Beef Magazine is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Sitemap


Articles from 2006 In November


Ethanol Corn Crunch Both Good And Bad

Reducing American dependence on oil and petroleum products via increased domestic ethanol production is doable, and could benefit ag on a net basis, though livestock sectors may pay the price.

That's the aggregate view of two recent studies, one conducted by Iowa State University's Center for Ag and Rural Development (CARD), and the other commissioned by the 25 X '25 Working Group. The 25 X '25 program seeks to have America producing 25% of its energy needs by Year 2025.

"Much of the debate surrounding the current incentives to the ethanol sector suggests these incentives are driven in large part by a desire to reduce U.S. dependence on imported oil. By stimulating the production of ethanol to as much as 20% of total fuel use, these incentive structures appear to be well on their way to meeting this goal," explains the CARD report. "Other beneficiaries include landowners, who will benefit from a dramatic increase in corn prices and associated increases in land rents.

"U.S. crop growers will benefit until the higher profits are captured by higher land values and land rents. Dairy and beef producers who are near ethanol plants will benefit from having access to DDGs (dry distillers grains). Owners of ethanol plants will benefit until corn prices rise to eliminate the current arbitrage in ethanol production.

"Specialized pork and poultry producers who don't own shares in ethanol plants will lose, as higher corn prices, and eventually reduced international competitiveness, cause a reduction in production levels. The transition to these lower production levels will be painful for most of these producers. Ethanol construction will stimulate rural economies, as will the flow of profits from ethanol facilities. However, there will be a reduction in livestock in these same areas and this will eventually work to offset this advantage," the report says.

Meanwhile, the 25 X '25 study conducted by researchers at the University of Tennessee concludes:

  • The 25 X '25 goal is achievable. Continued yield increases in major crops, strong contributions from the forestry sector, utilization of food-processing wastes, as well as the use of over 100 million acres of dedicated energy crops, like switch grass, will all contribute toward meeting this goal. A combination of all these new and existing sources can provide sufficient feedstock for the additional 15.45 quads of renewable energy needed (a quad is 1 quadrillion BTUs).
  • The 25 X '25 goal can be met while allowing the ag sector to reliably produce food, feed and fiber at reasonable prices.
  • Reaching the goal would have an extremely favorable impact on rural America and the nation as a whole. Including multiplier effects through the economy, the projected annual impact on the nation from producing and converting feed stocks into energy would be in excess of $700 billion in economic activity and 5.1 million jobs in 2025, most of that in rural areas.
  • By reaching the 25 X '25 energy goal, the total addition to net farm income could reach $180 billion, as the market rewards growers for producing alternative energy and enhancing our national security. In 2025 alone, net farm income would increase by $37 billion compared with USDA baseline projections.
  • Reaching the goal would also have significant positive price impacts on crops. In the year 2025, when compared with USDA baseline projections, national average per bushel crop prices are projected to be 71¢ higher for corn, 48¢ higher for wheat, and $2.04 higher for soybeans.
  • With higher market prices, an estimated cumulative savings in government payments of $15 billion could occur. This doesn't include potential savings in fixed/direct or Conservation Reserve Program (CRP) payments.
  • In the near term, corn acres are projected to increase. As cellulosic ethanol becomes commercially viable after 2012, the analysis predicts major increases in acreage for a dedicated energy crop like switch grass.
  • The higher crop prices don't result in a one-to-one increase in feed expenses for the livestock industry. Increases in ethanol and biodiesel production result in more distillers dried grains (DDGs) and soybean meal, which partially compensate for increased corn prices. Moreover, the integrated nature of the industry allows for the adjustment of animal inventories as a way to adjust to the environment and increase net returns. In addition, the production of energy from manure and tallow could provide additional value for the industry.
  • Contributions from America's fields, farms and forests could result in the production of 86 billion gals. of ethanol and 1.2 billion gals. of biodiesel, which has the potential to decrease gasoline consumption by 59 billion gals. in 2025. The production of 12.83 quads of energy from biomass and wind sources could replace the growing demand for natural gas and coal-generated electricity. These renewable energy resources could significantly decrease the nation's reliance on foreign oil and fossil fuels, and enhance the national security of all Americans.
You can find the complete CARD study at www.card.iastate.edu and the 25 X '25 report at www.25X25.org.

Corn Prices Lose Some Momentum

Though the cost of corn remains high, at least it seems to have found a practical top for the time being.

"The recent run-up in corn prices appears to be over, at least for now," says Derrell Peel, Oklahoma State University ag economist. "Much of the price increase was based on expectations about new ethanol demand but the fact is most of that increase isn't a reality yet. Corn futures also indicate corn markets have topped for now. It's possible corn prices could actually retreat somewhat depending on how feed use, exports and other market segments adjust to the higher prices over the winter, although prices are likely to remain well above year-ago levels. At any rate, corn prices aren't expected to continue increasing anywhere near the rate seen recently, if at all."

For the week ending Nov. 19, according to the National Ag Statistics Service.

  • Corn -- 94% is harvested, which is 4% behind last year and 1% behind the five-year average.
  • Soybeans -- Growers have harvested 96% of the crop, compared to 99% at this time last year and 97% for the average. Harvest lagged behind normal in the eastern Corn Belt and Ohio River Valley. Kentucky growers are 15 points behind the normal pace with just 77% of their acreage harvested.
  • Winter Wheat -- 92% of the crop has emerged, 1% ahead of last year and the five-year average. 57% is rated good or excellent, compared to 55% at the same time last year; condition has declined slightly in the past two weeks.
  • Sorghum -- 89% has been harvested, compared to 91% last year and 88% for average.


Market Demands Some ID Today

Though NAIS has apparently become road-kill on history's highway, there's no question the market is paying for verification of certain practices and product attributes that must be substantiated via individual animal ID.

For example, it seems everyone is chattering about source and age verification, and more recently Non-Hormone Treated Cattle (NHTC) for the European Union.

Premiums for age -- specifically for cattle 20 months of age and younger and eligible for export to Japan -- have been running $3-$4/cwt. on feeders and $2-$3/cwt. on fed cattle, according to Bill Mies, eMerge Interactive vice president of national accounts.

That's when premiums are available, though. According to Mark Spire, Schering-Plough Animal Health bovine technical services manager, sources for age premiums are dwindling. He explains packers are typically able to meet still-paltry Japanese demand by pulling from their regular purchases.

Both of the gentlemen visited with BEEF recently about the differences and similarities between Quality Systems Assessment programs (QSAs) and Process Verified Programs (PVPs). Both are USDA programs used to verify source, age and other cattle attributes.

"The biggest misunderstanding in the country, and I think one that has slowed adoption of source and age verification, is some mistakenly think these are steps in a national animal ID program," explains Mies. "They're amazed to discover these (QSAs and PVPs) are private-industry programs aimed at getting them more money for their cattle."

Spire emphasizes there are lots of folks, including government officials, who continue to wrap NAIS -- and its purpose for national animal disease surveillance and animal health monitoring -- with animal ID needed for market-driven programs such as QSA and PVP. "This confusion has delayed the widespread adoption of both types of USDA programs," he says.

You can explore QSA's and PVPs in more detail in the upcoming December issue of BEEF. The next issue of BEEF Stocker Trends will also provide more info about these programs.

National ID Is Dead

USDA effectively and quietly knocked the National Animal Identification System (NAIS) in the head last Wednesday. It did so with the unheralded publication of the "NAIS User Guide," which replaces all former NAIS draft documents. This document, for the first time, emphasizes NAIS as a voluntary program rather than as a steppingstone to a mandatory one.

In fact, at the very beginning, the guide explains, "USDA is not requiring participation in the program. NAIS can help producers protect the health and marketability of their animals -- but the choice to participate is theirs."

Late last month at a community outreach event in Kansas City, Chuck Conner, USDA Deputy Secretary, and Bruce Knight, USDA Under Secretary for Marketing and Regulatory Programs, paved the way for the agency's back-pedaling.

"Since we've had some confusion on this, we need to be as clear as we can be. This is 'voluntary' with a capital V. Not a currently voluntary, then maybe a mandatory system. This is a permanently voluntary system at the federal level," Conner said.

"We're making it crystal clear that NAIS is voluntary -- no ifs, ands or buts," explained Knight. "Farmers can choose to register their premises. They can choose to participate in individual animal or group identification. And they can opt to be part of tracking. Or not."

The guide goes on to explain, "Participation in NAIS is voluntary at the federal level. Under our current authorities, USDA could make the NAIS mandatory, but we are choosing not to do so -- again, participation in every component of NAIS is voluntary at the federal level. The NAIS does not need to be mandatory to be effective; we believe the goals of the system can be achieved with a voluntary program. As producers become increasingly aware of the benefits of the NAIS and the level of voluntary participation grows, there will only be less need to make the program mandatory."

Absent from the "NAIS User Guide" are the suggested timelines and benchmarks for achieving an effective level of producer participation. Instead, USDA emphasizes its belief that market demands will provide the necessary incentive for participation.

That's possible, though it hasn't been the case, thus far. It's hard to imagine, too, the need commerce will see for a system cohesive and coordinated enough to provide the industry-wide, 48-hour trace-back NAIS was designed to provide. Consequently, the only real incentive for animal ID remains to be the value individual producers see in it for management purposes.

So, it seems NAIS is over, at least for the tenure of the current administration.

You can find the complete "NAIS User Guide" at animalid.aphis.usda.gov/nais/naislibrary/documents/instructions_guidelines/NAIS-UserGuide.pdf.

Grassland Oregon introduces SucraSEED

Grassland Oregon recently introduced SucraSEED, a new line of high-sugar grass seed products designed to increase livestock growth and dairy milk yield while reducing environmental pollution. The new seed mixtures produce a progressive variety of forage grass that is already in wide use in Europe and New Zealand with profitable results. Now, SucraSEED is readily available and gaining momentum within the US farming and ranching markets.

Since its development 20 years ago by the Institute of Grassland and Environmental Research (IGER), High Sugar Grass (HSG) has been shown to provide a number of benefits to dairy, beef and lamb producers. Multiple trial studies have demonstrated measurable increases in livestock performance, including increased live weight gains in lambs and beef cattle (up to 20%) and higher dry-matter intakes (up to 4.41 lbs/head per day) and increased milk yield in dairy cows (up to 6% more milk for the grazing season).

This increase in productivity is caused by very high levels of water-soluble carbohydrates (WSC) present in the specially bred grass. The sugars, by providing extra energy to microbes in the animal’s rumen, allow the animals to digest more of the protein that they take in. As a result, more grass protein is converted to milk and meat, and less is excreted as unused nitrogen into the land.

The decrease in waste nitrogen is a significant environmental benefit. HSG studies in Europe and New Zealand, for example, reported a reduction in nitrogen pollution of as much as 24%.

Grassland Oregon’s SucraSEED product line includes mixtures specially formulated for specific livestock: Beef Bank (for cattle) Cash Cow (for dairy) and Great Gains (for sheep and goats). For complete information about Grassland Oregon and SucraSEED, please visit: http://www.sucraseed.com

Minimize disease by spreading cattle out

The more dense the animal population, the more likely disease will be present, say veterinarians Mike Apley and Mark Hilton. Simple phrases like “exposure equals disease” or “the solution to pollution is dilution” are accurate, they say.

As an example, why does one Midwest operation calving in a mud lot in February have calf diarrhea while a herd just a mile down the road that begins calving in late April on pasture has none?

A scouring calf produces billions of disease organisms. If there are 40 pairs on five acres, it's almost a guarantee that more calves will be exposed and they will amplify that pathogen. Billions of organisms turn into hundreds of billions.

All neonates are “incubators of disease.” They simply do not possess the level of immunity that an older animal possesses. If this same group of 40 cows calved on 80 acres of pasture, the chances of calf scours developing in the herd are many times less likely.

Worry About The Important Stuff

I suppose someone can make the case that national ID, or even country-of-origin labeling, can save your operation in the case of a disease outbreak. In reality, however, neither is likely to amount to a hill of beans in and of themselves in regard to the profitability of your specific operation.

Rather, they reflect broader national issues, likely your vision of what it means to be customer-centric and what is the proper role for government. These can be very important issues, but if they involve very much of your time or energy, they probably reflect management priorities that are way out of line.

I received an email this week from a producer who said he hadn't slept well for a couple of years because of one of these issues. I admire his commitment and passion but, upon reflection, it made me think of how often we let one of these industry issues take on a life of its own and its importance to swell all out of whack.

If this producer had spent all those sleepless nights focused on marketing his cattle better, breeding better cattle, enjoying his family more, making a bigger contribution in his community, or even team-roping, he would be a lot happier and healthier.

These broader philosophical arguments mentioned above aren't without merit, and may be worth good discussion, even an occasional debate. However, there are a lot more important things that relate directly to the success of our operations that deserve our time and consideration.
-- Troy Marshall

Fear and Greed, And Supply and Demand

After three years of record-breaking, bin-busting corn harvests, corn prices have defied all conventional wisdom by skyrocketing. Bred females have lost $300 and calves $150/head in the initial market implosion.

In the short-term, fear and greed rules, and they certainly took over the last several weeks. When one domino fell, the others followed closely, and market fundamentals became irrelevant. We went from a "never having another bad day" attitude to "we are heading to zero at Mach 1."

While the reality is somewhere in between, the situation illustrates why commodity producers always seem to focus on supply. It's not because supply is the biggest factor; it's simply the factor we can quantify either before or after the effect, and supply to some extent is also under producers' control.

Demand is a more nebulous measure; it's rarely fully known until after the transaction occurs. Still, it is demand that has rallied the corn market; it is demand that has made it possible for our industry to enjoy unprecedented prices for an extended period of time. It is demand that will take corn to new price levels, as well.

It's unfortunate our industry has always been so supply-driven and cost of production-oriented. Just imagine what we could have done if we'd focused on growing the top line instead.
-- Troy Marshall

Wisconsin Rolls Out Voluntary Animal ID Cost Sharing

Wisconsin is offering a voluntary animal ID cost-sharing program on a first-come, first-serve basis to in-state producers with a premises registration number. The program consists of sign-up, approval and confirmation of participation followed by tag purchase and application, reports Wisconsin Ag Connection. Reimbursement is upon completion of these steps.

Meanwhile, USDA has released official Animal Identification Numbers (AIN) as part of the National Animal Identification System (NAIS). The Wisconsin Department of Ag Trade and Consumer Protection (DATCP) and the Wisconsin Livestock Identification Consortium (WLIC) are initiating the voluntary animal ID program using DATCP-selected AIN tags. All USDA-approved devices will be accepted as official ID in Wisconsin. Cost sharing, however, will be for DATCP-selected AIN Radio Frequency ID tags only and doesn't cover application of tags, the report says.

For background on how to purchase animal ID tags or devices, visit: http://animalid.aphis.usda.gov/nais/animal_id/purchase_tags.shtml. Learn more about NAIS at: www.usda.gov/nais.
-- Joe Roybal