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Monday, November 5,2007

Study highlights needs of renewable fuels industry

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

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Monday, November 5,2007

Study points to red meat as a cause of cancer

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

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Monday, November 5,2007

Harvest levels remain high

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

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Monday, November 5,2007

Colorado producer is Red Angus Breeder of the Year

by WLJ
Larry and Jean Croissant were honored by their peers by earning the Red Angus Association of America’s (RAAA) Breeder of the Year Award. The Croissants received the award at the 2007 National RAAA Convention held in Dodge City, KS, Sept. 26-29 at the historic Dodge House Hotel and Convention Center. They were presented the award by Donnell and Kelli Brown, RA Brown Ranch of Throckmorton, TX, long time friends, customers and one of the industry’s largest seedstock producers. Croissant Red Angus is a family owned and operated seedstock operation located in Briggsdale, CO. Larry and Jean, along with their son-in-law and daughter, Kevin and Sallie Miller, strive for disciplined and balanced trait selection. They are committed to raising efficient and maternal-based cattle whose progeny possess superior carcass traits. Croissant Red Angus has a standing policy of culling all open females, allowing no excuses as to the reasons why the animal(s) failed to breed. This has accelerated their cattle’s fertility and earned their program credibility from their customers. Other Red Angus producers have taken notice of Croissant’s breeding program and taken advantage by utilizing their genetics in their own seedstock operations. Croissant Red Angus hosts an annual sale in March—last year they sold approximately 50 head of bulls raised in their operation—and offer animals private treaty throughout the year. Croissant’s mission statement reads, “Our goal is to produce the best possible seedstock in a commercial production environment without excess feeding and pampering. We use proven AI sires, manage our cattle in large contemporary groups, and collect all data from birth to harvest, providing the best described seedstock possible.” The Croissants understand the needs of their customers, the commercial cattlemen. They treat their herd the same way their customers do, forcing their females to produce within the environment they are raised. This strict dedication to producing efficient cattle has allowed the program to receive the attention of the nation’s bull studs. They currently have two bulls, LJC Javelin M08 and LJC Mission Statement P27, being collected and marketed by Genex Cooperative, Inc. “We feed out all our non-selected registered seedstock and commercial calves to harvest at our ranch. We also purchase calves from some of our customers and add them to this group. This allows us to get performance data including carcass data to harvest. This data is invaluable to us, our customers, and the breed. It is not only tied to individual bulls, but is also tied back to our individual cows to more accurately describe their contribution to the calf crop,” states Larry. The quality of Croissant bred feeder cattle earned two RAAA GridMaster Carcass Awards this past year after being harvested on the Angus America Grid. Along with his dedication to their program, as well as their customers’ success, Larry has served on RAAA’s Board of Directors for multiple terms, taking a leadership role and personal commitment to the direction the RAAA is headed in the beef industry. His input and energy have been greatly appreciated by the association and his fellow producers. The RAAA is excited to have a member as progressive in their approach to producing better beef as Croissant Red Angus and honored to present them with the Breeder of the Year Award for 2007.

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Monday, November 5,2007

Cattle-Fax predicts little change in 2008

by WLJ
Prices for fed cattle will go up slightly in 2008, according to the prognosis offered at the 2007 Texas Cattle Feeders Association Annual Convention by Randy Blach, executive vice president of Cattle-Fax. Blach predicted the 2008 average price would be around $92 to $94 per cwt. “I don’t think you should be surprised if we sell cattle into the low dollar area into the spring and when we’re in our biggest supplies, we may very well be trading cattle in the mid-to-upper 80s. “With feeder cattle and calf prices, they’re likely to stay close to the same levels they’ve been at here in the last few years, too,” he said. Blach also advised cattlemen to expect to continue paying high prices for commodities like feed grains. “All these other markets are demanding more and more of our grains and protein supplies. That’s driven by the weak dollar. If you think we’re going back to the days when we had cheaper grains and cheaper protein sources, it’s not likely to happen any time soon,” he said. However, the weak dollar can also be an ally for cattlemen as more foreign markets for beef become open. “I would argue, if we had a level playing field, with the dollar where it is today, we may very well eclipse” the export levels projected for the next few years, Blach said. As for the size of the beef cow herd, Blach predicted it will be “down a couple hundred thousand head” on Jan. 1, 2008, when compared to Jan. 1, 2007. However, that decline is expected to be offset by an increase in dairy cow numbers. Meanwhile, the numbers of commercial steers and heifers headed to harvest will remain level, Blach predicted. “For the last couple of years, we’ve basically been sitting here at 27.7 to 27.8 million head. We don’t see that changing next year… We don’t have any more of them to feed; we don’t have any more of them to process. So, some of those challenges with excess capacity are going to continue,” Blach said. He also expects the trend toward heavier cattle to continue with cold carcass weights climbing by 12 to 14 pounds next year. “We’ve been incentivized with cattle trading in the $90s and cost of gains in the $60s to the low $80s depending on the region of the country. We’ve been incentivized to make them big. I don’t believe that incentive is going to go away,” Blach said.

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Monday, November 5,2007

BEEF talk

by Kris Ringwall, North Dakota State University
Buy a scale The beef industry has been producing beef since the first two cows were domesticated. We hope one cow produced a heifer to be kept as a replacement and the other cow produced a bull calf suitable for harvest. In the early days, calf size would have been noticed, if for nothing else, because of the number of people who could be invited over for pot roast. Through the years, weight and frame still remain critical to the success of a commercial beef operation. Through time, calves and cows got bigger in weight, muscle and frame. The current benchmarks for those who use the North Dakota Beef Cattle Improvement Association CHAPS program would suggest that a typical cow would weigh 1,413 pounds and have a 5.5 frame score. These cows would be producing 566 pound steers at 189 days of age. The heifers would weigh 546 pounds and the bulls would weigh 621 pounds. These calves would be gaining 2.53 pounds per day or have a weight per day of age of 3 pounds as they grazed summer pastures. (The difference between average daily gain and weight per day of age is that weight per day of age includes birth weight.) Watching calves going through the local auction barn the other day, the lots did seem to be somewhat on the light side. The published sale report in the local paper reported a total of 126 lots of steer calves. Fifty-one of the 126 lots had an average weight that was less than the typical weight seen in the CHAPS calves prior to weaning. While this is not a direct comparison and is not intended to be, one notable fact was that 11 lots of calves did not break 400 pounds and 35 lots did not break 500 pounds. Actually, the calf weights were not that atypical of a spread in weight seen at many sales through time. However, producers do need to be careful, especially as they talk about calving later and producing lighter calves. Those 400-pound calves at $1.33 would gross $532 dollars per head. During the same sales, there were 23 lots of calves that weighed in at more than 650 pounds. For a typical 650-pound calf bringing in the neighborhood of $1.14, the gross dollars would be $741 per head, a difference of more than $209 per head gross. If one really knew the expenses and the production data, a stronger statement could be made. Historically, light calves bring great dollars per pound, but the heavy calves bring home the big dollars. There is real merit in calving at a time of the year when the weather is more cooperative, the pressure is taken off the winter feed supply, more cows are calving closer to pasture turnout or cows are on pasture. However, producers must remember that the lack of a management plan with light-weight calves simply hands the opportunities to the next owner. Given the current benchmark for calves grazing on grass with their mothers, simple math (using weight per day of age of 3 pounds) will estimate an approximate weight. If the sale date is Oct. 27, a calf born March 1 would be 240 days old and could weigh 720 pounds. A calf born April 1 could weigh 627 pounds, while a calf born on May 1 could weigh 537 pounds. There are many sides to the equation, but the expense side and income side always seem to be battling. Now is a good time to think through just what generates dollars in the beef business. If one is in doubt, buy a scale.

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Monday, October 29,2007

BEEF Talk

by Kris Ringwall, North Dakota State University
Load’em up and bring those “doggies” home The fall of the year represents changing times. Colors change, the air becomes crisp, and the growing season comes to a close. It is time to move on. The grain harvest is an early indicator that the time to move from field to bin is here, but the real clincher is the movement of calves. Last week, the Dickinson Research Extension Center started bringing home the calves for weaning and sorting. In the end, cows go one way and calves the other. This activity is motivated by good management principles, which are driven by survival. Soon the water will freeze and any day, the color of white could shut things down. It is time to haul cows and calves. The image of pickups and trailers moving up and down the highways becomes common. A few brief discussions are held to reminisce about the days when all the cattle were herded home, but those mainly are memories. Granted, there are many cattle still herded, but time, labor and the simple availability of efficient transportation make the shift to hauling fairly easy. At 10 miles a day, herding cattle takes time. With many cattle today some 50 to 100 miles from the home ranch, herding cattle just isn’t practical. When hauling, one soon learns to appreciate the good roads in rural America. The North Dakota Agricultural Statistics Service lists statistics indicative of how rural North Dakota is. With a population of 633,837, the most recent census numbers note that about 44 percent of the population still is considered rural. On average, there are 9.2 people per square mile with access to towns by using 106,609 miles of road. There are 30,619 farms in North Dakota with an average size of 1,283 acres. Of the 44,144,595 acres that make up North Dakota, 39,294,879 acres are used for farming. That is what being rural is. The network of rural roads becomes crucial to the daily lifestyle of those who live and make their living in the country, especially as the calves are hauled. Even with that backdrop of rural America, the old days are getting further and further from our thoughts, especially our younger side. The world today is different. Think about all those youth who are at home, in school, at a university or just starting out in the work force. What is their world? The majority of youth are not connected to a rural world. The remnants of being rural are disappearing quickly. Road maintenance and the patience of the county road grader are not witnessed by many. The dilemma of rural versus urban is very real. The scenes are changing, at least from where we sit. The answers often are not apparent and not always welcomed. The scenic view of herding cattle certainly fits with the urban flare, but parking a herd of 300 cows and calves is not as easy today as it was, so we haul. Rural versus town versus city versus metropolitan center creates some interesting lifestyle contrasts. The further one gets from original rural communities, people become more consumers than producers and more energy users than providers. The potential disconnect from the world around us and beyond is real. As a result, if we are not careful, most of those around us like to look, but the feel and smell are best left somewhere else. Perhaps that is why the sights and sounds are better viewed on the big screen with the feel and smell of popcorn outweighing the nitty-gritty impacts of a real cattle drive. In the meantime, load’em up, get those diesels started and bring those little “doggies” home.

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Monday, October 29,2007

Cattle on feed numbers up 9 percent

by WLJ
—Cattle 700 pounds and heavier account for 54 percent of total placements. Cattle on feed numbers were down again according to the Oct. 1 USDA cattle on feed report. According to the National Agricultural Statistics Service, total on feed numbers were estimated at 11 million head, 4 percent lower than a year earlier. However, the number remains 5 percent higher than 2005. Total inventory included 6.83 million steers and steer calves, or 62 percent of the on feed numbers, down 5 percent from last year. Heifers and heifer calves accounted for 4.07 million head, down 1 percent from 2006, an indication that U.S. herd numbers will grow only slightly, if at all, when the end of the year inventory report comes out in January. It is likely that high grain prices and a solid calf market are causing some producers to put off herd size increases for the time being. On feed numbers in key states continue to show a preference for states where there are large supplies of less expensive feedstuffs available, particularly those in the north. States reporting a decrease in the number of cattle on feed were led by Idaho, which was down 21 percent. Colorado numbers were down 11 percent, Kansas was down 6 percent, Nebraska was down 4 percent, and Texas was down 3 percent from 2006. Iowa led the way for states increasing in on feed numbers, with an increase of 11 percent. South Dakota and Arizona reported a 4 percent increase and California rose 3 percent. The placement figure was perhaps the only surprising portion of the report, exceeding analysts’ expectations. September feedlot placements totaled 2.43 million head, 9 percent more than September 2006 and 3 percent above the same month in 2005. The shift toward heavier placement weights continued last month. Placements of cattle under 600 pounds totaled 610,000 head, while those in the 600-699 pound range were 505,000 and cattle placed in the 700-799 pound class totaled 570,000. Placements of cattle weighing more than 800 pounds were 740,000 head. As a result of increased feeding costs, feedlots have been showing a preference for heavier weight classes to cut the number of days on feed. Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel noted that as of this most recent report, nearly all placements into feedlots are now yearling cattle. “In many ways, this (the Oct. 1 report) reflects the first chance that the market has had to respond to the signals that started one year ago. It was difficult to provide increased numbers of heavy feeders last winter and spring, especially given the dry conditions and lack of wheat pasture last year,” Peel said. “Placements were low this summer as the growing season provided the first significant opportunity for taking feeder cattle to heavier weights on forage and it is those cattle that were placed in September. Not only were placements higher in September, but placement weights were higher as well. Placements weighing over 700 pounds were up nearly 20 percent, while placements that weighed less than 700 pounds were down 1.5 percent. It has taken a year, but the industry has now transitioned almost entirely to a yearling based flow of feeder cattle.” He said the premium for adding pounds to calves in grazing programs will continue to be a preferred method of lowering feeding costs, particularly in areas where grass and other low-cost forage is available, although he noted there is likely to be a decline in the number of caves heading to wheat grass this year. “There will continue to be an incentive for forage-based gains as long as feedlots keep looking for heavy feeder cattle to place. The lack of wheat pasture in the southern Plains means that more cattle will remain in other stocker and backgrounding programs around the country this winter,” Peel said. American Farm Bureau Federation Chief Economist Jim Sartwelle said the number of lightweight placements will be important next month as producers work to find winter forage for calves, which may be difficult to come by this year as a result of high wheat prices. “Given how tight feeder cattle supplies have been since late summer, and with fall weaning fast approaching, I have to wonder if we may see a larger number of lighter-weight feeders going into the feed yards in the next 30 days,” Sartwelle observed. Further, “as reports come out of Oklahoma indicating less wheat pasture will be made available for grazing this winter, we will watch the placement weight sections of the next two monthly USDA Cattle on Feed reports carefully for indications that light-weight feeders are being diverted from the wheat field to the feed bunk.” Marketings remain a tough spot for the cattle feeding business as cattle are fed to heavier weights to spread expensive cost of gain over more pounds. At the same time, beef demand remains lackluster, making margins in the beef business tough to maintain. The result last month was a drop in marketings from September 2006 levels. Total marketings for the month were reported at 1.71 million head, 3 percent below 2006 and 6 percent lower than two years ago. Although analysts continue to predict tight supplies of fed cattle through the fourth quarter and well into the first quarter of 2008, the failure to market cattle in a timely manner could result in a backlog of fed cattle next summer, hurting prices. Sartwelle said that is the exact scenario analysts are watching for signs of trouble in the feeding industry. “Calf and feeder cattle prices will follow the strong fed cattle market only as long as demand for them remains high,” he said. “We do not expect the profit crunch cattle feeders have endured recently to relax any time soon. Continued red ink in the feeding sector will eventually spill over into the feeder cattle and calf markets. We continue to monitor this sector closely.” However, for now, Sartwelle said he expects the industry to benefit from the tight supply of fed cattle numbers expected through the end of the year. “The bottom line is the trade expects tight supplies to continue into the second quarter of next year, with the April 2008 fed cattle futures contract trading at a $3.50 premium to the June 2008 contract,” Sartwelle said. “I do not see any news in this report that has not likely been built into the recent $90 to $92 fed cattle trade.” — John Robinson, WLJ Editor  

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Monday, October 22,2007

Stockmen’s association supports checkoff changes

by WLJ
—Studies begin to question sustainability of the ethanol industry. FUSDA moved its corn crop expectations higher as part of the Oct. 1 Crop Production report. According to National Agricultural Statistics Service (NASS), the total national corn production will reach 13.3 billion bushels, up 26 percent from 2006. The number was on the low end of analysts’ expectations and the news spurred corn prices to move slightly higher following the report, according to Virginia Tech Commodity Marketing Agent Mike Roberts. Based on crop conditions when the report was compiled, yield will average 154.7 billion bushels of corn per acre nationally, up 5.6 bushels from last year’s average with much of the increase coming in the Plains, central Corn Belt and Mississippi Delta. According to NASS, there are 86.07 million acres planted to corn this year in the U.S., a substantial increase from last year’s 70.6 million acres, as farmers take advantage of the ethanol-fueled increase in corn prices. Already, as a result of favorable harvest weather conditions, corn harvest is well ahead of normal, reaching 53 percent complete last week, 14 percent ahead of last year and 12 percent higher than the five-year average. In the central Corn Belt where the crop maturity was promoted by favorable harvesting conditions, harvest was 20 percent ahead of 2006. In other regions, harvest progress last week was reported from 1 percent to 12 percent ahead of last year. In Kentucky, North Carolina, Tennessee, and Texas, corn harvest was reportedly near completion. Although harvest was looking good, wet weather in the forecast late last week threatened to derail farmers’ efforts. Across the Midwest, growers were working to get as much grain harvested as possible in an effort to avoid rewetting the crop and the potential for mold that comes with precipitation. Roberts said producers may want to lock in corn crop prices soon to protect profits from any downside pressure during harvest. “Producers having sold 60-70 percent of this year’s crop are in good shape as this market trades sideways. If you have any corn left un-priced, now would be a good time to consider locking it in,” he said. In addition to the crop condition report, NASS issued the World Agricultural Supply and Demand Estimate (WASDE) last week which added fuel to the bullish corn news. USDA raised its forecasts for U.S. corn exports, predicting U.S. corn exports could reach their highest levels in nearly two decades. The possibility that European Union nations could lift their ban on genetically modified imports could quickly build on that number if the news comes as expected in the next few weeks. According to the WASDE report, exports of U.S. corn are expected to increase by 100 million bushels during the 2007/2008 marketing year, which is likely to offset the reduced expectations for usage by the ethanol industry which has cooled off in the second half of the year. NASS lowered expected ethanol corn usage by 100 million bushels for the second month in a row. U.S. corn exports are expected to reach 2.35 billion bushels during the ’07/’08 marketing year as a result of a sliding U.S. dollar in the currency markets and poor growing conditions in several countries which impacted foreign production. According to Mike Woolverton, Extension grain economist at Kansas State University, China, in particular, was hit by weather related crop reductions. “China just announced they will export no more corn this year. Drought in the North China Plain reduced corn yields and even though China is not a large corn exporter, it leaves the United States as the major corn exporter in the world. By the end of the ’07/’08 marketing year, U.S. exports of corn may be far greater than the current WASDE projection,” he said. Woolverton also noted the reduction in expected corn usage by the ethanol industry in his report. Domestic ethanol plant usage of corn will need to be watched closely,” he said. “Higher corn price, given the low ethanol price, is pushing ethanol producers even more into the red. The USDA dropped projected ethanol purchases of corn by 100 million bushels in this report. Unless the profit picture improves, it could go lower.” That profit picture looks grim for much of the ethanol industry, according to several analysts. The news that several ethanol plants are either slowing their plans for expansion or cancelling construction altogether could further reduce usage estimates and cause farmers to shift acreage to other crops next year. According to a research note published by Wells Fargo analyst Michael Swanson, the corn usage by the ethanol industry, as calculated by USDA, could be overstated. “The USDA’s 3.2 billion bushel estimate implies another 2.1 billion gallons of supply. My estimate of balance ethanol production needs calls for 2.4 billion bushels of corn usage. And that estimate might be too aggressive to recover the historical (ethanol versus crude oil price) spreads,” Swanson said. He said a better estimate of ethanol usage of corn, which includes factoring in the usage of co- products by the animal feeding industry, indicates that only 82 million acres of corn will be needed next year to meet all demands. “That wouldn’t do anything to reduce corn stocks,” Swanson said. “I am sure that this represents the most bearish analysis in the market. Even so, I will put my detailed weekly analysis of gasoline with ethanol distribution up against most of the warm and fuzzy hopes for China to ride to the rescue with huge export demand.” He said that a swing of 15 million corn acres back into wheat and soybean production next year will cause rapid corrections in both markets. “This means producers need to be aggressively marketing on all fronts,” Swanson said. “If ethanol can’t pull the corn train at $4 a bushel, all bets are off.” — John Robinson, WLJ Editor  

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Monday, October 22,2007

Higher cash expected

by WLJ
—Studies begin to question sustainability of the ethanol industry. Fed cattle trade was off to a slow start last week as traders waited for the USDA cattle on feed report before exchanging cattle for cash. Expectations of increased placements and lower marketings did little to dampen hopes of higher cash for the week, however. As of Thursday, analysts were expecting cash trade to develop $1 higher, at $94 live and $141-144 dressed. Cash trade the week prior in the south came at mostly $92.50, while farther north, Nebraska and Colorado cattle traded from $90-92.50, with dressed sales from $140-143. Dressed sales in the western Corn Belt traded from $138-141 with live sales in the $88-90 range. Stagnant consumer demand and record protein production is creating a difficult situation for packers and cattle feeders alike. The Chicago Mercantile Exchange (CME) premium for October contracts vs. the August contract caused feeders to hold onto supplies longer, adding weight to already finished cattle. That has led to a short-term oversupply of very heavy animals which packers are discounting as they work through them. For the week ending Oct. 6, packers for the first time produced more than 1 billion pounds of red meat in a single week. For the week ending Oct. 13, the total was 975.5 million pounds, of which 503.5 million pounds was beef, well above the same period a year earlier when 486.8 million pounds were produced. Adding to the supply was a robust increase in pork production which, at 468.7 million pounds, was more than 36 million pounds more than a year earlier. The record pork production is driving prices lower, making “the other white meat” an attractive option when compared to beef at the retail level. However, despite lower prices, University of Missouri agricultural economists Ron Plain and Glenn Grimes noted last week that retail demand actually increased during the first three quarters of 2007, although beef showed the smallest gains of all proteins. “Demand for all meats at the consumer level for January-August was up but broilers. Beef demand was up 0.8 percent, pork up 1.9 percent, turkey up 3.2 percent but broilers were down 1.9 percent,” Plain and Grimes said. “The demand for both live fed cattle and live hogs showed strong growth for the first eight months of 2007. Live fed cattle demand was up 3.8 percent and live hog demand was up 3.3 percent.” They attributed the increased demand for fed cattle to growth in both domestic and export markets. However, it’s likely that competing meats will continue to drag on beef sales, making it difficult to maintain cash fed cattle prices in the mid $90 range. Without significant winter weather, hitting the $1 market, which seemed likely during late summer as a result of tight supply, may prove to be difficult. Packers, however, seemed little concerned about losses averaging $30 per head last week. Beef cutouts last Thursday were slightly higher on the Choice, moving up 37 cents to $145.64 and slightly lower on the Select, which was down 47 cents to $133.24. Slaughter volume remained strong for the week through last Thursday, totaling 516,000 head, 14,000 more than the previous week and 17,000 more than a year earlier. Live weights for the week ending Oct. 13 were five pounds heavier than a year earlier, averaging 1,295 lbs., four more than the prior year’s record. The increase in red meat production and the stagnant domestic consumption serves to illustrate the importance of improving export demand and market access for all U.S. meats, but beef in particular. Feeder cattle In auction markets around the country last week, the cash trade for feeder cattle picked up slightly in some places and was able to stop its downward slide to remain steady in others. A burgeoning corn harvest estimate was not enough to depress corn futures, although the bulk of the rise in corn markets last week was due to export speculation after China announced that it will not export any more corn this year. While the corn market, though higher, still had a positive effect on stopping the downward-spiraling prices on feeder cattle, the biggest price boost to the feeder cattle trade remains in the short supply. Demand both for fed cattle and cattle to place on feed is far outstripping the supply of cattle available, especially now as the largest runs of yearlings through sale barns have dwindled and buyers have mostly a few remaining new crop calves to wait for. “The feeder cattle trade and prices have certainly stabilized, but I don’t want to get too brave and say it’s going to go a lot higher,” says Troy Vetterkind of Ehedger.com. “There’s a lot of optimism among some buyers regarding what they are able to do with a few of these calves if they have forage, which is helping to keep things from sliding too far down. But right now, I think we’ve shown that the market has essentially broken and corrected itself just a bit,” Vetterkind explains. Vetterkind said that feeder cattle are more closely tied to fed cattle price swings than anything else. “When the fed cattle stopped going down, so did the feeders, so I think what the market is trying to tell us is that no matter what corn seems to do, the feeder cattle prices are affected more by the short supply than feed issues,” Vetterkind said. “After the cattle at auction markets have been picked through, we’re seeing more demand for specific types and kinds of cattle which can go straight to feed, because yards need to fill their pens right now.” In Oklahoma City last week at the Oklahoma National Stockyards, a large run of feeder cattle produced one of the few local auctions where any class of steers and heifers were lower, though not sharply. Of the 8,627 head run, the steer and heifer calves were $2-3 lower, where demand was moderate for calves but good for larger feeders. A group of 631 lb. steers brought $116.10 at this sale, with heifers of similar weight and condition bringing $10 less. Buyers were very selective for flesh and weighing conditions with the best action being on long-weaned calves and yearlings in thin flesh. The bulk of the supply has turned to calves with the majority going to feed yards. A line of rain storms went through the state late Sunday leaving most areas with beneficial rain, the exception being the far northwest part of Oklahoma. Compared to the previous sale, last week’s sale in Joplin, MO, at the Joplin Regional Stockyards saw prices steady except on 450-550 weight steers which were $3-6 higher. Demand was moderate to good on the moderate supply of 4,000 head. A group of 629 lb. steers sold for an average of $115.22 at this sale, and heifers of 620 lbs. sold for $106.66. The Bassett Livestock Auction in Bassett, NE, was one of the few places in the country last week which had a large run of yearlings. The 2,600 head that showed up at the sale consisted entirely of average to good quality yearlings, for which there was moderate to good demand. It was clear that buyers in attendance at this sale were ready for high quality, ready-for-feed cattle, as a six weight steer would have brought an average of $118.42, and a large number of steers weighing an average of 868 lbs. sold for $115.20. Heifers followed suit with strong prices as well, bringing a $113.26 average on 655 weight cattle, and $109.38 for heifers weighing 872 lbs. Steer and heifer calves under 500 lbs. were $2-5 higher at the Torrington Livestock Commission in Torrington, WY, last week, with 500-700 lb. feeders steady to $1 higher on good demand. An average of $114 was paid for 824 lb., ready-for-feed steers, while $116.02 was paid for small, weaned 568 lb. steers. A limited run of larger heifers was seen, but prices on 871 lb. cattle averaged $106.49. Last week in Davenport, WA, at the Stockland Livestock Auction, nearly 2,040 head sold in uneven fashion, with weights under 500 lbs. bringing $2-6 higher compared to the previous sale, while weights over 500 lbs. were $2-6 lower. Trade was active with moderate to good demand, with a limited test of heavy feeders ready for the bunk. An average of $97.09 was paid for unweaned calves weighing 638 lbs., and heifers of a similar condition weighing 622 lbs. brought $92.82. — WLJ  

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