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Cattle Feeding Profits May Be Short-Lived

cattle feeding profits

Finally.

In September, cattle feeders started turning a profit after more than two years of losses on average. Unfortunately, profits may be a short-lived exception.

“Looking ahead, even with the recent rapid decline in feedstuff costs, cattle feeding returns will be tempered by record high feeder cattle costs,” say analysts with the Livestock Marketing Information Center (LMIC). “Breakeven sales prices for steers placed in recent months have surged. Red ink is expected to return as soon as December of this year. Further significant upticks in heavyweight feeder cattle prices will likely require at least parallel increases in fed cattle prices.

This is based on the estimated monthly cattle feeding returns, a benchmark LMIC has kept since the mid 1970s. Those returns started turning red in May of 2011.

“The biggest losses in history were recorded on closeouts for June 2012. Most estimated closeouts finally went positive in September of this year and the LMIC’s calculations were well into the black in October,” LMIC analysts say. “These 29 consecutive months of red ink was the second longest time period in the LMIC monthly series.”

The folks at LMIC emphasize constructing a benchmark for cattle feeding returns is becoming increasingly difficult because the business has changed significantly in just a few years.

For example, the LMIC benchmark assumes a beef type steer weighing 750 lbs. placed in a Southern Plains feedlot, fed a standard corn-based ration, fed on a group basis, achieving average performance and sold in the cash market.

In contrast to these assumptions, LMIC analysts explain, “Increasingly, cattle are not custom-fed and the feedlot stage involves: purchasing animals well before they enter the feedlot, sorting animals often several times, using beta-agonists, using creative feedstuffs, sophisticated risk management tools, managing animals for specific markets, and the list could go on.”

 

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Calf And Feeder Prices Chug Ahead

calf and feeder cattle prices

Calf and feeder cattle prices continue to run counter to traditional seasonal trends.

Steer and heifer calves sold $1-$4/cwt. higher last week, with plenty of instances of prices $8-$10 higher, according to the Agricultural Marketing Service (AMS).

“Demand was equally good throughout the country for lightweight calves with most auctions starting the bidding process at $2/lb. for steers under 500 lbs. (even in the Southeast),” AMS analysts said Friday. “Buyers became noticeably price conscious at the $2 mark on calves over 500 lbs. as perhaps the arithmetic of $1,000/per head was just too easy to figure.”

A light test of true yearling cattle sold steady. The CME Feeder Cattle Index was about even week-to-week, while Feeder Cattle futures found more traction, especially later in the week as corn prices continued to erode.

 “The cheapest corn price in three years is causing many Midwestern farmers to consider walking a portion of their crop to town,” AMS analysts say. “Commercial feedlots are reluctant to butt heads with these seasonal buyers and usually find it easier to let them have their load or two and be on their way. Plus, most big feedyards are currently bursting at the seams with previously contracted country or video purchased cattle.”

Cash fed cattle trade continued sluggish this week but finally opened up Friday with live prices in the Southern Plains $1 higher than last week at $132/cwt. Week-to-week, Choice beef cutout values were $1.63/cwt. lower and Select was down $1.30.

“The beef complex has struggled again this week as turkey has taken front and center stage as we approach the Thanksgiving holiday,” says University of Tennessee agricultural economist Andrew P. Griffith in his weekly comments. “Beef is always considered an option in consumers’ diets, but this slowdown in prices may be an indication of some pushback from consumers due to high wholesale and retail beef prices. Additionally, it is going to be difficult for beef to gain any additional shelf space at retail due to the promotion of turkey.”

All of that makes it tougher sledding for feedlots (see Cattle Feeding Profits May Be Short-Lived), given the fact that calf and feeder markets appear to have more fuel left to burn.

 

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“The calf market has come through the heavy offerings and deliveries of October and November relatively unscathed,” AMS analysts say “Now, country deliveries are mostly complete and as we approach lighter runs in the auctions and the onset of holiday schedules, there still seems to be plenty of demand to push feeder and stocker cattle prices even higher.” 

Moreover, in recent weeks it appears producers are starting to hold more heifers back for production.

AMS analysts talked about the $2,700-$3,000 paid for top-quality pairs at the Northwest Cattlemen’s Association bred female and pair sale at Woodward, OK this week.

“Many believe prices like these could be only the tip of the iceberg by early next spring, depending on what kind of winter most areas experience,” AMS analysts say.

 

 

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Beef

EPA Proposes To Scale Back Renewable Fuel Quota

epa modifies Renewable fuel standard

The Environmental Protection Agency (EPA) in a Nov. 15 news release announced its targets for renewable fuel volumes in 2014. According to EPA, it will seek comments on the following proposed volumes:

  • Renewable fuel—15.21 billion gallons proposed volume for 2014, with a range of 15.0 to 15.562 billion gallons.
  • Cellulosic biofuel—17 million gallons with a range of 8 to 30 million gallons
  • Biomass-based diesel—1.28 billion galloons
  • Advanced biofuel—2.2 billion gallons with a range of 2.0 to 2.51 billion gallons.

The proposed volumes are less than the targets set out in the legislation that established the Renewable Fuel Standard. For example, the target of 15.21 billion gallons for renewable fuel, which is ethanol distilled from corn and biodiesel from soybeans, is less than the original target of 18.15 billion gallons established in the legislation.

According to EPA, the reason for the reduction is that the U.S. has hit the E-10 blend wall. “Nearly all gasoline in the U.S. is now E-10, which is fuel with up to 10% ethanol,” EPA says. Ethanol production has been increasing while advances in vehicle fuel economy and other factors have pushed gasoline consumption lower than what was expected when Congress passed the Renewable Fuel Standard in 2007.

“As a result, we are now at the E-10 blend wall, the point at which the E-10 fuel pool is saturated with ethanol. If gasoline demand continues to decline, as currently forecast, continuing growth in the use of ethanol will require greater use of higher ethanol blends such as E-15 and E-85,” EPA says.

The American Farm Bureau expressed disappointment with the announcement. “The American Farm Bureau Federation is disappointed in the Environmental Protection Agency’s proposed reduction in the amount of ethanol that must be blended into the nation’s gasoline supply,” says AFBF President Bob Stallman. “This decision strikes a blow to conventional ethanol production as well as dampens the prospects for advanced biofuels.

“The intent of the Renewable Fuels Standard revised in 2007 (RFS2) was to get more renewable fuels into our nation’s pipeline and move beyond the E-10 fuel blend. Today’s announcement from EPA moves us in the opposite direction. This decision has the potential to pull the plug on new technologies and investments that are currently in place and needed to produce advanced biofuels.”

Likewise, the Illinois Farm Bureau expressed disappointment. “The U.S. EPA’s decision to reduce the level of total renewable fuels for 2014 is both unwarranted and disappointing. Illinois Farm Bureau policy supports both the Renewable Fuel Standard (RFS) and higher blend levels of ethanol in our nation’s motor fuel supply to achieve reductions in greenhouse gas emissions and to push the United States farther down the path toward complete energy independence.  

 “In the coming weeks, Illinois Farm Bureau will submit comments and work with elected officials and other groups supportive of the RFS in the hopes of convincing EPA and the Administration to take a second look at a proposal that has the potential to drive up gasoline prices for consumers, increase greenhouse gas (GHG) emissions, and drop corn prices below the cost of production,” the group said.

Others, however, heralded the news.  A coalition of 21 groups, including the National Cattlemen’s Beef Association, said, “We appreciate this action as it acknowledges a problem exists with the current policy. The inflexible RFS mandate continues to have a detrimental impact on the economy and makes feeding animals risky because our industries are not competing on a level playing field.  Today is a step in the right direction, however, it is the responsibility of the Congress to find a lasting solution to this rigid, inflexible program and put livestock and poultry producers back on equal standing in the marketplace.”

American Meat Institute (AMI) Vice President of Regulatory Affairs and General Counsel Mark Dopp adds, “EPA’s decision to reduce the ethanol mandate is long overdue. While this is a positive step, the fact remains the RFS is a flawed policy that requires Congressional action. Even with a record corn crop expected this year, the damaging ripple effect of this defective policy has moved through the meat and poultry complex for the past several years. The time for Congressional action is now.”

The EPA decision to reduce the corn ethanol mandate of the Renewable Fuel Standard (RFS) is appreciated, Dopp said, as it acknowledges a problem exists with the current policy, but more needs to be done to fix the RFS, which continues to have a detrimental impact on food prices.

Recently-released USDA data show food costs have outpaced other staple items during the past year, climbing 1.4%, according to the Consumer Price Index released October 30. However, meat prices --which include beef, pork, poultry, and eggs – rose 2.9% since September 2012. According to USDA’s September Livestock Outlook, monthly retail beef prices set successive new records in July and August with Choice beef prices reaching $5.39/lb., while all-fresh beef reached $4.97/lb., according to AMI.

These price increases have occurred over the same time frame that ethanol use has skyrocketed. Ethanol use accounted for approximately 14% of total corn use in 2005-2006 and in 2012-2013 that percentage is projected to be more than 43% of U.S. production, AMI says.

According to Josh Winegarner, government relations director for the Texas Cattle Feeders Association (TCFA), "While TCFA continues to support full repeal of the RFS, we are pleased that EPA has proposed to use its waiver authority and reduce the 2014 statutory RFS requirement for grain-based ethanol production by 1.3 billion gallons. Interestingly, the proposed mandate for grain-based ethanol production is approximately the amount needed to fulfill the requirement for 10 percent inclusion in gasoline in order to serve as an oxygenate," he says.

"Unfortunately, it seems that they haven’t completely abandoned the idea of creating markets where they don’t exist, since they are soliciting comments on how to increase usage of E-15 and E-85. The fact that they are having trouble selling enough of those products to meet the current RFS mandate should tell them something."

In a separate action, EPA also will seek comments on petitions for a waiver of the Renewable Fuel Standards that would apply in 2014. “EPA expects that a determination on the substance of the petitions will be issued at the same time that EPA issues a final rule establishing the 2014 RFS,” the agency said in its news release.

The clock will begin ticking once EPA publishes both proposals in the Federal Register. Upon publication, a 60-day comment period will open.

 

 

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High Prices Are Just Part Of The Equation

cattle market prices continue higher

Just about every market summary and outlook you pick up mentions record prices and the prospects for new highs in the next few years. While record high prices are certainly preferable to record low prices for obvious reasons, these new record prices have raised questions. 

Rising input prices, drought, ethanol, and several other factors have prevented cow/calf producers from seeing significant benefits from these prices. Perhaps expansion will actually begin this fall and next year. All the signals point that direction, but contrary to what market signals should do, the industry continued to liquidate during the past few years of higher prices.

Feedyards were caught in the middle and went through what was a record period of extended losses; cattle feeders lost money for 29 consecutive months, with the first hints of profitability showing up in just the last couple of months. Reduced supplies are pushing prices higher, but input costs are rising, exposure to risk has gone up dramatically, and infrastructure is being permanently lost. 

We are experiencing some relief from the exploding costs of cattle feed and energy, but the structure of those markets dictate that the risk continues to be to the upside and the good old days of $2/gallon diesel and $2.50/bushel corn are gone.

 

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What’s more, rising cattle prices have fostered some concern by cattlemen over how high retail prices can go before consumers start to push back. Already, beef is being replaced by pork and poultry on some menus as the HRI trade tries to adjust to the higher cost of beef. Demand remains a concern; high quality branded beef programs and exports continue to enjoy growth but the traditional base of our market continues to struggle. 

 

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Innovative New Website Connects Buyers And Sellers Of Purebred Cattle

Bovalink.com is a new and exclusive way to advertise registered cattle to potential customers by connecting cattle operations across the country through a simple, easy-to-use website. The first of its kind, there has never been a more efficient or effective way to promote an operation large or small, while marketing cattle and semen all year round.

“Bovalink.com is a platform to put all your information in one, centralized location,” explained Garth Waletich, Bovalink.com creator and founder. “It’s easier to access for commercial cattleman and a great way to promote your operation.”

The website is set up much like a social network for cattlemen by connecting ranches, feedlots and individual buyers from across the country, making this a truly unique service. To be part of the site, a one year subscription allows anyone to easily become a member and includes a 100 percent money back guarantee if Bovalink.com doesn’t meet expectations.

“We stand behind our product the same way you stand behind your bulls,” assured Waletich.

Bovalink.com members have their own webpage on the site where they can feature purebred cattle and semen with multiple photos, videos, EPDs, scan data, sales results and much more. The information can be put on the site as soon as it is obtained, giving the ranch more exposure time with potential buyers.

After members have their information posted on the site, Bovalink.com starts their advertising campaign. The campaign includes email blasts, connection to Bovalink.com’s 7,000 plus Facebook followers, Twitter updates, sale calendars within agricultural publications and over-the-phone contacting. The website system can be used on mobile devices so everything can be viewed on a smartphone or tablet.

Bovalink.com knows the industry because Waletich not only works in the industry, but has been a part of it his whole life. Waletich was raised on a farm in Eden, SD and is now running a registered herd of his own. A strong supporter and promoter of the beef industry, Waletich saw a void in marketing for purebred breeders. To fill that void and give producers another opportunity to utilize technology and help increase profits, Waletich created Bovalink.com.

“This industry is our passion,” shared Waletich, “and we will work harder than anyone to get you more bids and increase your operation’s exposure. We look forward to working for the cattleman while promoting our industry.”

 

Eliminating Trans Fats – What This Means For Beef Producers

eliminating trans fats

The Food and Drug Administration (FDA) last week announced a preliminary ban on trans fats. I don’t have an opinion on how much of a health risk, if any, that trans fats represent. But it’s enlightening to note that, since the attack on trans fats began, consumption has fallen by approximately 80%. 

The marketplace has done a great job of reducing the use of trans fats, largely because of government action. For example, New York City made news by banning trans fat use in restaurants. Americans now consume less than 1 gram of trans fats daily compared to 4.6 grams/day in 2003. 

 

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Still, many food products still contain trans fats, including things like margarine, microwave popcorn, frozen pizza and coffee creamer. That is a significant portion of my diet. I get that the FDA commissioner called it poison, and many are calling for USDA to institute an absolute ban in school lunch programs. I just hope this isn’t like the elimination of animal fats in the oil McDonald’s used to cook its French fries; I’m not sure I can even remember how much better tasting those fries were than what they have today.

The activists have been all over this issue, and because nutrition has become so politicized it is difficult to determine what is “real” science and what promotes specific agendas. What we do know is that the anti-beef crowd has strong ties to the nutritional activists and we better do our homework, because eventually it won’t just be trans fats and large sodas that are on the hit list of foods they want to ban.

 

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What Do We Do About The .01 Percent Of Producers Who Actually Abuse Animals?

This week in Colorado we had an undercover video released by the group Compassion Over Killing. Initially, many of us as producers instinctively question these type of videos because in the past, we have seen them concocted, pieced together and generally misrepresented.

This, however, was the second time in Colorado in the last couple of years that such a video has emerged in which the animal abuse appears to be real. Certainly all of the cattle organizations, agricultural groups, and state agencies responded appropriately by condemning the abuse and calling for investigation and enforcement of the laws that were broken. 

The challenge for agriculture is that Colorado has become largely an urban state. In fact, six rural Colorado counties recently voted to secede from the state, in part because Colorado has evolved to the point where agriculture and energy production are no longer viewed as a positive, nor have a voice in state or local government.

Colorado agriculture is currently engaged in almost annual negotiations with the Humane Society of the United States (HSUS), which identifies an agricultural practice it wants eliminated, with the promise to use the referendum process if the industry doesn’t act. The reality is that the odds are with HSUS at the ballot box, given the disparity in financial resources and an urban majority of voters.

 

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This year, the issue is tail-docking, a practice the industry has already largely eliminated. But a few continue to utilize the practice and there is nothing legislatively that prevents it. HSUS views this as low-hanging fruit. The industry frets about the “slippery slope” concept, while realizing tail-docking is a practice perhaps not worthy of a heated defense. The problem is that we know the demands will keep coming, and we’ll eventually be faced with losing production practices that are backed by sound science, and benefit both animals and producers, but won’t survive a challenge at the ballot box.

The other video incident in Colorado involved a producer who allowed some of his animals to starve and failed to uphold basic animal husbandry standards. Again, what was shown is neither typical nor cultural; it is an anomaly in every sense. I do not know the individual but I surmise that a series of grave management and financial mistakes led to a snowball effect that consumed this person. There is nothing logical about failing to take care of your animals, not only from an ethical standpoint, but financial as well.  

The most recent video fits into this category as well; it shows an anomaly that makes no sense and no one would condone. It is just an example of inherently flawed humans that we see all the time in many areas.

While there is probably no way to ever identify or stop these rare occurrences from happening, education and surveillance are important. These 0.1% outlier incidents are something we will have to deal with, but with education and cultural pressure from within, hopefully the frequency will continue to decline. Relative to broader issues like tail docking, the industry needs to step up and eliminate these practices because we can’t waste our limited political capital defending a practice that is destined to be eliminated regardless.

 

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Winter Feed: Do You Have Enough To Feed Your Cows?

winter feed supply  do you have enough

Yesterday was my 26th birthday, and lucky gal that I am, my husband Tyler bought me a trailer load of bred cows for my big day. I was too tired for dinner and a movie anyway, after spending my birthday tearing down and replacing fence in some old lots we have in order to get them winterized for these spring-calving cows.

While we worked, Tyler was calculating numbers in his head -- how many extra tons of hay we’ll need, how early our first cows will be calving, and how many days we have left to finish up our projects before the snow flies.

As we crunch the numbers and double-check our feed resources to make sure we have enough hay to feed our cows through the winter, there are a few important factors to think about. This includes just how much a gestating cow will eat and the quality of forages we have on hand.

With winter just around the corner, I’m sure most of you are well along in stockpiling your forage resources for the cold months ahead. For those of us still winding up the process, here are a few key considerations to think about, courtesy of Glenn Selk, Oklahoma State University Emeritus Extension animal scientist.

Selk says that estimating forage usage by cows is an important part of the task of calculating winter feed needs. "Hay or standing forage intake must be estimated in order to make the calculations. Forage quality will be a determining factor in the amount of forage consumed. Higher-quality forages contain larger concentrations of important nutrients so animals consuming these forages should be more likely to meet their nutrient needs from the forages. Also cows can consume a larger quantity of higher quality forages," he says.

Selk explains that higher-quality forages ferment more rapidly in the rumen leaving a void that the animal can refill with additional forage. "Consequently, forage intake increases. For example, low-quality forages (below about 6% crude protein) will be consumed at about 1.5% of body weight (on a dry matter basis) per day. Higher-quality grass hays (above 8% crude protein) may be consumed at about 2.0% of body weight. Excellent forages, such as good alfalfa, silages, or green pasture may be consumed at the rate of 2.5% dry matter of body weight per day. The combination of increased nutrient content AND increased forage intake makes high quality forage very valuable to the animal and the producer. With these intake estimates, now producers can calculate the estimated amounts of hay that need to be available.  

“Using an example of 1,200-lb. pregnant spring-calving cows, let's assume that the grass hay quality is good and tested 8% crude protein. Cows will voluntarily consume 2.0% of body weight or 24 lbs/day. The 24 lbs. is based on 100% dry matter. Grass hays will often be 7-10% moisture. If we assume that the hay is 92% dry matter or 8% moisture, then the cows will consume about 26 lbs./day on an 'as-fed basis.'

"Unfortunately we also have to consider hay wastage when feeding big round bales. Hay wastage is difficult to estimate, but generally has been found to be from 6% to 20% (or more). For this example, let's assume 15% hay wastage. This means that approximately 30 lbs. of grass hay must be hauled to the pasture for each cow each day that hay is expected to be the primary ingredient in the diet,” Selk says.

In addition to these considerations, we must also consider mineral needs, and determine if the protein available in our alfalfa and mixed grass hay will be enough for these cattle, or if we need to add a supplement program to the mix. Hopefully we’ll have it all figured out by the time the snow flies. 


How about you? Do you have enough forage resources on hand, or will you need to purchase more? What’s the cost of hay in your area? Do you supplement with mineral during the winter months? How does your ration change as the cow enters her final months of gestation and after calving? Leave your thoughts and experiences in the comments section below.

 

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Meat Market Update | Daily Choice Cutout Still Remains Timid

Ed Czerwien, USDA Market News reporter in Amarillo, TX, provides us with the latest outlook on boxed beef prices and the weekly cattle trade.

The daily Choice cutout for Friday, Nov. 9 was 202.79 which was 1.81 lower than the previous week. However, the weekly total for the daily spot volume was 689 loads, which was only 10.5% of the total sales for the week. The comprehensive Choice cutout was consistent with last week's numbers, ending at 202.26.

The latest average national steer carcass weight for week ending Oct. 26 was 876 lbs. compared to the same weight in the prior year and a four-year average of 860 lbs. (2008-2011).

Find more cattle price news here or bookmark our commodity price page for the minute-by-minute updates.

Industry-First Locomotion Scoring Program Aimed At Combating Lameness

Research shows that 90% of beef cattle lameness is caused by problems in the foot, with the most common causes being footrot and toe abscesses. Zinpro Corporation – in conjunction with the Beef Cattle Institute and Kansas State University – has developed the Step-Up Management Program.

The cornerstone of this industry-first program is a new locomotion scoring system. The program is designed to help identify the early onset of lameness, and is based on the observation of cattle walking (gait) with special emphasis on head bob and stride length. Connie Larson, Ruminant RNS Manager for North America, explains the goals of Zinpro’s lameness management program and the four-point, locomotion-scoring system.