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Monday, September 11,2006

Markets remain strong

by WLJ
A shortened kill week, along with packers threatening to reduce harvest rates, drove beef cutout values higher last week. The higher boxed beef prices were encouraging news for feedlots who, as of last Thursday, were still holding out for steady to higher money despite packer margins still estimated to be slightly negative. The sharply higher pre-holiday weekend trade was difficult to explain and it had analysts scratching their heads last week. The result, though, was an expectation that when trade occurred, it would be at prices in the range of $92 live basis and $145 dressed in the north. There was some light volume at mid week at $141 dressed basis in Nebraska according to HedgersEdge.com, but not enough to call a trend. The last confirmed trade was two weeks ago at $90-92.75 and dressed sales, which traded at $140-145, going into the Labor Day weekend. Last week, the gambit of packers to push cutout prices higher finally worked. On Wednesday last week, Choice cutout values rose $1.05 and Thursday, Choice boxed beef gained an additional 22 cents to trade at $148.28, up more than $7 from the prior week. Select values were also higher, adding more than $3 from the previous week, trading at $138.59 last Thursday. Analysts last week warned it would take substantial cuts in harvest level if those prices were to be maintained. For the week though, it appeared packers had no intention of cutting back. As of Thursday last week, packers had harvested an estimated 388,000 in just three days, 7,000 head more than a year ago, but substantially lower than the prior full week of slaughter when 512,000 head were killed. According to Glenn Grimes and Ron Plain at University of Missouri, demand for beef at the consumer level for January-July based on preliminary data was down 4.6 percent from a year earlier. Demand for pork at the consumer level was down 5.4 percent for these 7 months compared to the same in 2005. Demand for broilers was down also for January-July of 2006, showing a 7.1 percent loss from a year earlier. There is some good news, according to Grimes and Plain, who said fed live cattle demand was up 3.5 percent for January-July compared to 12 months earlier. Due to large beef exports and smaller beef imports, beef production in the U.S. was up much more than beef consumption domestically. Beef production was up 7 percent for January-July, but beef consumption per person was up only about 1.4 percent compared to the same period in 2005. There has been some concern about rising consumer prices cutting into beef demand, however, so far that hasn’t been the case. Now, with fuel prices beginning to decrease, there is optimism among economists there won’t be a dip in retail level demand. All of that is important because carcass weights continue to rise as feedlots hold cattle back to take advantage of steadily rising prices. Last week, steer weights posted a new all-time high, according to USDA data. The trend looks like it will continue both this year and for the foreseeable future since packers aren’t docking feeders for excess weight. One cattle buyer for a major packer last week said the discounting for heavyweight carcasses wasn’t happening until carcasses breached the 1,050-lb. mark. Since that translates into an approximately 1,650-lb. live animal, there was little reason for feedlots to push cattle to the packer before they received their asking prices. All of the uncertainty and unusual trading behavior had live cattle futures trading unevenly last week with most market players waiting to see what direction cash cattle took. October live cattle contracts on Thursday last week were 70 points lower, trading at $93.75 at the end of the session. December contracts posted the largest drop, losing 85 points to close at $93 and February lost 42 points, closing at $92.52. April and June issues were both higher, closing at $91.97 and $87.97 respectively. Feeder cattle Feeder cattle prices are on fire, at least that's what industry leaders and anyone watching the steady and increasing prices say. The question as to why is one that is receiving several guesses, but the answer is unknown. Not only on the Chicago Mercantile Exchange (CME) are prices increasing and even reaching contract highs, but in reality, the high earning can be better seen in livestock auction markets across the country. In most markets across the country, prices increased by $1-2 higher for feeder steers and heifers. More specifically, at the Joplin Regional Stockyards in Joplin, MO, compared to a week prior, steers were steady to $2 higher, heifers were $1-3 higher. Market officials described the demand as moderate to good with supplies moderate. Last Tuesday, 6,000 head went through the ring, down 800 from a week earlier. Much needed rain fell across the four-state area over the weekend. But, according to co-owner of the market, Jackie Moore, not enough moisture for producers to wean and hold calves. The bulk of the offering was in medium to fleshy condition, with a few weaned and vaccinated. Moore said the bulk of feeder calves this time of the year are heading to Oklahoma to feed on wheat pastures. He said buyers from Iowa and Nebraska are also shipping cattle north to stock pastures that have received adequate rainfall compared to the souther tier. In regard to the prices, Moore doesn’t have an explanation. “I have my theories like everyone else, but nothing is concrete when it comes to the markets,” said Moore. “The markets have their own personality. Right now, they are having fun laughing at analysts trying to guess their next move. As far as I am concerned, I am enjoying their perplexing direction.” In Oklahoma City, supplies were light with only 920 head, due to the Labor Day holiday. The Market was closed Monday. However, steer and heifer calves were steady to $2 higher. Demand was described as very good for light holiday receipts. The majority were weighing under 600 lbs. In South Dakota, the trend was maintained. Again, prices seen were averaging steady to $2 higher. At the Hub City Livestock Auction, feeder steers and heifers sold $2 higher compared to a week earlier. Offerings including weaned spring calves with both spring and fall shots, made a total 2,864 head making their way through the ring. That number is up from the week earlier's 1,314 head. Demand was said to be good with steers making up the majority of supplies. In Wyoming, prices were seen as high as $6 up from the week before. At the Torrington Livestock Commission Co. last Monday at their Special Labor Day Feeder Cattle Sale, steers and heifers under 600 lbs. sold $3-6 higher, with most advance on weights under 450 lbs. Feeders over 600 lbs. were steady to $3 higher. Demand was called good with large buyer attendance. The majority of supplies were steers. On CME, prices were uneven, but still very strong. According to industry sources, a decrease on the board with prices as high as they have been is insignificant. In addition, the “real world” is showing little sign of any digression at this point. However, September trade was up 25 points, closing at $119.23 and October down 23 points, settling at $118.70. November was down just 5 points to close at $119.05 last Thursday. Despite any negative points on the board, few can or have argued the feeder market’s strength.

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Monday, September 11,2006

Premise identification abandoned in Vermont

by WLJ
— Other states now questioning registration process. Vermont Agriculture Secretary Steve Kerr is putting the mandatory premises registration process on hold, but his office insists it has nothing to do with the strong opposition the agency has faced from producers in the tiny New England state better known for maple syrup than livestock. The decision came after Kerr said USDA could not assure him the information contained in the database housing premise information would be exempt from Freedom of Information Act (FOIA) requests. “USDA had promised us complete confidentiality at every step of this process,” Kerr said. “Now we have reason to believe that may not be the case. Without 100 percent confidentiality, we will not be sending any information on Vermont farms to the USDA database.” The Vermont Agency of Agriculture has been drafting the rules mandating premises registration as a tool to help contain an outbreak of animal disease. The agency simply needs to know where the animals are should a disease like bovine spongiform encephalopathy, avian influenza or other animal disease be detected. The process of drafting the rules will continue once the issue of where to keep the database is settled, according to Kerr. He said the current proposal will remain in place until it expires next spring. In the meantime, his agency has started working on a new system. According to Kerr, the decision to put the process on hold has nothing to do with the level of opposition that has been the tenor of all the hearings. He said those within the agency were expecting such opposition, though some of them were a little surprised by the personal attacks that came at the beginning of the hearings session. Kerr said it is highly unlikely that any premise information would ever be released and even if it did, it isn't much more than what someone could obtain by opening a phone book. “However, the Agency of Agriculture and the farmers were assured that this information would be secure, and we need to know that it is,” he said. The Agency had been hosting hearings and educational sessions on the proposed new premises registration rules over the past several weeks, however, now the focus will shift to emphasizing education about the benefits of premise ID and how it can help producers in the event of an animal disease outbreak. “Educating the public on how to keep their animals and themselves safe is a critical part of these meetings,” Kerr said. “We want these forums to continue so we can share that valuable information and answer any questions the public may have on biosecurity.” Through Vermont's voluntary premises registration program, about 300 local farms have already supplied their names, locations and types of animals housed. In a letter to USDA Secretary Mike Johanns, Kerr asked for absolute assurances that the database is secure. “Failing such a guarantee,” wrote Kerr, “I ask that you provide the Vermont farmers who have registered voluntarily the option to remove their information from the database.” Since Vermont officials made the announcement halting the registration process, other states have expressed similar concerns over confidentiality of the federal database. Wisconsin and Massachusetts officials are also requesting assurance from USDA that provided information would be protected. Wisconsin Agriculture Secretary Rod Nilsestuen, in a letter addressed to USDA Chief Veterinary Officer John Clifford, said he was concerned about the release of information to the public through FOIA requests. Nilsestuen requested USDA remove premise information from the database if the agency could not guarantee it would remain confidential. — John Robinson, WLJ Editor  

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Monday, September 4,2006

BLM seeks bids for new horse facilities

by WLJ
— Two new pastures in the West needed to house unwanted horses. John Hughes from Bartlesville, OK, has been in the cattle business for over 55 years now and is enjoying the run of profitability that he calls the best in history. Along with his stocker operation, which consists of 2,500 to 5,000 head depending on the year, the ranch also dedicates 18,000 acres to housing 2,128 unwanted wild horses and burros contracted through the Bureau of Land Management (BLM). The BLM manages wild horses and burros as part of its overall multiple-use land management mission under the authority of the 1971 Wild Free-Roaming Horses and Burros Act. In the fall of 1989, the ranch saw its first wild horses and burros. Hughes has been taking care of them ever since. “It really works out well for us,” said Hughes, who started the second operation in the country to facilitate unwanted horses, the first being in South Dakota. Today, there are eight such facilities, five in Oklahoma and three in Kansas. “For 10 years, we were the only running horse sanctuary, as people like to call them.” The largest “sanctuary” is located in Pawhuska, OK. With 31,000 head of horses currently running wild in the U.S. and long-term facilities such as the Hughes operation close to capacity, BLM is needing more space, according to spokesman Tom Gorey. Gorey said the most recent count of 31,000 exceeds by around 3,000 the number determined by BLM to be the appropriate management level. Gorey said the herd size typically doubles every four years, despite birth control efforts. There are currently 18,947 head in long-term facilities with the current maximum capacity being 19,700, making the need for more facilities critical. Of the wild horses and burros in the U.S., Gorey estimates 50 percent are in Nevada, making pastures west of the Mississippi River a prime location for two additional long-term facilities able to maintain 1,500 head annually starting Nov. 1, 2006, with an option for an additional four one-year extensions. “We wanted to reach further that just those two states (Kansas and Oklahoma),” said Gorey. Producers opting to submit a bid to BLM will be required to house the horses with adequate fencing, quality hay, sufficient forage and reliable water sources, according to Gorey. Producers bid on the needed price per head per day. Generally, producers receive between $1.22-1.30 per animal per day, or around $465 a year per horse, according to Gorey. BLM representatives will also monitor the operation to ensure the animals are being cared for and to observe forage and water conditions. Depending on the decision in Washington D.C. regarding a permanent ban on horse slaughtering, additional pressure may be placed on these facilities, as well as the wild horse and burro population. “It is possible that a ban on horse slaughtering could impact our situation. In the past, people have brought horses to our facilities and have turned them lose and with a ban, that could happen more frequently,” said Gorey, adding that BLM has taken no position on House Bill 503, the bill to ban slaughter. Since 1973, BLM has placed more than 213,000 horses and burros into good private homes through adoption. Under a December 2004 amendment to the 1971 wild horse law, animals over 10 years old, as well as those passed over for adoption at least three times, are eligible for sale. Since that amendment took effect, BLM has sold more than 1,900 horses and burros, according to Gorey. Hughes warns producers considering making a bid to BLM to conduct plenty of research before making the leap. “Prospective bidders need to have their ducks in a row,” said Hughes. “I recommend they have a range management specialist come out and conduct a full-fledged, bonafide study and sure enough come up with some figures. They (BLM) want to be confident you have the right resources to support that many horses and burros. You have to have the fencing and management ability. You have to have the background, education and experience because they (BLM) don’t want to get embarrassed.” Hughes said he allocates eight to 10 acres per horse on “good quality” bluestem grass and feeds hay for 160 days, but said every operation is different. He said when a horse reaches the point where its quality of life is nonexistent and suffering he has permission to ethically euthanize the animal. “If we didn’t have permission to put suffering horses down, I would not agree to take care of them,” said Hughes. “I can’t stand to see suffering animals. Humane animal rights groups want us to wait until they are to the point they can no longer stand up. That’s ridiculous. We want the animals to have a good life while they are here. This is their last home; they are not going anywhere else.” For more information regarding BLM’s wild horse and burro adoption program, see www.wildhorseandburro.blm.gov; for information about the agency’s sale of older wild horses and burros, see www.blm.gov/nhp/spotlight/whb_authority Producers interested in facilitating wild horses and burros should contact their respected state BLM representative. — Mike Deering, WLJ Editor  

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Monday, September 4,2006

Canada finds fault lies with feed

by WLJ
—Contaminated feed most likely source of BSE infection in 50-month cow. The 50-month-old Alberta, Canada, dairy cow diagnosed with bovine spongiform encephalopathy (BSE) last month probably contracted the disease from contaminated feed, the Canadian Food Inspection Agency (CFIA) said last week. The finding by CFIA came after an enforcement investigation was launched because the animal, born on a dairy farm near Edmonton, Alberta, contracted the disease well after the 1997 Canadian ruminant animal feed ban was put in place. “A particular incident was documented in one commercial feed facility that may have permitted the contamination of a single batch of cattle feed with prohibited material,” CFIA said in a release Aug. 24. CFIA officials did not disclose the name of the plant which had manufactured the feed. “The entire batch of feed was shipped to the BSE-positive animal’s farm. This particular batch of feed is the most probable source of infection,” CFIA’s report found. The announcement came a day after Canada confirmed its eighth case of mad cow disease, two weeks ago. The most recent case was found in an Alberta beef cow believed to be between 8 and 10 years old. Brad Wildeman, executive vice president of Canadian Cattlemen’s Association, said the announcement of BSE being found in a 50-month-old animal caught the organization and much of the industry off guard. He attributed the case to the possibility that some of the feed mills or delivery trucks may not have been flushed properly early on during the first days of the feed ban. “Some of the employees at these plants aren’t Harvard graduates, but if you look at CFIA’s assessment that compliance is in the range of 95 percent, it’s certainly possible that some trucker or plant didn’t flush their equipment properly,” Wildeman said. “As with anything government mandated before BSE was discovered in North America attention to the regulations probably wasn’t as good as it could have been. Now I’d say that people are far more observant of the regulations.” He said there is significant concern among producers north of the border regarding the effect further cases of BSE would have on the plans to open the U.S. border to cattle over 30 months (OTM) of age. “This has cost the industry a substantial amount and is still costing Canadian producers $1.2 million in lost value per day.” He said the inability of producers to ship cattle, such as seedstock and particularly dairy seedstock, has been devastating to the Canadian industry. USDA, which has been working with CFIA on the investigation, said it had received a copy of the report and would factor it into the risk assessment and the pending regulation on Canadian import of animals OTM of age. USDA withdrew the OTM regulations from the rule-making shortly after CFIA announced the finding of BSE in the 50-month-old cow. “We are now reviewing the report to determine whether it impacts the Department’s proposed minimal risk rule. The proposed rule would allow imports of animals over 30 months from countries that pose minimal risk. Data provided in today’s report will be factored into the current risk assessment,” USDA said after CFIA released its report. The infected dairy cow died of complications arising from mastitis, not BSE. The CFIA report said it would likely have been several more months, at the earliest, before the animal exhibited any clinical signs of BSE infection. CFIA officials attributed the fact that the case was found prior to the onset of symptoms to the “robust” nature of the Canadian BSE surveillance system. “This animal was detected and diagnosed with BSE during a pre-clinical phase of the disease. The normal disease course to expression of clinical signs in this animal would be expected to have included an additional three to six months of incubation followed by an additional one to two months of clinical expression prior to being recognized as symptomatic of BSE and targeted for testing. Had an unrelated disease not hastened her entry into the surveillance stream, this animal would most likely have demonstrated clinical signs sometime between 54 and 56 months, not significantly different from the age range of previous cases,” CFIA said. Bill Bullard, CEO of R-CALF United Stockgrowers of America, said the findings are troubling and underline the issues being addressed by R-CALF. Bullard said the report brings to light new information which has not yet been taken into consideration. Specifically, he called attention to findings that showed the animal could have gone several more months before it developed clinical signs of the disease. “If you look at the dates of birth and compare it to when the ban on animals under 30 months of age was lifted by USDA, it is clear this animal would have been eligible for importation to the U.S. and that we are still at risk of importing animals which have potentially been infected with BSE,” Bullard said. He said this latest report shows the failure to implement the stringent feed ban guidelines recommended by an international team of scientists has left open significant pathways of BSE infection on both sides of the border. USDA officials said they would also continue to monitor the investigation of Canada's eighth case of BSE found in a much older cow two weeks ago. Those findings will also be considered in the new minimal risk rule when it is reintroduced in the future. In the investigation of the previous case, confirmed in July, two feed manufacturing facilities received prohibited materials from the same rendering plant implicated in previous BSE investigations, the CFIA report said. CFIA tracked roughly 170 cows that originated at the same farm as the infected dairy cow. An expanded investigation located 38 live animals on the farm and in other herds to which they had been sold. Most of those animals have been destroyed and their carcasses burned. Four animals have been retained under quarantine to allow for calving or collection of valuable genetic material, CFIA said. They will also be destroyed. Of the remaining animals, 113 have died or been slaughtered. Eight animals were determined to be untraceable. — John Robinson, WLJ Editor  

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Monday, September 4,2006

Cull feeding scenario changed

by WLJ
— Higher costs may have reduced value of feeding cull cattle. Producers have a variety of differing philosophies when it comes to handling cull cows. Numerous studies have shown that selling unproductive cows contributes a substantial amount of money to an operation’s bottom line. According to the 1999 National Beef Quality Audit, cull cow marketing creates an average of 16 percent of ranch income. In some cases, it could be much more. Feeding culls is normally a proposition which is both risky and potentially rewarding, however, with this year's drought and high fuel costs translating into increased feeding costs, the picture may have changed somewhat. Jim Robb, director of the Livestock Marketing Information Center, said right now, the market indicators show that producers ought to sell their culls as soon as possible to avoid the price decline in the fall. However, he does expect some seasonal price rally through next year up to April 2007. According to USDA data, cow slaughter has been running 15 percent above the prior year for the first six months. R. Curt Lacy, extension economist for University of Georgia, said cow numbers are essentially the same this year as in 2001 and compared to the last severe drought year in 1993, there are one million fewer cows in the U.S. herd. Lacy said he expects this will contribute to a slight price decline in the next several weeks and months of approximately $7-10 per cwt. However, he said depending on drought conditions and available feed resources, it is likely more profitable to sell cattle now rather than further depleting feed resources. “The bottom line is, in all likelihood it is more profitable to market a cull cow in better condition and save the feed than to deplete feed resources and sell a thin cow for less money,” Lacy said. He said the consequences of marketing during the fall run of cull cattle would be less of a factor this year as a result of the early shipment of cows. “Cattlemen should not let concerns about the large numbers of cows being marketed keep them from making the correct culling decision,” he said. Of course, the major question any operation will need to consider is can feeding be done efficiently and at a profit. This year, that particular question is a more important consideration as a result of feed costs and lack of available grass.   Darrell Busby, livestock field specialist for Iowa Beef Center (IBC), has been involved in feeding cull cows for the premium white fat market for several years and said IBC intends to feed another group of cull cows from November to February again this year. He said although he hadn't yet completed projections, it has been profitable in most of the previous trials. However, finding a buyer could be the biggest challenge for anyone considering feeding cull cattle. In the areas with good quality winter forage or inexpensive feed, the practice of feeding culls may represent a feasible opportunity. Although purchasing culls for the purpose of feeding is a risky proposition at best, it can benefit a ranch that feeds out their own cows. In order to take advantage of high cow beef values, it is important to carefully select the animals placed on feed, specifically avoiding over-conditioned cows which gain poorly, and unsound or sick cattle, which can result in higher loss rates as well as a discounting of the carcasses that end up in the processing chain. At current market levels, a “high dressing utility” cow can bring in excess of $45 per cwt. while a lower yielding cutter in poorer body condition may bring $40 per cwt. or less. That analysis shows even at a high rate of gain, feed cost this year could make feeding cull cows more risky. The expiration of Mandatory Price Reporting has eliminated the price discovery and with the amount of consolidation among cow processors, it is important to evaluate the buyer market before undertaking the venture.   Market conditions Prior to the occurrence of bovine spongiform encephalopathy in North America, cow plants slaughtered an average of 7.2 million head of cows each year. Now, annual cow slaughter could drop to 4.8 million head this year. That's a number some believe is barely keeping up with current demand for cow beef cuts, a market which, by most accounts, is expanding and increasing in value. Although the cow beef market is expanding, fewer cattle in the processing chain is leading to rapid consolidation among cow processors. This consolidation is decreasing the number of plants and buyers, driving the price down in communities which don't have a nearby packer. In addition, it means that cattle that do find a buyer—although recent auction barn prices have still been above the five-year average—are having to be shipped farther for processing, increasing costs and adding uncertainty to the practice of feeding culls. — John Robinson, WLJ Editor  

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Monday, September 4,2006

What would an outbreak of FMD do to the U.S.?

by WLJ
In 2001 an outbreak of foot-and-mouth disease (FMD) in the United Kingdom (UK) resulted in catastrophic economic losses exceeding $15 billion. The cost to livestock producers was estimated to be nearly $1 billion and at least 6 million animals were slaughtered. Any outbreak of FMD in the US today, where the density of livestock animals is high, would likely be as devastating as the one that hit the UK in 2001.   With no recent FMD outbreak to use as an example, it is hard to predict how an outbreak might spread in today’s US. Current information on precise animal locations, movement and husbandry practices is not up to date, and this lack of information hampers the implementation of an effective response strategy. As a result, the US is left vulnerable to an FMD epidemic. Supported by the Office of Homeland Security and the USDA, researchers at the Center for Animal Disease Modeling and Surveillance (CADMS) in the School of Veterinary Medicine at UC Davis, are developing a simulation model, designed to characterize the size and duration of an FMD epidemic anywhere in the U.S. The model will also be used to identify the best strategies, to contain an outbreak and minimize the impact to the livestock industry. According to Dr. Carpenter, co-director of CADMS, “the exercise made it very clear that knowing the precise locations of livestock and the movements of animals, vehicles and people on and off the farm are critical in order to be able to predict where the disease will spread, as well as the magnitude of the outbreak.” CADMS has already gathered data from livestock producers in the state of California and now the model is being expanded to encompass the entire nation. In order to obtain the necessary information for the model, an online survey will be available to livestock producers in the western states starting this October. Clair Thunes, CADMS Project Manager, believes that all livestock producers will find the survey simple, educational and short to complete. “The response from the livestock industry in California has been outstanding and we are hoping to get the same response from the rest of the country.” CADMS guarantees that all the information will be kept confidential and will only be used for modeling purposes. For more information, please contact Pelayo Alverez by phone at 530/554-2988.

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Monday, August 28,2006

Cattle on feed 7 percent higher

by WLJ
— Placements 17 percent above last year. — Marketings slightly higher than 2005.   The USDA National Agricultural Statistics Service (NASS) cattle on feed report released Aug. 18 was mostly in line with analysts’ pre-report expectations. The total number of cattle on feed as of Aug. 1 was up 7 percent over 2005, at 10.82 million, the second highest on record behind 2001 when NASS reported 10.89 million head on feed. The Aug. 1 number is down only 50,000 head from the July 1 number. NASS statistics show the normal decline is closer to 300,000 head between July and August. Erica Rosa, agricultural economist with the Livestock Marketing Information Center (LMIC), said the numbers were pretty much as she expected, with nothing too surprising showing up in the report.   “Even though placements were up, it was mostly lighter weight calves which were placed earlier as a result of drought conditions and a lack of available forage,” Rosa said. “We don’t expect those placements to create a problem later this year. In fact, we expect beef production will actually be down in the second half of the year.” According to several analysts, the report was expected to have little impact on the direction of trade, despite its slightly bearish nature. For almost two weeks prior to the report’s release, market economists were warning the industry to expect a jump in the number of cattle on feed and July placements as a result of the summer’s ongoing drought.   During the month of July, feedlot placements numbered 1.96 million head, 17 percent higher than last year and 14 percent above 2004. This year’s placement number, while high, was expected as more calves have been weaned early and shipped to feedlots to reduce pressure on pastures and cow herds.   Placements in South Dakota, which is suffering through severe drought, showed the greatest increase, rising 60 percent above last year. California however, reported placements dropped 24 percent from 2005 and Oklahoma, where many cattle moved to feedlots early, was down 6 percent.   Placements of lightweight cattle less than 600 pounds were 570,000 head in July. Placements of cattle in the 600- to 699-pound class were 403,000 head and 700- to 799-pound placements totaled 490,000 head. Perhaps the only surprise for analysts in this report was the continued strong number of heavyweight cattle 800 pounds and over last month, with 500,000 head being placed on feed in July.   Rosa said most of those heavy placements were yearlings from the northern tier which had been held over by producers for placement on feed this year. She said the continued dry conditions in the north had finally pushed those heavier cattle into feedlots. Marketings of fed cattle during July reached 1.96 million head, 2 percent above the same month during both the past two years. Rosa said the marketing rate was in line with LMIC’s pre-report expectations.   Feedlots in South Dakota sold 27 percent more cattle last month than the prior year. Iowa feeders also were well above normal, marketing 16 percent more cattle this July than in 2005. California was also well above the prior year, marketing 14 percent more fed cattle. Bob Price at North American Risk Management Services, Inc. cautioned cattle feeders about the current rate of marketings and front end ready supply. Feedlot operators have heard the advice frequently over the past several months.   “Marketings projected from weight breakdowns of placements show a decline in numbers in the September and October before jumping sharply higher in November to February time frame. However, the front end numbers and the computed carryover remain record-high. This should mitigate to some degree the drop off in cattle placed against September and October as more front end cattle are carried into that time frame.”   Price said there was some good news ahead for cattle feeders who have done a good job so far in the month of August with liquidating cattle.   “July marketings were reported at 1.955 million head, up slightly from last year's record low number and well below the five-year average. The computed carryover grew by 164,000 head,” Price said. “August sales have been brisk and this should help whittle down the carryover coming out of this month.”   Several states were below last year’s marketings number including Colorado, which was down 10 percent, Idaho, where feedlots sold 11 percent fewer cattle, Washington, with fed cattle marketings down 13 percent and Oklahoma, where feedlot sales declined 15 percent from July 2005.   Price echoed what many analysts said about the report's overall impact on the market. “This report should have much less of a reaction on the futures than the last two reports have had,” Price said. He said he believes the report’s big placement number could keep some pressure on the February live cattle contract though. — John Robinson, WLJ Editor  

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Monday, August 28,2006

Trade expected steady to slightly higher

by WLJ
— On feed report does little to move market despite jump in placements.   Fed cattle trade last week was at a virtual standstill with offers last Thursday at $88 live basis and $139-$141 on dressed cattle. Packers were still about $5 below live and $5-6 on the dressed asking prices at press time last week. Trade was expected to be at least steady to higher when it did finally occur last week.   “Producers have every reason to hold firm given the packers’ record of caving in at the last minute and having the economic incentive to add weight,” said Andy Gottschalk at HedgersEdge.com last week. He estimated that despite a falling cutout value, packers last Thursday were still in positive territory, earning approximately $3.35 per harvested animal, down approximately $23 per head from the prior week.   The cattle on feed report issued by USDA on Aug. 18 was essentially a non-event. It was largely in line with pre-report expectations and did little to provide market direction. Mike Roberts, commodity marketing agent for Virginia Tech, said last week the report “showed no surprises, was basically neutral, and slightly bullish to feeders.” Roberts said he was optimistic about prices over the next 12 months as a result of a potential production void due to good prices and dry weather.   He said some analysts noted that placements in earlier months were heavier and are hitting the market now.   “Cash sellers should sell live cattle at the heaviest possible weights, not hurrying anything out the door. Hedgers should seriously consider protecting December and February marketings,” he said.   Packers, who have largely filled pre-Labor Day demand, are faced with a decline in consumer interest in higher priced beef items. Retailers are largely focused on value and were straying away toward pork and poultry last week as feature items. Beef will certainly factor into holiday grilling plans, but based upon the large demand for grind product, it seems they will choose to serve hamburger rather than steak. Middle meats are still dragging down carcass cutout values with the only strength to be found in the end meats right now.   Last Thursday for instance, the Choice cutout value dropped $1.23 to trade at $146.40. Select cutout values were down 76 cents, to $136.11. The spread, under $11, was expected to continue to narrow until the retail sector was able to stir demand through lower priced features. Despite the softness in cutout values, packers were taking advantage of the positive margins to make hay while the sun shined. Harvest last Thursday was estimated at 128,000 head. That number was up 7,000 head above the prior week and 3,000 above 2005 levels. For the week last week, USDA estimated harvest as of Thursday at 509,000 head, 12,000 above the previous week and 22,000 above the prior year.   On the Chicago Mercantile Exchange (CME) last Thursday, live cattle futures traded modestly higher with the nearby August contract gaining 92 points, closing at $88.12. October contracts gained 87 points to close the day’s trade at $92.32 and December was up 62 points, to $91.42, at the end of Thursday’s session.   Feeder cattle The anticipation of at least steady to possibly higher fed cattle trade last week fueled the demand for feeder and stocker cattle and prices across most of the country, along with contract trade on CME, was mostly higher. There was some weakness in the corn market as a result of improvements in crop condition and better than expected yields being found on crop tours. That weakness added strength to feeder cattle in many areas. Although there are a number of reports of early weaning and continued problems with drought in much of the central U.S., the large runs of fall calves haven’t started trickling into auction markets yet, or in some cases are already past, leaving producers to sell bred cows. Fortunately, despite the awkward trickle of cattle into markets, prices have remained strong for the past several weeks for not only cows, but also feeder cattle. Both Western Video Market and Superior Video Market sales found strong prices for their customers and willing buyers. Western Video Market sold some good lots of cattle in the 510- 565-lb. range for $139-145.50. Another bunch in the 500- 535-lb. class sold in a range of $132.50-137. A lot of 600-lb. feeder steers brought $136 and some steer consignments in the 830- 860-lb. class sold in a range of $107.75-113.75.   On CME last week, prices moved higher in unison with fed cattle contracts and were steady to slightly higher with the prior week. The nearby August contract traded 35 points higher last Thursday to close at $116.25, nearly 75 points above its Thursday close the week prior. September feeder contracts last week were mostly steady to slightly lower than the previous week. In last Thursday’s session, the contract traded 17 points higher to close at $116.27. October and November were also mostly steady with October gaining 25 points to close at $117.17 and November up 30 points to close at the same price in last Thursday's trading session. The feeder cattle cash settled index as of Aug. 22 was up slightly to $116.18.   In auction market trade, in Abilene, TX, last week, feeder steers were steady to $2 higher, yearlings $1-3 higher. Feeder heifers steady, yearlings steady. Slaughter cows and bulls steady. Replacement cows and cow/calf pairs sold for prices steady to firm with the previous sale. Trade was called good and demand active.   At Oklahoma City, OK, the Oklahoma National Stockyards sold cattle higher last week. Feeder steers and heifers were steady to $1 higher. Steer and heifer calves steady to $3 higher. Demand good for all classes. Some rain and cooler temperatures over the last weeks have brought relief to parts of the region but some areas remain very dry. In West Plains, MO, compared to the prior week, light steer calves under 450 lbs. and heifers under 400 lbs. were $2-5 higher, steers over 450 lbs. sold $1-3 higher, with most advance on 500-650 lbs. Heifers over 400 lbs. were steady to $2 higher, although weights over 700 lbs. were not well tested. Supply moderate, both quality and flesh conditions, in most cases, not as attractive as last week. Demand good, continuing best on better quality, uniform lots of weaned calves having received one to two rounds of vaccinations and most all yearling cattle. Cattle feeders and backgrounders, currently in the market, continue showing a bullish side and obviously feel comfortable with the market remaining fairly stout or perhaps just nervously hoping.   In McCook, NE, last week, steers and heifers under 600 lbs. were called steady to $3 lower. According to market reports, there were not enough over 600 lbs. to call a price trend at the sale. I n Hub City, SD, one of the few northern tier markets to have sold a significant number of feeder cattle, steers and heifers sold steady. In Sioux Falls, SD, a light run of feeder cattle sold with higher undertone noted.   On the west coast in Galt, CA, feeder steers and heifers under 600 lbs. sold for prices mostly steady with the prior week. Feeder steers and heifers over 600 lbs. sold for prices mostly $2-3 higher than the week prior. — WLJ  

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Monday, August 14,2006

Fed cattle trade sharply higher

by WLJ
— Fed cattle $5-6 higher live and $6-7 higher dressed. — Feeder cattle follow feds higher. Packers stepped up to the plate early last week and paid sharply higher prices for cattle in both the north and south Plains. Trading occurred late Wednesday afternoon at $86 live basis in the south, $5-6 higher than the previous week. In the northern Plains, packers paid $136 live, $6-7 higher than the prior week. Volume was reportedly good with feedlots in Texas, Kansas and Nebraska each trading approximately 90,000 head, according to USDA figures. Despite the good cleanup of feedlot show lists on Wednesday, there was some additional light trade reported on Thursday morning last week. Analysts said the positive news from Japan, which reported that five tons of beef sold out in a single day, coupled with rising domestic demand in advance of the Labor Day holiday, were the primary factors in the rise in prices paid by packers last week. It also appeared that at least one major packer last week was very short on their supply of fed cattle, which added to the early trade. Packer margins last week were much improved from prior weeks and on Thursday, HedgersEdge.com estimated packers were earning $46 on every head passing through plants. The margins were bolstered by a rising boxed beef cutout value last week. On Thursday, Choice boxed beef cutout values rose another 62 cents in morning trade to $147.59. The day prior prices had added $1.29 to the Choice cutout value. Select boxed beef was also up, adding $1.54 last Wednesday and another $1.09 Thursday to trade at $136.11. Trade was called moderate on light to moderate offerings from packers last week. Packers, in an effort to take advantage of positive margins, ramped up harvest levels last week killing 127,000 head last Thursday for an estimated 502,000 head for the week-to-date total as of Thursday. That number was 64,000 head more than the prior week and 18,000 ahead of last year’s numbers. Retail movement of beef out of packing plants last week was good as buyers began forward contracting to meet holiday demand and cooler weather also led consumers back to beef cuts as grilling weather returned after a hot spell across most of the country which had decreased demand temporarily. All of the positive news coming from the cash fed cattle trade, coupled with the improvement in the boxed beef complex, spilled over to contract trade last week. Prices were lifted significantly ahead of the Cattle on Feed report by the much improved trade on the cash side. On the Chicago Mercantile Exchange (CME) last Thursday, prices were also sharply higher. The August contract traded up 217 points to close the day at $88.47 and setting a new contract high in the process. In fact, during last Thursday’s trading session, all but the February contract broke through resistance levels to reach new contract highs. The October live cattle contract was up 192 points on the day and closed at $92.37. December contracts closed up 97 points to settle at $90.97. Mike Roberts, commodity marketing agent for Virginia Tech, said last week that the boost in retail demand and the market opening in Japan were driving contract prices higher, but he cautioned that the market would be slow to recover overseas. There was also optimism last Thursday about Korean inspectors being dispatched to review the two plants that had previously failed the inspections by South Korea. The prospect of fully revived Asian trade added support to the already exuberant marketplace in Chicago and in the country last week. “Quick shipments (to Japan) indicate better-than-expected price levels may be in order. Cash sellers should continue to sell live cattle as soon as they can at the heaviest possible weights,” Roberts said. He also cautioned feeders not to jump into the corn market ahead of USDA’s crop report, due out last Friday, because of the current volatility. “Corn users should not consider pricing more corn needs at this time,” Roberts said. Feeder cattle According to industry leaders, and taking a solid glance at the feeder cattle market, allows one to say with confidence that producers have little to no validity for complaints. Although auction markets across the country have feeder cattle prices staying steady to slightly higher, as well as slightly lower, prices are still strong considering drought conditions and a heavy supply. Also on the CME, contracts are all in the black. Compared to a week prior in Oklahoma City, feeder cattle stayed steady to $1 lower. Steer and heifer calves were described as selling unevenly steady. Officials at the facility said demand was moderate to good. Supply in Oklahoma City was heavy with 9,200 head selling, compared to 7,966 the week before. Quality was staggering, being called plain to average with an increased showing of number 2 muscled cattle in thin to average flesh coming off short grass due to extreme drought conditions. Like many other geographical regions of the U.S., weather continues hot and dry. In all parts of Oklahoma, they have witnessed 23-plus days of 100 degree or better temperatures. In Winter, KS, 1,058 fewer head were sold last Thursday, but the lighter supply increased demand and allowed producers to realize steady to $1 higher. Steers weighing 700-950 lbs. traded firm to $1 higher, with heifers weighing 700-900 lbs. steady in what was called a very limited supply. Slaughter cows brought good money, selling from $1-3 higher. Slaughter bulls in a very limited test, firm to $1 higher. At the Joplin Regional Stockyards in Joplin, MO, last Tuesday, 4,800 head traded places compared to the 3,270 the week before. Trade could be called uneven in Joplin with a wide flux in prices. Compared to the week prior, steers under 700 lbs. were steady and over 700 lbs. steady to $2 higher. Heifers in south Missouri weighing 450-600 lbs. sold weak to $3 lower and heifers under 450 lbs. and over 600 lbs. traded steady. Similar to Oklahoma City, Joplin market officials said temperatures were forecast at 100 degrees plus and said the heat is holding the calf trade in check. In Hub City, SD, at the Hub City Livestock Auction, 3,119 head went through the ring. Compared to the Wednesday the week before, feeder steers and heifers sold up $2-4 with good demand in all classes. Offerings included long strings of reputation feeders off grass, where the cattle were average to thin, again undoubtedly due to drought conditions. At the Billings, MT, Livestock Commission Co., 555 head sold where feeder cattle offerings were too limited to offer any price comparisons. However, the market sold slaughter cows and bulls steady to $1 lower. Six hundred and forty head sold at the Stockland Livestock Auction in Davenport, WA, up 300 head from the Tuesday prior. Slaughter cows and bulls, like most other markets, were realizing higher prices. They were bringing steady to $1 higher in Washington last week. Trade was also described as active with good demand. In the most recent Superior Livestock Auction, held July 31 through Aug. 4, over 207,820 head sold with consignors from 31 states. The auction was held in Winnemucca, NV. Officials there said the demand was “excellent” and trade “very active” on all classes of cattle. The calves on cows in the southern region were $2-5 lower while the weaned calves were selling mostly $2 higher in all tiers. Egbert Livestock in Wells, NV, sold 410-lb. calves that were certified natural from Anus and Angus cross for $158.85 per cwt. Skinner Ranches in Jordan Valley, OR, sold 515-lb. certified natural Red Angus and Hereford cross steers for $140.50 per cwt. The yearling steers were trading steady to $2 higher while heifers suffered $2 lower. Officials at the market said the largest interest was in good quality, conditioned yearlings to be “delivered immediately.” Van Norman Ranches in Tuscarora, NV, sold Angus and Beefmaster cross steers weighing 725 lbs. for $114.50 per cwt. Delong Ranch in Winnemucca, NV, sold 800-lb. certified natural Red Angus/Charolais cross steers for $115.50 per cwt. Debruycker Charolais sold cross steers weighing 890 lbs. for $112.85 delivered. Cedar Top Ranch in Stuart, NE, received $116.25 for their yearlings weighing right around 860 lbs. On the CME, contracts traded significantly higher across the board as a result of spillover enthusiasm from the live cattle pit last Thursday to reach some new contract highs. August contracts traded $1.33 higher, closing at $117.40, which was 15 cents short of being a new contract high. September did reach new highs last Thursday, increasing 150 points, settling at $117.45. October contracts traded 140 higher to close at $117.93. November followed trend, settling at $116.75, which was 105 points higher than last Wednesday’s $115.20. — WLJ  

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Monday, August 7,2006

Canadian cow imports delayed

by WLJ
— USDA halts rule-making process. USDA has rescinded a proposal which would have allowed imports of Canadian cattle over 30 months of age, saying there won’t be a ruling on the case until it has completed its investigation into the most recent case of bovine spongiform encephalopathy (BSE). The most recent case, announced last month, was found in an animal just 50 months old. That animal had been born nearly four years after Canada’s ruminant animal feed ban was enacted. Dennis Laycraft, executive vice president of Canadian Cattlemen’s Association, said he hoped the delay would be a short one. “USDA has inspectors here working with the Canadian Food Inspection Agency and we hope the delay in this rule will be limited to two to four weeks,” Laycraft said. “Since they are working side-by-side, they will have access to the information as it is being researched, but for right now, we are still waiting for specifics.” USDA spokesman Ed Loyd said the department has withdrawn the proposal which had been under review by the White House Office of Management and Budget that would have allowed shipments of cattle over 30 months of age and beef from the older animals. That rule was expected to be published in the Federal Register sometime in August. “If no revisions to the proposed rule are needed, it will continue through the rulemaking process as planned. Holding this proposed rule has no impact on current trade or related regulations,” said Loyd. According to Loyd, USDA is committed to insuring the feed ban in place in Canada is working properly before continuing down the road toward restoring the full flow of cattle across the border into the U.S. “As Secretary Johanns indicated on July 13, we have questions about Canada’s recent case of BSE in an animal born several years after the 1997 feed ban was instituted. We believe it is prudent to hold the proposed rule until the joint investigation into how this animal may have been exposed to infected material is complete,” said Loyd. He said USDA wants to know how the latest infected animal in Canada acquired the disease, considering it had been born in 2002, well after Canada imposed feed regulations in 1997 designed to curb the spread of BSE. “It is important to confirm that Canada’s regulatory system is effectively protecting consumers and livestock so there is no question about safety as we proceed.” The U.S. banned Canadian cattle and beef in May 2003 after Canada’s first case of BSE. When the ban was eased in August 2003 to allow imports of younger cattle and boneless beef from those animals, USDA said it hoped to eventually end all restrictions. Laycraft said he believed the case was caused by either residual feed contamination or perhaps through the accidental exposure to contaminated feed for other livestock. He pointed to the enhanced feed ban put in place recently. The Canadian feed ban closely mirrors the one in Europe which prohibits ruminant animals from being used in animal feed or fertilizer. “The incidence in Canada is fairly similar to what we have seen in other countries which have had cases of BSE. We anticipated having more cases crop up,” Laycraft said. Scientists say cattle under 30 months are at little risk of contracting BSE, however, USDA argues that beef, from cattle of any age, is safe once the tissues which harbor the BSE prions, including the brain and spinal cord, have been removed from the carcass. R-CALF USA President and Region Five Director Chuck Kiker praised USDA’s decision to halt the rule making process. “The assumptions regarding the scope of the disease problem in Canada, along with the ineffectiveness of the Canadian feed ban, must now be changed following Canada’s discovery of a BSE-infected cow that was only 4 years and 2 months old.” In addition, R-CALF continues to urge USDA’s Animal and Plant Health Inspection Service to publicly announce it is postponing, indefinitely, plans to allow into the U.S. cattle over 30 months (OTM) of age from Canada, and beef from those OTM cattle, until the full scope of Canada’s BSE problem is scientifically known and a new risk assessment is completed that incorporates the four separate BSE-infected cows born after Canada’s feed ban was implemented in 1997. — John Robinson, WLJ Editor

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