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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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Monday, December 3,2007

Decision on endangered species listings revised

by WLJ
—California red legged frog, Arroyo toad among animals to be reviewed.   U.S. Fish and Wildlife Service (FWS) officials announced late last month that it would reverse course on seven of eight recent endangered species decisions which were impacted by former Deputy Assistant Interior Secretary Julie MacDonald who resigned in May. The decision could have significant impacts on ranchers whose land is inhabited by the animals. The news means that earlier victories on the part of ranchers could be overturned as part of the review. According to a letter which was sent to House of Representatives Natural Resources Committee Chair Nick Rahall, D-WV, FWS officials said they will reverse the original rulings after finding that they had been “inappropriately influenced” and that “revising the seven identified decisions is supported by scientific evidence and the proper legal standards.” Acting Fish and Wildlife Director Kenneth Stansell wrote the letter to Rahall, saying that the cases were reviewed “after questions were raised about the integrity of scientific information used and whether the decisions were made consistent with the appropriate legal standards.” The decisions included a decision to prevent Endangered Species Act (ESA) protection for the white-tailed prairie dog. However during the FWS review of species rulings during MacDonald’s tenure, the agency determined that it “believes this decision should be reconsidered.” The white-tail prairie dog is now subject to a 12-month review on the status of the population which will be responsible for determining whether the animal warrants protection. FWS also revised the ruling on the Preble’s meadow jumping mouse in Colorado and Wyoming, as well as a separate ruling on the mouse’s habitat in the two states. The mouse will lose protection in Wyoming, while remaining a protected species in Colorado where FWS officials found development threatens its habitat. Four other cases which will receive reconsideration involve critical habitat declarations for the Canada lynx, 12 species of the Hawaiian picture-wing fly, the Arroyo toad and the California red-legged frog. The single case which will remain intact after FWS review is the southwestern willow flycatcher. The agency found after its review that the decision to prevent a critical habitat declaration was “scientifically supportable.” In a statement on the issue, Rahall criticized MacDonald, saying she “should never have been allowed near the endangered species program.” Referring to Stansell’s letter, Rahall also took a shot at the Bush administration, saying that FWS’s “announcement is the latest illustration of the depth of incompetence at the highest levels of management within the Interior Department and breadth of this administration’s penchant for torpedoing science.” Environmental activists at the Center for Biological Diversity took their criticism of the agency and MacDonald’s impact even farther, filing suit in federal court last month seeking the protection of an additional 55 species, many in California, Arizona and New Mexico. “To quell the scandal, the Department of the Interior and the U.S. Fish and Wildlife Service pledged to review eight decisions illegally reversed by MacDonald. This cynical effort at damage control flamed the controversy, however, because MacDonald is implicated in more than 100 cases of overruling science,” the group said in announcing their lawsuit. “In response to a congressional request, the Government Accountability Office is currently investigating additional instances of science manipulation by MacDonald.” The lawsuits challenge the FWS’s refusal to list the Montana fluvial arctic grayling in Montana and Mexican garter snake in Arizona and New Mexico as endangered species, along with the elimination of 109,382 acres of protected critical habitat from the Santa Ana sucker in California, loach minnow in Arizona and New Mexico, and the spikedace, also found in Arizona and New Mexico, and its refusal to provide any critical habitat at all for the Mississippi gopher frog in Alabama, Louisiana and Mississippi. “These are some of the most endangered species in the United States,” said Michael Senatore, senior counsel for the Center for Biological Diversity. “It’s outrageous that federal scientists were blocked from protecting them by political appointees in Washington, D.C. The depth of corruption within the Department of the Interior goes way beyond Julie MacDonald and eight decisions. It impacts hundreds of endangered species and millions of acres of wetlands and wildlife habitat.” However, the impact of additional lawsuits, combined with the effects of the additional reviews announced two weeks ago, will only add to the over-worked status of FWS officials who are already struggling to deal with the requirements of the ESA. Speaking about the additional reviews now required in California, FWS spokeswoman Valerie Fellows said, “These are a top priority, but we are already working with a limited staff and limited resources, and facing a number of court-ordered deadlines.” — John Robinson, WLJ Editor  

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Monday, November 26,2007

Southern placements show strength

by WLJ
—Nov. 1 on feed numbers down 1.7 percent from 2006. —Fed cattle marketings rise.   There was little in the Nov. 1 cattle on feed report to cause shockwaves in the market last week as numbers were in line with pre-report expectations. On Nov. 16, USDA reported that in feedlots with more than 1,000 head capacity, there were 11.76 million head of cattle on feed. The number was down 1.7 percent from 2006, but it remained 4 percent ahead of the five-year average. The number of cattle on feed remains supportive of the market through the end of the year and into the first quarter of 2007 as tight supplies are expected to continue to boost fed cattle sale prices. “Predictions about the latest U.S. cattle inventory and October marketing numbers were generally right on the money. While there are no big surprises in USDA’s report, it’s reasonable to conclude that supplies of fed cattle will be tight at least through the first quarter of 2008, especially when you look at current activity in the futures markets,” said Jim Sartwelle, American Farm Bureau Federation livestock economist. “We’re tacking back toward the placement patterns that existed before the ethanol boom. Cattle feeders this October returned to the longer-term trend of Octobers past.” According to the National Agricultural Statistics Service report, net placements last month totaled 2.669 million head. That figure is 13.6 percent above last year and more than 2 percent higher than market analysts expected. A sizeable increase in heavyweight placements illustrated the preference by feedlots to hold cattle on feed a shorter number of days in an effort to minimize cost of gain due to expensive grain and hay. Placements of feeder cattle weighing more than 800 pounds were up 23.1 percent from last year. The number of cattle in the 600-800 pound range was also up from last year, rising 15 percent. Lightweight placement numbers increased just 1.8 percent from year ago figures. Sartwelle said the increase in October corn prices led to the preference for heavier placements as feedlots, nervous about the rise, showed a preference for the heavier cattle. However, he said he didn’t expect to see that trend continue as feedlot managers adjust to the more expensive feeding costs. “More and more, we’re hopeful the industry is adjusting to higher feed costs and that the fall of 2006 was an anomaly in cattle feeding,” he said. “I expected to see signs of lighter-weight feeder cattle heading to feed yards due to short supplies of wheat pasture available for grazing this winter. We haven’t seen that flow of light-weight feeder cattle to the yards yet.” Sartwelle said that is a shift away from October 2006, when more than one-third of newly placed feeders weighed less than 600 pounds. He said the issue going forward will be a very limited availability for heavier feeder cattle, which have mostly been accounted for. “Supplies of heavier-weight feeder steers and heifers are still pretty tight, as evidenced by nearly 60 percent of all placements weighing in at less than 700 pounds despite the crystal-clear preference by the market for heavier calves,” he said. Placements it Texas, Oklahoma, and Colorado, partially due to the lack of available wheat pasture this winter, were steady to slightly above last year. Feedlot placements in Iowa, Nebraska and South Dakota showed 11 percent more cattle in feed yards compared to last year’s numbers. The battle between packers to gain market share by purchasing fed cattle, despite expected losses in that sector over the past several months, led to a sharp rise in fed cattle marketings last month. For October, total marketings reached 1.876 million head, 6.3 percent higher than 2006. However, there was one less marketing day in October 2006, so the actual increase was just 1.7 percent from last year. According to University of Nebraska agricultural economist Darrell Mark, marketings as a percentage of the on feed inventory jumped to 17.1 percent, compared to 15.5 percent last year. Those figures show feedlot marketings over the course of the month enabled feeders to maintain their current state, tightening the supply of market-ready cattle even farther. “This suggests that the on feed inventory became more current this past month, which is supported by the spike in cattle slaughter and dressed weights in October,” Mark said. “As slaughter numbers and weights have begun to decline in the past couple of weeks, the front-end supply of cattle in feed yards has decreased. The number of cattle on feed for more than 120 days was 7.2 percent lower on Nov. 1, 2007, compared to last year.” — John Robinson, WLJ Editor  

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Monday, November 26,2007

Border now open to older Canadian cattle

by WLJ
—Shipments began to trickle south on Nov. 19.   USDA moved forward with its planned opening of the border to Canadian imports of live cattle born after March 1, 1999, and beef from cattle of any age last week. However, despite attempts to fight the proposal, analysts said there would likely be little market impact. The number of cattle expected to flow south will be limited by a lack of proper documentation, excess slaughter capacity in Canada, the cost of shipping cattle south, and a surge in the value of the Canadian dollar. Those factors combine to create a financial barrier which will be difficult for cattle owners to hurdle while remaining profitable. Despite attempts by R-CALF United Stockgrowers of America to prevent the border from opening, which included filing for an emergency restraining order on Nov. 16, the courts failed to step into the fray in time to prevent the opening. As of Nov. 19, no action had been recorded on either the emergency restraining order or the group’s lawsuit aimed at preventing over-thirty- month (OTM) cattle and beef shipments. Despite the open border, very few shipments actually occurred, according to USDA’s Animal and Plant Health Inspection Service (APHIS) which is responsible for examining cattle shipments from Canada. APHIS spokesman Ed Curlett said the agency had recorded very few cattle crossing into the U.S. from Canada on the day the border opened last week. Curlett said Monday’s tally of cattle entering the U.S. as a result of the new regulation was 514 head, through seven ports of entry. Curlett said Monday’s reported totals included 35 head at Dunseith, ND; 174 head through the port of entry at Niagra Falls, NY; 37 head at Pembina, ND; 33 head at Port Huron, MI; 77 head at Sumas, WA; 85 head at Raymond, MT; and 78 head at Highgate, VT. However, concern remains among U.S. cattle producers who fear that the Canadian ruminant-to-ruminant feed ban has not been in place long enough, or been enforced stringently enough, to prevent future cases of the disease from being imported. In addition, U.S. Cattlemen’s Association (USCA) officials said last week that the potential losses from lost export markets were an additional consideration. “U.S. Cattlemen’s Association has consistently contended that USDA’s priority should be regaining lost U.S. export markets,” stated Chuck Kiker, USDA director and Animal Health Committee chairman from Beaumont, TX. “It is perplexing that USDA fails to recognize this discrepancy in the Final Rule. This issue continues to serve as a roadblock for regaining lost export markets, a situation exacerbated by quality control issues that have occurred in recent months when export markets received shipments of beef containing banned materials. It’s time for USDA to explain to producers how the decision was made to set an effective feed ban date for Canada well before the feed ban was effectively implemented.” “The March 1, 1999, feed ban implementation date effectively compromises two of these fire walls,” noted Kiker. “Unfortunately, USDA’s decision appears to be politically driven rather than based on the best available science and data.” One possible political motivation often cited by USDA is their ongoing effort to improve international markets for U.S. beef. Those efforts have been frustratingly slow and the move to allow older Canadian imports into the U.S. is considered a key to improving trade. For example, by paving the way for expanded trade, there may be reciprocal benefits in the future for U.S. beef producers, including more relaxed restrictions for breeding stock headed for Mexico. For more than a year, U.S. states bordering Mexico have been pushing the Mexican government to allow shipments of U.S. cattle south. Mexican bull buyers have long been an important source of customers for U.S. cattlemen in Texas, New Mexico, Arizona and California. However, Mexican officials have reportedly tied expanded trade to restoring trade between the U.S. and Canada. But USCA said last week those concerns aren’t enough to override the concerns that beef producers and consumers have on the subject of allowing OTM cattle in from Canada. “Consumer confidence, both domestically and internationally, is something U.S. cattle producers take very seriously,” noted Danni Beer, USCA Region X director from South Dakota. “The U.S. produces the safest beef in the world. Mitigation measures have been implemented and extensive testing has been conducted to ensure the U.S. feed ban has been effective. In the wake of numerous food recalls as well, as consumers’ growing concern about the safety of foreign produced food and goods, this is no time for the U.S. to lower its import standards and risk a negative outcome.” Although there will continue to be concerned cattle producers here in the U.S. as long as the border remains open, producers and government officials from north of the border say they are relived to get the issue put behind them. “This government and our industry partners have worked closely with the American industry and with the USDA to achieve this goal,” said Canadian Agriculture Minister Gerry Ritz. “It’s great to see our work pay off with the USDA Final Rule normalizing trade for all cattle born after March 1, 1999.” — John Robinson, WLJ Editor  

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Monday, November 26,2007

BEEF talk

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

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Monday, November 19,2007

Regulatory bottleneck limits ethanol

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

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Monday, November 19,2007

Livestock groups eye Senate farm bill

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

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Monday, November 19,2007

Fed cattle prices begin long awaited rally

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

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Monday, November 12,2007

Panorama Beef receives wetlands award

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

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