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Articles from 2013 In March


Coalition Pushes For Japan Trade Talks

japan beef export trade talks

A coalition of food and agricultural organizations and companies again last week urged the U.S. and other countries in the Trans-Pacific Partnership (TPP) negotiations to quickly welcome Japan into the trade talks.

Japan recently announced its intention to join the TPP negotiations, which currently include Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

In a letter sent to President Obama, the coalition of 75 food and agricultural organizations said the inclusion of Japan in the trade talks would generate enormous interest and support in U.S. agriculture.

Food and ag companies see promising trade opportunity with Japan, provided appropriate trade stipulations are addressed.

"The addition of Japan to the negotiations will exponentially increase the importance of the TPP to U.S. farmers and ranchers, processors and exporters as well as other sectors of the U.S. economy," said the coalition. "Furthermore, it will spur interest in the TPP among other countries in Asia and Latin America."

Allowing Japan to join the talks also will send a strong signal to other nations that efforts to negotiate more open and transparent regional trading arrangements will continue, even as multilateral efforts to do so are stymied.

To read the entire article, click here.

 

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Beef Demand Will Determine Supply-Side Price Strength

beef demand will determine beef supply beef prices

Notwithstanding the surge in cattle markets this week, folks are still wondering how much upside exists in near-term markets.

In his early-week market comments, Derrell Peel, Oklahoma State University Extension livestock marketing specialist, pondered whether beef markets had already peaked this spring.

Peel notes fed cattle prices and boxed beef prices this year and last year broached the $200/cwt. threshold in early March before retreating. Cash fed cattle prices also peaked in early March both years before sliding backwards.

“…In contrast, feeder cattle prices have behaved very differently this year compared to 2012,” Peel says. “Most feeder prices have fallen since the beginning of the year. Last year, feeder prices rose to an all-time peak in early March.”

Peel explains feedlot placements for the last nine months are 8.6% less than the same period a year earlier. Placements during the same timeframe last year were 2.1% more than the prior year. He points out other differences this year, which include Mexican cattle imports that are a third less than last year, as well as storms that have disrupted beef production (decreased carcass weights) and marketing this winter.

“It is critical to not lose sight of the widely accepted notion that feeder cattle supplies are ‘drying up’ and how this influences placements…,” Glynn Tonsor, Kansas State University (KSU) agricultural economist, points out in this week’s In the Cattle Markets, reflecting on the 14% fewer February placements than a year earlier. 

Though cattle supplies continue to dwindle, Tonsor points out the recent paucity of placements likely has everything to do with actual net returns vs. projected returns when cattle were placed.

Tonsor and fellow KSU agricultural economist Kevin Dhuyvetter first projected returns (Kansas) for steers marketed in February back on Oct. 4. Projected returns were $22.70/head, with an estimated feeding cost of gain of $120.18/cwt. and an estimated selling price of $135.47/cwt. (breakeven fed cattle price of $133.83). Instead, estimated close-outs for those steers March 4 were estimated at minus $139.50/head return, with a feeding cost of gain of $122.84/cwt. and an average selling price of $125.47 (breakeven selling price of $135.42).

 

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“It is likely the worse-than-expected recent returns realized by feedyards spilled over into less aggressive interest in placing additional cattle in February,” Tonsor says. “The related question many industry analysts are asking is if these adjustments in placement interest are complete, or if similar behavior will underlie next month’s Cattle on Feed report.”

“Beef demand is still a concern and failure of boxed beef price to push above $200/cwt. will perpetuate the current limits in fed and feeder cattle markets….”  Peel says. “Feeder cattle markets will take their cue from fed cattle and boxed beef prices, but will be influenced by several additional factors as well.

Drought conditions will determine summer grazing demand for stocker cattle. Feedlot demand for placements will likely increase some as feedlots move past the current storm impacts and realize more additional pen space in the coming weeks. From this point on, the corn market will be anticipating corn production for the coming marketing year. If current plans for a much larger corn crop are realized, cheaper feed prices will begin to be reflected in feeder cattle prices before long. Across the board, supply fundamentals will increase price pressure on feeder and fed cattle prices and boxed beef prices. It all depends on beef demand,” Peel says.

 

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Corn Crop Could Be Record-Large

2013 cron crop will be record large

Corn producers intend to plant 97.3 million acres for all purposes this year, according to Thursday’s USDA Prospective Plantings report. This year’s projection is up slightly from the 97.1 million acres planted last year, and 6% more than in 2011.

At a trend yield of 163.54 bu./acre, corn production this year could be about 14.6 billion bu., according to Todd Davis, American Farm Bureau Federation crops economist.

Producers also plan to plant 77.1 million acres of soybeans, which could also result in record-large production. Though the intention represents slightly fewer acres than last year, using the average yield of 44.4 bu./acre projected by USDA in February, Davis explains total production could be 3.38 billion bu.

"If these early planting and yield projections are realized, corn and soybeans stocks will increase, which would ultimately lead to lower feed costs for livestock and poultry farmers," Davis says.

Corn stocks in all positions on March 1 totaled 5.40 billion bu., according to Thursday’s USDA quarterly Grain Stocks report. That’s 10% less than the previous March, though it was higher than the average estimate of 5.013 billion bu. heading into the report.

 

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Soybeans stored in all positions on March 1 totaled 999 million bu., 27% less than a year earlier, but also more than the average pre-report estimate of 935 million bu.

“The forecast gives us an indication of what farmers intend to plant as of early March, but between now and fall harvest the influence of still-dry soils, volatile commodity prices and weather uncertainty will play out, which may change what farmers plant,” Davis says.

Drought continues to be the primary monkey in the closet.

“The drought is forecast to ease in the western Corn Belt but will persist in Nebraska and Kansas, intensifying in Texas and Oklahoma,” Davis says. “However, just because the drought may be easing doesn’t guarantee record crop yields in those areas.”

 

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Cattle Prices Surge On Limit-Down Corn Move

corn drops limit with planting intentions

Boom, just like that.

Feeder Cattle futures ended the holiday-shortened week limit-up. Most of what was a light offering of yearling feeder cattle sold steady to $5 higher at auction. Cash fed cattle gained $2-$4 on a live basis ($127-$129/cwt.) and $4-$6 on a dressed basis ($202-$204/cwt.). That was despite Choice boxed beef cutout value trading $2.28/cwt. lower week to week (Friday), and Select trading $3.90/cwt. lower.

Just a week earlier, the market reporter for Superior’s video auction noted, “Many buyers have seen enough red ink that they are not buying replacement cattle for their empty pens unless they can lock some sort of reasonable breakeven into their purchases...”

Part of the surge was fueled by the previous week’s Cattle on Feed report that pegged February placements 14% below the previous year.

Mostly, last week’s rally centered on the bounty projected by Thursday’s USDA Prospective Plantings and quarterly Grain Stocks reports (see "Corn Crop Could Be Record-Large"). That news pummeled CME Corn futures limit down 40¢ for old-crop corn.

Until then, calves traded unevenly steady to $5 lower at auction, with stiffer declines on lightweight calves in the Southeast, according to the Agricultural Marketing Service (AMS). AMS analysts note the previous weekend’s widespread snowstorm helped curb consignments.

Following the crop and stocks reports, AMS analysts say, “Word spread instantly and trading became active in Thursday sale barns like Ogallala, NE; Dalhart, TX; Salina, KS; and even in the still-parched areas of southwest Kansas…”

Although questions remain about short-term market strength (see "Beef Demand Will Determine Supply-Side Price Strength"), AMS analysts said Friday, “March 28th is when the feeder and stocker cattle market found a bottom with a springboard to bring demand and attitudes out from under the cloud that has plagued them since right after the first of the year… Now, severely dwindling calf and yearling supplies are armed with the arrival of spring and its warmer days, greener pastures, and the annual lighting of the backyard grill. The glimmer of hope for at least some relief in feed costs is slim but nearby corn contracts fell below $7/bu. for the first time in over a month, and Good Friday’s closing prevented moods from changing until next week.”

 

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New Mexico Horse Stunt Hurts All Producers

The animal rights community was abuzz last week, when an individual associated with a proposed New Mexico horse-slaughter plant created his own video. In the video, the individual leads what looks like a healthy horse to a spot in a dirt road, strokes the animal, says “All you animal activists, (expletive) you,” and then shoots the horse in the head. The apparent purpose was to taunt the animal rights community; instead, it greatly bolstered their cause.

I can understand the emotions that most livestock producers harbor toward radical environmental and animal rights people. After all, nobody cares more than ranchers about the land and/or the animals entrusted to their care. It’s part of our code and who we are; thus, it’s totally contrary to our being when someone challenges our commitment to such deeply held beliefs.

But while it’s a sacred trust that we believe and uphold on a daily basis, we also have to realize that there are a few people out there who don’t act appropriately or fail to live up to those standards.

There’s a growing realization in the U.S. that the horse slaughter ban has resulted in a precipitous increase in animal abuse and animal cruelty cases. The horse-slaughter ban has had the exact opposite effect of what was intended by those who supported the law. It’s only tangible results have been to increase animal welfare problems and the abuse of horses, while lowering the overall value of horses.

Just when it appears that common sense and a factual-based approach to the problem is possible, we get an individual making a video like this. It’s bad enough when you get the staged and misleading videos created by the radical activists, but it is far worse when a legitimate video so negatively reflects on an individual who is actually part of the industry.

Of course, this individual was summarily fired. While he may be that one in 100,000 individuals who doesn’t embrace our core beliefs, we still have to ask ourselves how we can find these individuals and eliminate them from our industry. And we have to, because the damage they cause is significant and real.

 

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It’s More Than Just A Question Of Moisture

It’s More Than Just A Question Of Moisture

USDA’s most recent Cattle On Feed (COF) report showed placements and COF numbers at levels that are unprecedented since the data series began in 1996. Everyone continues to be focused on the weather situation, which has precluded any chance of expansion thus far, and may actually cause 2013 to be yet another year of liquidation.

Without a doubt, moisture is the key in the short term. With moisture, we’ll see a decrease in input costs; and we should see a double-plus situation where margins are increasing from both an increase in prices received and a decrease in prices paid for inputs.

Still, it’s a valid question to ask how much expansion will occur when moisture conditions improve. There’s little doubt that prices and rain will result in a rebuilding of numbers, but it’s also probably true that the industry will never see the type of numbers we once had. Our genetics are improving at a phenomenal rate, which means we’ll never need the cow numbers we once did to meet demand.

The forced liquidation of our cowherd over the last few years has also translated into one of the most effective culling periods in our history. The poorer-end cows have been liquidated, and the average genetic value of today’s cowherd is significantly higher than just a few years ago. Not only are we seeing improvement in genetic trends from a seedstock industry perspective, but we effectively ratcheted up to unprecedented levels the selection pressure in the cow-calf sector. We simply need fewer cows today to produce the same amount of beef.

There are two ways to look at these numbers:

• The expected further declines in calf numbers, especially when expansion begins, will result in even tighter supplies in the near term. Of course, the converse is also true in that small increases in cow numbers will result in larger increases in production.

• Then there are questions about demand. We continue to rely disproportionately on exports to bolster demand. The subsidization of ethanol had two effects: it led to a significant downsizing of our cowherd, and reduced the volume of product we can sell profitability at various price levels. Demand has been more resilient than many experts had predicted, but higher prices typically mean less volume.

Couple that with the fact that capital requirements to run a cow have been growing at a far faster rate than prices have increased, and we have an entirely different relationship between margins and how producers will respond to them. Sure, $100/calf profits are nice, but they no longer are sufficient to encourage producers to expand significantly, as the per-cow unit cost of production has grown to a point where profits have to be significantly higher than in the past to trigger expansion.

 

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Throw in the fact that livestock production is no longer competitive with grain production from a profitability standpoint, and one has to question whether diversified producers will respond as they have previously to improving cattle prices. For diversified ag operations, livestock production is no longer a significant contributor to profits; more importantly, it’s no longer a necessity.

Diversified operations are now making the base-line decision about whether or not the cattle enterprise is worth their effort; not too long ago, it was considered a vital part of the operation. Certainly, expansion will occur when Mother Nature decides to cooperate, but without drastic increases in profitability, expansion will likely be smaller than many people anticipate. 

 

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A Middle-Aged Perspective On Youthful Exuberance

beef industry management tips

I’m sure many of you can still recall the youthful exuberance and optimism you embodied when you entered the cattle business. It all seemed like one, big wonderful opportunity back then – with everything just waiting to be grasped. The key to taking advantage of those opportunities was straightforward back in those days – just use your brain and outwork everybody.

Applied knowledge and work ethic undoubtedly did play a tremendous role in our success, but with age also comes a little cynicism. What’s also needed to complement that hard work and applied intellect is timing.

As I get older, the successes seem to come more often. Part of that can be explained by more experience, but luck is a part of it, too. The difference today vs. when I was young is that I simply have more resources and perspective to take advantage of those random opportunities.

Outliers: The Story Of Success” by Malcolm Gladwell, is one of the books that truly changed my outlook in life. It confirmed the value of practice, work, etc., but it also pointed out the importance of timing and circumstances.

Fortunes will be made and lost in the cattle industry over the next 18 months, and a lot of it has to do with Mother Nature and outside factors. In this environment, two people can make the same decisions and take similar actions, but one may be mightily rewarded, while the other will not.

At first, this realization of the importance of timing and circumstances was a great letdown to me. It somewhat destroyed my conviction that just working harder and smarter was enough. Over time, however, this realization has helped me create a new perspective.

For example, there were times when I was essentially making a decision that was akin to my hoping to become a professional basketball player. While hard work, good coaching, etc., will undoubtedly help me reach that goal, the fact that I’m middle-aged and barely stand 5 ft., 10 in. are bigger determining factors.

 

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Now, I’m learning that the optimism of my younger days was well-founded, but it has to be applied to the right opportunities; the key to our success is picking the right opportunities at the right time. For example, Bill Gates and Steve Jobs made the right decision to get involved in computers when they did. A couple of similarly bright, hardworking young people making a similar decision today may build themselves a good living, but they likely won’t become billionaires.  

Honestly, many of us in the industry have tended to make decisions on what activities to engage in based more on what we wanted to do – and then trying our best to make it work – than really evaluating the opportunity those activities represent. Our goal now is to spend more time focusing on the right opportunities, and not just the execution. The bottom line is that execution will always be important, but we need to change our focus toward ensuring that we are executing on the right things.

 

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Fed cattle slaughter has slacked off recently, leaving many to speculate that tight supplies are coming home to roost. However, taking a look at the boxed beef trade reveals another reason—packers have plenty of inventory in storage and can be a little more selective when they drive the alleys. Ed Czerwien with USDA Market News in Amarillo looks at the numbers.

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5 Things To Keep In Mind When Working With Family

tips for family farms

When I graduated from South Dakota State University in 2009, I thought I knew it all. With my expensive college degree in agriculture communications in hand, I moved home and immediately had some suggestions for “improvements” around our ranch.

However, when my ideas fell on deaf ears, I was flummoxed and frustrated. Even though I was now an adult, I learned that I had some stripes to earn around the place. I always say that my first year out of college was my most educational, as I experienced a few of the hard knocks of youthful enthusiasm in trying to make my place in our family business.

It was just a short year later that I married my husband Tyler and introduced a whole new dynamic to our operation -- a son-in-law. There were a few awkward moments as Tyler learned “Dad’s way” of doing things, and Dad got used to having someone new helping out around the ranch. Soon enough, however, Dad realized that he finally had another guy to hang out with on the ranch. After all, a wife and three daughters had him outnumbered most of his life; he finally had an ally and partner-in-crime to tinker with machinery and do more of the heavy lifting around the place than us girls could do.

In addition to my parents and my husband and myself, I have two younger sisters who are still active on the ranch, and a set of grandparents from whom we rent land. With so many individuals in the picture, you can bet that there are occasional disagreements.

When it comes to working alongside your family, it’s important to keep a few things in mind. I’m not saying that my family has got this down pat yet, but we are learning. So, here are my top five pieces of advice for anyone involved in a family business:

1. Respect each other. Without a doubt, different family members have different life experiences, expectations, plans, goals and ideas. Whether you’re the founding member or the newbie, it’s important to always put yourself in someone else’s shoes before criticizing or trying to change things.

2. Communicate. Whether it’s deciding who will take the 2 a.m. check during calving season, or sitting down and developing a will and a trust, no decision is too big or too small to discuss. If the lines of communication are open, there’s less potential for confusion and wrong assumptions. Talk to each other. Listen to each other’s plans, ideas and thoughts for the future. Write them down, and work together toward common goals.

3. Resolve conflicts. There are some days when things aren’t going to go as planned. Cows are going to get out; machinery is going to break; an anniversary or birthday will be forgotten; the markets crash; the weather doesn’t cooperate; the list goes on and on. To get along, it’s important to think before you react. It is so easy to blame someone else when something goes wrong and to get mad, but if you just buck up and deal with the tasks at hand together, suddenly the problems don’t seem so bad anymore.

So, let off some steam by putting in a solid day’s work. I confess, I scoop out the barn when I’m mad; pitching manure the old-fashioned way is my stress-reliever, as odd as that may seem. Be sure to share your feelings. Don’t let a grudge build up and drive a wedge between family members. Talk it out and move forward.

4. Recognize each other’s strengths. My mom is great at financial planning, tax preparation, record-keeping, and keeping us organized. Dad is our genetics man. He can tell you the bloodlines of any cow on the place just by looking at her, and he loves planning his next genetic pairings when breeding season comes along. He’s also pretty good at putting together a feed ration; feeding cattle is something he takes pride in. I have a long winning streak of rate-of-gain champion steers at the county fair to prove it, too.

I’m kind of falling into the position of marketing and advertising, and this is something my sisters help with, too. Of course, we also help with the cattle, but we really thrive on promoting our cattle during bull sale season. Tyler is our fix-it-man. If it’s broken, take it to his shop; he will have it up and going again pretty quick. He’s very detailed-oriented and loves to resurrect old equipment and make it new again.

By acknowledging what each individual member of the family is good at, each person feels more valuable to the ranch and appreciated by the group as a whole. Make sure to compliment one another from time to time, too. A few kind words really go a long way toward boosting morale.

5. Have fun. Is it worth it if you aren’t enjoying what you’re doing? We love raising cattle. There’s nothing better than taking a pasture tour during the summer and seeing those calves grow. Outside of ranch work, we enjoy having game nights or going to basketball games. We enjoy working together and playing together, and that makes our jobs as beef producers pretty fun. 

This isn’t an exhaustive list of tips, but it gets the ball rolling. How about adding some of your thoughts on the subject to the discussion? This article from Colorado State University Extension offers more advice on the topic.

What advice do you have for family farming or ranching operations? What things have you learned over the years to make it easier to work with family? List your best ideas in the comments section below.

 

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