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Monday, October 15,2007

More corn residue available for grazing

by WLJ
Grazing corn residues is one way to reduce the cost of wintering beef cows in the upper Midwest, a North Dakota State University (NDSU) cattle expert says. “With the increase in corn acres in North Dakota and the surrounding region this year, availability of corn residue also has increased, making this practice even more attractive,” says Greg Lardy, NDSU Extension beef cattle specialist. Corn residue left behind after harvest includes the stalk, leaf, husk and cob, as well as downed ears. The amount of downed ears varies with the corn variety, but it can be as much as three to five bushels of corn per acre. Generally, approximately 50 pounds of residue is left on the field per bushel of corn harvested. For example, if you harvest 120 bushels of corn, you can expect about 6,000 pounds of residue per acre (120 bushels x 50 pounds of residue per bushel). Obviously, the cow will not graze or use all of that material. At the most, a cow will be able to graze about 50 percent of that material (in this example, about 3,000 pounds per acre), Lardy says. One acre of corn residue should support a 1,000 pound cow for about 1.5 to two months. Strip-grazing the fields (dividing the field and limiting access using electric fencing) will improve utilization and allow you to increase the stocking rate. The residue portions with the greatest nutritive value include the husk and leaf. The cob is fairly high in digestibility, but very low in protein. The stalk is low in both protein and digestibility. The longer the cattle graze a particular corn field, the lower in nutrient content their diet will be. This is due to the cattle selecting the higher-quality material first and the loss of nutrients due to weathering. Longer-term grazing may require protein supplementation to meet the nutrient needs of grazing beef cows. Corn residue also is low in most minerals and vitamin A. Therefore, producers should follow a good-quality vitamin and mineral supplementation program when grazing corn residue, Lardy says. Corn residue can be grazed long into the winter feeding period, provided snow cover does not limit the cow’s selectivity and grazing ability. The length of time will vary from year to year. Once fields are snow-covered, the ability of the cow to select the higher-quality portions of the corn residue is limited. Two factors are the biggest limitations to grazing corn residue in this area of the country. First, many cornfields are not fenced and, second, many do not have adequate water for grazing livestock. “However, the amount of residue available for grazing and its cost effectiveness should cause beef cattle producers to at least consider this option as one means of lowering the cost of winter feeding,” Lardy says.

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Monday, October 1,2007

Pressure mounts on Mexican border issue

by WLJ
—Beef seedstock exports are an important target for producers in border states. USDA’s recent move toward trade rationalization is likely to be a step in the right direction toward opening live cattle trade with Mexico, the current largest importer of U.S. beef. USDA officials said last week the agency is pressuring Mexican officials to begin allowing beef from older animals and live seedstock and commercial beef animals to be shipped into the country. Despite the fact that Mexico has already imported more than 370,000 metric tons of beef from the U.S. from animals under 20 months of age, the border has remained closed to live animals since the first case of bovine spongiform encephalopathy was discovered in the U.S. in 2003. Now, U.S. officials say it is time for Mexico to accept the same standards for trade which are in the process of being established between the U.S. and Canada, a move that would benefit producers in the U.S. and Canada alike. To that end, two weeks ago, the director of the Arizona Department of Agriculture, Don Butler, and secretary of agriculture and livestock for Sonora, Mexico, Alejandro Elias Gutierrez, recently signed a joint letter addressed to U.S. Department of Agriculture Secretary Mike Johanns, prior to his resignation, requesting the reinstatement of beef cattle trade between the U.S. and Mexico. “As co-chairs of the Border Governor’s Conference Agriculture Work Table (AWT), we are writing to express the AWT’s support for reinstatement of beef cattle trade between the United States and Mexico,” wrote Butler and Gutierrez. “This topic has been thoroughly discussed during our AWT meeting with widespread support for restoring trade. We applaud USDA’s efforts in working with Mexico on the implementation of the Breeding Dairy Heifers Final Protocol in October 2006... It is now time to complete the opening of the border to other classes of cattle...We appreciate your prompt attention to this issue and urge you to work aggressively with Mexico to make the full reinstatement of cattle trade a high priority.” Cattlemen’s groups from U.S. border states have been working for years to restore trade between the two nations and applauded the assistance from governments on both sides of the border. “This joint effort will assist us greatly in re-opening the Mexican border to the export of live cattle from Arizona into Mexico,” stated Tom Chilton, president of the Arizona Cattle Growers’ Association (ACGA) from Tucson. Chilton went on to say, “The ACGA and its members have been frustrated for the last two years in trying to re-establish a normal trade relationship with Mexico. We raise and provide high quality animals to markets around the world and, hopefully, we will add Mexico to that list again.” Mexican producers have long had an interest in importing Canadian cattle, which would require trucking through the U.S. However, the U.S. ban on Canadian imports would have jeopardized the flow of Mexican feeder cattle into the southern U.S. The result has been continued stalling by Mexico to remove the blockade on breeding cattle from the U.S. until trade between the U.S. and Canada was normalized. One significant impact of seedstock trade ban often cited by U.S. producers is the likely decline in the quality of Mexican feeder cattle if producers south of the border are unable to purchase high quality U.S.-bred bulls. That decline in quality could lead to reductions in feed efficiency and quality grade in some southern Plains feeding areas where approximately 1 million head of Mexican cattle are fed annually. “We have worked jointly with our neighbors in Mexico and resolved many issues surrounding animal health and food safety over the last several years—it is now time to resolve this issue and once again open the Mexican border to our high quality production,” stated Scott Shill, president of the Arizona Cattle Feeders’ Association (ACA) from Yuma. The ACA has worked with Mexico officials and producers to normalize animal health standards and surveillance for a variety of animal diseases over the past 15 years. Shill went on to say, “Arizona’s beef producers were doing $1 million worth of business a week (beef and live cattle trade) prior to this barrier being placed; we look forward to recapturing this important segment of Arizona’s economy.” Since this Mexican trade barrier was raised, Arizona’s $2.8 billion beef and cattle economy has lost nearly $200 million of business with Mexico. “Hopefully, this effort is successful and it will end our frustration with a trade barrier that should have been removed two years ago,” said Chilton. — John Robinson, WLJ Editor  

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Monday, October 1,2007

On feed numbers support late 2007/early 2008 expectations

by WLJ
— Cattle on feed numbers total 10.3 million head, down 6 percent from 2006. — Placements drop 7.5 percent. — Marketings, even with last year, remain a blemish in an otherwise bullish report. The Sept. 1 cattle on feed report contained more good news for cattle feeders and cow/calf producers. On feed and placement numbers were inline with analyst’s pre-report expectations. As expected, it was the third consecutive month showing lighter placements and tighter fed cattle supplies ahead, paving the way for strong markets well into next year. The number of cattle on feed totaled 10.3 million head on Sept. 1, 2007. The inventory was 6 percent below the same date last year, but 3 percent above Sept. 1, 2005. “Looking inside the numbers, it’s clear inventories are down in nearly all the major cattle feeding states from a year ago,” American Farm Bureau Federation Livestock Economist Jim Sartwelle said. “We witnessed a none-too-subtle shift in feeder cattle placements from the south Plains to Nebraska, South Dakota and Iowa last fall and winter,” Sartwelle said. “This was in response to increased corn prices and the attraction of ample supplies of ethanol co-products in those key corn-growing states to the fed cattle sector.” As with each report this year, the trend in cattle feeding continues to show a shift toward the northern Plains, with on feed numbers in Iowa and South Dakota climbing 8 percent and 13 percent higher, respectively, than September 2006 counts. Meanwhile, on feed numbers in Texas dropped 7 percent and feedlot numbers in Kansas declined 10 percent, while Colorado on feed number were down 10 percent. In Idaho, on feed numbers dropped 13 percent, likely as a result of Tyson’s plant closure there last year which has meant cattle must be trucked farther for processing, reducing the incentive to feed in the region. However, despite the migration toward northern states, Sartwelle said there is reason to believe that trend may not hold up in the future. “As the year has worn on, some of the advantages in Nebraska, South Dakota and Iowa have fallen prey to cyclically reduced feeder cattle supplies,” he said. That’s because in August, only South Dakota and Arizona saw feeder cattle placements above 2006 levels, with numbers up 23 percent and 20 percent, respectively, Sartwelle said. “In addition, although cash corn prices decreased markedly through the summer, the stigma surrounding placing lighter weight cattle remains.” Placements in feedlots during August totaled 2.12 million, 7 percent below 2006 but 6 percent above 2005. Net placements were 2.07 million. During August, placements of cattle and calves weighing less than 600 pounds were 490,000, 600-699 pounds were 440,000, 700-799 pounds were 549,000, and 800 pounds and greater were 640,000. “During August 2007, placements of cattle that weighed between 600 pounds and 799 pounds actually increased relative to 2006, but the drop—by 190,000 head—in cattle weighing less than 600 pounds more than made up for those modest increases. We are unsure how much of this loss is due to projected costs of gain for 500-pound calves and how much is due to there just not being many 500-pound calves available during August,” Sartwelle said. HedgersEdge.com market analyst Andy Gottschalk agreed with Sartwelle’s comments on the stigma surrounding lightweight calves and went one step farther in his analysis, saying that the drop in calf value, as a result, has created a potential opportunity for profits. “Calf prices continue to weaken relative to the price of feeders and fed value. Versus feeders, calves are trading at their lowest level since September 2003,” Gottschalk said. “This condition creates an opportunity to swap from that which is ‘overpriced’ (feeders) to that which is ‘underpriced’ (calves),” he said. Gottschalk offered the following example: “If calves are placed in a grow yard, significant profits are available. Using a cost of gain of $60 per cwt., a 550 pound steer calf grown to 750 pounds would require a selling price of $134 or greater to allow only a breakeven, versus the January feeder futures currently trading at $114.50. Any price under $134 for 550 pound steer calves would capture additional profits to the producer, if those cattle were grown to 750 pounds,” he said.  “Under a similar scenario, a 450 pound steer calf grown to 700 pounds would benefit if the selling price received for the steer calf was less than $144 per cwt.” In terms of fed cattle marketings, many analysts attributed the lackluster number to multiple factors. Among the most commonly cited reasons was the significant premium offered by October cattle contracts over August on the Chicago Mercantile Exchange, giving cattle feeders reason to hold cattle over. However, the result was record carcass weights for this time of year. “Carcass weights continue to raise a caution flag, which should encourage more aggressive marketings of fed cattle,” said Gottschalk. “This industry must still market though May Placements, which were sharply above April and prior year levels.” He said the overall effect of slow marketings in August is likely to be offset by the tight supplies during the fourth quarter of 2007. However, Gottschalk cautioned that demand is going to be the primary driver of fed cattle prices, rather than supply. “We are convinced that our price forecast of a $97 fourth quarter high is likely to be exceeded. We would not rule out a run at $100 as fed cattle supplies tighten during the November- December time frame,” he said. — John Robinson, WLJ Editor  

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Monday, October 1,2007

Operating Committee approves beef checkoff initiatives for 2008

by WLJ
—Committee forced to cut more than $1.8 million in proposals. The Beef Promotion Operating Committee last week funded a total of 42 program proposals with beef checkoff dollars for Fiscal 2008. At the same time, however, a tight budget forced the committee to reject more than $1.8 million in proposals to stay within the Cattlemen’s Beef Board’s (CBB’s) $46.8 million national program budget for the coming year. “This was one of the most difficult Operating Committee meetings I’ve been through during all the years I’ve served on it because of all the tough choices we had to make,” said CBB Chairman Ken Stielow, a producer from Kansas. “At the same time, it was one of the best because of that. We have a very tight budget for 2008—down about 9 percent from the 2007 budget—so we really had to debate the merits of each program extensively.” The plan funds promotion, research and information programs and is designed to build demand for beef using the checkoff funds remitted to CBB. The plan still must be approved by USDA before any funds can be expended. Approval of the plan came after a day-and-a-half of presentations and discussion. The Operating Committee—10 producer members of the CBB and 10 producer representatives from the Federation of State Beef Councils—had to balance the industry’s requests for funding against anticipated checkoff collections for 2008. “Discussions got a little lively at times,” Stielow said. “Contractors knew that the budget was going to be tight, so they made sure their proposals didn’t have any fat around the edges. That meant that we had to cut things we didn’t want to cut, and that can become an emotional experience.” The result, Stielow said, is a producer-selected menu of checkoff activities that the committee believes will create the best opportunities for cattle producers in the coming fiscal year given the budget constraints. Contractors with program proposals included in the plan are the American National CattleWomen (ANCW), the American Veal Association, CBB, the Meat Importers Council of America, the National Cattlemen’s Beef Association (NCBA), the National Livestock Producers Association, and the U.S. Meat Export Federation (USMEF). The approved checkoff plan of work for CBB during fiscal 2008 includes: • More than 22.8 million for promotion. Promotion efforts include new consumer advertising, retail marketing, foodservice marketing, new product and culinary initiatives, the National Beef Cook-Off, a Northeast beef promotion initiative, and veal promotion. • About $7.4 million for research projects focused on a variety of critical issues including beef safety research, product enhancement research, nutrition research, and market research. • A total of $6.3 million for consumer information programs including a Northeast public relations initiative, national public relations, nutrition influencers support, and a youth education and information program. • More than $2.4 million for industry information projects including beef, veal and dairy-beef quality assurance programs, the National Beef Ambassador program, and dissemination of accurate information about the beef industry to counter misinformation from anti-beef groups. • About $5.25 million for foreign marketing efforts managed by the USMEF, including education programs and marketing of U.S. beef in Taiwan, the ASEAN, the Caribbean, Central/South America, Dominican Republic, Europe, Greater China, Japan, South Korea, Mexico, Middle East, and Russia. • More than $2.3 million for producer communications, which includes Producer Outreach using Beefmobiles, paid media, beef and dairy earned media, CBB Communications and semi-annual producer attitude surveys. A separate $10.66 million in allocations from the Federation of State Beef Councils will further increase checkoff funding of national promotion programs by $4.9 million; research by $1.76 million; consumer information by $1.3 million; industry information by $560,000; and foreign marketing efforts by $2.1 million. Of the $1.8 million denied, producers on the Operating Committee turned down nearly $1.5 million in proposals from NCBA, $33,500 from ANCW, and $305,000 from the National Livestock Producers’ Association. Programs authorized by the Operating Committee must be approved by USDA before any money can be spent. Each contractor of the Beef Checkoff Program works on a cost-recovery basis and, by law, cannot profit from work they do on behalf of the Beef Board and state beef councils. Each contractor is subject to audits by CBB and USDA on an ongoing basis. — WLJ  

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Monday, October 1,2007

Beef has tough retail competition

by WLJ
—Packers are losing money with cutout stalled below $148. Fed cattle trade was extremely slow last week. Packers were offering $92 and feeders were looking for $96. Futures markets started the week with a roar after a bullish cattle on feed report, but slowly declined by mid-week with the October contract at $96.95. The general tone of the fed cattle markets was that prices would be higher and it was apparent trade would take place Friday. There were roughly 2,500 head traded in the southern Plains early in the week at $95.50, JBS Swift was the buyer. Last Thursday morning, National Packers apparently had bid $95 and weren’t getting cattle bought. There was very little dressed trade and feeders were looking for $147-148. Feeders felt that packers had already worked through their contracted animals and were in need of cattle. Packers have been throwing feeders a few head fakes over the past few weeks with plant closures and dropping Saturday slaughter schedules. They were attempting to reduce production to bring the beef cutout values up. Ironically, daily slaughter last week showed that they haven’t slowed down much, with daily kills running over 125,000 head a day. Two weeks ago, there were 645,000 head processed. The week prior, there were 643,000 head processed and last week, they were on track to slaughter around 645,000-650,000 head. It was clear that packers had beef inventory that needed to be moved and many market watchers were expecting a beef fire sale. That had not occurred as of last Thursday. Packers were able to move a large volume without affecting the cutout value much. For the week ending Sept. 21, there were 8,157 loads traded and the composite cutout was $144.35. Over half the total trade volume was ungraded beef. Market economist Glen Grimes at University of Missouri pointed out that “everyone in the industry benefitted from the higher retail prices but the packer. The fed cattle prices for January- August were up 8.6 percent. The producer-retailer margin was up 7.8 percent, but the packers’ margin for the first eight months of 2007 was down 17.5 percent from 12 months earlier. In times with tight fed cattle supplies, the packers in the beef industry usually have to work with tighter margins.” Andy Gottschalk at HedgersEdge.com anticipated that packers would need to get used to more negative margins over the next three years. He said they were losing $35 a head as of last Thursday. Grimes also pointed out that cow slaughter for the year through the week ending Sept. 1 was up 8.1 percent from 2006. However, cow slaughter for the four-week period ending Sept. 1 was down 5.8 percent from a year earlier, but cow slaughter for the four-week period ending Sept. 2, 2007, was up 24.6 percent from 12 months earlier. “So even though cow slaughter recently has been below last year, it is still large compared to two years earlier. We do not believe cow/calf producers are changing the size of the cow herd very much in either direction,” he said. Seasonal increases in slaughter cow numbers in many areas of the country had packers readily filling their harvest schedules. However, the lack of demand from the grinding sector caused movement to be slow, which was expected to continue until prices were lowered. Last Thursday, the 90 percent lean was trading at $126.21 and the 50 percent trim was at $51.44, while the cow beef cutout was at $105.76. Feeder cattle The strength in the grain market and weather concerns were the main drivers in the feeder cattle market last week, despite concerns over reportedly tight supplies of calves coming to market. There are many in the grain industry who expect the corn crop will not come in as large as USDA has projected, which could lead to a rise in prices. In addition, export volume remains strong, cutting into already tight supplies despite what is expected to be a record crop. Last week, those concerns pushed Chicago Board of Trade (CBOT) December corn futures toward $3.90 a bushel, with many believing that $4 will be eclipsed in the near future as harvest progress continues to creep northward. The wheat trade is also starting to impact the feeder cattle market. Winter wheat planting is progressing now in the southern Plains where, according to USDA, 25 percent of the crop is now in the ground. If wheat prices weren’t regularly pushing limit higher on CBOT, there would likely be ample winter wheat grazing available. However, the $9.38 per bushel price makes wheat pasture grazing prospects questionable going into the fall ahead of stocker operations contracting for calves. With wheat prices at their best in recent memory, it becomes questionable how much will be available this year to lessen the cost of calf feeding before moving them into feedlots. The other variable starting to play a roll in buyer interest in feeder cattle is the seasonal temperature swings now starting to take their toll on calf health. Temperature swings of 30 degrees or more are making buyers more cautious in auction markets, and calves which have been weaned and preconditioned with at least one round of shots are selling at a premium to the fleshy loud lots being sold alongside, particularly in the high Plains region. On the Chicago Mercantile Exchange last week, feeder cattle traded sideways to lower as a result of the upward movement in grains and despite the steady to higher cash fed cattle trade expected for the week. At the close last Thursday, feeder cattle contracts were mostly lower with the spot month September contract expiring in higher territory, up 22 points ending at $116.07. October was down 42 points at $115.50, while November contracts also lost 42 points to end the session at $115.82 and January declined 35 points to finish at $114.67. In cash market trade last week at El Reno, OK, feeder steers were steady to $1 lower. Feeder heifers sold steady, except for those over 800 lbs., which were $1-2 higher. Steer calves were called steady to $3 higher, with the most advance on heavier weights. Heifer calves moved $1-3 lower. Demand was reportedly moderate to good for feeder cattle, although the selection of feeder steers was not as attractive as the prior week with several light muscled cattle available. Calf demand was also called moderate to good with the best action of the day coming on long- weaned or preconditioned calves. Meanwhile, to the north in Joplin, MO, compared to the previous week, yearling feeder cattle sold fully steady. A larger supply of steer and heifer calves traded $1-4 lower.  Buyers were said to be wary and keenly listening for representation of calves and a description of their background and origin. The calf offering was very uneven as to quality and covered the full range, which is typical of early fall, but not typical for the Four State Area. In Dodge City, KS, feeder steers in the 300-650 lb. range and feeder heifers weighing from 300- 700 lbs. were sold in large enough numbers for a full market test but a higher undertone was noted. Feeder steers in the 650-950 lb. range were steady to $1 higher, while feeder heifers in the 700-800 lb. class were $1 higher. There was no test on heavier weights. Farther north in Bassett, NE, compared to the sale two weeks earlier, feeder steers were mostly $2 lower and feeder heifers sold steady to $2 higher with good buyer demand on all classes of cattle on the run, which was comprised primarily of reputation strings of light fleshed yearlings off grass. In La Junta, CO, last week, steer and heifer calves under 600 lbs. were called $2-4 higher with some instances of as much as $5 higher. Those cattle over 600 lbs. and yearling feeder steers sold steady, while yearling feeder heifers were $2 lower. At the market in Philip, SD, feeder steers over 600 lbs. sold mostly steady last week, while steer calves under 600 lbs. were called $2-3 lower. Heifer calves under 600 lbs. were $1-3 higher. Feeder heifers over 600 lbs. sold steady to $2 higher. There was reportedly good buyer attendance and the best demand came on load lots of reputation offerings. There was moderate to good demand on all other classes of cattle. Farther west, in Billings, MT, yearling feeder steers and heifers’ receipts remain seasonally light and not present in enough numbers for a good market test. However, steer and heifer calves were called mostly steady in a very light test with moderate to good demand for calves and yearlings. In Ogden, UT, feeder steers up to 850 lbs. were mixed last week, but reported to be mostly $4-5 lower, with some instances of as much as $10-15 lower on the lighter weights early in the sale. Steers weighing more than 850 lbs. were mostly steady. Feeder heifers were also mixed but mostly lower by as much as $6-8 with some instances of as much as $12-15 lower, while Holstein steers sold $3-4 lower. Farther south in Roswell, NM, last week, feeder steers were unevenly steady, while heifers under 600 lbs. sold steady to $2 lower and those over 600 lbs. were not offered in enough numbers to call a market trend. — WLJ

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Monday, September 24,2007

Study shows ethanol subsidy obsolete

by WLJ
—Transportation and oversupply concerns plague market. Last week, Archer Daniels Midland Co. was passed as the largest producer of ethanol in the U.S. when Poet LLC started production at its new 65 million gallon plant in Portland, IN. The new plant, which will consume an estimated 22 million bushels of corn annually, will increase the company’s annual production to 1.1 billion gallons per year from 22 plants nationwide. The latest plant to come on line this year will boost ethanol availability in the U.S. to 7.2 billion gallons in 2007, a number which industry watchdogs point out exceeds demand of 6.7 billion gallons. In fact, a report issued earlier this year by analysts at the investment firm Lehman Brothers estimated the surplus at about 1 million gallons per day starting in the second half of 2007. The firm’s report attributed part of that to the ethanol plant construction boom, but said transportation bottlenecks are a bigger problem. The ethanol industry, which has faced increasing problems with distribution, now faces over- supply and dwindling margins which has led to a tightening of available capital for construction and expansion as well as a lower investment appeal for existing plants. “Margins certainly have tightened over the last year and will continue to do so in the near future,” said Poet CEO Jeff Broin last week as the company started its newest plant into production. In fact, financial industry analysts have painted a picture of the industry which is far more bleak. “We expect the relentless supply of new ethanol production capacity will lead to a 70 percent decline in margins by 2009,” wrote Bank of America analyst Eric K. Brown in a May 2007 research report on the industry. Ethanol and biodiesel production in the U.S. amounted to little more than a niche market for environmentally conscious consumers prior to the implementation of the government imposed mandate which required U.S. refiners to use 7 billion gallons of renewable fuels annually by 2012. Since then, the industry has been plagued with distribution problems because ethanol cannot be shipped through existing pipelines which criss-cross the nation and are used for moving petroleum products. Instead, because of its corrosive nature, ethanol must be moved by truck or railcar from mostly rural central U.S. production areas to large, often coastal cities for refining or consumption. The transportation issue has led to bottlenecks and increasing costs for the industry. On top of these woes, many energy industry experts are now saying the ethanol business needs to stand on its own, without the lucrative government subsidies which have spurred its growth. In fact, a meat industry-funded study released last week shows that ethanol production, particularly when funded by a government subsidy, may not be the panacea envisioned by some well meaning lawmakers. In fact, the economists who conducted the study found that ethanol is viable without government subsidy so long as the price of oil remains above $65 per barrel. Last week, crude oil set new record highs above $81 a barrel. “Even without subsidies, ethanol production would be expanding at a significant rate due to high gasoline prices and the improvements in ethanol production technology in recent years,” the study’s authors said in their report. The report, authored by Thomas E. Elam, president of FarmEcon.com, and commissioned by a coalition which included American Meat Institute, The National Turkey Federation and the National Chicken Council, argues that government ethanol subsidies should be tied directly to gasoline prices rather than the current flat rate paid to producers. “In fact, if oil prices go high enough, the government should consider taxing ethanol used for fuel to alleviate the effects of ethanol demand on food prices,” Elam wrote. “At $80 per barrel, the U.S. food sector will find itself paying over $5 per bushel for corn. China, having seen what ethanol is doing to food costs, has banned further development of grain-based ethanol production.” Elam contends that the federal 54 cent per gallon ethanol subsidy has the indirect effect of increasing the cost of ethanol and food production by increasing grain prices across the board. “...the federal ethanol subsidy raises the breakeven corn price for ethanol plants by about $1.42 per bushel. If ethanol producers expand production until they bid corn prices up to their breakeven corn price point at today’s gasoline price level, it will take corn prices to near $4.75 per bushel, about double the average price of corn before the increase in gasoline prices,” Elam found. “At the current 12 billion bushels of annual corn production, that amounts to an increased corn cost for all U.S. users and our corn export customers of $17 billion per year. These costs are going up even as corn production increases. Included in those paying higher costs are ethanol producers themselves.” He points out as a part of his research that the industry continues to push for 100 percent market penetration for 10 percent ethanol blend gasoline, known as E10. However, Elam notes that 100 percent penetration may not be feasible. “At 100 percent penetration, the ethanol industry will require over 50 million acres of corn every year and total corn acres will need to be over 120 million. Until 2007, total corn acres rarely exceeded 80 million acres,” Elam pointed out. “Clearly, corn could further displace other crops, reducing their supply and raising their prices.” More specifically, he said, 100 percent E10 penetration would require 200 million tons of corn annually, the equivalent of 10 percent share of global grain supply, creating a significant spike in global food costs. However, according to Elam’s study, the actual cost of the ethanol production subsidy alone may be much higher than anyone anticipated. “In total, the costs of ethanol paid by taxpayers, fuel purchasers and the food system is about $31 billion in 2007, or about $4.40 per gallon of ethanol produced. Corrected for energy content of ethanol relative to gasoline, this is equivalent to a wholesale gasoline price of $6.67 per gallon. Ethanol is not a cheap source of energy; it is about three times as expensive as gasoline,” Elam stated in his report. “Created at a time when the ethanol industry was not profitable, changing circumstances have rendered the current fixed-payment federal ethanol subsidy program obsolete.” — John Robinson, WLJ Editor    

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Thursday, September 20,2007

Beef Bits

by WLJ
27, 2004 Brazilian exports doubled Brazil exported nearly $243 million in beef products during August, a rise of 121.5 percent compared to August of 2003, according to Brazil's Beef Exporters Association. Through August, the industry has exported $1.55 billion worth of beef in 2004, more than it exported all last year. Roughly 80 percent of exports are bulk beef products, with the remainder processed products. Brazil's major customers this year are Russia, the Netherlands and Chile. ‘Hot and Beefy' promo planned Sobik's Subs, a Florida chain of franchised restaurants run by Quality Restaurant Ventures, will roll out a "Hot and Beefy at Sobik's" promotion beginning next month. Three new hot beef sandwiches will be added to the chain's menu—Italian Beef, Russian Beef and Hot Beef and Cheddar. Sobik's already offers a Cheese Steak sandwich and meatballs in their menu's beef segment. Quiznos, Checkoff partnering In a partnership with the Beef Checkoff Program, Quiznos Sub is introducing a new steakhouse Beef Dip Sub. The promotion began Sept. 6 and runs through Oct. 17 at participating Quiznos Sub stores in the U.S. During the promotion, the beef sub will be promoted nationally via radio and TV spots, and newspaper coupons in freestanding inserts. The Beef Checkoff logo will appear on all marketing materials. "We are extremely happy to be partnering with the Cattlemen's Beef Board to promote our new Steakhouse Beef Dip sub," said Trey Hall, chief marketing officer at Quiznos Sub. "We want to help support the great beef produced across the U.S. by America's cattle farmers and ranchers." Krystal expanding in Texas Three franchise groups have inked deals with Chattanooga, TN-based Krystal Company to open 18 new Krystal hamburger restaurants across Texas over the next four years. Texas currently has two Krystal restaurants—one in Beaumont and one in the Waco/Killeen area. The first of the new restaurants are set to debut in Dallas and Houston in November, followed by Austin early next year. The chain is known for serving its specialty of small, square steamed hamburgers. George Jones' burgers unveiled Williams Sausage Company recently announced it is adding a couple new hamburger products to its George Jones brand name product line that are scheduled to hit customers starting sometime next month. The two new beef products are hamburger steaks and hamburger patties marinated with George Jones Good on Anything Sauce. The new beef products will be sold in boxes of 12 4-ounce patties or six half-pound steaks. McD's raises dividend 38 percent McDonald's Corp. hiked its annual dividend 15 cents, from 40 cents to 55 cents, payable on December 1 to shareholders of record as of November 15. The dividend has more than doubled in two years, from 23.5 cents in 2002. The payout to shareholders will total nearly $690 million. "(The) 38 percent dividend increase—our second largest since 1980—reflects our ongoing confidence in the business and is another sign that we're making significant progress revitalizing McDonald's," said Charlie Bell, McDonald's CEO. Jack in the Box expanding San Diego-based Jack in the Box Inc. projects same-store sales increases of between 2.5-3 percent in fiscal 2005 and will debut 45 to 50 new Jack in the Box stores, remodel another 50 and open approximately 75 more Qdoba Mexican Grill locations. The new stores will be a mix of franchised and company-owned locations. The company said that it will beat analysts' projections for the first quarter of 2005, although it will miss by a penny projections for the fourth quarter of this year. Jack in the Box also said that it expects its profit margin to increase by 80 basis points due in part to lower beef prices and development of new premium products. The company is also testing a new casual dining format in several U.S. markets, with Dallas scheduled to be next. The others are San Diego and Bakersfield, CA, and Boise, ID. Jack in the Box will operate over 2,000 restaurants by the end of the fourth quarter, the company indicated.

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Thursday, September 20,2007

Obit

by WLJ
20, 2004 Thomas D. Guerin Thomas D. Guerin passed away on August 25, 2004 in Roseburg, OR. Born in Oakland, CA, Guerin knew nothing about cattle and ranching when he took over his father's ranch in 1943. Guerin had a commercial beef cattle operation and in his early years operated a small feedlot and sold locker beef to the hospitals and nursing homes. Recently, after he fell and broke his hip, all he wanted was to get well so that he could get back to the ranch and see his cattle. Guerin also served on numerous boards pertaining to Agriculture and Agriculture Conservation. He is survived by his wife, Arlene, Myrtle Point, OR; daughters Cheryl (Bill), Tigard, OR, and Anne, Langlois, OR; step daughter, Dani Hanson, Myrtle Point; and several grandsons and two great-grandsons.

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Thursday, September 20,2007

Beef Bits

by WLJ
20, 2004 OBC exec. moving on The Oklahoma Beef Council (OBC) announced last week that Michael Kelsey has resigned as the group's executive director, effective October 29, 2004, and that he has accepted the position of executive vice president of the Nebraska Cattlemen. Kelsey has been with the OBC since August of 2000 as executive director and has played an important role in guiding Oklahoma's beef industry through some of its key milestones and achievements. Programs and activities of the OBC will continue under the leadership of Melissa Morton, collections and compliance officer, who has been named interim executive director. The OBC Board of Directors is forming a search committee to accept and review resumes for the executive director position. Resumes are currently being accepted and the search committee will begin review on October 15, 2004. Applications may be sent to Executive Director Search Committee, c/o James Campbell, 2312 Exchange Ave., Oklahoma City, OK 73108. Morton's growing by five Morton's Restaurant Group, New Hyde Park, NY, will add new upscale steakhouse restaurants in Chicago; Atlantic City, NJ; Charlotte, NC; Bethesda, MD; and Fort Lauderdale, FL, the company recently announced. The Chicago restaurant will be the second in that city's downtown. The new facility in Charlotte will also be that city's second Morton's restaurant, and the new addition in Washington, DC, will be that metro area's sixth such restaurant. In Atlantic City, the restaurant will be inside Caesar's Hotel and Casino, while the Fort Lauderdale Morton's will occupy Las Olas River House, a downtown luxury mixed-use condo complex. The additions will bring its count of upper-end steakhouses to 70 worldwide. CKE sales soar, profits plunge CKE Restaurants, the operator of the Carl's Jr. and Hardee's chains, reported strong same-store sales growth at both chains during the second quarter, but registered a net loss of $11.4 million in the period, which ended August 9. Same-store sales rose 8.1 percent at Carl's Jr. and 6.2 percent at Hardee's. The overall loss was attributable to payments to settle three wage and hour class action lawsuits, a previously announced pre-payment premium on outstanding debt and other one-time charges. Without those, the company would have reported a net profit of approximately $10.8 million, or 17 cents per share. The company operates 3,206 franchised or company-owned restaurants in 44 states and 14 countries, including 2,067 Hardee's, 1,016 Carl's Jr.'s and 105 La Salsa Fresh Mexican Grill locations. BK's August sales stronger Miami-based Burger King's company owned stores saw an 11.1 percent same-store sales increase in August, while franchised stores grew at a 4.5 percent rate, for an overall growth rate of 5.1 percent over the year-ago period. The announcement marks the seventh consecutive month of positive same-store growth results. Among the new products driving the chain's growth, has been the new Angus beef hamburger products. Kroger Q2 earnings decline Beset by labor unrest that hammered sales at the company's Ralph's and Food 4 Less stores in California and rising product costs, Cincinnati-based Kroger reported net earnings of $142.4 million for the second quarter ended August 14, down from $190.4 million in the same quarter a year ago. The company said its earnings were affected not only by the recently resolved strikes and their aftermath, but also by a premium of $15.3 million paid to retire $750 million in debt. Sales increased 5.1 percent to $13 billion in the quarter, but same-store sales growth, excluding gasoline, was an anemic 0.6 percent. Without the California stores included same-store sales grew 1.1 percent, which was called respectable. All breed tour in Lisbon, ND Fourteen seedstock operations representing the Angus, Buelingo, Chiangus, Longhorn, Lowline, Red Angus, Simmental, and Shorthorn breeds will be featured on the 2004 All Breeds Cattle Tour. The 18th annual event will be held Oct. 4-5 in the Lisbon, ND, area. "The All Breeds Cattle Tour is an excellent way to view the herds of multiple operations and compare multiple breeds in a short amount of time," said Tracey Koester, of the North Dakota Stockmen's Association. Visits will include: Melroe Farms, Gwinner; Alamo Farms, Ransom Angus, Bear Creek Beef, Wendel Livestock, and Schmit Farm, Oakes; Crete Grain Westgate and James Valley Grain, Crete; and Spring Valley Angus, LaMoure, ND, where a Pfizer Excede demonstration will be conducted. The final tour stop will be at the Ransom County Expo Center in Lisbon, where exhibits from Black Tie Simmental, Erdmann Angus and Hieggelke Simmentals will be displayed. For more information call 701/223-2522.

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Thursday, September 20,2007

Beef Bits

by WLJ
13, 2004 McDonald's sees its 16th consecutive increase McDonald's Corp. reported its 16th consecutive increase in monthly same-store sales despite a slight drop in Europe, reports the Associated Press. The fast-food chain said its comparable sales were up 7.2 percent at its U.S. restaurants and 3.9 percent worldwide. Sales in Europe fell 2.1 percent, a drop the company blamed on weak performance in Germany, poor weather, and a decline in tourism across the continent. The latest strong performance at U.S. McDonald's was credited to improved service, marketing, and expanded menu variety, including the recent launch of Chicken Selects. McDonald's stock rose 52 cents, or 1.9 percent, to $27.90 in morning trading on the New York Stock Exchange, September 9. Beef spending up $22B in 10 years Consumers will spend $68 billion on beef in 2004, according to a report released from the Texas Beef Council. If the beef industry were a private corporation, those revenues would rank it ninth, right behind IBM, in the Fortune 500 list. The 2004 figures represent a $22 billion increase over 1995, which was three years before the beef checkoff program helped stabilize beef demand after 20 years of decline. The projections were made by Cattle-Fax, the beef industry economic analysis arm. Packers charged with fraud Criminal charges have been brought against three Canadian meat processors who sold possibly tainted meat. The provincial police in Ontario, Canada, brought criminal fraud charges against Walter Clare and his sons, Jeffrey and Jay. All three are owners of Alymer Meat Packers Inc., a slaughter and meat-processing company in the southwest region of the province. The men were also criminally charged under the Food and Drugs Act with selling meat unfit for human consumption and labeling meat in a manner that was false, misleading, or deceptive regarding its safety. They are scheduled to appear in St. Thomas court on October 19, 2004. The company was separately charged with fraud and conspiracy to commit fraud. The government alleges that Alymer employees last summer knowingly accepted and processed cattle that were dead when they arrived at the plant. Meat from the carcasses was then mixed with carcasses from animals that entered the plant alive. The plant's license was suspended after a search August 21, 2003. Tyson makes FORTUNE list Tyson Foods has been listed by FORTUNE magazine as one of America's fastest growing companies. The Springdale, AR-based company ranks 44th on FORTUNE's list of "The 100 Fastest Growing Companies." Tyson is the highest ranked food company and the only meat protein company to be included. "It's an honor to be recognized for the progress we've been making since our acquisition of IBP three years ago," said John Tyson, chairman and CEO. "We're continuing our aggressive campaign to increase our value-added product sales over the next three to five years and believe our recently unveiled 'Powered by Tyson' marketing campaign will boost our efforts." Over the past three years Tyson has experienced a 41 percent earnings-per-share growth, 49 percent increase in revenue and a total return of 32 percent. Aussie beef exports slip Beef exports from Australia, a major global exporter, slipped a little in August from July, but remain well up on shipments in August 2003, according to the latest official figures. Exports to the U.S. grew sharply in August from July, while exports to Japan fell, resulting in the U.S. overtaking Japan as the major beef export destination, the figures show. The figures confirm the overwhelming reliance of these two major markets on the overall trade. Total beef exports in the first eight months of this year of 591,243 metric tons were up 7.4 percent from the year-earlier period, mostly reflecting sharply higher exports to Japan. Carl's Jr. on the road Fast-food burger chain Carl's Jr., Carpintera, CA, is taking its signature hamburgers, fries and several other menu items beverages on the road to select football games this season. Carl's Jr. traveling Star Diner restaurant-on-wheels visited the University of Utah versus Texas A&M tailgate party on Thursday, September 2. Typically, the Star Diner will stay fairly close to its home base in California, but Carl's Jr. believes the Utah trek was a fun, innovative way to allow loyal customers, and potential customers, to sample its Six Dollar Burger, Famous Star hamburger, and Western Bacon Cheeseburger. The diner's final destination will be Magna, UT, where a recently opened Carl's Jr. franchise "adopted" a local high school. The restaurant will kick off assistance for Cypress High School with a visit from the Star Diner to raise funds for the athletic department.

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