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Articles from 2004 In June


Deadline For BEEF Top 40 Nominations Is Thursday

Time is running out for nomination of candidates to "The BEEF Top 40," a 40-person honor roll of beef industry giants. To be included as part of special editorial coverage in BEEF magazine's 40th anniversary issue in September, BEEF will recognize 40 individuals, living or deceased, who made significant contributions to U.S. beef industry in the past 40 years. Only folks nominated by readers will be considered.

Nominate a favorite mentor, educator, association executive, researcher, producer pioneer, etc., by jotting down your nominee's name, title, his or her contribution to the U.S. beef industry and why it is significant. Then, either e-mail it to [email protected] or mail to: The BEEF Top 40, 7900 International Drive, Suite 300, Minneapolis, MN 55425.

Be sure to include your name and contact information in case the independent panel of judges wants additional information on your candidate. Remember. The deadline is Thursday, July 1.

Extended Deferral Of Capital Gains Measure Moves Forward

The U.S. House passed the American Jobs Creation Act of 2004 (H.R. 4520), which includes the "Rancher Help Act," a provision that allows for the extended deferral of capital gains tax from drought-related sales of livestock.

"This is a huge boost for cattlemen in states suffering from ongoing drought," says Bryan Dierlam, director of legislative affairs, National Cattlemen's Beef Association (NCBA). "We have worked for years on this, and we thank Rep. Scott McInnis (R-CO) and Sen. Craig Thomas (R-WY) for seeing the Rancher HELP provision remains a priority in Congress."

Under current tax laws, ranchers forced to reduce their herds due to historically dry grazing lands are exempt from paying capital gains tax if they replace their herds within two years. This legislation will increase that timeframe to four years. With many regions seeing year after year of drought, this offers help for cattlemen trying to save their livelihood during long-term, unexpected, dry conditions.

Another provision would give a tax credit to livestock producers, including cattle producers, who produce electricity from renewable resources like livestock waste nutrients. The credit is in the amount of 1.8¢/Kw hour of electricity produced.

Conditions Encourage A Shift In Pregnancy Check Timing

Today, most progressive operations have elected to calve their heifers in front of their cowherd and run their yearling heifers under a shortened breeding season (45-60 days). Yet, traditionally they don't pregnancy check the heifers until fall, marketing any open females.

It may be time to reconsider that timing. Many areas are in a drought condition. Carrying open heifers through the summer utilizes valuable resources that could be used to sustain animals carrying pregnancies. Plus, the marketplace is providing ample incentive to getting those heifers to town as soon as possible.

With the new restrictions on cattle more than 30 months of age, producers are getting leery of any cattle that won't be out of the feedyard much beyond their second birthday. The risk and discounts are considerable for cattle that might "mouth out" over the age limits.

In addition, prices for feeder heifers are at near-record highs. Economists estimate that the value difference between an open heifer this summer and one in the fall could be significant, as much as $250-$300/head.

Certainly, for many management scenarios, it isn't practical to preg check before fall. But, skilled veterinarians can detect pregnancy rates at 60 months of age, and those with ultrasound capabilities only need a month or less to detect pregnancies.

For many producers there may be sufficient economic incentive to start planning their preg checking and marketing programs on first-calf heifers not long after the bulls have been pulled.

The Best Of Times, The Most Frustrating Of Times

The fed market continued to display its strength as fed cattle traded at $90/cwt. again this week. And, there's little sign of weakness as nearly every month except October has set new contract highs.

The feeder and calf markets continue to follow suit. It appears that, by this fall, the industry will have recorded the two most profitable years in its history.

Usually when a market reaches such lofty heights, the risk is to the downside. A review of the market fundamentals, however, indicates that moving higher yet may be the more likely scenario.

There are several factors that helped the market attain its current levels. Certainly, supply is one. The longest cattle cycle in history has been extended by drought, and outside influences such as the discovery of BSE in Canada and the terrorist attacks of Sept. 11, 2001.

In addition, feeder-cattle prices have continued to pull into the mix heifers that normally would be kept back as replacements. As a result, expansion has yet to begin in earnest. It's important to note that when expansion occurs it will actually tighten supplies even more in the short term.

Certainly, the decrease in beef tonnage from Canada tightened supplies even more last summer. And, the import restrictions on live cattle have continued to decrease available numbers domestically.

The feeding industry also has remained extremely current in its marketings, which has driven down carcass weights and increased that segment's market leverage. Record profitability, and a board that until two weeks ago continued to discount the deferred months, helped encourage marketings, as did rising corn prices.

Yet, any contention that this market is supply-driven is inaccurate. After all, net beef supplies aren't down dramatically, and most analysts believe the loss of U.S. export markets has taken $12-$15 off the price we would have if our export markets were still open.

No, this is largely a demand-driven market, and it's really exciting considering that this demand growth appears to be part of a long-term shift that still is gaining momentum.

Normally, a rise in corn prices exerts significant downward pressure on calf prices. This time around, however, other positive forces have offset the rise in corn prices.

The increased demand for corn also appears to be part of a long-term structural change, as demand for alternative uses for corn, such as ethanol production, continues to surge. But, the 2004 corn crop went in under excellent conditions. With continued good weather, it will be interesting to witness the yields possible given the recent improvements in corn genetics.

On the positive side, cattle supplies are expected to continue to tighten, especially as expansion begins. Demand continues to improve. And, while U.S. export markets have been slow to reopen, indications are they will return, but over an extended phase-in period. While it will take time to rebuild our export markets, given the growth of Southeast Asia, and China in particular, the long-term outlook is tremendous.

In addition, the branded revolution, the movement to value-based marketing pricing systems, and the improvements in genetics are improving both the quality and consistency of our product.

On the negative side, the reopening of the Canadian border is expected to take several dollars off the fed market (short-term overreaction from a psychology standpoint could be even more). The removal of premiums in the deferred months and higher breakeven levels will make it more difficult to remain as current as we have been. And, adverse weather conditions in the Corn Belt could pressure feeders and calves.

Anti-beef groups, shaken by the recent demand growth for beef, have redoubled their efforts to shake consumer confidence in the health and food safety aspects of eating beef. In addition to the hit from losing our exports, the increased costs as a result of BSE are estimated to be $30 or more/head. That means we're $180 or more lower than we would have been prior to BSE.

Of course, the big bogey man remains the potential of finding another U.S. case of BSE. And, the loss of the checkoff, should the U.S. Supreme Court rule against it, could also short-circuit demand growth.

All in all, however, the positives seem to outweigh the negatives.

The interesting thing about this period of record profitability for all production segments is the frustration level that remains, especially in the cow-calf segment. Uncertainty seems to have increased, and drought and increased price volatility has affected attitudes negatively. And while profits have been large, net profit has not increased as much because of the simple fact that fewer pounds are being produced.

Internal industry politics and the corresponding rhetoric have been very negative, with the focus being on problems rather than solutions. The tension between two distinct visions for the future of the industry -- value-added vs. commodity-based -- has reached the tipping point. So, despite record price levels, the beef industry finds itself caught in an election-year type of climate where the negatives are being accentuated.

Perhaps it would be a good thing to sit back and look at all the positives in the marketplace. The bottom line is that, despite the turmoil of the past 24 months, there's more to be excited about in the beef industry there has been in a long, long time.

2003 BSE Case: The Cost Of One Sick Cow

They call her the “index cow” — the cow that stole Christmas when she was discovered to have bovine spongiform encephalopathy (BSE) Dec. 23, 2003. Her legacy continues to raid every segment of the U.S beef industry.

The National Cattlemen's Beef Association (NCBA) estimates the cost of implementing new regulations directly addressing BSE could hit $300 million/year. Meanwhile, the lost revenue from the non-ambulatory ban could eclipse $50 million/year.

Cattle-Fax says the removal of specified risk materials from beef at slaughter will cost beef processors $100 million/year. The loss of use of advanced meat recovery systems could be another $15 million/year.

USDA announced in March it plans to increase BSE testing to about 200,000 head annually. NCBA chief economist Gregg Doud pegs the cost at $30 or more/animal.

When the U.S. Animal Health Association endorsed implementation of a national animal identification (ID) system last fall, it estimated a comprehensive ID plan would run around $15/animal/year.

Of course, the above accounting doesn't include the loss of domestic and foreign beef markets, or the impacts on cattle prices.

$5.5 Billion This Year?

Early on, a 10% drop in 2004 U.S. farm income due to BSE was predicted. Global Insight (GI) Inc., an international think tank in business and economic forecasting, recently updated the prediction, saying 2004 U.S. net farm income will be down $5.5 billion from 2003 — mostly due to the index cow.

In 2003, the U.S. beef export value was $3.3 billion. Before the BSE discovery, 2004 exports were predicted to grow 0.5%. However, GI says the forecast has been cut 75% from the 2003 level.

GI says each $10/cwt. drop in average price of fed and feeder cattle, and cows will lower U.S. farm cash receipts nearly $2 billion/quarter.

Prior to Dec. 23, beef prices had been at record levels, with fed prices at $90/cwt. after topping $100/cwt. in October and November. Today, prices for nearly every cattle class are higher than last year. Beef-cutout prices are higher. Even export-sensitive, by-product prices are significantly higher.

The 2003 Beef Demand Index increased more than 5% compared to 2002, and more than 15.4% since reversing a 20-year decline in 1998. The index is a reflection of per-capita consumption and consumer spending for beef. There's no indication this trend has changed, says Charlene Schuster, executive director of the Montana Beef Council.

“We fully expect demand will continue to outpace that of a year earlier,” she says. “And, the second quarter is traditionally the strongest demand period.”

Split Within The Industry

While, collectively, the beef business chugs along despite BSE, the industry is fighting itself. Controversy over BSE testing erupted after Creekstone Farms submitted a request to USDA in February for the OK to conduct private BSE testing at its Arkansas City, KS, processing plant. Creekstone says it has assurances from Asian customers that such voluntary testing will reopen the markets for Creekstone products.

USDA refused the license request, saying 100% testing isn't justified. NCBA agrees. The use of 100% testing as a marketing tool is disrupting government-to-government discussions on restoring trade for U.S. beef and undermines consumer confidence, says Jan Lyons, Kansas cattle producer and NCBA president.

“Allowing private companies to use testing as a marketing tool will place undue costs on cattlemen without producing additional protections for consumers and our animal herds,” Lyons says.

Wythe Willey, chairman of Iowa Quality Beef Supply Cooperative (IQBSC), Tama, IA, warns that rapid tests are known to create false-positives.

“Our industry can't afford the ramifications of a false-positive finding,” Willey says. IQBSC doesn't favor testing cattle less than 30 months of age — the vast majority of cattle harvested in the U.S.

Dave Wood, beef division chairman for Harris Ranch Beef Co., Coalinga, CA, says if Creekstone is allowed to proceed with 100% testing, other markets could make similar unscientific demands.

Needle In A Haystack?

Creekstone Farms' CEO John Steward says the firm will challenge the USDA decision. Creekstone would test more than 300,000 head/year, vs. USDA's plan to test 220,000 head.

“USDA is planning on spending at least $72 million of taxpayer money to conduct these tests,” Steward says. “Our plan will cost less than $6 million using the identical test kit, and our customers are willing to pay for the cost of the testing.”

Meanwhile, Dr. Stanley Prusiner says the only way to assure beef is BSE-free is test all cattle at slaughter. He's the University of California-San Francisco neurologist who discovered prions — the malformed proteins believed responsible for BSE.

Only such testing will eliminate prions from the food supply and restore consumer confidence, Prusiner says. He says BSE hadn't been found in the U.S. because USDA tests too few animals.

“Once more cows are tested,” Prusiner says, “we'll be able to understand the magnitude of our problem.”

Some say Prusiner's credibility is tainted because he's an owner of a company that markets BSE testing kits.

“I greatly respect his work, but believe that such a disclaimer is appropriate and should be made in every discussion in which he's cited,” says Jared Taylor, Ames, IA. He's a veterinarian and adjunct instructor in the Center for Food Security and Public Health Iowa State University College of Veterinary Medicine.

Taylor believes the revised BSE testing program recently proposed by USDA is a rational attempt to balance the need to establish a baseline of prevalence with the enormous demands of locating a proverbial “needle in a haystack.”

Hide and Offal Value

  12/22/03 3/23/04
  $/head $/head
Steer Hide, butt brand $66.94 $65.03
Tallow, edible 4.34 3.06
Tallow, packer bleachable 13.64 10.20
Tongues, Swiss #1 white 12.50 2.93
Cheek meat, trimmed 5.36 2.81
Head meat 1.40 1.15
Oxtail, selected 5.48 2.55
Hearts, reg, bone out 1.53 1.15
Lips, unscalded $1.66 $1.02
Livers, slected, gall off 4.34 2.81
Tripe, scalded, edible 4.59 2.30
Tripe, honeycomb, bleached 2.93 2.17
Lungs, edible 0.13 0.13
Melts 0.00 0.00
Meat-and-bone meal, 50% blk/ton 6.12 6.50
Blood meal, 85% blk/ton 2.81 2.17
Total $133.75 $105.95
Source: Cattle-Fax

Cost Summary

New Regulations Cost
Specified Risk Materials $100 million
“Downers” $50-70 million
Over 30 months of age $17-73 million
Advanced Meat Recovery $15 million
BSE Testing $1.2 (to $201 million)
Total $183-277 million
  ($27-41/head)

Regulators And Congress Take Aim

Today, Americans are just beginning to see how important BSE-related issues have become on Capitol Hill. The National Cattlemen's Beef Association (NCBA) reports that seven pieces of legislation have been introduced in Congress to address animal identification (ID) and traceback.

  • The BSE and Other Prion Disease Prevention and Public Health Protection Act contains ID language and provides for a national animal heath laboratory network. It also calls for rapid prion disease screening for all non-ambulatory ruminants 30 months of age and older and expands testing for chronic wasting disease in farm-raised deer and elk.

  • The Animal Feed Protection Act would impose a comprehensive ban on interstate commerce in animal feeds that contain specified risk materials from ruminants.

  • H.R. 3705 seeks to amend the Federal Meat Inspection Act to require USDA to test all cattle for BSE at slaughter.

  • The Consumer and Producer Protection Act would redefine a “downer” to exempt those paralyzed by “fatigue, stress, obdurator nerve paralysis, obesity, or one or more broken or fractured appendages, severed tendons or ligaments, or dislocated joints.”

    Meanwhile, the animal feeding industry has been hit with several interim rules by the Food and Drug Administration (FDA) designed to strengthen BSE firewalls. These include:

  • Elimination of present exemptions that allow mammalian blood and blood products to be fed to other ruminants.

  • Banning poultry litter and plate waste as feed ingredients for ruminants.

  • Requiring feed manufacturing equipment, facilities or production lines to be dedicated to non-ruminant animal feeds if they use protein prohibited in ruminant feed.

  • Increased inspection of feed mills and renderers by the FDA.

    There is concern though, that animal products prohibited from cattle feed are currently acceptable for use in pet food. Such products include meat-and-bone meal. There's been much informal discussion about banning such animal products from pet foods for two reasons:

  • A significant amount of pet foods may be entering the human food chain.

  • Accidental or unintended consumption of pet foods by animals intended for human consumption.

FTAs Open Markets

Before BSE was discovered in the U.S., international trade was a $5.76 billion industry, and growing (see page 31). Establishing international trade relationships is important to increase the demand for high-quality beef abroad.

Free trade agreements (FTAs) have created freer access to international markets, done away with trade barriers, and reduced tariffs for U.S. exports.

The U.S. has negotiated several FTAs with countries in just the past couple of years. These include Chile, Morocco, Singapore, Australia and the Central American countries.

The following is an explanation of the latter two agreements — the Australian FTA and Central American FTA (CAFTA), and how they will affect the future of U.S. beef markets.

Australian FTA

On Feb. 8, 2004, agreement was reached on an FTA with Australia, pending final approval from Congress.

Australia is the No.-1 exporter of beef. Currently, the tariff rate quota (TRQ) for Australian beef to the U.S. is 378,214 metric tons (mt), with a 4.4¢/kg in-quota tariff and an out-of-quota duty of 26.4%. The first and only time Australia filled their TRQ was in 2001.

“Due to what is being considered the worst drought in its history, Australia will not fill its TRQ in 2003,” says Gregg Doud, National Cattlemen's Beef Association (NCBA) chief economist.

The FTA will phase out the above-quota duties over 18 years. The initial increase will amount to 0.17% of U.S. beef production and 1.6% of U.S. beef imports, according to a fact sheet from the U.S. Trade Representative (USTR).

The agreement increases Australia's FTA access to the U.S. from 15,000 tons to 70,000 tons over that 18-year period.

After BSE was found in the U.S. the agreement was modified to make up for the loss of export markets.

“If U.S. exports do not exceed 2003 levels during the first two years of the agreement, the increase in market access for year 2 would not go into effect,” Doud says.

He adds that throughout FTA negotiations there was an assumption that a new World Trade Organization agreement would be developed within the next 10 years, increasing U.S. access to other international markets via multilateral reductions of tariffs on beef.

“The U.S. cattle industry's primary objective in these negotiations was to prevent any potential negative impact on the U.S. beef industry caused by this FTA before the U.S. beef industry would have an opportunity to increase its ability to export beef via the WTO trade liberalization process,” Doud says. “The expectation being that once this reduction in beef tariffs globally was in place, Australia would not have enough production to meet this global demand and still annually fill its U.S. quota.”

CAFTA

Meanwhile, the CAFTA agreement opens opportunities for U.S. high-quality beef to Central America. Six countries are included in CAFTA — El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic and Costa Rica. Hotels and restaurants that cater heavily to the tourism industry in these countries have driven up the demand for high-quality beef.

CAFTA's importance is explained on the USTR Web site www.ustr.gov: “The CAFTA countries and many other developing countries already enjoy duty-free access to the U.S. market for the majority of their exports… Yet these countries often have high tariff and non-tariff barriers for U.S. exports and impose restrictions on U.S. businesses.”

The CAFTA agreement secures market access immediately for high-quality beef cuts grading USDA Prime and Choice. It phases out tariffs and TRQs for other beef products over 15 years.

Flax added to supplement

New Generation Feeds has added FlaxLic to its SmartLic supplements. FlaxLic contains a high level of alpha-linolenic acid, an omega-3 fatty acid. It contains 15% fat, most of which comes from flaxseed and edible linseed oil. FlaxLic is also fortified with vitamins A, D and E, and offers up to 125% NRC nutrient requirements for trace minerals.
(Circle Reply Card No. 170)

Banamine Available

Banamine® Injectable Solution from Shering-Plough Animal Health is again available to serve as adjunct therapy in treatment of bovine respiratory disease. It's non-steroidal and anti-inflammatory.
(Circle Reply Card No. 172)

Synthetic Grease

John Deere introduces a synthetic, non-toxic, high-performance lubricant for all farming and general-purpose equipment applications. Multi-Purpose Extreme-Duty Synthetic Grease is odorless, waterproof, silicone-free and outlasts petroleum-based greases and oils. It's also USDA-approved for use in food-handling and processing facilities.
(Circle Reply Card No. 175)

Onset Product Catalog

The 2004 product catalog from Onset Computer Corp. is available. The catalog offers detailed product descriptions, specifications and prices for its line of Hobo®/Stowaway® data loggers, weather stations and Tattletale® logger-controller products.
(Circle Reply Card No. 177)

D-L Catalog Available

The 2004 D-L GOLDENROD General Products Catalog from the Dutton-Lainson Company features more than 400 products for farm, home, auto, hardware and industrial applications. New items include Hired Hands fence tools, Strong Arm® AC/DC winches with remote control, and a weld-on swivel bracket that fits all D-L swivel jacks with ½-in. pins.
(Circle Reply Card No. 173)

Colostrum Supplement

Trouw Nutrition USA developed Ultra Life Colostrum Supplement for calves to fill the void resulting from recent changes in the FDA's ban on blood products as a feed source. Ultra Life utilizes Greenline technology, a synergistic blend of natural ingredients developed to improve calves' natural immunity. The key ingredient is Protimax® hyperimmunized egg protein, a rich source of egg globulin proteins.
(Circle Reply Card No. 176)

7-way Clostridial Protection

For complete 7-way clostridial protection, Colbalt 7 from Agrilabs has shown to provide optimum immune response with minimal incidence of injection-site reaction. The 2-mL dose vaccine is administered subcutaneously, with a follow-up dose given 2-6 weeks later.
(Circle Reply Card No. 178)

Adspec Returns To Market

Pfizer Animal Health announced the return of Adspec® Sterile Solution to the cattle market. Adspec is a broad spectrum anti-infective indicated for the treatment of bovine respiratory disease. It is administered subcutaneously into the neck and has a withdrawal time of 11 days.
(Circle Reply Card No. 171)

Detecting E. coli

The BAX® system, a genetics-based diagnostic tool by DuPont Qualicon, has been validated by the AOAC Research Institute (AOAC-RI) as a performance-tested method for detecting E. coli O157:H7. The BAX system detects target bacteria in raw ingredients, finished food products and environmental samples. AOAC-RI is an international scientific organization that provides independent, third-party assessments to ensure products perform as they claim.
(Circle Reply Card No. 174)

Sunrise Living Quarters

Sundowner Trailers' Sunrise Living Quarters is a weekender package that offers a full-size bed and adjacent storage; bath with shower, toilet, shelves, overhead cabinet and door mirror; kitchen area with sink, microwave, fridge and large storage cabinets; bench seat which lifts for more storage; a hanging wardrobe closet with a large counter top; a television hookup and more.

These standard features are available in two-, three- and four-horse models. All Sundowner trailers are backed by transferable, three-year, hitch-to-bumper and eight-year structural warranties.
(Circle Reply Card No. 179)

Fundamentally, We Look Great

“Schizophrenic” is John Lawrence's description. “Optimistic” is Harlan Ritchie's characterization. Bill Helming calls it “very positive and very solid.” But, all three experts concur that, despite the current challenges posited by a single case of bovine spongiform encephalopathy (BSE), the U.S. beef industry is fundamentally looking good.

“Until Dec. 23, the industry lived in fear of when we would find the first case of BSE in the U.S.,” says Lawrence, an Iowa State University economist. “Now, with heightened BSE surveillance, the worry is if we'll find a second one, and what if we don't get our beef export markets back.”

But Lawrence sees plenty of silver lining and potential, beef demand being a prime example.

“Even if low-carbohydrate diets end up being a fad, the underlying work the industry has done in positioning beef and its role in a healthy diet should sustain beef demand,” Lawrence says.

Another component is the industry's investment in developing more convenient beef items, he adds. About 1,500 such beef products have been developed in the past four years, says the Cattlemen's Beef Board.

“Those are really paying off,” Lawrence says. “They not only give consumers more choices, but that many more products on the retail shelf also give beef more face time with consumers. If the industry hadn't developed those products, our competitors would likely have that space and exposure.”

Lawrence expects Asian markets to be reopened to U.S. beef in 2004. Hopefully, he adds, the resolution will be a long-term one based on sound science. His optimism is based on the fact that Japan was an early adopter of the control of process and standards philosophy espoused by management theorist W. Edwards Deming.

“If the U.S. can show Japan that it has a set of controls and procedures in place that provide the outcome and assurances the Japanese are after, that could be an acceptable and honorable solution for everyone,” Lawrence says.

Ritchie, a Michigan State University distinguished professor of animal science, says the industry's recent advances in meeting consumer demands for convenience and eating experience will serve the industry well. He attributes much of the demand recovery of the past 4½ years, after a 20-year decline, to the development of hundreds of innovative, convenient branded products.

Another positive development is the National Cattlemen's Beef Association-funded National Carcass Merit Project that has enabled breed associations to identify sires and lines of cattle within their respective breeds that are capable of improving beef quality and cutability.

“We are seeing more cooperation and coordination among industry sectors than many of us thought would be possible a few years ago,” Ritchie says. That, along with the growth in consumer adoption of high protein/moderate carbohydrate diets, has helped the beef industry regain the market share usurped by competing proteins, he says.

Ritchie adds that food safety remains a challenge, but technology such as irradiation and other interventions has reduced the incidence of bacterial pathogens such as E. coli O157:H7.

Even more is promised by the adoption of a system of individual animal identification and source verification, he says. “Implementation won't be easy, but such a system will help put us on equal footing with those countries that have already done so,” he says.

One worrisome subject, Ritchie says, is the industry division regarding the mandatory beef checkoff. “Both sides need to work hard at resolving these differences. If not, the industry will be hard pressed to maintain its momentum in the years ahead,” he says.

Despite the industry's current volatility — and potential — Ritchie suggests producers bear in mind that change is a given. “Change is inevitable. It is adaptation and survival that are strictly optional,” he says.

“While it would appear the industry is in an extended period of favorable prices, producers can't afford to let their guard down,” Ritchie says. “In spite of improved margins, it's important that producers and the industry keep production costs in check.”

While Helming, an economist from Lenexa, KS, says there certainly will be short-term gyrations in the beef and related industry markets, the underlying fundamentals point to a bright picture over the next 7-10 years. The very realistic and likely trading range (new price plateau) for fed cattle is $80-100/cwt. for the next 7-10 years, he says.

One driving factor is an eight-year herd liquidation trend that may well continue for several years yet. Here's why:

  • Calf, feeder cattle and milk prices aren't high enough to encourage building the beef and dairy cow inventory.

  • Cattle feeders are willing to pay more for heifers as placements than ranchers are to keep them. As a result, many ranchers will continue to take the cash.

  • On-going drought and poor pasture conditions in key areas of the U.S. continue to shrink cattle numbers in those areas.

  • Fewer beef and dairy cows are needed due to major productivity gains. Helming says total beef and dairy cattle inventory fell from 132,250,000 head in January 1976 to 94,882,000 head in January 2004, a decline of 28% in 28 years. Yet, the U.S. set an all-time, record-high beef production of 27.1 billion lbs. in 2002.

  • An aging population of beef and dairy operators is less inclined to take on more risk by expanding their herds.

  • Federal and state tax laws, such as death taxes and real estate taxes, contribute to operators' decisions not to expand their cattle inventories. Meanwhile, such tax obligations force many operations that can't afford to borrow the money to pay them to sell out or cut back their operations.

  • And, land-use restrictions. Population growth, particularly in the Southeast, as well as more lucrative uses for land than cattle, continue to shrink cattle numbers in such areas. Meanwhile, in the West, regulatory and activist pressures have made life tougher for ranchers utilizing public lands.

Tight Supplies To Continue

Helming predicts relatively tight beef supplies for the next 3-5 years, possibly longer. A current 30-35% overcapacity in the feeding sector promises to drive further consolidation in the feeding, and also in the packing, sector due to positive economies of scale for larger operations, he says.

Helming estimates feedyards of 10,000- to 35,000-head annual capacity have a cost of operation of about 30-35¢/head day. Meanwhile, 50,000- to 120,000-head-capacity operations run about a dime less.

“That tells you the smaller operators, but not all, will be facing a lot of pressure. There simply won't be enough cattle to go around. Someone is going to have to shut their doors,” Helming says.

In the cow-calf sector, Helming expects some consolidation but not to the degree in the feeding, packing and retail segments. “We'll have fewer, bigger and better managed cow-calf operations, vertically coordinated with other segments further up the value line. Vertical integration isn't a worry; no one wants to own ranches. There's no money in it,” he says.

Regarding beef demand, Helming calls the beef demand upturn, “the most positive underlying fundamental development that has occurred in the history of the beef industry.” The high-protein diet phenomenon, he says, is not a fad. “I'm absolutely convinced it's a trend,” he says.

From a longer-term perspective, Helming says there's more opportunity than there's ever been in terms of the future viability of the U.S. beef industry.

“All these factors are creating a foundation and a climate that will foster more interest, capital and commitment to branded beef and all branded protein. That's particularly true for beef because the industry is so far behind pork and poultry,” Helming says. “Over the next 20 years, we'll see tremendous advances in the branding arena for beef.”

Top 10 Beef Cow States (1,000 Head) Jan. 1, 2004

Texas 5,483
Missouri 2,125
Oklahoma 1,970
Nebraska 1,848
South Dakota 1,711
Kansas 1,550
Montana 1,472
Kentucky 1,128
Tennessee 1,103
Iowa 984

Presidential Elections 2004

Few national elections have managed to sustain the fever of battle through a four-year election cycle, but 2000-2004 seems to be such an exception. An electoral college largely divided along urban and rural lines put George W. Bush in the White House in 2000 and granted a razor-thin majority to Republicans in both houses of Congress.

This November looks to be more of the same as Bush vies for a second term against the likely Democratic nominee, John Kerry. With Congress essentially shackled by a 50-50 party split, the contest for the White House is the most anticipated prize, says Chandler Keys, vice president of government affairs and the chief lobbyist for the National Cattlemen's Beef Association in Washington, D.C.

“Power always travels to where it meets the least resistance. With control of Congress virtually split, which party wins the White House will really be important this year,” he says.

Keys says the Bush Administration has been “very positive” toward the cattle and beef industry.

“We have had a lot of contact with the Bush White House and we share a lot of similar philosophies about markets, demand and the global marketplace. We've gotten along well with them in collaborating to make sure the BSE incident was handled in a way that wasn't hysterical but science and risk based,” Keys says.

Such collaboration also paid dividends in food safety, he adds, where the industry recorded huge progress toward reducing incidence of E. coli O157:H7 and other pathogens.

“We have continued to work together in implementing and fine tuning programs like the Hazard Analysis Critical Control Point (HAACP) program,” Keys says. “We've cooperated to ensure the program is effective at addressing the critical food safety control points and not used for political control points.”

Keys chalks up other significant progress made under the Bush Administration in the areas of federal lands and private lands. And, with the help of committee chairmen assignments in Congress, Keys says, NCBA was successful in garnering a two-year delay in implementation of the country-of-origin-labeling (COOL) law.

“If we hadn't achieved that delay until September 2006, the industry would have to be preparing for that right now, on top of everything else,” he says.

Keys sums up the political situation this way: “At the end of the day, what the industry wants is strong beef demand, a cooperative government, and profitability in the industry. That's what we have now but it takes diligence and fortitude to maintain that.”

A total of eight senators and 29 congressmen, who are either retiring or running for another office, leave a total of 37 seats up for grabs in 2004. But, Keys says one of the most-watched races will be in South Dakota where Democratic Sen. Tom Daschle, the senate's minority leader, is in a tough re-election race against former U.S. Rep. John Thune, a Republican.

“Daschle is a very powerful figure on the political scene, and he has a more populist view of American agriculture. He's a big proponent of COOL and has come out in favor of 100% testing of cattle for BSE. It's likely that if Kerry is elected president that Daschle would be a key advisor on agricultural matters to him,” Keys says.
Joe Roybal

Help us recognize the industry's best

As part of our 40th anniversary issue in September, BEEF editors want to recognize those, living or deceased, who made the most significant contributions to the U.S. beef industry over the past 40 years, and we want readers to help. Using nominations by readers and final selections by an independent panel of judges, the “BEEF Top 40” will recognize the folks — professional or volunteer — who most contributed to the dynamic beef industry of today.

Go to www.beef-mag.com to access a form you can submit electronically, or print out and mail to BEEF Top 40, 7900 International Dr., Suite 300, Minneapolis, MN 55425. The deadline is July 1.


Make your reservations for the Kansas State University (KSU) BEEF ID Academy. The second of four, comprehensive seminars on electronic animal identification (ID) and traceback is set for June 14-15 at the KSU ID Beef Facility in Manhattan. Other KSU BEEF ID Academy sessions will be held July 19-20 and Aug. 2-3. Find out more about the curriculum, sponsors and registration at www.beefacademy.com.


Mesquite Organic Beef LLC, the nation's only large-scale producer of USDA-certified-organic grass-fed beef, is seeking ranchers to join its network. For more information, call 888/480-BEEF, or visit www.mesquiteorganicbeef.com.


Judge tosses out Pickett v. IBP jury verdict. The Feb. 17 jury verdict in Pickett v. IBP that recommended Tyson Fresh Meats pay $1.28 billion in damages to plaintiffs disadvantaged by captive supply was overturned by U.S. Senior District Judge Lyle Strom. Strom agreed with a Tyson motion that plaintiffs hadn't proved their contention that the world's largest packer was illegally manipulating prices. Plaintiffs said they plan to appeal the ruling.


Applied Reproductive Strategies In Beef Cattle Symposium is Sept. 1-2. Set for the Sandhills Convention Center in North Platte, NE, the meeting is sponsored by the North Central Region Bovine Reproduction Task Force and Extension services from multiple states. Contact Rick Funston at 308/532-3611, Ext. 140, or e-mail [email protected] for more information or to register.


“BVD Wildfire” is the latest fact sheet available for free download at www.beefstockerusa.org. The fact sheet covers symptoms of bovine viral diarrhea (BVD) as well as confirmation, prevention strategies and managing the potential for further infection, particularly in dealing with, and minimizing, persistently infected calves.


For the second consecutive year, the “Beef. It's What's For Dinner®” checkoff campaign has won an EFFIE, one of the advertising industry's most coveted national awards. The award is presented annually by the New York American Marketing Association in recognition of the year's most effective advertising campaigns. Other winners include Pepsi, IBM and Kellogg.


Online coverage of last month's Beef Improvement Federation annual meeting is available at www.bifcon ference.com. The coverage is courtesy of Angus Productions Inc., with sponsorship by Boehringer Ingelheim Vetmedica, Inc. Included are releases and articles on cow herd efficiency, DNA fingerprinting, new technologies and genetic prediction.