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Articles from 2016 In February


Get to know the 2016 Seedstock 100 operations

The Seedstock 100 program recognizes the largest seedstock operations in the United States in the number of bulls sold annually. For the first time, BEEF magazine’s Seedstock 100 offers a gallery of photos that illustrate the biggest seedstock operations the industry has to offer. You will see a wide variety of photos from the Southeast to the mountains of Montana. In between, you will see the familiar sight of a cattle drive down a country road.

The list, sponsored by Boehringer Ingelheim Vetmedica, ranks seedstock operations on the number of bulls sold annually. That’s not necessarily the same as the number of bulls registered annually, and because of the growing importance of partnerships and cooperator herds, the list makes no distinction of ownership.

Read more from Seedstock 100 owners:

Seedstock 100 Listing

Think you are just buying bulls? Think again...

Manage bull costs with these producer tips

Balance tops bull buyers' list

Consumer segmentation around “evolving” values

Consumer segmentation around “evolving” values

No matter the industry, consumers can prove to be fickle. They are a moving target. That sentiment is well outlined in a recent study commissioned by the Food Marketing Institute and the Grocery Manufacturers Association. The study provides excellent insight into shifting customer segmentation around important topics such as antibiotics, hormones-growth promotants, genetically modified foods, humane treatment and farm or producer values.

To that end, last week’s Industry At A Glance highlighted consumer willingness to pay for various attributes in the food they buy. Not surprisingly, recent changes in lifestyle and age (18-34) were the drivers of the largest willingness to pay more for important attributes.  

This week’s illustration highlights consumer segmentation in the marketplace. That is, approximately half of all consumers categorize themselves as “traditional” – their respective shopping habits haven’t evolved over time.  Meanwhile, though, that leaves the other half of customers specifically shopping for attributes important to their lifestyle. And within that latter group, 27%, 15%, and 10% are defined as “balanced health,” “free from,” and “naturally oriented” buyers, respectively.  

consumer shift

How do you perceive this segmentation? Does this line up with your perceptions of the current marketplace? Have your buying habits and priorities changed over the years? Where might this trend be headed in the future? How does the beef industry ensure it’s a part of the evolving marketplace and growing demand going forward?

Leave your thoughts in the comments section below.

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.

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How feasible is antibiotic–free meat?

How feasible is antibiotic–free meat?

In an effort to meet perceived consumer desires, food producers are increasingly using label claims that tout non-GMO, natural, organic, hormone free and pesticide free products to convey a higher degree of healthiness. The latest additions consumers must consider are antibiotic-free and raised without antibiotics, spurred by reports of antibiotic resistant super bugs and antibiotic residues in meats.

Seizing on this as an opportunity, companies such as Tyson Foods and Perdue Farms Inc.; retailers Wal-Mart Stores Inc. and BJ’s Wholesale Club Inc.; and fast food chains such as Chick-fil-A have jumped on the antibiotic-free bandwagon.

But questions remain, including the feasibility and sustainability of raising livestock in an antibiotic-free environment in sufficient in number to feed an ever-growing population of meat eaters, what this means in added cost to consumers and if antibiotic-free really means antibiotic-free.

The challenge: Raising healthy food-producing animals

The Wall Street Journal recently described the monumental task facing meat producers in light of an ever-increasing demand for meat.

“At current consumption rates, the world would need to generate 455 million metric tons of meat annually by 2050, when the global population is expected to reach 9.7 billion, from 7.3 billion today. Given today’s agricultural productivity, growing the crops to feed all of that poultry, beef and other livestock would require every acre of the planet’s cropland, according to research firm FarmEcon LLC—leaving no room for raising the grains, fruits and vegetables that humans also need.”

Along with this anticipated strain on the world’s grain producers, of necessity, food animals which have had to be raised in close proximity to one another are going to have to continue being raised in close proximity to one another if this demand is ever to be met. And in such confined quarters, disease is a real problem that, if not contained, can wipe out a huge number of animals very quickly.

Since the 1950s, antibiotics have been used routinely in the feed and drinking water of livestock raised for human consumption. This practice has resulted in animals being in better health overall as well as weighing more at the time of slaughter, an obvious financial benefit to the livestock farmer. The mechanism of this weight gain is not completely understood but, in addition to creating generally healthier animals, it is believed that continuously administering low-level dosages of antibiotics results in better nutrient absorption.

Due to increasing concerns over antibiotic resistant super bugs in humans, there has been a growing clamor from consumer groups to eliminate the use of antibiotics in rearing livestock for human consumption—despite there being little evidence that antibiotic use in rearing food animals is the cause of antibiotic resistant bacteria. That clamor also highlights the possibility of antibiotic residues in meat—despite the fact that since the 1950s, the U.S. Food and Drug Administration (FDA) has banned antibiotic residues in meat.

In a 2011 industry white paper published by the National Institute for Animal Agriculture titled Antibiotic Use in Food Animals, the authors state:

“If antibiotics are administered to cure a sick animal, the animal itself —in the case of meat production , or animal products —such as milk —are not allowed to enter the food supply until the withdrawal period has passed and the medicine has sufficiently cleared the animal’s system. The required periods for withdrawing medication are specific for each drug and species and are approved by the FDA based on research studies of residues in edible tissues.”

FDA Guidance #209 and #213

These growing concerns came to a head when, in December 2013, the FDA published voluntary guidelines calling on the industry to observe more prudent use of antibiotics and to work toward their complete withdrawal at the growth promotion level. FDA Guidance for Industry directives 209 and 213 “establish the procedures for voluntarily phasing out growth promotion indications for medically important antibiotics.”

Guidance 209, published in 2012, specifically states two voluntary principles:

“The use of medically important antimicrobial drugs in food-producing animals should be limited to uses that are considered necessary for assuring animal health and the use of medically important antimicrobial drugs in food-producing animals should include veterinary oversight or consultation.”

Guidance 213 was more specific to the elimination of antibiotics used in animal feeds. It provides the procedures for voluntarily phasing out growth promotion indications and establishing therapeutic treatment indications for the use of medically important antimicrobial drugs in food-producing animals.

All pharmaceutical companies have gotten on board and are changing their label claims to be in accordance with the FDA directives.

Current practice down on the farm

There are different dosage levels of antibiotics used in rearing livestock depending on the circumstance: growth promotion, disease prevention and disease treatment. It is FDA’s plan to phase out growth promotion use while preserving therapeutic use under the oversight of veterinarians. This is critical for the overall health of the animals, which are often raised in close quarters in order to meet, in a cost-efficient manner, the demands of American’s ever-increasing appetite for meat.

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According to the Animal Health Institute, even if every manufacturer were to end the production of antibiotic-containing feeds for growth promotion, antibiotic use could continue for disease prevention and treatment under the guidance of a veterinarian. And since the use of antibiotics is driven by many factors like weather and disease outbreaks, it is unlikely that overall [antibiotic] use would be greatly affected.

When is an antibiotic not an antibiotic?

Adding to the disconnect between consumer perception of antibiotic-free and actual antibiotic practice on the farm is the characterization of antibiotics themselves. The FDA lists 18 different categories of antimicrobials. Among them is a class of antimicrobials called ionophores; including laidlomycin, lasalocid, monensin, narasin and salinomycin.

Although not strictly characterized as antibiotics, ionophores are nonetheless antimicrobials, i.e., drug substances whose function is to kill microorganisms, bacteria and protozoans. Among the 18 classes of antimicrobials, ionophores are the second largest class approved for use in food-producing animals by total kilograms. The latest statistics available from FDA show that in 2014, 4,718,650 kg were actively marketed, surpassed by tetracyclines at 6,600,849 kg.

However, ionophores aren’t used in human medicine and therefore, fall outside of the FDA’s efforts. Nonetheless, these widely-used products in beef production and other food-producing species are counted in the total antibiotic use by livestock producers.

The cost to the consumer

Writing in The Journal of Applied Poultry Research, poultry veterinarian Hector Cervantes explains:

“There is little convincing scientific evidence that the use of antibiotics in food-producing animals is contributing to the antibiotic resistance issues that are relevant to human medicine. However, public perception in first world countries suggests that consumers believe this to be true. According to the U.S. Organic Trade Association, sales of antibiotic-free (ABF) organic foods have grown at a rate of 20% per year since 1990. This is in spite of wider recognition that antibiotic resistance in humans is caused by antibiotic use in humans and not in food producing animals.”

Notwithstanding, this message seems to be falling on deaf ears. Last year, The Wall Street Journal reported that the sale of antibiotic-free beef, while only 5% of the total beef market, has been growing at a pace exceeding the overall market. From 2011 – 2014, when retail beef sales were up 12.1%, natural beef grew at a 38.9% rate and organic beef at an astounding 324.1% rate. This despite a 30-80% increase in the costs of raising natural, grass-fed and organic beef (raised without the use of antibiotics) that is ultimately passed along to consumers.

In the same vein, five months earlier, The Wall Street Journal reported that poultry producer Pilgrim’s Pride Corp, the second largest U.S. poultry producer announced plans to eliminate all antibiotics from a quarter of its chicken production by 2019.

Raising healthy livestock, given the ever-increasing demand for high-quality, value-priced meat without the use of antimicrobials during an animal’s life, is a challenge. Farmers, faced with the juxtaposed demands of quality and affordability, will have to continue to practice judicious use of antimicrobials to treat or prevent diseases in order to maintain a healthy population of animals while following the FDA’s recommended withdrawal times to prevent antibiotic residues.

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And their use of antibiotics to raise healthy animals will continue to come under scrutiny, despite the lack of evidence that bacterial resistance to antibiotics in farm animals jeopardizes human health through the creation of super bugs. Consumer pressure seems to be winning out.

Greg Rummo is CEO of New Chemic, Inc., a company that imports various animal health products. This article is an adaptation of a paper he wrote as part of his Doctor of Business Administration (DBA) studies.

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References

Apley, Mike and Griffith, Gary, Nov. 4, 2011, Chlortetracycline, Oxytetracycline, Tetracycline and Bacitracin Tissue Residue Studies in Swine Conducted in Reference to Foreign Export Markets, NPB #09-257, The National Pork Board

Bunge, Jacob, April 15, 2015, Pilgrim’s Expects 25% of Its Chicken Will Be Antibiotic-Free by 2019, The Wall Street Journal

Bunge, Jacob, December 2015, How to Satisfy the World’s Surging Appetite for Meat, The Wall Street Journal

Cervantes, Hector, Antibiotic-free poultry production: Is it sustainable? The Journal of Applied Poultry Research 2015 J. Appl. Poult. Res. 24:91–97 http://dx.doi.org/10.3382/japr/pfv006

Cervantes, Hector, Oct. 23, 2008, Coccidiosis Control, The Poultry Site;  http://www.thepoultrysite.com/articles/1138/coccidiosis-control

Effects of FDA’s Proposed New Regulations Regarding Judicious Use of Antibiotics in Medicated Feed and Drinking Water of Food Animals, February 2014, Q&A Paper published jointly by Bimeda, Inc., and the Animal Health Institute

Industry Experts, Veterinarians, and Sanderson Farms Weigh-In on Antibiotics in Poultry Production, Feb. 9, 2016, PR Newswire

Information synthesized from an Oct. 26-27, 2011, symposium in Chicago, IL: “Antibiotic Use in Food Animals: A Dialogue for a Common Purpose,” National Institute for Animal Agriculture 

Kesmodal, David, Sept. 15, 2015, Beef’s Meaty Profits Slow Effort to Boost Antibiotic-Free Production, The Wall Street Journal

Kesmodel, David,  Bunge, Jacob and McKay, Betsy, Nov. 3, 2014, Meat Companies Go Antibiotics- Free As More Consumers Demand It, The Wall Street Journal

Natural Resource Defense Council, 2015, Case Study, CS:13-03-C, Going Mainstream: Meat and Poultry Raised Without Routine Antibiotics Use

White, Elinore, Price, Bill, Nov. 7, 2013, Media Statement on U.S. FDA Guidance #209, #213 and the Draft Veterinary Feed Directive, Zoetis Animal Health

Why BQA needs to be a mandatory beef industry program

Why BQA needs to be a mandatory beef industry program

As consumers express more concern over animal welfare practices, beef producers need to tell their story to preserve their market share. “At one time, consumers had a concept about what we did,” says Kacy Atkinson, Colorado State University (CSU) livestock production Extension specialist. “They were happy to go to the store and buy the food we produce, take it home, and feed it to their families.”

The reality is that is not the world we live in anymore, she says. “We have a lot of people who have no concept of what happens on a farm or ranch. We have so many people on social media, and information spreads like wildfire. We used to get our daily news at 5:00 and 10:00 each evening, now we get news instantly. When information comes out on Facebook, Twitter or Instagram, it has not been a positive experience for us in the agriculture industry.”

With less than 2% of the population directly involved in production agriculture, and less than 1% making a full-time living in the business, 94% of consumers have zero connection to the agricultural industry. “They can't comprehend it or understand it, on any level,” Atkinson states.

More importantly, we are living in a world where science no longer means anything. “Opinions matter more than facts,” Atkinson says. “In agriculture, we try to fight our problems with research, facts and finding the truth. But the reality is, if we continue to come at consumers with research and facts, they will think we are lying, and we cannot be trusted or believed,” she explains.

Because of this, Atkinson feels there has never been a more important time when the beef industry needs to come together, collectively, and address these concerns. However, Atkinson says some specialized producer groups are attacking ranchers who raise beef conventionally, just to take advantage of marketing opportunities. “It is causing fragmentation in the industry, and consumers are starting to see traditional beef production as bad,” Atkinson says.

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When NCBA conducted a study looking at how consumers felt about beef, 92% of consumers had animal welfare concerns and felt animals were being mistreated. However, when a core group of these respondents were given a firsthand view of every segment of beef production from the cow-calf operation, feedlot, and packing plant, that number dropped to less than 8%.

“When consumers could see for themselves what we are doing, they could see we are doing things right, and for the right reasons,” Atkinson says. “Consumers don't see a beef industry, pork industry and poultry industry. They see an agriculture industry. If one segment is doing something wrong, in their minds, the other segments are just as guilty.”

As the middle class incomes grow, consumers will become choosier about what they eat. “They are going to be more judgmental and righteous about the choices they make,” Atkinson says. “If we want to retain our market share, we are going to have to be able to answer questions about why we do certain things, and explain it in a way they can understand.”

Atkinson sees the biggest weaknesses in the beef industry as not telling our story, not being transparent and not educating consumers about what we do and why we do it. “We will have to accept that there will be practices that consumers are not ever going to accept,” she says. “But, we need to do a better job educating consumers about what influences beef quality, and be able to show them we are doing things right, and prove it.”

BQA can help

The industry has a tool to address these concerns. The Beef Quality Assurance program was first introduced as a national program to enhance consumer confidence in beef. The program is now offered at the state level, so each state can address differences in production practices.

“BQA is a great tool,” Atkinson says. “It takes a dollar to fix a problem at the source, but if we wait to address the problem at the processing and production chains, it is $10. If we wait till it reaches the consumer level, it is $100. We need to fix things at the base production level, and that is what BQA does,” she states.

However, BQA is voluntary. “Consumers know this program is voluntary, and even though 90% of producers may follow BQA practices on their operations, because they don't have their certification certificate hanging on the wall, they assume we are not using it,” she says.

Since the program is voluntary, there are no standards that companies like Walmart, Wendy’s and Subway can look at and say, these are the principles the entire industry is using. Because of that, they can't use BQA for the foundation of their own programs, she continues.

Since the industry does not have a standard, each company is developing its own. “When you sell your calves, do you know where the meat will end up?” she asks. “What will it be like, as a cow-calf producer, to have to meet these standards for every one of these companies?”

Atkinson says BQA needs to be a mandatory program. “If our industry would participate in BQA collectively, most of those companies would be happy to accept that for their programs,” she states. “If we don't step up to the plate as an industry, there will be a day when we will be regulated from the top down.”

Atkinson says regulations may be forthcoming from packing houses, which are getting heat from the food service industry. If packers start requiring BQA practices, Atkinson says, it will trickle down to all the other segments of the industry.

Gayle Smith is a freelance writer from Potter, Neb.

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5 Trending Headlines: Look for fewer Mexican cattle in 2016; PLUS: The downfalls of good stockmanship

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Take a balanced approach when selecting herd bulls

Bull sale season is in full swing, and many producers, including myself, are busy studying sale catalogs, dissecting the data on each bull and prioritizing which traits are most important to focus on.

This week’s poll at beefmagazine.com asks, “What is most important to you in selecting herd bulls?”

With the votes just starting to come in, so far readers are split with 56% of participants saying that maternal traits are the most important so they can produce daughters that will go back into the cowherd. The remaining 44% say that performance traits are most important as calves are sold by the pound and they want to produce the kind of cattle buyers will bid on.

Vote in the poll here.

One reader responded to the poll writing, “Why can’t I have both? Actually, I have to have both, starting with fertility or there won’t be anything to feed and harvest. Heterosis helps both, too.”

Another reader asked, “How about profitability?”

With profitability in mind, it’s probably wise to make herd sire selections with a balanced approach. If we only select for single traits year after year after year, then other traits will suffer.

READ: When selecting a bull, begin with the end in mind

For example, if we choose calving ease every time, we might have light birthweight calves, but are we giving up pounds and performance in those calf crops? If we select for terminal traits each breeding season, we might have heavier calves that gain and grade well down the road, but will the replacement heifers we retain be lacking in fertility traits?

When evaluating expected progeny differences (EPDs), consider both growth and maternal traits in your selections.

Growth traits depicted by EPDs such as weaning weight and yearling weight are important for producing calves that perform well, which translates to greater profitability. However, with growth comes added frame score size, which could be detrimental when trying to maintain the appropriate cow size within the herd. Thus, too much emphasis on growth traits can result in cows that are too large and negatively impact the bottom line with their extra feed requirements.

Meanwhile, maternal traits such as milking ability, fertility, and calving ease maternal are good to consider; however, when choosing new genetics with greater milking ability, remember that the more a cow lactates, the more nutrition she’ll need to nurture her calf, maintain her weight, and successfully breed back in a timely manner.

While everyone’s “ideal” bull is certainly different, there’s one thing for certain; if we make a balanced approach when selecting genetics while avoiding extremes, we can avoid the pitfalls of one-trait selection and raise steers that will grow and perform in the feedlot and heifers that will have the maternal traits needed to be productive in the cowherd for many years.

The opinions of Amanda Radke are not necessarily those of beefmagazine.com or Penton Agriculture.

 

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More meat and more corn

Corn Production

Look for beef production to increase about 4% this year as more cattle are placed on feed and beef cowherd expansion continues, says Shayle Shagam, livestock analyst with USDA’s World Agricultural Outlook Board.

At this week’s annual Agricultural Outlook Forum (AOF), Shagam explained record and near-record calf prices the past couple of years, along with dramatically improved forage conditions, set the stage for increased production.

“Although recent declines in feeder calf prices may have tempered returns, it is likely that herd expansion will continue through 2016,” Shagam says. “Feeder cattle prices in 2016 will likely be less than those in 2014 and 2015, but returns for cow calf operators should be sufficient to support continued herd expansion.”

USDA projects the 5-Area fed steer price for this year at $133-$142 per cwt, compared to last year’s average of $148.12.

“As fed cattle supplies increase during 2016, prices are likely to be pressured, but feedlot margins are negative and cattle feeders are expected to attempt to leverage their position by slowing the pace of marketings and attempting to reduce bids for feeder cattle,” Shagam says.

As occurred last year, he expects slower marketing to increase the average carcass weight—to an average of approximately 827 pounds this year.

“With adequate forage available, cow-calf operators and backgrounders may be more resistant to feedlots’ attempts to pressure feeder calf prices, but supplies of cattle outside feedlots are 5% higher and many of these cattle are expected to be placed during 2016,” Shagam says. “Feeder steer prices are forecast to average $176-$185 per cwt, down from the record prices of almost $203 in 2014 and 2015.”

The upside to the lower prices is that consumers should find beef and meat more affordable. Even with an anticipated uptick in exports, USDA expects production of all major meats—beef, pork, broiler and turkey—to increase this year. That would be the first time since 2008 that production of all major meats increased during the same year.

“While meat prices rose by 3.0% annually in 2015, the January year-over-year change is down 4.7%, suggesting lower meat prices will persist in 2016,” explained USDA Chief Economist Robert Johansson, at the AOF. “With continuing lower commodity prices and falling energy prices, it is likely that annual food inflation in 2016 will remain at or below the long-run average of 2.8%.” Food inflation was 1.9% in 2015. USDA forecasts food inflation at 2-3% this year.

Trading soybeans for corn

“Corn area is expected to increase by 2 million acres to 90.0 million in 2016 with lower fuel and fertilizer making corn more attractive relative to other crops,” Johansson said.

With growing global stocks from record and near-record crops of corn, wheat and soybeans the last three years, Johansson explained production continues to outstrip demand for many grains and oilseeds.

Overall, USDA estimates the 8-Crop Area planting total in 2016 to fall by 2.5 million acres.

“Further price reductions are expected for the 2016-17 marketing year for corn, soybeans, wheat, and cotton,” Johansson says. “Wheat prices are estimated at $4.20 per bu., a decline of 16% from the current year. Corn prices are projected to fall to $3.45 per bu. for the 2016-17 marketing year. Soybeans prices are forecast at $8.50 per bu.”

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Economic outlook improves for cattle feeders

Economic outlook improves for cattle feeders

“Feeder cattle prices (700-800-pound steers) have returned to much more normal price levels relative to those of fed animals,” say analysts with the Livestock Marketing Information Center (LMIC), in this week’s Livestock Monitor. “In the Southern Plains, the market premium last week was about $24 per cwt. compared to over $51 a year ago. The peak weekly premium last year was over $82 per cwt.”

LMIC analysts explain last year’s extraordinary premium level overwhelmed relatively inexpensive feed costs. It also contributed to slower fed cattle marketing.

“The very high cost of cattle to go on feed to replace traditionally market-ready animals was a major contributor to the slow marketing rate in 2015, which was a driver of the cattle price collapse last fall,” LMIC analysts explain. “…In recent months, incentives to delay marketing of finished cattle and create associated problems have dissipated significantly.”

Using recent prices for steers weighing 700-800 pounds, LMIC estimates breakeven prices for steers marketed in the coming months to be less than $130 per cwt, the least since October of 2014.

 

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Grass and graze-out buyers push calf and feeder prices higher

Grass and graze-out buyers push calf and feeder prices higher

Calves traded mostly $3-$8 per cwt higher this week—instances of $10 higher—and yearlings sold mostly steady to $3 higher, according to the Agricultural Marketing Service (AMS). Depending on the region, buyers were after cattle for both graze-out winter wheat pasture and summer grass.

Overall, AMS analysts say demand is especially strong for calves and stocker cattle weighing 500-700 pounds, with the most demand for long-time weaned calves and light yearlings with good weighing conditions.

“Demand is especially good for lighter-fleshed cattle to turn back out on graze-out wheat,” explained the AMS reporter on hand for Monday’s sale at Oklahoma National Stockyards where stocker-weight steers traded $5-$10 higher.

“Demand for thin or medium-fleshed short yearlings, along with weaned calves, increased due to buying activity for the Flint Hills and Osage grazing areas, along with restocking wheat pastures for graze-out wheat,” explained the AMS reporter at Tulia Livestock Auction in Texas on Thursday. Yearlings weighing 600-750 pounds traded $1-$5 higher there. Calves weighing less than 600 pounds sold $3-$12 higher.

Further north, the AMS reporter on hand for Thursday’s auction in Mitchell, S.D. explained, “Buyers are selective when it comes to flesh and the amount of mud cattle are carrying. Cattle feeders are treading cautiously as feeding conditions remain very poor and outgoing cattle continue to lose money.” Feeder steers there weighing less than 800 lbs. sold steady; steady to $2 higher at heavier weights.

“Continued support in the cattle futures this week definitely gave support to feeder cattle
prices,” AMS analysts explain. “Cattle futures trade also seems to have calmed down and been less volatile the last couple of weeks.”

Feeder Cattle futures closed an average of $4.12 higher week to week.

Through Friday afternoon, cash fed cattle trade was shaping up to be another weekend affair. Although moderate demand was reported in all major cattle feeding regions, cattle feeders were mostly passing on packer bids. Though there were too few transactions to trend in any region, early dressed sales in Nebraska were steady to $2 higher at $212-$214 per cwt. Early dressed sales in Iowa-Minnesota were $2-$4 higher at $212-$214.

One reason for cattle feeder optimism was the fact that Live Cattle futures gained ground—an average of $2.35 higher week to week—as wholesale beef values finally offered some hope for a seasonal bottom.

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Choice boxed beef cutout value was $6.01 per cwt higher week to week at $217.67 on Friday. Select was $3.84 higher at $211.99. For all practical purposes, that’s the first week-to-week gain since the middle of January.

That was despite the monthly USDA Cold Storage report pointing to record volumes of frozen meat.

Total red meat supplies in freezers January 31—1.2 billion pounds—was 9% more than the previous month and 7% more than the previous year, a record high since the series began in 1915.

Frozen beef supplies of 518.5 million pounds were 1% more than the previous month and 5% more than the previous year, also a record high for the month.

USDA expects total red meat and poultry production to increase almost 3% this year to a record 97.35 billion pounds. It increased 2.7% last year, the most rapid increase since 2008.

 

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Are marketplace concerns legitimate?

Are marketplace concerns legitimate?

I’ve always been skeptical of the conspiracy theorists relative to the marketplace. In the short term, market psychology can take the market higher or lower than the fundamentals would indicate. Yet, there seems to be those who always come out when the market takes a downturn; distorting the data and pointing fingers because retail prices haven’t declined as much as wholesale beef prices. 

That, of course, is always true, but the inverse was also true when the market went dramatically higher. Retail prices tend to be far less volatile and move much more slowly than wholesale beef prices. The reasons for this are obvious, well understood, and this has been the case for decades. 

These same demagogues resurrect packer collusion arguments when the markets move lower and yet the pricing models and statistical analysis never confirm their position. These individuals weren’t claiming a conspiracy when prices went higher than anyone anticipated in the fourth quarter of 2014, but their voices become shrill when the market moves lower than anyone anticipated, like the fourth quarter of 2015. Yet the resurrection of the same old arguments that we see every time the market moves lower are as predictable as they are wrong. 

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BEEF Seedstock 100 List
Looking for a new seedstock provider? Use our UPDATED Seedstock 100 listing to find the largest bull sellers in the U.S. Browse the list here.

 

With that said, we have seen some things in the last 15-18 months that are new and perhaps legitimate concerns. Some of it boils down to rethinking how we look at the data. Actual head counts or numbers mean very little; the market does not respond to head counts, it responds to pounds or tonnage. 

As we all know from a cow-calf perspective, it isn’t the number of cows that is the important number, it is pounds produced per acre. From the packer side, they don’t look at spreading their fixed costs over X number of head, rather it is over pounds. The same can be said for every segment of our business. 

Even measures like currentness, which is still important, has to be rethought. Under the classic definition, the industry was uncurrent late summer through the fall. In actuality, market fundamentals had shifted the ideal marketing endpoint, and producers were making good decisions based upon marketing signals. The marketing window changed. 

In addition, we have seen an unprecedented increase in volatility in the futures market. The old saying is that volatility equals opportunity, but for many producers it has made it difficult to use the futures market as a risk management tool, causing cattle producers to argue it is broken as a price discovery option. Whether it be computers, high-frequency traders or some other factor driving this change in behavior, it is real and significant. Finding a solution to the problem, though, has not been easy. We need and want speculators as we need the liquidity and market depth they provide, but we don’t want their market-distorting tendencies. 

Many would argue that increased risk and increased volatility is simply the new norm. If it is, the new norm will certainly be more challenging. Hopefully, we focus on the “real” market issues instead of the rhetoric that gets trotted out in every market turn that is more about stirring up membership than helping the industry.

The opinions of Troy Marshall are not necessarily those of beefmagazine.com and the Penton Agriculture Group.

 

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