livestock equipment supplier offers custom lengths from 10 to 40 feet and adjusts from 30 in. wide down to 18 in. without pins and levers, using smooth rotary adjustment. 

“Custom alleys and gates are almost required because ranch layouts are unique and everyone works cattle a little differently,” says Williams. “Custom equipment can be particularly important to part-time ranchers, who may need to adjust alley angle to use existing barns or pens.”

For added safety, alley height can be customized from 3 to 6 feet or more, catwalks added, and even special combo alleys provided. 

According to Williams, cattle can get excited and stressed when you get them in an alley or head them into a chute. “By using versatile equipment you can adjust to your set of cows, whether it is a higher alley, a double alley, or adding catwalks, you make it safer and easier for yourself, your help, and your cattle.

“I buy heavy-duty cattle working equipment and prefer to customize equipment when possible because it only takes one preventable accident to make you wish you’d done it right,” says Williams.

The livestock equipment supplier’s crowding tubs can similarly be customized by the angle cattle enter or exit to make ranchers’ cattle working operations more efficient. 

Using pre-manufactured radius panels for easy permanent installation, ranchers can custom-build their traditional or cornerless crowding tubs to turn cattle 90 degrees, 180 degrees, or something in between because the panels and even the crowding gate are sold separately. Instead of limiting crowding tubs to standard 90 or 180 degrees, the custom crowding tubs can vary tub angle to suit ranchers’ layouts.

For greater versatility, the supplier’s loading chutes can be constructed for both semi and stock trailers, with the loading sides reversed at the rancher’s discretion. Such dual purpose cattle loading chutes allows loading semis or stock trailers from one location by simply changing the position of the loading gate. Safety features from catwalks, to access gate, sheeted sides, plate floor, and anti-slip bars can also be added.

“Buying quality equipment in the cattle business makes sense because you buy it once and it works as intended when you need it,” concludes Williams.  “Your ROI can be surprisingly quick when you avoid premature replacement costs, equipment downtime, safety issues, and operate more efficiently.”

Whether farmers and ranchers take advantage of durable hay saving feeders or operate more safely and efficiently with custom cattle working equipment, the time to improve their operation is now – before the first frost of winter sets in.

For more info, call 1-866-532-9123 or visit www.gobobpipe.com.

Material on BEEF Briefing Room comes directly from company news releases. Source: GoBob Pipe.

Best management practices for ranchers compiled in book form

If there’s one thing true about cow-calf production, it’s that nothing is simple. Everything is inter-related in a very complicated system, and what you do in one part of your ranch management  affects your operation in many other ways.

To help ranchers in The upper Midwest understand those inter-relationships and work through the many and varied management decisions that have to be made every day, SDSU Extension recently released “Best Management Practices for Cow-Calf Production,” which was developed as a go-to resource for cattle producers.

"This iBook is really unique. Fresh and up-to-date, there isn't anything like it available for cattle producers in this region of the country," said Barry Dunn, South Dakota Corn Utilization Council Endowed Dean of the SDSU College of Agriculture & Biological Sciences, SDSU Extension director.

More than 20 South Dakota State University faculty and SDSU Extension staff contributed to the peer-reviewed iBook which serves as a comprehensive resource containing the latest in research-based information on all aspects of the cow-calf industry, including developing heifers, integrating backgrounding, systems management, nutrition, reproductive technologies and management, health programs, genetic testing, marketing strategies and range and pasture management innovations.  

"Whether you're a seasoned cattle producer or just starting out, this iBook is a valuable resource providing applicable information on best management practices critical to a cow-calf operation," said Rosie Nold, co-editor of the book and SDSU associate professor.

As an iBook, the resource is interactive, and when new information is released, the book can be updated more quickly than traditional hard-cover books.

"Even a seasoned producer needs an up-to-date guide because the beef industry is continually changing. Today, there are fewer producers, larger herds and the genetic potential of animals has improved dramatically," said Joe Cassady, SDSU Animal Science Department head and professor.

As changes to the herd, feed supplies or farm and ranch goals occur, cow-calf producers respond by adapting and improving their management practices. "This book is designed as a go-to tool to help them make decisions based on the latest research," Cassady said.

Although all the information is scientific and research-based, this iBook is written for the layperson, explained Cassady. "Cattle producers don't go to academic journals for information. We developed this book so they would have the information they need in an easy to understand and navigate format."  

For example, the section on reproductive management pulls heavily from recent research conducted at SDSU by Dr. George Perry, animal science professor and co-editor of the book. 

The iBook will also be used as a text book.

"Truly a living book, this is one textbook our students can take with them to utilize it as a reference guide whether they return to their family's cow-calf or feedlot operation or work in the industry as a feed or pharmacy rep," said Dunn, who spent the first 20 years of his career ranching and the next 10.5 years teaching beef production at SDSU and Texas A&M University, Kingsville. 

Before its release, this iBook underwent a third-party, peer-review conducted by experts in each specialty area. To purchase this iBook, visit iGrow.org/store.

 

CRYSTALYX Brand Supplements

Watch out for moldy hay this winter

cattle-hay2clx.jpg

As winter approaches we need to start thinking about feeding hay. This year has been very hit-or-miss in terms of rainfall. Those who got it, got more than enough. And those who didn’t, well... The problem is that most of the available hay is going to come from those areas that received ample rainfall and faced less-than-ideal harvesting conditions. Under those circumstances, mold becomes an issue.

No matter how hard you try, all hay will have at least a small amount of mold. Mold growth can occur in the field during the drying process or after baling. Unless mold is present at a level that it can be readily smelled and seen with the human eye, it usually isn’t an issue for your livestock. Horses and other non-ruminants are most susceptible to mold toxicity; however, ruminants can also be affected under certain circumstances. When mold is obviously present, you need to take action to minimize negative effects caused by dust, mycotoxins and reduced nutritional quality.

The physical dust created by the mold spores can be an issue. Horses are most susceptible and can develop respiratory issues, Recurrent Airway Obstruction (RAO or heaves). A horse with RAO has a normal temperature and appetite but exhibits labored breathing during exercise with coughing and nasal discharge.

Not all molds produce dangerous mycotoxins and even the ones that do, produce variable amounts. Once again, horses and non-ruminants are most susceptible. Ruminants are protected to some extent due to rumen fermentation, but they are still susceptible when the mycotoxin load is excessive, especially pregnant animals and those under stress.  The potential negative effects of mycotoxins include: abortions, reduced feed intake, lowered fertility, suppression of the immune system, lethargy and increased morbidity.

Additionally, heat generated by mold growth can result in significant loss of dry matter and energy within the forages. Carbohydrates are consumed by the mold and heating denatures protein rendering it unavailable for use by the animal. The overall result is poor nutritional quality.

So if you find yourself with moldy hay, what can you do? Below is a list of strategies that you can follow to deal with moldy hay:

  • The first thing to do is to identify your most “at risk” animals and avoid feeding them moldy hay if possible. Animals deemed to be the most at risk will be non-ruminants, especially horses, and pregnant and/or stressed livestock.
  • Next, identify the least susceptible animals (mature male ruminants, open mature female ruminants) and feed the worst hay to them.
  • Allow livestock to sort through hay and reject moldy portions. Remove rejected hay and discard.
  • Another strategy is to dilute the moldy hay with “clean” feed. This can be good quality hay or high fiber feedstuffs such as soyhull pellets, dried distillers’ grains or baled corn stover.  
  • Feed hay outside to minimize respiratory issues due to dust.
  • If late enough in the season, you can use temporary fencing to take advantage of new spring growth in non-pasture areas to reduce reliance on hay.
  • In all cases, provide high quality minerals or vitamins and make sure that protein and energy are not lacking in the diet. There are a wide variety of self-fed supplement products that can help you meet these needs. Livestock on a high nutritional plane will be much more capable of withstanding a temporary encounter with mycotoxins than animals that are lacking.

Visit www.crystalyx.com for more information on providing quality minerals, vitamins and protein through self-fed low moisture block supplements.

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Is the cattle cycle back? Part 2 of a 2-part series

Weaned beef calves

Last month’s column looked at 80 years of cattle cycles — each lasting from nine to 11 years. My goal this month is to project the next cattle cycle and its related price cycle.

Let’s start with a look back at some historical data. Figure 2 shows the U.S. All Cattle numbers from 1986 to 1996. Compare that to Figure 1 and note that cattle prices tend to go in the opposite direction that cattle numbers go. Since beef cow producers in the aggregate respond to beef prices, cattle numbers tend to mirror beef prices, but with a biological lag.

Please note five things about Figure 1:

  1. The distances between the three price lines (Figure 1) change as we go through the price cycle.
  2. The distance between the price lines implies different buy/sell margins directly impacting post-weaning enterprises.
  3. The larger the buy/sell margin, the harder it is to make money with post-weaning enterprises.
  4. Beef prices tend to go in the opposite direction of cattle numbers.
  5. In Figure 2, note the U-shaped cattle numbers cycle and the opposite shape of the cattle price cycles (Figure 1).u.s. all cattle numbers

Fast-forward 10 years to 2006. The seven years of volatile corn prices from mid-2006 through 2013 turned the cattle industry upside down and, basically, broke the cattle cycle (Figure 3). Note the trend line for corn prices over these seven years, and then note the trend line in Figure 3 for U.S. All Cattle numbers. Basically, from 2006 to the present, the cattle cycle has been broken.

Will we see cattle cycles again? Assuming that corn prices stay reasonably stable, as we saw before 2006,
I would answer “Yes, I think so.”

Cattle cycle theory

Let’s now review the theory of cattle cycles. Hopefully, this will help clear up the concept of cattle cycles and beef price cycles. I am turning to a master’s degree thesis at the University of Wyoming to help explain cattle cycles. Figure 4 was taken from that Wyoming master’s degree thesis published in early 2000s.

Let’s review this chart in detail and try to grasp this researcher’s concept of cattle cycles. He uses three relationships in this cattle cycle diagram: cattle prices, cattle numbers and harvest numbers. There are four stages of a cattle cycle listed across the top of the diagram. The stages are:

• Rebuilding stage

• Exhaustion stage

• Sell-off stage

• Last stage

Rebuilding stage: Starting on the left-hand side, which we’ll call year 1, cattle numbers (the yellow line) are going lower, so the harvest number (the red line) is also going lower. As harvest numbers continue down from year 1 through year 5, prices keep increasing. Increasing prices, in turn, stimulate increasing cattle numbers through heifer retention. But due to the biology of the beef cow, the cattle number increases lag the price increases. Harvest numbers go lower and lower as heifers are diverted from feeding to breeding. Note the low in harvest numbers around year five. This is where we are now, sort of.

Exhaustion stage: Prices finally peak out somewhere around year five and turn downward. Due to the lag in heifer development, cattle numbers keep building even as prices turn lower. Lower prices finally stimulate less heifer development and even some selling of mature cows, leading to even more harvest numbers. Increased harvest numbers pressure prices even lower.

Last stage: Finally, lower prices stimulate even more harvest numbers, and prices reach a bottom. Then, the cycle starts over again.

Some things to note about Figure 4:

  • The cattle numbers cycle lags the price cycle.
  • Harvest numbers run countercyclical to price.
  • The price cycle causes cattle number cycles; i.e., ranchers hold back more heifers as prices increase and sell off more females when prices are low.
  • The price cycle and numbers cycle together drive the harvest cycle.

While in theory the cattle cycle, price cycle and harvest cycle move in nice smooth curves, in reality these curves are not so smooth. These theoretical curves, however, can help us all perceive how the cattle cycle and price cycle will tend to go through time.

Projecting the next cattle cycle

Record beef cow profits in 2014, coupled with a favorable corn prices outlook, clearly triggered an interest in herd expansion. Existing cattle producers are asking me about holding back additional heifers, and I am getting phone calls from outsiders wanting to own beef cows. Yes, the next cattle cycle in now underway.

Let’s turn to data from the University of Missouri’s Food and Agricultural Policy Institute (FAPRI) to project the next cattle cycle ahead for nine to 10 years. Figure 6 presents FAPRI’s spring 2015 projected U.S. national beef cow numbers through the next cattle cycle. Note that the numbers suggest a five-year expansion phase projected to peak about at the same level as the year 2010. Then, we will have five years of slow, decreasing beef cow numbers completing the cycle somewhere around year 2024. I will use this for my next cattle cycle projection.

I decided to overlay my price projections over FAPRI’s projected U.S. All Cattle Inventory numbers for the next cattle cycle. FAPRI focuses its feeder cattle price projections on Oklahoma City 600- to 650-pound steer prices. Figure 7 presents historical Oklahoma City prices and U.S. All Cattle numbers for 2008 through 2014. The data for 2015 through 2024 are FAPRI’s projected All Cattle numbers and projected Oklahoma feeder cattle prices for the 2015 through 2024 time period.

Figure 8 presents my projected fall weaning steer calf prices for the eastern Wyoming/western Nebraska region for the next cattle cycle. The prices in Figure 8 for 2008 through 2014 are my historical fall weaning prices, including my September 2015 projected $242 fall weaning price. The 2016 through 2023 lines are my projected long-run planning prices based heavily off FAPRI’s projected Oklahoma City 600- to 650-pound feeder prices.

The projected fall 2015 weaned steer price is down substantially from the record high in 2014; however, if this projection comes true, this 2015 weaning price is still the second-highest on record.

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

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Meat Matters

Anatomy of a cattle market collapse

Beef marketing

The live cattle and wholesale beef markets were still reeling in early October after a historic late-summer collapse that saw cattle prices fall 22% in eight weeks. However, the seeds of the collapse were sown nearly a year earlier.

Cattle feeders were coming off one of their most profitable periods in some years in 2014, and had built a strong equity position. They pushed feeder cattle prices to record highs in their desire to fill pens. Breakevens seemed high but no one was concerned, as cash live cattle prices topped $170 per cwt the last two weeks of November 2014 to set a new all-time record.

At the same time, carcass weights set new all-time highs. Heifer weights averaged 830 pounds for the week ended Nov. 8, 2014, and steer weights averaged 906 pounds the following week. Way back in the fall of 2007, they averaged under 860 pounds.

2015 began with live cattle in early January averaging $169.67 per cwt, the fourth-highest price ever. This would prove to be the high for this year. Prices fell $10 per cwt by the end of February, and cattle feeders faced big losses. They were paying the price for buying such expensive replacements the previous fall and forgetting that the money always runs out before the cattle.

Cattle Market Audio

Listen to the Weekly Cattle Market Wrap-Up NOW!
Click here to get the latest market update from USDA's Ed Czerwien. Listen here.

Losses continued, so cattle feeders kept feeding cattle longer and longer to avoid having to replace them — because it was economical to do so, and to try and reduce the losses with more weight. A few analysts warned this could create a backlog. But as cash live cattle prices appeared to put in a low the third week of July, then rallied to $151 per cwt the first week of August, most cattle feeders shrugged off the warning and kept holding cattle.

One factor out of cattle feeders’ control was that packers from March through August ran steer and heifer slaughter at their lowest levels in many years because of weak beef demand. August commercial cattle slaughter was the lowest since 1961. Cattle feeders were unable to sell some cattle even if they wanted to.

As it turned out, cattle feeders ignored the warning signs at their peril, as they did in 1993. The price declines that year were much less extreme (14%). But the industry also ignored warnings of a backlog until it was too late. Cattle feeders had endured a tough winter, and there was talk in the spring of 1993 of heavy death losses and no backlog. But many ignored the fact that the number of cattle on feed for 120 days or more on March 1 was 700,000 head more than the prior year. Prices on a monthly basis peaked in March, then eroded every month but two to put in a monthly low in December.

In retrospect, the longer feeding time only delayed the inevitable. Steers set a new carcass record of 914 pounds the first week of September, and this had increased to 923 pounds two weeks later. Weights don’t normally peak until mid-November, so steers could reach 935 pounds or more.

These jumbo-sized carcasses also carried more backfat than seen in years, so cattle feeders faced heavy discounts for both overweight and over-fat cattle. That’s the main reason why cattle sold as low as $114 per cwt in Iowa on Oct. 2. One can only hope the supply of these cattle was cleaned up in October, and that the market has started to rebound. But the collapse is a reminder that the first loss is the least loss in cattle feeding.

Steve Kay is editor and publisher of Cattle Buyers Weekly (cattlebuyersweekly.com). See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.

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Wulf Cattle Company finds success in value-added cattle

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When Jerry Wulf talks about how the feeder cattle market is changing, he speaks from experience. Wulf Cattle Company, Morris. Minn., has ranches in Minnesota, South Dakota and Nebraska, as well as a feedyard that markets nearly 55,000 fed cattle each year. Many of the feeder cattle come from their own genetics, Wulf says; they purchase many of their bull customer’s calves so they can follow them through the feedyard.

The Wulfs jumped into the value-added cattle business early on, starting about 20 years ago. More recently, they have added an all-natural program, and six years ago, a NHTC (non-hormone treated cattle) program for the European Union market. Although producing cattle for this many different markets may seem complicated, Wulf has good reasons for taking it on.

“We have found that if we can influence and control the genetic component of the animal we are feeding, we can get more margin by pursuing the value-added market. It has brought us closer to our customer, and taught us how to listen to them,” he explains. In 2007, Wulf says Tyson approached them about the all-natural program, and becoming a producer of NHTC. “They wanted us to be a supplier of this type of beef,” he says.

“We are now the largest supplier of Tyson's value-added cattle program. We deliver cattle to Lexington (Neb.) every week for both the natural and NHTC programs. We meet with Tyson quarterly, and we have the opportunity to meet with their customers. By listening to them, we find out what they want, and what the consumers want. Then we go back up the supply chain, and build those value-added cattle,” he says. “We strive to listen to them, and go back and build the cattle they are happy with, keeping efficiency and production in mind.”

During their quarterly meetings with Tyson, they discuss the demand for that type of beef, where they think the market for this program is headed and if it will keep going, he says. “We have been amazed that even through the high cattle prices, the demand for this program has been sustained, and even grown for these value-added products. They want cattle that are guaranteed humanely-raised. They are even starting to talk about how to raise beef without GMO corn. Tyson has implemented its own initiatives beyond the all-natural program,” he says.

Nebraska seedstock producer Loren Berger sees big changes coming down the pipe in feeder cattle pricing. “I think there will be a major change in the next 10-15 years in how feeder cattle will be priced. Right now, price is based on averages, but in the future, companies may start looking at the true value of feeder cattle and how they are raised, and price them based more on what they are really worth.”

There are data that suggests the difference between an average pen of cattle in the feedlot and a superior pen of cattle is over $200 a head. “If we can measure those differences prior to going to the feedlot in terms of how they were managed, preconditioning and genetic potential, by far the most valuable will be the history of those cattle in previous years,” Berger explains.

“If you have data to show that my cattle have performed a certain way in the feedlot for a number of years, that is probably the most convincing data you have to put a value on those cattle. If they are superior, they should demand a premium because they are worth more than the average,” he notes.

In their own operation, Wulf says they are integrated from genetics to slaughter, which makes them totally transparent. “The only way to do that is to assume a share of the risk,” Wulf says. “All our cattle are either sold on the grid, or we are required to meet certain specifications. As long as we do that, Tyson has been good about sharing information and feedback.”

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Wulf shares the information he gets back from Tyson with the ranchers who supply feeder cattle. “This information helps us find out if the calves performed good or bad. Someday, we hope that allows us to pay our calf suppliers more. But we won't do that until we get a complete history on how they perform. Clearly, we need a health score card, including morbidity and mortality, as well as feedlot performance data.”

Whitman, Neb. seedstock rancher Jerry Connealy also sees value-added and end-product merits becoming more important, and discounts getting bigger as fed cattle marketing changes. “A lot of our customers wean and sell their calves, but there are more all the time who are retaining ownership, backgrounding and selling to the feedyards. We even have quite a few taking them through finish,” he says.

“No matter what they do, they are getting feedback in some way. If they sell them, those calves go to a feedyard and get data back. Based on that data, they either show up in the seats to buy those calves next year, or they don't. If those calves are taken all the way to finish, the producer will get data back from the feeder and the packer,” he says.

“Based on that, (that rancher) will be back at my sale next year buying bulls again, or he will change his criteria on what pressure he wants to place on marbling, ribeye and backfat based on the failings on the report from the packer,” he explains.

Gayle Smith is a freelance writer from Potter, Neb.

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