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Monday, November 26,2007

BEEF talk

by Kris Ringwall, North Dakota State University
A burden or opportunity? For the past six years, North Dakota Beef Cattle Improvement Association producers have been involved with age- and source-verification research with North Dakota State University (NDSU) and numerous partners. This partnership led to a successful application to USDA to provide third-party verification for age and source by the North Dakota Beef Cattle Improvement Association. The CalfAID program was named an official USDA-Agricultural Marketing Service Process Verified Program in 2006. Data collected is processed through the cow herd appraisal performance software for nearly 400 North Dakota cow/calf producers, with a typical herd size of 190 cows, as well as beef producers in many other parts of the country. In 2004, 2005 and 2006, 14,432 calves were tagged either by the owner of the calves or NDSU personnel. Combining the three years, 19.5 percent remained on the ranch or farm of birth as replacements. Of the calves offered for sale, 13 percent were traced to backgrounding lots, 29.3 percent were traced to feedlots, and 27.5 percent were traced successfully to the point of harvest. In addition, 10.3 percent never were traced and are considered lost. Despite the enthusiasm and desire for these cow/calf producers to provide the calf and corresponding data as a marketable package, only one in four calves arrived at harvest with the data package. Costs also were documented. Many variables exist in the cow/calf business, such as distance traveled, gathering time, and number of calves worked. Our best estimate per calf is $5 for tags, data management and verification; $7 for working calves, tag placement and documentation; and $8 for data collection and chute fees through the feeding and harvesting segments. The total cost estimate per calf worked on the ranch would be $20 and the total per-calf verified to harvest would be $56, that is if one takes into account that only one in four calves actually made it to the packer with the data intact. The one calf must carry the cost of the other three. In addition, shrink, the lost weight while handling calves, costs the producer. No one debates the need to move, process and work cattle, but it does cost money. Calves are living, changing and growing entities. The dollars are made in growth and meant to be profit, not cost recovery. This weight loss may not seem like much, but it does add up. Our estimates were $10 to $20 from each calf’s income potential. Behind the scenes, several very important components are required for preparing a calf and accompanying data package. Calf-AID provides source and age verification through data management, electronic animal identification and traceback to the extent possible. The need for a calving book that records data points along a calf’s life is essential. Producer data collection in the calving book is verified by CalfAID to separate conforming and nonconforming calves. The efficiency of the process is dependent on technology working in environments that are not technology friendly. New high-frequency technology is appealing to cow/calf producers and others who handle cattle. Recently, high-frequency tags were read with no interference or performance issues at a local livestock auction. A total of 188 calves in 10 different lots sold. The average read time was .338 second per tag, with a 99 percent read rate. This leap forward connects the calf and the data package and opens the door to track comingled and re-sorted lots of calves. Is this a burden or an opportunity? The answer brings a mixed response. The verdict certainly is not in on how the market actually will respond. Premiums are evident, certainly advertised, but the point still remains that only one in four of those calves our producers so painstakingly prepared for the market actually have paved the way. That rate needs to improve throughout the industry.

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Monday, November 19,2007

Regulatory bottleneck limits ethanol

by Todd Neeley - DTN
In a video produced by the American Coalition for Ethanol (ACE), scientists from the Lake Area Technical Institute in South Dakota disassemble the engine of a 2000 Chevrolet Tahoe. Part by part, they compare what a year’s worth of driving on E85 has done to a standard engine—and part by part, the technicians show that the engine is in better shape than a comparable engine run on regular unleaded gasoline. Despite the positive results, ACE officials say they would not recommend burning E85 in standard vehicles. But the test demonstrates what could be a pivotal point in ethanol’s future: Maybe, just maybe, standard vehicles will be able to run on higher ethanol blends (though not as high as E85) without ruin. Two things have prevented the use of higher blends thus far. One is federal regulatory hurdles. The other is the automakers, who won’t warranty engines to be used with blends higher than E10. Now there’s a chance the regulatory hurdles will come down. There’s no guarantee it will happen, but the government is taking another look. One concern the U.S. Environmental Protection Agency (EPA) has, according to the Natural Resources Defense Council (NRDC), is that higher blends have the potential to increase harmful emissions that contribute to air pollution. Those pollutants include nitrogen oxides, volatile organic compounds and carbon monoxide. However, newer model vehicles are better equipped to reduce harmful emissions, making it less likely that higher ethanol blends would contribute significantly to additional air pollution, according to NRDC. Federal approval to use such blends in standard vehicles would create a much larger market for an industry that is about to hit the E10 “blending wall” as new ethanol plants continue to come on line. Brian Jennings, ACE executive vice president, said his organization shares the same sentiment that the federal agencies do in wanting to thoroughly study the potential effects of using higher ethanol blends. “I wouldn’t go so far as to say frustrated,” he said. “We have a vested interest in ensuring that a fuel blend—whether E10, E20, E30, etc.—is going to be compatible with autos, that the fuel will work effectively and efficiently, that it will be safe, reliable and meet EPA emissions regulations. So, we recognize the hoops are in place for a reason. I think our concern is how would-be opponents might try to draw out the process and stand in the way. After all, we would be attempting to increase our market share.” The day when higher ethanol blends will be available to standard vehicles, however, is squarely in the hands of the U.S. Department of Energy (DOE), EPA and the U.S. Department of Transportation. Margot Perez-Sullivan, EPA media representative, said EPA and DOE have been looking at higher ethanol blends since the establishment of the Renewable Fuel Standard (RFS) in the 2005 Energy Act. At this time, she said, the federal government will not share results of testing that is ongoing on the current U.S. vehicle fleet. “When we have results, we will make a public announcement,” Perez-Sullivan said. Denny DeVos, director of corporate finance for Sioux Falls, SD-based ethanol producer Poet, said that regulatory bottlenecks are a major constraint to additional ethanol sales, rather than poor ethanol economics or an RFS that’s too low. Federal authority to allow blending of ethanol above the legal 10-percent cap, he said, would be the fastest, most effective way to cure the ethanol industry’s current glut. Simply increasing the RFS up to a proposed 36 billion gallons from the current 7.5-billion-gallon cap by itself won’t fix the problem, DeVos said. “The nation’s non-flex fuel vehicles could use ethanol blends of 20 to 40 percent without harming the environment and without the infrastructure challenges of E85. “It’s definitely very safe to blend ethanol at 30 percent without engine modification,” DeVos said. Higher blends up to 40 percent are the “upper operating range” of what oxygen sensors can detect in today’s engines. At $93-per-barrel crude oil, he said blenders could make an estimated $1 more per gallon with ethanol than using conventional gasoline, with federal tax credits included. The reason blenders aren’t doing it now with crude oil approaching $100 per barrel is that retailers can’t sell more ethanol because of federal regulatory barriers, DeVos said. Federal studies are underway looking at both exhaust emissions and evaporative emissions from the fuel blend or blends we would want approved, Jennings said. Scientists are looking at materials compatibility—immersing parts and materials in the higher ethanol blends to compare how they react versus how those same materials react to gasoline. Jennings said the work also includes studying drivability and durability, or how well cars operate on the higher blends, and the potential health effects and air quality. In 1999, ACE published the results of a year-long study conducted at Minnesota State University in Mankato; the study looked at the effects E30 and E10 ethanol blends had on 15 different vehicles including Ford, Chevrolet, Oldsmobile, Buick, Dodge, Cadillac and Geo, ranging in year from 1985 to 1998. The study found a reduction in fuel economy on E30 and “no apparent trend in vehicle emissions was identified,” the study said. “Some emissions increased, while others decreased. Almost all emissions were below federal standards.” Researchers applied the same vehicle-emissions test used by EPA, the study said. “There was not one drivability problem reported during the study,” the study said. “There were no fuel system compatibility problems experienced by any participants.” If the federal government decides to allow higher blends, attention will turn to whether the automakers will warranty cars for their use.

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Monday, November 19,2007

Livestock groups eye Senate farm bill

by Chris Clayton - DTN
Commodity farmers get the lion’s share of focus in the farm bill, but there are several provisions in the Senate farm bill that could affect the way livestock producers do business. Senate debate is stalled over how to accept amendments, but several senators are expected to offer proposals on the Senate floor as early as next week to tighten buyer-seller arrangements in the complex livestock industry. The Senate farm bill includes a ban on packer ownership of livestock longer than 14 days before slaughter. But the Senate bill also has a provision that would allow private companies to forward contract with dairy producers. There also is a provision to create an office of special counsel on competition issues at USDA. Arbitration in livestock and poultry contracts would also be voluntary and could not be a required provision in such contracts. Livestock producers and groups generally come down on different sides of these issues depending on whether they back open cash sales or argue that a producer and packer should be able to do business with limited government involvement. Allan Sents, a Kansas feedlot manager and board member for the U.S. Cattlemen’s Association (USCA), said some key amendments are needed to clean up and clarify language in the 1921 Packers and Stockyards Act that courts have repeatedly interpreted broadly to justify packer business practices. “To me, the clarification on the Packers and Stockyards Act is more import than the ban on packer ownership,” Sents said. Senate Agriculture Committee Chairman Tom Harkin, D-IA, plans to offer one such amendment to clarify a “competitive injury.” It would redefine the legal requirements for a producer to show in court that they have been injured by the way packers are buying cattle. Now, a producer must show that he and several others were affected by a packer’s actions, instead of just his own operation. “It’s just an untenable burden to be placed on a producer,” said Bill Bullard, R-CALF United Stockgrowers’s Association CEO. R-CALF backs the Senate provisions on country-of-origin labeling, the packer ban, interstate shipment of state-inspected meat, and the establishment of an office of special counsel for livestock at USDA. Further working on language in the packer laws, Sen. Charles Grassley, R-IA, and Sen. Jon Tester, D-MT, will offer a provision stemming from the Pickett versus Tyson court case. In that case, Tyson argued that acts violating the Packers and Stockyards Act were a justifiable business practice. The Grassley-Tester Amendment would state that claims of business justification would not be a legitimate defense for an unlawful practice. Other senators keep offering a litany of amendments, but National Farmers Union President Tom Buis said it’s likely a lot of those amendments are just political posturing and will be eventually pulled. Buis said his group likes much of what is in the Senate livestock provisions, with the exception of the provisions allowing forward contracting in the dairy industry. “We think it certainly could lead to further consolidation of the dairy industry,” Buis said. One proposal creating a lot of debate is a proposed amendment by Sen. Mike Enzi, R-WY, that is meant at getting to the issue of captive supply of livestock. The amendment would restrict confidential one-on-one business deals with prospective buyers. Under the proposal, forward contracts would be prohibited for more than 40 head of cattle. “The Enzi amendment is probably the most problematic provision out there,” said Colin Woodall, executive director of legislative affairs for the National Cattlemen’s Beef Association (NCBA). “The way it looks, it will probably be in the final Senate version.” Packers have sent out letters saying the Enzi provisions would take away premiums and niche-marketing contracts, but producer groups such as R-CALF and USCA have denounced those letters as fear mongering. Sents said he would like to hear the debate and merits of the Enzi amendment. Right now, Sents said cattle feeders often have to wait until sometime on Friday afternoon before the week’s cash trade really begins. Captive supplies by packers have created smaller trading windows and fewer cattle sold in negotiated markets, he said. “I certainly favor the concept of the Enzi amendment,” Sents said. Others argue that this focus on livestock is a holdover from price collapses nearly a decade ago and isn’t a reflection of the more recent strong markets in cattle and hogs. “Why is it so wrong to have contracts now that we’re making money?” said Joy Philippi, a Nebraska pork producer and past president of the National Pork Producers Council. The ban on packer ownership too may have a bigger ripple effect on pork than cattle, given the vertical integration in the pork industry. Philippi said contract-feeding hogs for packers is the way a growing number of younger producers are getting established in agriculture. “What happens to the people who have good feeding contracts with packers?” Philippi said. Restrictions on contracts and supply could generate a great deal of debate on the Senate floor. For instance, Harkin said he supports forward contracts as long as there are producer protections. Contracts should have provisions for resolving disputes between a buyer and seller, and there should be no mandatory arbitration clause in the contracts. Contracts must be transparent, and Harkin said there should be a window of time, 24 or 48 hours, to get out of the contract. “If you have all of those in there, it would be fine,” he said. The Senate bill has a provision for a new special counsel, but some senators want to broaden the authority in the language. Twenty industry groups ranging from NCBA and National Grain and Feed Association to the Grocery Manufacturers Association, the Pet Food Institute, Biotechnology Industry Association, and the U.S. Chamber of Commerce co-authored a letter earlier this week to express concern about an amendment by Grassley and Sen. John Thune, R- SD, on the special-counsel provisions. Senators are trying to address the perceived ineptness of the USDA’s Grain Inspection Packers and Stockyards Administration. The agency, known as GIPSA, has received a great deal of criticism from Congress over the past two years after a USDA Office of Inspector General report in early 2006 found GIPSA had done very few actual livestock investigations over the previous six years yet had artificially inflated the numbers. Some members of Congress sought to even separate GIPSA’s Packers & Stockyards oversight from USDA. Still, NCBA resists the argument that a special counsel is needed. “It’s just redundancy,” Woodall said. “It’s adding another layer of bureaucracy that we don’t think is going to do anything but slow things down ... It’s like having Kenneth Star on staff 24 hours a day and the sole purpose is to prosecute people.” Starr was the special prosecutor who investigated the Clinton presidency, leading to President Clinton’s impeachment trial by Congress.

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Monday, November 19,2007

Fed cattle prices begin long awaited rally

by WLJ
—Choice boxed beef prices gain $4.28 in first three days of last week. The fed cattle market rally looked like it was getting underway last week with some limited higher cash trade reported early in the week, including some grid trade in Texas at the $150 level. Last Thursday, there were a few reports of live cattle moving in Texas at $92.50 and reports of bids at $145-146 live basis by packers. However, upward surging boxed beef prices early in the week, along with strength on the Chicago Mercantile Exchange (CME), had feedlots holding out for better offers. Analysts last week said they expected trade to come in at $93-94 live and $144-146 dressed, compared to the previous week’s trade at the $92 to $93.50 level in the south and $92-93 live, $142-145 dressed paid in the north. Prior week Corn Belt sales were $90-91 live and $142 dressed. Packers have been relying heavily on contract and formula cattle and cash market purchases have been on the light side for several weeks, leading to reports of short bought packers. However, kill levels have also been on the high side, so it was expected last week that packers would have to come to the table and close up the gap between feedlot asking prices and packer offers last week to get cattle bought. Despite expectations of higher cash and continued reports of tight supplies of available, market- ready fed cattle, serious trade wasn’t expected until late in the week, perhaps being delayed until after the release of USDA’s Nov. 1 cattle on feed report due last Friday. That report was expected to show inventory numbers to be below year ago levels. The average of analysts’ expectations was reported by Dow Jones to be 2.1 percent below year ago levels. Placements of cattle into feedlots were expected 11 percent above November 2006 levels as a result of light placements a year earlier and a lack of available wheat pasture in the south, which has led some stocker operators to place cattle directly into feedlots. Marketings were estimated at a robust 7.3 percent above year ago levels, mostly a result of packers vying for market share as they continued heavy slaughter volume despite negative market fundamentals. Although those estimates are positive in terms of on feed and marketing numbers, the expectations of higher placements and strength in the corn market weighed on deferred futures in contract trade on the CME last week. As of last Thursday however, contract trade had firmed up and settling prices were firm, with December closing at $95.32. February live cattle contracts pulled back 10 points, to settle at $97.95, and April ended the day 2 points lower at $98.10. Ehedger.com analyst Troy Vetterkind said the midweek pull back was caused by a combination of factors, including the on feed report expectations. “Apparently the 11 percent increase in placements spooked the market, however I think a lot of us are expecting that, if not more, due to the end of the grass run of yearlings and the fall calf run,” he said. “One thing that we are probably going to see is a pretty sharp increase in lightweight placements due to less cattle going on wheat pasture this year.” He said the contract trade played right into the pre-report expectations, while supporting the case for higher cash cattle trade last week. “Packer interest should start to pick up today (Nov. 15) as many of them are getting short bought, especially on the southern Plains, and I think they could be getting a little short on contract cattle,” Vetterkind said. “They do have this week’s kill back, however, I also think they are also getting pretty good inquiry for beef this week for both spot and forward contract.” That was especially evident in the boxed beef markets last week. The Choice cutout jumped early in the week, adding $4.28 in the first three days of last week before softening Thursday. At the close of business last Thursday, Choice boxed beef was trading at $144.18, while Select was steady at $133.13. Harvest levels fell back as a result of a reduced schedule on Veteran’s Day last Monday. For the week through Thursday, harvest was estimated at 489,000 head, well below week and year earlier numbers of 511,000 head. In the cow beef markets last week, the fall run of culls had increased and pressure was evident in carcass and cutout values as a result of the increased volume. Cash prices paid for culls at auction markets in most areas was $2-3 below the previous week across the board, with prices in areas still affected by drought even lower. The cow beef cutout value was at $103.03 last Thursday, with 90 percent lean selling at $123.16 and the 50 percent trim moving at an average price of $64.73. Despite the slight dip from week earlier levels in all three products, the prices remain near year earlier levels, largely as a result of consumer demand for cow beef products. For the same date in 2006, cow cutout values stood at $100.92, while the 90 percent lean was selling at $124.23. The year-earlier prices for 50 percent trim were sharply lower at $35.19. The continued heavy numbers of cull cows being processed by packers and the number of heifers being placed on feed are a good indicator that herd growth this year will likely be minimal. In fact, a number of analysts have started predicting flat numbers will be reported in the Jan. 1, 2008, U.S. cattle inventory report, paving the way for another good year ahead for cow/calf producers. Feeder cattle Prices paid last week for feeder steers and heifers continue to show strength in more northerly auction markets, as uneven corn markets have some farmers deciding to take advantage of strong cattle prices and market a portion of their harvest through feeder cattle. Harvest has been delayed in some areas due to moisture and as farmers finish up corn and bean harvests, they are starting to show up in the auction barns. USDA Market Reporter Greg Harrison explains that the market remained solid for feeder cattle which were healthy and ready to be put on feed. “The markets here in northern Missouri showed that people were really looking for quality yearling-type feeders and younger calves which have been weaned and have had their shots,” said Harrison. “We are starting to see more yearlings and calves weighing in the 600-700 lb. range, and there is a lot more farmer-feeder activity with the harvest season winding down.” Harrison said that as long as fed prices continue to encourage strong demand from feed yards, it’s likely the recent cash trends for feeder cattle will stay healthy. “There’s some oomph in the fat cattle [market] right now and it’s keeping things going on the feeder side,” said Harrison. “There’s quite a few people right now who feel like we may see prices for feeders on the rise until at least the end of the year, especially as the marketings on the quality cattle become fewer and fewer.” “Overall, things seemed pretty unsteady with more strength in the northern markets,” added Harrison. “I think some of the southern markets have quality issues with leftovers from calves shipped out of the southeast due to drought. To the north, where there were some late harvests, buyers are going to town and keeping demand and prices better there, with the emphasis on quality.” At the Oklahoma National Stockyards in Oklahoma City, OK, last week, there were 10,884 head sold and compared to the previous sale, steers were steady to $1 higher, with heifers mostly steady. Steer and heifer calves of lesser quality were steady to $2 lower except for steers under 500 lbs. which were $2-4 higher. Demand was good for true yearling cattle and light weight steer calves, and moderate for other classes of feeder cattle. Buyers were noted as being very selective, with heavy discounts noted on No. 2, fleshy, full and plainer cattle. Feeder steers at 580 lbs. brought an average of $112.80 at this sale, with 578 lb. heifers following behind at $102.26. In Joplin, MO, last week at the Joplin Regional Stockyards, there were 6,000 head sold with steers and heifers under 600 lbs. steady to $2 lower, with feeders over 600 lbs. $1-3 lower compared to the previous sale. Demand and supply were both moderate, with most weigh-ups average to full. Steers weighing 570 lbs. were worth $110.56 at this sale, with heifers weighing 575 lbs. bringing $99.35. The Winter Livestock feeder cattle auction in Dodge City, KS, saw 5,197 head sell with steers weighing 350-700 lbs. steady to $4 lower, except steers weighing 500-550 lbs. which were steady to $5 higher. Steers weighing 700-750 lbs. were not well tested, but those weighing 750-795 lbs. were steady to $3 lower. Heifers weighing 350-600 lbs. were also steady to $4 lower, with the same exception coming at weights of 500-550 lbs., where they were steady to $1 higher. Examples include fleshy steers weighing 597 lbs. which brought $111, and fleshy heifers weighing 571 lbs. worth $101.74. To the north in Bassett, NE, approximately 2,800 head sold last week with the bulk of the feeder cattle trending steady, the exception being 500 and 550 weight heifers, which advanced $2-3. Overall cattle quality and buyer demand were both good. Steers weighing 605 lbs. were good for $121 at this sale, with lighter heifers weighing 568 lbs. worth $112.03. The Wednesday sale in Torrington, WY, last week saw 5,700 cattle sell, with steer and heifer calves selling $2-4 higher compared to the previous sale, though there were not enough comparable sales on yearling steers and heifers for a good price comparison.  Demand was moderate to good with several long strings of preconditioned and weaned calves, while overall quality was good to fancy. Value-added steer calves weighing 565 lbs. brought $126.25, with heifers of regular quality weighing 577 lbs. bringing $108.25. Last week in La Junta, CO, there were 3,886 head put up for sale, with steer calves under 550 lbs. steady to $1 lower, while steers over 550 lbs. were steady and, in instances, $1-2 higher. Heifer calves under 500 lbs. were $3 higher, with weights over 500 lbs. steady to $1 higher. Yearling feeder steers and heifers were scarce, though there was good demand. Five hundred fifty to 590 weight steers went for $109-115.50, with 615-640 weight heifers bringing around $101. — WLJ  

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Monday, November 12,2007

Panorama Beef receives wetlands award

by WLJ
Darrell Wood of Pete’s Creek Partnership, one of the founding ranches of Panorama Meats, Inc., the Angus grass-fed beef company based in Vina, CA, last week received one of three 2006 National Wetlands Conservation Awards from the U.S. Fish and Wildlife Service (USFWS), Department of the Interior. Wood received the award at a ceremony in Oklahoma City, OK, for his management of the Pete’s Creek Wetland and Riparian Restoration Project on 1,262 acres of the partnership’s ranch located in Lassen County just north of Susanville, CA. This land was also certified as organic grazing land for Panorama Grass-Fed Beef cattle in July 2006. Wood is a fifth-generation California cattle rancher whose family has been grazing cattle on this land almost continually since the 1930s. He is president of Panorama Meats, Inc. and is one of 43 family ranchers who raise Panorama Grass-Fed Beef, which is sold at Whole Foods Markets in northern California, Oregon and Washington, at many HEB stores in Texas, and at 188 Trader Joe’s stores in the western U.S. More information about Panorama Meats can be found at www.panoramameats.com. The annual award recognizes the contributions by private-sector individuals and organizations to the development, restoration and enhancement of wetlands. Wetlands are biologically diverse and dynamic ecosystems that support diverse populations of fish, wildlife and plants. According to USFWS, “wetlands provide habitat for more than 40 percent of the nation’s endangered and threatened species. They also help protect water quality by filtering out pollutants, provide natural flood control by absorbing excess water, buffer coastal areas from erosion, and offer scenic and recreational opportunities.” A special panel of national and regional Fish and Wildlife Service officials and nongovernmental personnel recognizes one individual every year for having made worthy contributions to wetlands conservation. Two additional awards go to a “group-assisted individual” and a “group.” In addition to his work to preserve wetlands, Wood is a leader in the preservation of California’s rangelands. He is board chairman for the California Rangeland Trust and past president of the Lassen County Cattleman’s Association. Both groups work closely with rangeland owners to protect and enhance the environmental and economic quality of the land. He has also been honored for grassland stewardship by the Society for Range Management.

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Monday, November 12,2007

Farm Bill expands help for beginning farmers and ranchers

by Chris Clayton - DTN
Beginning and young farmers and ranchers are going to have better options for tapping into USDA programs stemming from the 2007 Farm Bill. The House and Senate farm bills reflect that Congress is working to help younger producers get better access to capital and land. It’s a contrast to the past when lawmakers would talk about the needs, but never follow through with better benefits for younger, beginning producers. “Both bills represent the most attention beginning farmers have gotten in the farm bill,” said Ferd Hoefner, policy director for the Sustainable Agriculture Coalition. “As far as the farm bill, this is definitely a high-water point and if we can get some of the funding worked out, it could be a big breakthrough.” There are provisions in the commodity, conservation and credit programs that provide extra incentives for producers through tweaks such as lower loan rates or higher cost-share percentages, for example. Most of the beginning farmer provisions in the Senate and House are similar and in some cases, the language in the two bills is identical. Others, however, look comparable, but one chamber may have funding for a program while the other does not. The House passed its full farm bill in July. The Senate takes up the farm bill in a floor debate next week. The differences in the final Senate version and the House bill would also have to be hashed out before a final vote. Both bills right now increase loan limits for the Farm Service Agency on direct farm ownership and operating loans from $200,000 to $300,000. But the Senate also increased the funding authorization by a similar percentage to potentially allow for more loans at larger amounts. The House bill does not make that adjustment, which is a “fairly glaring oversight,” Hoefner said. “It sounds like a small point, but it could be a really big point down the road,” he said. There is comparable language in the two bills for the Beginning Farmer and Rancher Down Payment Loan Program, though there are differences in the allowable loan rate that would have to be adjusted. Both bills lower the down payment required to 5 percent and increase the allowable sale price to $500,000. Loan terms are also extended to up to 20 years. The Beginning Farm and Rancher Development Program was created in the 2002 Farm Bill, but never received any funding. The program is expected to create competitive grants of up to $250,000 for university extension offices or private non-profits to provide training, outreach and technical assistance for beginning farmers and ranchers. The House funds it with $15 million mandatory spending each year while the Senate has no mandatory money authorized. Then there is the individual accounts pilot program for beginning farmers and ranchers that would create matching savings accounts. The money could be used on capital expenses for a farm or ranch, including buying land. While authorized in both versions, neither the House nor Senate has actual money set aside. “But we’re not giving up that it may incorporated into a floor amendment,” Hoefner said. The Farm and Ranchland Protection Program, which funds conservation easements to protect agricultural property from being sold for development, also has $398 million in increased spending in the House bill while no new money in the Senate. The program has made it easier for older farmers to avoid selling out to developers and instead protect land for their children or other, younger farmers. Both bills offer beginning and socially disadvantaged farmers up to 90 percent cost-share for the Environmental Quality Incentives Program, or EQIP. That’s 15 percent better than the prevailing rates for other farmers. At least 5 percent of total EQIP funds in the House bill would go for beginning or disadvantaged farmers, while that is as high as 10 percent in the Senate bill. Each bill also has a provision offering incentives for landowners in Conservation Reserve Program (CRP) contracts to modify their contract if land is being sold to a beginning or socially disadvantaged farmer or rancher. This would allow the new buyer to return some of the land to production before the CRP contract expires while still paying the retiring landowner on the CRP contract. “This is sort of to level the playing field so the landowner might be more willing to sell to the beginning farmer rather than highest bidder, which is most normally the case,” Hoefner said. There’s another provision that also allows the young or beginning farmer to begin the transition to organic production though there may be a year left on a CRP contract. The bill also includes up to $20,000 per-year payments over three years for farmers attempting to shift traditional farmland into organic acres. The Senate treats this as part of the EQIP program.

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Monday, November 12,2007

BEEF talk

by Kris Ringwall, North Dakota State University
Forward thinkers always needed in the beef industry Organizations come and go, especially organizations formed for a specific purpose. As that purpose or the need diminishes, so does the organization. Some organizations seem to have a purpose or function that extends through time. These organizations are made up of forward-thinking people who have an ability to keep the never ending complex world organized. One such group is the North Dakota Beef Cattle Improvement Association (NDBCIA). I turned to the group for assistance when I was asked to testify before the U.S. International Trade Commission (USITC). The request was for information related to a qualitative and, to the extent possible, quantitative analysis of the economic effects of foreign animal health and sanitary and food safety measures on U.S. beef exports. As I pondered what I might contribute, I reflected on NDBCIA’s success. NDBCIA is one of those visionary organizations that gathered dedicated cattle producers in 1963. To this day, the focus remains. If one was to open the original bylaws, the needs of the organization, as defined by the beef producers at the time, were clear. Before getting to all of them, one is reminded that the crispness of the paper and the original typewriter imprints and overstrikes were done some time ago. The nine original incorporators had a vision of what the beef industry needed. They listed seven objectives: Advance the use of practical and scientifically proven information for beef cattle improvement by encouraging research and education related to the total advancement of beef cattle production; Encourage and coordinate herd improvement programs on the farm or ranch; Encourage and/or provide opportunities for recognition of superior beef type and conformation; Provide guidance and supervision of market and breeding animal evaluation programs in cooperation with breed associations; Assist in processing and evaluating records obtained in a herd improvement program; Promote and advertise superior stock based on accurate records; To become affiliated with the American Beef Cattle Performance Registry Association, thereby joining hands with sister state associations in the standardization of procedure in the measurement of the performance of beef cattle and also the recognition of cattle with outstanding productivity. After 44 years, these objectives still are driving NDBCIA and are the very reason that its founders’ thoughts really form the foundation of any comments one might make on behalf of the beef industry in North Dakota. The heart of NDBCIA rests in doing what is good for North Dakota people involved with the beef cattle production chain. NDBCIA experiences can offer guidance to the industry on issues such as age and source verification and what it means to be a North Dakota beef producer. The association is the home of 374 North Dakota producers who rely on the association’s cow herd appraisal performance system to process their production records. NDBCIA also actively supervises more than 850 production record accounts. Those founders should be recognized for what they started and what continues today as grass-roots producer families on the northern prairies. NDBCIA exemplifies the involvement and hard work needed within the beef industry. The earlier organizational pioneers extended themselves to educate and engage fellow producers and consumers on the aspects of beef cattle production. These efforts stand today as exemplary, along with the lessons taught about stewardship of the air, land and water, and care of their animals. The request to testify before USITC on behalf of those producers is truly an honor, but more importantly, it is the opportunity to represent the seven objectives of NDBCIA. The NDBCIA commitment to a better beef industry has set the tone for current members, which is a continued commitment to a healthy, strong beef industry with a vision for the future.

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Monday, November 5,2007

Study highlights needs of renewable fuels industry

by WLJ
—Rural communities shown to benefit from renewable fuel boom. A new study has identified the required private capital investment necessary for the renewable fuels industry to achieve the production goals established in the proposed Energy Bill. “The capital cost to meet the 36 billion gallon renewable fuels target by 2022 amounts to $105.5 billion (2007 dollars),” the study completed by John Urbanchuk, a leading analyst of the biofuels industry and a director for LECG, LLC, a global expert services consulting firm, concludes. “Providing the Farm Credit System with greater flexibility to support the financial requirements of the biofuels industry by enabling them to provide financing to a wider range of borrowers will facilitate ethanol and biodiesel industry expansion,” the study said. The Farm Credit System has been a major source of financing for the ethanol industry for well over a decade and reported, at June 30, 2007, $1.668 billion in loans outstanding relating to biofuels products and another $2.238 billion in loan commitments to extend credit to the industry. These outstanding loans represented 1.3 percent of the Farm Credit System’s total loan portfolio. Urbanchuk’s analysis shows that the Farm Credit System’s support for the ethanol industry over the years has helped provide $23.2 billion in gross economic output, $5.5 billion in household income, and 136,345 new jobs in the construction of ethanol plants; $317 million in annual transportation revenue to ship ethanol; $24.8 billion in gross economic output, $3.6 billion in household income, and 99,188 new jobs in the operation of the plants; as well as $4.3 billion in annual farm revenue for corn to make ethanol. “This study shows directly how the rural economy benefits from the Farm Credit System’s support of agricultural-based business and farmers. Farm Credit was there fifteen years ago, taking the risk to finance the early ethanol plants when others would not. Now that Congress is looking to agriculture and the renewable fuels industry to make a major contribution to our nation’s energy independence, it is important that this experienced lender be able to continue to support the industry going forward,” said Ken Auer, president & CEO of The Farm Credit Council, the national trade association representing the Farm Credit System. The study identifies how a 50-million-gallon per year ethanol facility employs 40 people with about a $1.9 million annual payroll. Such a plant will create nearly $89 million in demand for local business and an additional $31.5 million in household income. These “Main Street” business activities largely will benefit local community banks with increased deposits of payrolls and lending as local business activity increases. The Urbanchuk study also reviews the capacity of community banks to support the industry, noting that: “the debt cost for a new ethanol plant can easily exceed $130 million. If a typical community bank has a lending limit of $2 million, it would require a syndicate of 65 community banks to fund one new plant.” It would take another 290 plants, each with 100 million gallons of capacity, to achieve the production capacity recommended in the Senate version of the energy bill (H.R. 6). The study also highlights how the rising cost of new ethanol facilities has changed the composition of the equity partners. A typical plant today requires investors to come up with about $95 million before going to the credit markets for the other $130 million in debt necessary to construct a plant, the study said. These higher equity threshold levels mean farmers are no longer in the position to be the major equity providers for the ethanol industry and that other non- farmer investors must play a role if the industry is to continue to grow. The ability of the Farm Credit System to provide financing to this broader base of owners that include more non-farmers will be crucial to the ability of the industry to expand to meet the legislated target of 36 billion gallons by 2022, the Urbanchuk study points out. — WLJ  

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Monday, November 5,2007

Study points to red meat as a cause of cancer

by WLJ
—Industry advocates blast report, calling it anti-meat. An alarming study published last week by the World Cancer Research Fund (WCRF) pointed to a potential link between red meat consumption and cancer development. The report, which was an update to a study conducted a decade earlier, caused ripples of concern in many consumer media outlets and rankled meat and beef industry experts who called the report alarmist, unfounded and biased against meat consumption. The WCRF study focused on a vast number of outside research on the possible cancer-causing effects of an array of different foods, including meat, vegetables and fish, as well as individual vitamins and minerals, in their study. The findings, according to the group, indicate that the evidence linking meat consumption to certain types of cancer is “stronger than it was in the mid-1990s.” The panel of researchers concluded that: “There is limited evidence suggesting that red meat is a cause of cancers of the oesophagus, lung, pancreas and endometrium; that processed meat is a cause of cancers of the oesophagus, lung, stomach and prostate; and that foods containing iron are a cause of colorectal cancer. There is also limited, inconsistent evidence, mostly from case-control studies, that animal foods that are grilled, barbequed, or smoked, are a cause of stomach cancer.” The study’s authors concluded that the evidence of cancer caused by poultry, fish and eggs is insubstantial. Following the release of the report, several cattle and meat industry groups, including the Cattlemen’s Beef Board and American Meat Institute (AMI), labeled the study biased and dismissed its finding as a tactic meant to scare consumers away from meat consumption. “WCRF’s conclusions are extreme, unfounded and out of step with dietary guidelines,” said AMI Foundation Vice President of Scientific Affairs Randy Huffman, Ph.D. “Headlines associated with this report may give consumers another case of nutrition whiplash. The consistent finding in diet and cancer research is inconsistency,” he added. “No health groups should be dispensing clear-cut recommendations on specific foods when studies continue to contradict each other time after time.” Huffman stressed that the recommendations stand in sharp contrast to mainstream advice in the U.S. Dietary Guidelines. “The causes of cancer are extremely complex and involve factors like genetics, the environment, lifestyle and a host of other issues, Huffman noted. “Given the complexities and conflicting research findings, it is inconceivable that WCRF could draw definitive conclusions and make such precise recommendations about specific food categories.” He also stressed that he was extremely concerned that some contrary studies were left out of the WCRF review. In particular, Huffman said that the largest study ever done on red meat consumption and its impact on colon cancer, conducted in 2004 by the Harvard School of Public Health, was left out of the report. The Harvard analysis involved 725,000 men and women and was presented at the 2004 American Association for Cancer Research Conference. That study showed no relationship between red meat consumption and colon cancer. The Harvard study, titled, “Meat and fat intake and colorectal cancer risk: A pooled analysis of 14 prospective studies,” was not included in the WCRF findings, Huffman said. “This study uses what is considered perhaps the most reliable approach to analyzing relationships: pooling original data together and analyzing it,” Huffman said. “Given the study’s size, approach and very important finding, we’d like to know why it hasn’t published. WCRF and consumers deserve access to this federally-funded data which shows that red meat and processed meat were not associated with colon cancer.” “When this Harvard data showing no relationship between red meat and cancer is coupled with studies that found no association or only weak associations between red meat and cancer, we must absolutely dispute WCRF’s conclusions,” Huffman said.—John Robinson, WLJ Editor.  

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Monday, November 5,2007

Harvest levels remain high

by WLJ
—Late week fed cattle trade expected steady to lower. Fed cattle trade was once again a late week affair last week, with very little trade occurring in the major cattle feeding areas. Analysts last week said they expected trade steady to weaker than the prior week’s level. The last established market was Oct. 26, with live cattle trading in a range of $92-93.50, with the exception of Iowa/Minnesota, where live sales traded from $90-91. Prior week dressed sales in the northern tier ranged from $139-143. Dressed sales in Kansas sold at $146.50. The current drive for packers to obtain fed cattle at any cost to keep them away from competitors, despite substantial negative margins, continues to define the fed cattle markets. That heavy slaughter volume was preventing packers from being able to push the cutout values higher last week and Choice boxed beef dropped below the $140 level last week, slipping $1.21 last Thursday to $139.46 at mid-day. Select was also lower, losing 23 cents to trade at $127.92. There was little reduction in slaughter levels last week, with the week-to-date total through Thursday last week running 6,000 head above the year ago levels at 514,000 head, although packers were able to draw off supplies of contract cattle. In fact, according to Ehedger.com analyst Troy Vetterkind, one major packer last week was drawing on supplies of Canadian fed cattle to fill supply chains. He said that same packer would be dark Friday and Saturday last week for routine maintenance functions, limiting their harvest for the week. “The beef market continues to stumble and packers can draw from November contract cattle this week, so all of this combined will keep them less aggressive in the cash market this week, despite smaller showlists in most major feeding areas,” Vetterkind said. “It’s not to say that cattle feeders don’t have any bargaining power this week, as most feed yards remain fairly current and numbers should stay manageable for another couple of weeks.” He said the focus last week would be on the performance of the new December contract on the Chicago Mercantile Exchange. “I think there could be some more downside, however, I would really want to see the December contract hold the $94 level in order to keep both cash and futures markets stable,” Vetterkind said. The cow beef markets last week continued to be a bright spot in the cattle markets. The cow beef cutout last Thursday was trading at $103.64, while the 90 percent lean sold at $122.64 and 50 percent trim, $44.68. Feeder cattle Cash prices paid for feeder cattle were mixed this week, with weather and corn prices causing different price trends in different areas. The undertone of the market continues to be one of strong prices feeding off of low supply, as feedlots continue to work hard to fill pens even though the number of steers and heifers available to put on feed is low. Stephen R. Koontz, professor of Agricultural Marketing at Colorado State University, said that this year marks a place in the marketing cycle where demand for feeder cattle is high, almost no matter what the offering is. “This is the interesting part of the cycle where the meat side of the industry has to compete with the cow herd side,” says Koontz. “The packers and feed yards are looking pretty hard for cattle to go to slaughter but, unfortunately for them, cow/calf operators are looking for replacements and retained ownership,” Koontz said. Koontz explained that although margins are tight for feed yards right now, they will continue to try and fill pen space as they look ahead at future markets. “It’s going to continue to be pretty tough for feed yard managers to look at a budget and say it’s going to work, but with a pen-full mentality, I think most feedlots will try and stay as full as possible and look forward to what might be some pretty attractive fed cattle prices next year,” said Koontz. According to Koontz, the future continues to look bright for cow/calf operations for as long as the U.S. herd size remains small. “This is a trend which looks to be pretty favorable for cow/calf and stocker operators while the cow herd stays under the level it needs to be. The people who will get burned are the ones who look at owning the cattle while they’re on feed. They won’t be tough to market, but the price of feed isn’t going to go down considerably for awhile,” Koontz said. In Oklahoma City, OK, last week, feeder cattle were $1-2 lower following a steady to $2 higher trend on sale morning. Steer calves were $1-2 higher, with heifer calves steady to $2 higher. Demand for feeders was moderated as corn prices continued to climb higher. Demand was good for calves, and especially good for steers. In Joplin, MO, there were 6,000 head offered for sale last week, with steers and heifers under 600 lbs. steady to $2 lower, with weights over 600 lbs. $1-3 lower. Demand and supply was moderate with the calf trade opening lower, but gaining momentum as the day went along. The yearling trade was lower as buyers are working against a lower fed cattle market and higher corn prices. A noticeably higher percentage of yearlings and wean-vac calves were offered compared to the previous sale. A group of steers weighing an average of 626 lbs. brought $113.71 on this sale day, while heifers weighing 635 lbs. brought $102.17. At Faith Livestock Commission’s sale in Faith, SD, there were 5,534 head sold last week, with steer calves under 700 lbs. selling steady to $2 lower. Heifer calves under 600 lbs. sold fully $2 lower. A fancy 600 lb. steer was good for $126 at the Monday sale, while a group of fancy 561 lb. heifers were bringing $118. At last week’s sale at the Stockland Livestock Auction in Davenport, WA, the 1,617 head offered sold steady to $2 higher, yearlings were not well tested. Trade was moderate to active with moderate to good demand, with a group of steer calves weighing an average of 628 lbs. going for $95.84 at this sale. At Western Stockman’s Market in Famoso, CA, prices were $2 lower on feeder cattle and $5 lower on the stockers out of the 2,229 cattle available at the Monday sale. Good demand was exhibited for the feeders, especially quality 700-800 lb. steers and heifers. — WLJ  

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