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Thursday, December 20,2007

COMMENTS

by WLJ
September 5, 2005 It is absolutely amazing the punishment mother nature can dish out. This last hurricane, Katrina, wiped out an entire socio-economic system and it certainly won’t stop there. The economic system in that region has come to a screeching halt and it has been suggested that it will have a negative impact on the entire U.S. economy to the tune of one-and-a-half percent. Much of that impact is to be felt through higher oil and gas prices. The energy industry has become a very complicated business and the effects this one storm has had, in just a few days, on energy production and processing are enough to gag a horse. A couple weeks ago we talked about $3 diesel and $3.10 per loaded mile trucking rates. Over the next few weeks that might suddenly look cheap. The last I heard, there were seven oil platforms either sunk or adrift in the Gulf. The amazing thing is these rigs weigh in at 12,000 tons—they would be hard to lose. Katrina may have been the mother of all storms. I saw the damage that hurricane Ivan caused in the Florida Panhandle last spring and that was devastating enough. The damage from this storm looks 10 times worse. Our prayers go out to those people in need, and we’ll send a few bucks as well. As a direct result of the storm, crude oil futures were on a run last week, above $70 a barrel until the Bush Administration decided to open up oil reserves, which brought crude futures down ever so slightly to $68.85. Gasoline futures were a much different story. Last Wednesday, NYMEX gasoline futures were at $2.57; a week earlier they were around $1.90. I’m one of those who believes in the virtues of supply and demand, which is very real, but I remember learning in a college marketing class that the two biggest motivators for the human-being are fear and greed. We, as consumers, fear higher prices and oil traders are bidding up futures markets because of greed. Sometimes we talk about the speculators in the cattle markets and the idea that they shouldn’t be there unless they can deliver a load of cattle. Today it looks like the oil speculators are on a feeding frenzy with gasoline futures. I guarantee you that family fortunes have been made over the past month on oil futures. My friend, Andy Gottschalk, said that the speculators have put $15 on crude oil prices, and it looks much worse for gasoline and diesel. Ironically, disasters like this make all the issues that we debate in this cattle industry look pretty small. I guess some times we need to have things put in perspective to realize just how good we have it. These oil prices are absolutely an indirect burden on the cattle and beef industries. Trucking is a major issue and as I’ve discussed in earlier columns, the ultra rapid increase in energy prices takes billions away from consumer spending. The estimate at the first of the year was $135 billion. Since the first of August, Gottschalk has updated his estimates to be just more than $155 billion and $50 billion has come since the middle of July. When beef costs are twice that of pork and six times the price of chicken, it will suffer some impact. Consumers will make alternative lower cost choices. Perhaps it will simply be a shift from the restaurant to home and beef tonnage will stay respectable. But keep in mind over half of the modern day family meals are consumed away from home. The Texas Cattle Feeders Association announced late last week that they are donating $25,000 to the Cattlemen’s Katrina Fund. To make a donation, send a tax-deductible check made out to “Cattlemen’s Katrina Fund” to TCFA, 5501 I-40 West, Amarillo, TX 79106. For information, contact TCFA at 806/358-3681 or by email at info@tcfa.org. With the losses many have realized from this disaster, it really makes fuel prices pale in comparison. But, now we have to move on and ship the cattle, cut the corn and get it to markets so people can eat. Be thankful that farm fuel doesn’t have the taxes that road fuel does. It seems like a good time to place a moratorium on fuel taxes. — PETE CROW  

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Thursday, December 20,2007

Feds down on beef projections

by WLJ
— Energy prices curtail restaurant demand. Early optimism for a steady to $1 stronger fed cattle market was eroded last week when trade occurred Thursday at prices mostly $2-3 lower dressed, $1 lower live. Packing plants were starting to see profitable margins decrease and projections for late summer and fall beef demand decline as rising energy prices start to take a toll on consumer demand. By Thursday, Nebraska cattle feeders had traded approximately 55,000 head at $127-128 dressed, while Kansas feedlots had traded 30,000 head at mostly $81-81.50 live. Texas cattle feeders were still holding out for $82 at press time, however, packers were holding steady, offering $81 live. Last Thursday, the packer margin index was positive $2-3 per head, in comparison with $15 per head profit the prior week. According to analysts, that deterioration was related to an increase in fuel prices and lackluster beef demand in the restaurant sector. “It’s our estimation that about 40 percent of all beef middle meats are consumed away from the house,” said Jim Robb, chief analyst at the Livestock Marketing Information Center. “Most of that consumption is at mid-range priced restaurants that dot themselves along interstates.” Robb said that recent spikes in fuel prices are really starting to weigh on peoples’ travel habits and the slowdown in travel numbers will impact beef demand pretty profoundly if high fuel prices prevail. Reed Marquotte, M&Z Livestock Analytics, said energy costs are also beginning to weigh on feedlot and packer profit margins. “Transportation and cold storage costs are both escalating at a very rapid pace due to gas and oil prices skyrocketing,” he said. “We didn’t see much of a rally in (boxed) beef prices through the week, and that resulted in packers pulling the reins back on both the volume of their cattle purchases and the price paid for those cattle.” After rallying about $3 through Wednesday, boxed beef prices saw a $1.50 turnaround on Thursday. Choice boxed beef was selling for $134.62 per cwt, while Select was at $124.70. Trade volume was moderate last week, which analysts felt was disappointing, citing the lack of forward post-holiday buying as a reason for concern. Packers were in need of fewer cattle last week due to a short kill week coming up because of the Monday holiday. As a result, 115-120,000 fewer cattle are needed by packers to fill their demand for the week. Slaughter volume last week was steady with the previous week, at 486,000 head through packing houses last Monday through Thursday. For the week ending Aug. 27, 661,000 head of cattle were processed, steady with the previous week, and about 40,000 head higher than needed to meet current level of beef demand. “Last week’s kill certainly curtailed any need for extra cattle this week or next, particularly if Labor Day beef movement is as low as some projections indicate,” said Marquotte. Heavier finishing weights of cattle also continue to reduce the number of cattle needed by packers, analysts said. For the week ending Aug. 27, the average live weight of all cattle processed was 1,266 pounds, three pounds heavier than the week prior. The average carcass hanging weight was 780 pounds, two pounds heavier than two weeks ago and 15-20 pounds heavier than the same week last year. Feeder markets Solid was the best word to describe feeder markets last week. Despite dwindling margins and optimism in the fed market, and in the face of stories of devastation from the south, buyers were purchasing feeder calves at prices generally above the prior week throughout the west. With few exceptions, analysts noted that demand was good for loads of uniform thin to moderate flesh cattle. Quality appears to be improving as larger lots start heading for the sale barns. Grazing prospects throu-ghout winter wheat country appear to be very good and stockers are sourcing cattle now. However, the good grazing conditions are also allowing producers to keep cattle on pastures longer, resulting in supply shortage, particularly in the northern-tier where demand has been strong on rising prices for the past several weeks. Corn prices also helped strengthen the feeder cattle market last week, as cash corn, last Thursday, was between $2.05-2.10 per bushel, or $3.65-3.80 per cwt. Prices were down from beginning of the month range of $2.25 per bushel or $4-plus per cwt, which added support last week. Prices in the southern tier continue to rise as supplies hold steady and dry conditions ease. In Oklahoma, markets for feeder steers and heifers were $1-3 higher on solid demand and stronger attendance at sales. Because of the long, dry stretch of weather during mid-summer, cattle are arriving at the sale in good feeding condition, noted as slightly thin to moderate flesh. In Joplin, MO, prices for steers were $2-4 higher for mid-weight steers and $3-5 higher for heifers with some lots selling as much as $8 higher. At other markets across the southern tier, prices were noted to be at least firm and steady. Most sales noted prices $1 or more higher. Supplies across the north are still moderate at best, however, some good volumes are just starting to be seen at steady to slightly higher prices. Continued good weather is allowing cattle producers the opportunity to graze longer; the result is a slow trickle of calves into the markets which is keeping prices higher for producers. As long as supplies don’t overwhelm the northern markets, feeder prices should stay solid. Working against producers will be continuing feedlot losses. Analysts are still predicting short-term supplies in September will continue to exceed demand, meaning lower prices for the fed market. Feeder losses will weigh on the feeder market as supplies start to increase toward their annual peak. Also, transportation costs, which are rising out of control, are going to affect every segment of the beef industry and create a great deal of uncertainty as every sector of the economy tightens its belt to absorb the impact. Analysts last week said fuel costs can also trigger a radical spike in fertilizer costs, particularly ammonia and other liquid nitrogen-based compounds. Robb said because those chemicals are used greatly in southern pasture grazing situations, some stocker operators may have to pay less for calves and lighter feeder animals late this year. “There’s a direct correlation between fuel prices and these fertilizer costs, and that correlation is about one to one, meaning that the jump seen in gas and oil prices is what can be expected from a fertilizer standpoint,” said Robb. He also said, however, that producers who have poultry waste available can help themselves out from a cost standpoint. Chicken manure is as rich in nitrogen as many liquid fertilizers and is much more cost effective. “If application of chicken waste becomes more prevalent, maybe the calf market won’t soften up as much as we think,” he said.

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Thursday, December 20,2007

KAY'S KORNER

by WLJ
September 5, 2005 The other day, I struck gold when I went to my local Costco store. That’s where I buy most of my beef because Costco sells only USDA Choice beef at the best everyday prices I’ve come across. I was scanning “in-the-bag” items in the meat case when I spotted whole strip loins (about 10-11 pounds per bag) at only $5.15 per pound. Then I turned the bag over and saw the words “USDA Prime” printed on the original packer bag. It seemed to be the only Prime bag in the case so I quickly put it in my cart. Then I sidled up to the meat manager and asked him if this was “for real.” He assured me it was and that packers occasionally throw in Prime to fill an order. Or they do it by mistake. Anyway, I went home a happy beef eater, positively salivating at the thought of buying ten pounds of Prime beef at such a good price. Yet I couldn’t help also wondering about the vagaries of beef merchandising. After all, only 3% of all beef that is graded hits Prime. And in the summer, it can drop to as low as 2.5%. In contrast, 57.5% of the beef is Choice and 39% Select (based on 2004 grading). Only a few weeks earlier, I had spent the day with a Southern California meat company that has a thriving business supplying white tablecloth restaurants in one of the nation’s most affluent markets. Several times, they told me how much of a struggle it was to get enough Prime beef. So finding Prime beef at Costco reminded me of how imperfect our beef marketing system is. Packers mostly do a good job of maximizing the value of what they produce. But companies, large and small, sometimes get “caught” with product. Or distributors do. And once product gets some age on it, it tends to decline in value. Understandably, packers and others live and die by the old adage of “sell it or smell it.” So why isn’t a lot more research being done into extending beef’s shelf life? Remember the enthusiasm several years ago about the advantages of feeding Vitamin E to cattle while they’re on feed. Studies clearly showed that it improved beef’s color and shelf life. Some cattle feeders and beef marketing programs made the use of Vitamin E a requirement. But any notion of it becoming an essential part of every animal’s feed ration simply evaporated. Why? Because no one in the commodity beef chain was prepared to pay any more for it. Retailers didn’t seem to care. And packers are in the business of squeezing out pennies to make profits. So they weren’t going to pay a producer if they couldn’t sell the beef at a higher price. This attitude is prevalent throughout the beef chain and is the main reason why there’s still insufficient focus on improving beef quality. There are companies large and small that are doing a lot with producers and end users. But that appears to be more than balanced by a growing trend in the industry, which I find both fascinating and potentially rather disturbing. When Wal-Mart entered the grocery business (in the late 1980s), it sold little beef for a number of years. A turning point came in 2000 when it decided to eliminate butchers in its meat departments (in its SuperCenters) and go 100% case-ready. I don’t know how many of its divisions are handling only case-ready, but I do know that major supplier Tyson Foods is building a huge new case-ready plant in Texas that will double its CR production. Wal-Mart is the nation’s largest buyer and seller of beef, by a huge margin. It bought more than 2 billion pounds of beef in 2004, twice as much beef as McDonald’s bought. Wal-Mart bought nearly all Select beef. To reach its price points for its customers, and of course make money, Wal-Mart asks its beef suppliers to pump the beef. Ostensibly, this is to tenderize the lower- grading beef and make it more “fail-safe” when being cooked. But it’s a stretch to say that pumping beef is improving the quality. Trouble is, more packers and other people now believe the only way to improve beef’s quality is to inject it with some solution or other. The way I see it, that’s a slippery slope that the pork and poultry industries have already slithered down. The beef industry should take heed of the moves to take the moisture out of pork and chicken, and renew its focus on improving beef quality in other ways.— Steve Kay (Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533; Petaluma, CA 94953; 707/765-1725. His monthly column appears exclusively in WLJ.)  

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Thursday, December 20,2007

Futures give fed market optimism

by WLJ
— Calf, yearling market widely varied. Fed cattle trade last week was just starting to get charged up before press time Thursday, at prices $1 stronger live, $2-3 higher dressed. Volumes, however, were very slight as packers were trying to control the market from being much more than steady with the previous week. In addition, volumes were hampered somewhat because of Labor Day. As of Thursday afternoon, 10-12,000 head had traded hands in Nebraska at $128-130 dressed, some $82 live. The same prices were paid on limited volumes of cattle in both Iowa and Colorado, also. Southern Plains trade still hadn’t started last Thursday, with producers asking mostly $84, and packers coming in with bids mostly around $81, some $81.50. Texas market sources said that $83 might get some cattle traded, but it would be at the last minute on Friday. “They really think $84 is doable,” said Brent Snyder, analyst with Texas Cattle Feeders Association. Live cattle futures contracts added some bullishness to producers’ thoughts last week. At close of business Thursday, October live cattle were at $83.45, December $86.55 and February $88.37. Prices were up $2.25, $2.15 and $1.60 from settlement prices the previous Friday, respectively. Also adding some strength to the market complex was a stronger boxed beef market. Choice boxed beef was $1 higher through most of last week, compared to the end of the previous week. In fact, Choice almost got back to $135 per cwt. Select stayed mostly steady with the previous week. Boxed beef strength was also noted in the movement from packers to retail outlets. Spot cash movement topped 500 loads both last Wednesday and Thursday. Analysts with Cattle-Fax called Labor Day beef demand better-than-expected, as good weather was reported across the large majority of the U.S. The one exception, of course, was in the Deep South and Gulf Coast areas, where recovery from Hurricane Katrina was beginning. Last week’s continued increase in Choice boxed beef prices also gave analysts the feeling that demand for higher quality middle meats is stronger than once thought, thus improving the profitability for retailers. That extra profit is being used to buy more meat on the wholesale market. Fed trade volumes last week weren’t expected to be very large due to packers having one less slaughter day and being able to hold on to a one- or two-day supply of cattle into the third week of September. Between Tuesday and Thursday, 376,000 head of cattle were processed, 4,000 head more than the same week a year ago. On a daily average basis, last week’s slaughter volume was 125,300 head, about 4,000 head more per day than the previous week. Additional optimism was being shown by producers because of the three-week-long stretch of profitable margins being reported by packers. The packer margin index last Thursday was around $5 per head, down $3-4 from the previous few business days. Double-digit packer profits were being reported during much of the second half of August. Feeder market Feeder cattle volume is starting to increase in the north, however, that didn’t deter prices paid for cattle being offered from that area of the country. However, some pressure could be expected in upcoming weeks due to high fuel prices and lackluster demand. Prices at Torrington, WY, were $2-3 higher for steers and heifers over 700 lbs. Light feeder cattle in La Junta, CO, were lightly tested, however, 700-lb. steers were $1-2 higher. Billings, MT, reported light tests, but strong demand for the first loads of cattle for the season. In the southern tier, cattle were also trading at higher volume and prices. Feeder steers in El Reno, OK, were selling for prices as much as $4 higher and demand was considered strong for steers in the 650-750 lb. range. Feeder heifers were also steady to $2 higher. In Dodge City, KS, feeder steers in the 400-700 lb. range were lightly tested, but nonetheless sold $1-3 higher, heavy feeders, 850-950 lbs. sold as much as $3-4 higher. Feeder heifers across all weight classes were noted to be $1-3 higher. The Superior Video Auction last week brought mixed results. A number calves still on cows were offered. Those lots were heavily discounted by buyers, and several “no-sale” lots were noted by analysts. Producers offering weaned calves were receiving a $6-9 premium for uniform loads. Southern tier cattle brought an average price of $126.44 for calves in the 400-700 lb. range, with one instance of $157 for a load of lightweight 400-lb. calves in the southern tier. Fuel prices were beginning to moderate late last week as the impact of the hurricane was alleviated some by an opening of the Strategic Petroleum Reserve and a return to production of some of the refineries and pipelines knocked off-line by the storm. Several analysts have noted concern edging toward bearishness on feeder cattle prices as supplies begin to increase going into fall. Strong fall grazing prospects combined with good corn prices for feedlots are lending support for the feeder market right now. Going forward, market conditions are likely to soften some as supplies increase. The uncertainty for cow/calf producers right now lies in the weak fed market and high transportation costs, both of which continue to put downward pressure on the feeder markets which continue to exhibit good resiliency. According to Jim Robb, chief analyst with the Livestock Marketing Information Center, fuel costs are likely to add $1 per cwt to both cattle and grain transportation costs. In addition, fuel increases will be seen in the feed mills of most feedlots. As a result, prices to be paid for cattle coming into feedlots this fall could be pressured another $2-5 per cwt. — WLJ

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Thursday, December 20,2007

June beef imports a record; up 5% for first six months

by WLJ
The U.S. imported a record 123,875 tons of beef and veal during June, 8.8% higher than May and 8.3% higher than June 2004. Official figures show that imports of fresh, chilled beef came to 41,371 tons, virtually unchanged from the previous month but up by 9.2% over the same month last year. Imports of frozen beef were 75,639 tons, which was 12.8% above the previous month and 10% above June 2004. During June, beef imports from Canada came to 38,099 tons, unchanged from May. U.S. imports of beef from Canada during the first half of 2005 were 15.9% higher than a year ago, amounting to 202,616 tons. Canada was the leading beef exporter to the U.S. in June, accounting for 32.8% of total U.S. imports for the month. Beef from Australia during June rose 10%, compared to May, to 35,633 tons. Imports from Australia for the first half of the year totaled 132,890 tons, 18.3% below the same period a year ago. During June, the U.S. imported 25,186 tons of beef from New Zealand, a rise of 32%, compared to May. First-half beef imports from New Zealand were 123,645 tons, down 12.3% from last year. U.S. beef imports from Uruguay during June rose by 1.9 %, compared to May, to 17,541 tons. Total imports from Uruguay for the year to date were 79.3% more than last year, at 96,800 tons. Overall, during the first half of 2005, U.S. imports of beef and veal came to 617,154 tons, up 5.2% compared to the first half of 2004, USDA said.

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Thursday, December 20,2007

Record ag income last year; cattle prices contributed

by WLJ
The agricultural sector contributed a record $125.9 billion to the U.S. economy in 2004. Net farm income, which is the return earned by farm operations, was a record $82.5 billion. A survey conducted by USDA indicated unique results among recent years in that both livestock and crop industries generated record levels of value of production and receipts in the same year. As a result, total receipts were a record $241.2 billion, which was $24.6 billion more than the previous record of $216.6 billion in 2003. Total 2004 production expenses, at $209.8 billion, rose more than 5% compared with 2003. Producers spent a record amount on purchased inputs, including items such as feed, seed, chemicals and especially fuel. The increase of more than $36.4 billion in the value of farm sector production over 2003’s record of $242.6 billion was of such magnitude that farmers earned a record net income, despite increasing production costs. Producers’ net cash income also increased to a record $85.5 billion in 2004, with cash expenses consuming 68.5 cents of each dollar of gross cash income, the smallest share since the late 1980s. The occurrence of two consecutive years of exceptionally large harvests for major crops and unusually high prices for most classes of livestock and milk have created record earnings for the farm sector, and participants who assume production risks have reaped the benefits. Production of livestock tends to be more stable from year to year, but prices can vary substantially depending on supply conditions. Thus, most of the volatility in the value of livestock production arises from fluctuations in market prices. Expenses for purchased supplies used in the production of crops and livestock were 5% higher in 2004 than during the prior year, and $13.4 billion greater than in 2002. This compares to the $60.3 billion difference in the value of farm sector production between 2002 and 2004. The gains in value of production have been largely a result of large harvests of crops and high prices for livestock and related products, neither of which required a corresponding increase in costs to realize the benefits. Net farm income, which is a measure of the sector’s profitability, was a record $82.5 billion in 2004, up $23 billion, or 39%, from the previous record of $59.5 billion in 2003. At $82.5 billion, net farm income was 67% above the average of the preceding 10 years. Market prices available to farmers for sales of livestock and products were substantially higher in 2003 and 2004 and have been a primary force behind the past two record years for farm income. In addition, near-perfect growing conditions for corn, soybeans, and other major crops produced large harvests. In spite of these large harvests, market prices available to producers for crops have remained strong relative to their 10-year averages. Completing the 2004 income portrait, the farm sector contributed a record $125.9 billion in value added to U.S. national economic output, up $24.7 billion from 2003 and 40% above the average of the prior 10 years. Two years ago was the first time that the economic output attributable to farmers and other agricultural stakeholders had exceeded $100 billion. Market prices received by farmers for sales of livestock and products were a primary force behind these two record years for farm income. Cattle and calves are the number one commodity in terms of cash receipts, with sales of $47.3 billion in 2004, and normally are more than double the sales of the second ranked commodity, dairy products. However, in 2004, dairy products rose $6 billion to top $27.4 billion. Livestock producers were able to sell their product at market prices that were high by historical standards, while buying feed at prices which were under pressure from large supplies following record harvests. 2005 Forecast In 2005, net farm income is forecast by USDA to be $71.8 billion, down $10.7 billion from 2004. Income is forecast down in 2005 only because it rose $23 billion to an unprecedented level in 2004. That year, both crop and livestock commodities experienced exceptionally favorable market and production conditions. Two consecutive years of record high corn production and large harvests for other major crops, combined with unusually high prices for livestock and milk, created record earnings for the farm sector. The value of production in the U.S. farm sector is forecast to be $269.1 billion in 2005. USDA predicts farms will contribute $118.3 billion to the U.S. economy in 2005, following successive record years of $101.2 billion in 2003 and $125.9 billion in 2004. Operators are forecast to earn net farm income of $71.8 billion in 2005, following records of $59.5 billion in 2003 and $82.5 billion in 2004.Total cash receipts are forecast to be $239.6 billion in 2005. Net cash income is forecast to be $85.2 billion in 2005, declining less than 1% from 2004. The value of crop production is forecast to be down by $12.4 billion in 2005 from 2004. However, cash receipts from the crop sales are forecast down only $1.8 billion as farmers sell large quantities of inventory carried over into this year. These sales will help maintain income near 2004. Cash receipts for crops are forecast to be $116 billion in 2005, down from the record $117.8 billion in 2004 due to a decline in production, higher transportation costs and downward pressure on market prices in the latter part of 2005.

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Thursday, December 20,2007

USDA offers disaster aid

by WLJ
USDA last week allocated over $170 million in emergency assistance available to agricultural producers suffering from Hurricane Katrina. In addition, USDA's Commodity Credit Corporation (CCC) is implementing immediate changes to its Marketing Assistance Loan Program. "We are doing everything we can to help our Gulf Coast producers recover from the affects of Hurricane Katrina," said Agriculture Secretary Mike Johanns. "This assistance is an important component of USDA's efforts and our commitment to help farmers and ranchers rebuild their operations.” USDA is providing more than $20 million in Emergency Conservation Program (ECP) funds to help producers repair damage to their lands. ECP participants will receive cost-share assistance of up to 75% of the cost to implement approved emergency conservation practices such as debris removal and restoration of fences and conservation structures. ECP is administered at the county level under the guidance of USDA Farm Service Agency (FSA) state offices. USDA has allocated $855,000 in ECP funding for Baldwin, Choctaw, Clarke, Greene, Marengo, Mobile, Sumter and Washington counties in Alabama. Another $12.45 million has been set aside for ECP efforts in the Louisiana counties of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana, and Allen, Avoyelles, Beauregard, Concordia, Evangeline and St. Landry. The entire state of Mississippi has been allocated $7.1 million. Giles, Lawrence and Wayne counties in Tennessee will work with $25,000 in ECP monies. Emergency loans A total of $152 million in FSA's Emergency Loan Program is available to eligible producers who have suffered at least a 30% reduction in crop production or have sustained physical losses to buildings, chattel or livestock. Farmers and ranchers have eight months from the date of a presidential or secretarial disaster declaration to apply for low-interest agency loans. In addition, CCC is implementing changes to its Marketing Assistance Loan Program to allow producers to obtain loans for "on-farm" grain storage on the ground, in addition to grain bins and other normally approved structures. This action is designed to alleviate short-term logistical problems and support local cash prices above distressed levels as a result of the hurricane. Grain producers in the U.S. are facing logistical challenges as port operations in the central Gulf Coast and lower Mississippi River, which were already complicated by summer drought conditions in the upper Mississippi and Illinois River basins, have been hampered by Hurricane Katrina. The changes to the Marketing Assistance Loan Program are consistent with emergency storage provisions already available to commercial warehouses and remain consistent with the existing CCC mandate that ensures the orderly marketing of U.S. farm commodities. CCC has authorized outside, on-farm storage of commodities which have been offered as collateral on non-recourse marketing assistance loans as long as such storage meets CCC guidelines. Commodities stored outside must be protected from animals and located so that water drainage will not seriously affect the quality and quantity of the commodity. Producers are responsible for ensuring that the quality of the commodity pledged as marketing assistance loan collateral is maintained during the entire loan period. CCC is also reminding producers that its Farm Storage Facility Loan Program (FSFL) is available to provide low-interest financing for producers to build or upgrade on-farm grain or silage storage facilities. Eligible size of the structure is determined by the borrower's demonstrated need for additional on-farm storage capacity to store eligible commodities. An eligible borrower must have a satisfactory credit rating, as determined by CCC, and demonstrate the ability to repay the facility loan debt. Facilities built for commercial purposes and not for the sole use of the borrower(s) are not eligible for financing. The maximum amount a person is allowed to borrow through the FSFL program is 85% of the net cost of the eligible storage facility and handling equipment, not to exceed $100,000. Loans over $50,000 must be additionally secured with a real estate lien. Loans are repaid through seven annual, equal installments. Loan applications should be filed in the administrative FSA office that maintains the farm's records. Additional assistance FSA has other programs to help producers recover from losses resulting from natural disasters such as Hurricane Katrina. FSA's Noninsured Crop Disaster Assistance Program (NAP) provides financial assistance to producers of noninsurable crops when low yields, loss of inventory or prevented planting occur due to natural disasters. To be eligible for NAP assistance, crops must be noninsurable crops and agricultural commodities for which the catastrophic risk protection level of crop insurance is not available. Producers must meet other eligibility requirements to receive NAP payments. Also, FSA's Debt Set-Aside (DSA) Program is available to producers in primary or contiguous counties declared presidential or secretarial disaster areas. When borrowers affected by natural disasters are unable to make their scheduled payments on any debt, FSA is authorized to consider set-aside of some payments to allow the farming operation to continue. After disaster designation is made, FSA will notify borrowers of the availability of the DSA. Borrowers who are notified have eight months from the date of designation to apply. Also, to meet current operating and family living expenses, FSA borrowers may request a release of income proceeds to meet these essential needs or request special servicing provisions from their local FSA county offices to explore other options. Producers should attempt to contact state FSA offices if local FSA offices are temporarily closed due to hurricane considerations. The following telephone numbers cover Gulf Region state FSA offices: • Alabama, 334/279-3500; • Louisiana, 318/473-7721; • Arkansas, 501/301-3000; • Mississippi, 601/965-4300; and • Florida, 352/379-4562.

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Thursday, December 20,2007

Obit

by WLJ
September 13, 2004 Record Stockman Publisher Emeritus Harry E. Green, 81, of Lakewood, CO, died Sept. 5 of cancer and heart disease. Editor and Publisher Dan Green said, "Dad was tough and a real fighter, not giving in to the ravages of his diseases. He maintained an active interest in his beloved Record Stockman and livestock industry, his family, and Colorado sports teams, right up to the end." Green is survived by two sons, Dan, Lakewood, CO, and Gibb, Windsor, CO; stepson John D. Walker, Beaver, UT, stepdaughter Donna Gary, Artesia, NM; four grandchildren and two great-grandchildren; brother Ralph H. Green, Greeley, CO, and sister Louise Westover, Tucson, AZ. Green was born and raised in Greeley, and attended the University of Denver, and later the University of Colorado. While a student at CU he was also herdsman of the Painter Cattle Co. at Roggen, CO. Upon graduation he joined the Record Stockman as a fieldman and became publisher in 1963. Green was an innovator in both livestock publishing and the printing business. Green was a director of Denver's National Western Stock Show. He was especially proud of founding, The Livestock Marketeers, along with Ross H. Miller and Claud Willett. The Livestock Marketeers is a fraternity of livestock fieldmen, sales managers, and auctioneers that meet for dinner to honor two Marketeers of the Year, during the National Western Stockshow.

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Thursday, December 20,2007

Feds focusing on import safety

by DTN
Working to heighten public awareness on the Bush administration’s efforts to improve the safety of imports, two cabinet secretaries toured a small meat plant on Sept. 12 to talk about the importance of high business standards. Cracks in import safety have become a national focus this year with recalls ranging from pet foods to children’s toys. It has led to a political and consumer backlash that will place more demands on businesses and government officials to ensure foreign products are safe. The demands, however, are stressing the inspection system as the global economy and more trade deals open up U.S. ports to more goods. “I believe...that our current import systems are not keeping pace with the growth,” said Health and Human Services Secretary Michael Leavitt. In response, the administration has created an interagency working group on import safety that involves 12 federal departments and is headed by Leavitt. The working group provided a report to President Bush on Sept. 10 to push strategic goals of import safety. A follow-up report will be issued later in the year to reflect any new funding, restructuring or changes in law that may be needed to better link government departments mandated with protecting consumer goods. Leavitt and Agriculture Secretary Mike Johanns spent the morning of Sept. 12 talking with producers, business owners and front-line inspectors in Kansas City on the issue of import safety. The visit is one of several federal officials will be conducting to “make sure our ideas match reality,” Leavitt said. A key part of the import-inspection strategy will be to shift from intervening when tainted food is found to “prevention and verification” that will concentrate inspections and resources on food sources most likely to encounter contamination. Inspectors will concentrate more on trouble spots and use technology “to shrink the size of the hay stack” where the needle may be found, Leavitt said. Quality has to be built into products and there must be a process in place to ensure foreign suppliers are meeting U.S. quality and safety standards, the two secretaries said. “You can’t inspect everything,” Leavitt said. “If there is one thing I have found in my travels, it’s the vastness of the amount of products that come into this country. It’s not just food.” Such emphasis on import and export safety and quality is critical in agriculture, Johanns said. Agricultural exports will hit about $79 billion this year and ag imports will be about $70 billion, he said. Next year, each will increase about $4 billion in value, Johanns said. The crossover from manufacturing and imports from other sectors has an effect on agriculture because problems challenge the integrity of a country’s overall inspection and quality system. “Issues from one sector are very definitely going to impact other sectors,” Johanns said. Leavitt and Johanns toured Boyle’s Famous Corned Beef, which imports beef and pork from countries such as Chile and Canada. The company, which employs about 45 people, further processes beef, pork, chicken and turkey into marinated, sliced or pre-cooked products for retailers and restaurants. Besides being an importer, Boyle’s also exports its processed meats as well. Johanns noted he was impressed with Boyle’s traceability system, which can track the final destination of shipped boxes within hours, he said. A key issue for companies is the growing demand to track product ingredients from fork back to farm. That places particular focus on companies that import food products. “A lot of this is being driven by businesses who are seeing consumer reaction to this,” Leavitt said.

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Monday, December 3,2007

Live cattle sales steady

by WLJ
—Analysts encourage caution, expect near-term weakness. Live cattle trade began at mid-week last Wednesday with prices steady to higher than the previous week. Sales last week in the northern Plains trended steady from $95 to $95.50, with dressed sales steady at $150 in Nebraska and steady to $1 higher, from $150-151, in Colorado. Live sales in the southern Plains were fully steady from $95-95.50, with dressed sales reported in Kansas $1 higher at $152. Western Corn Belt fed cattle trades last week were steady from $94 to mostly $95 on the live side and steady to $2 lower from $148-150 dressed. Much of the credit for last week’s climb in the cash market was a result of a surge in boxed beef prices from the previous week as demand picked up and retailers began looking ahead to the holiday season. The likelihood of short supplies of product had Choice boxed beef prices pushed higher last Thursday. At mid-day, Choice was mostly steady at $150.93, while Select product moved at $136.62. Those prices were $2-3 higher than the previous week and an advance of $7 from two weeks earlier. Some of the bounce in boxed beef prices came as a result of a holiday-shortened production schedule two weeks ago and a production shortfall as a result of a fire at JBS-Swift’s Grand Island, NE, plant, which broke out Nov. 24. The reportedly minor electrical fire shuttered the plant for three days and lowered the week’s production farther than expected last week. For the week-to-date total slaughter through last Thursday, packers had harvested 505,000 head, well above the prior week total of 390,000 head and the 491,000 head total for the same period in 2006. The Chicago Mercantile Exchange last week was working against the cash market, moving lower for much of the early portion of the week. At the closing bell last Thursday, December contracts were 42 points lower than the prior day, ending at $94.57. February traded down 40 points to close at $96.65 and April lost 22 points to close the session at $97.70. However, despite the gains in the boxed beef market and steady live cattle trade last week, analysts were adding caution to the market last week, encouraging the timely sale of any market- ready supplies. The market needs to be on the lookout for a lower trend in the short-term, said Virginia Tech Commodity Marketing Agent Mike Roberts last week. “Prices were pressured by some hedge selling and concerns over how much higher cattle prices can go amid an abundance of meat protein in the supply chain,” Roberts said. He urged cattle feeders to be aggressive in their marketing efforts. “Cash sellers should definitely push market-ready cattle out of the door,” Roberts said. It will be important for cattle feeders to lock in any profits available going ahead into early 2008 when prices are expected to peak early in the year. Analysts are predicting that the spring high will come very early in the first quarter. Red ink has reportedly taken its toll in the feeding sector this fall, and Iowa State University agricultural economist Shane Ellis said recently that feeders could expect more of the same into next year despite high beef prices and a shortage of available fed cattle. “We know that cattle feeders have been seeing some red ink so far this fall and based on the futures market, this is likely to continue until the second quarter of 2008,” Ellis said. “Producers using a position on the futures market would have their best chance of locking in a profit margin from April to June.” He said their analysis also shows a positive year-over-year trend in the Iowa fed cattle market in 2008, however, that may not necessarily point toward better times for cattle feeders after mid-2008. “As for the breakeven points past next summer, uncertainty in the 2008 corn crop and supply have kept the forecasted breakevens for cattle finishing well above the range of expected sale values,” Ellis said. Feeder cattle Demand for nearly all classes of cattle at auctions around the country was good last week, with prices up across the board. As the fall run of calves dwindles, order buyers are able to find generally fewer ready-for-rail feeder cattle and are turning to calves, which some say may be the best value. Troy Applehans, analyst at Cattle-Fax, explained that even though the unweaned calves are generally of lesser quality, supply and price gaps have tightened enough to make them an attractive option. “I think if you take a look at what the calf market has done, you’d see that it has declined enough in price so that some people are beginning to realize that the unweaned calves may be the best buy,” said Applehans. Applehans said that while the gap between the prices being paid for calves and bigger feeders has been large in the past, unweaned calves have nearly caught up to the larger cattle and are now the best bargain. “What we look at pretty closely a lot of the time, the calf-to-feeder spread, which recently has gone down to about 105 percent or so, meaning that for the past month or so, calf prices are only about 5 percent away from feeders,” explained Applehans. “There’s no doubt that most feed yards would probably prefer to feed yearlings, but they are in very short supply, and with the calves being cheap enough to take the risk on lesser quality cattle, the demand for them is high.” Applehans also says that the price spread has allowed more people to get into the calf market than would normally be the case. “There’s more calf users out there right now that are more willing to just background the calves, which has kept the demand higher than it would be otherwise,” said Applehans. “Definitely, folks will have to put some money into the calves to get them healthy and doing well, but there is definite value in them. Most guys probably have a situation where they can feed a high amount of roughage or even just put them in a dry lot for the winter and will come out better on the calves in the end than they would on yearlings.” In Oklahoma City last week at the Oklahoma National Stockyards, there were a total 7,350 receipts with most cattle going higher. Feeder steers and heifers were lightly tested, at steady to $1 higher. Steer and heifer calves were $2-4 higher, with the most advance on the steer calves. There were 5,100 cattle available for sale last week at the Joplin Regional Stockyards in Joplin, MO, where compared to the week previous, steers under 700 lbs. were steady to $2 higher, with weights over 700 lbs. going $2-4 higher. Heifers were steady compared to a light test at the previous sale. Demand was moderate to good for the moderate supply. Buyers had the opportunity to purchase several loads of yearling cattle. Higher fed cattle trade and feeder cattle futures added to the positive side. Feeder steers weighing 626 lbs. went for an average of $109.71 at this sale, with heifers weighing 624 lbs. coming in over 10 lower at $97.36. At the La Junta Livestock Commission Company in La Junta, CO, last week, steer and heifer calves under 600 lbs. were $2-4 higher, with weights over 600 lbs. at $2-3 higher. There were 2,961 head available at this sale, with active trade and good demand. Previous sale weeks did not see enough yearling feeder steers and heifers to produce an accurate comparison. Steer calves weighing between 600-630 lbs. were selling from $107.50-$113.75, with heifer calves weighing 615-625 lbs. going between $102-104. In Torrington, WY, last week, there was a good run of 6,850 head, with steer calves under 650 lbs. going $1-3 higher compared to the previous week. Heifer calves under 600 lbs. were $3-6 higher, with instances of $7-10 higher. There were not enough comparable sales on yearling steers and heifers for a good price comparison, however, there was a higher undertone noted. Demand was called good. — WLJ  

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