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Thursday, December 20,2007

Obituary

by WLJ
May 9, 2005 Well known cattle fieldman William S. Roche, 85, resident of Galt and Lodi, CA, died May 1, after a battle with Alzheimer’s Disease. Born Oct. 26, 1919, in Early, IA, Bill Roche was a true gentleman, who enjoyed the cattle business, his family and painting. Roche graduated from Iowa State University in 1941 with a B.S. in Agriculture and entered the military in 1942 where he received a Bronze Star. After returning home he married Joyce Kischer in 1946. He worked as a fieldman and county youth extension director and later became the Secretary of the Northwest Iowa Angus Association. In 1954 he moved to California to work for the American Aberdeen Angus Breeders Association, then became the West Coast Regional Manager and Western Director of Regional Managers for the American Angus Association. In 2001, Roche was inducted into the Angus Heritage Foundation, which honors and identifies distinguished persons who have made major contributions to the improvement and advancement of Angus in the United States. Roche is survived by his wife of 59 years, Joyce Roche, Galt; daughter Kris Roche, Davis; son Steve Roche (Janet), Davis; grandchildren Joelle and Jacob Roche; sisters Miriam Dokken, Nebraska, and Avis Reid, Kansas, and many cousins. © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Thursday, December 20,2007

Fed cattle prices rise slightly after early trade

by WLJ
After some early week reductions in the number of fed cattle being harvested, the beef cutout value regained traction last week and rose more than $5 in a period of three days. Early in the week, Tyson Foods Inc. confirmed it had closed two plants and reduced the number of hours being worked at others due to packing house loses caused by poor movement of beef at the wholesale and retail levels. The industry’s average margin last Monday was estimated at a negative $18.65 per head, compared with a negative $18.70 on Friday and a negative $7.05 a week ago, according to HedgersEdge.com. The cut backs in harvest to just 106,000 head last Monday were short lived as the cutout rebounded from nearly two weeks of lower trade. However, by midweek, packers were hard at work slaughtering cattle after margins moved back into positive territory. By last Thursday, packers were averaging $18.05 per head and they harvested an estimated 125,000 head, despite continued difficulty moving beef loads out of cold storage warehouses. That compares with 123,000 head for the previous Thursday and 125,000 a year earlier. As mentioned, the beef cutout values rose sharply last week as a result of those slaughter cuts and last Thursday, Choice values again moved higher to $161.32, gaining 46 cents in morning trade. Select prices rose $1.45, to $148.40, although volume for much of the week was light to moderate. The difficulty in the packing sector was not carrying over to other segments of the industry. Early trade in the Corn Belt, Nebraska and Colorado on Wednesday last week, at prices steady with the previous week, fueled speculation that when trade finally broke loose, it would be at better prices. Early prices were 50 cents higher, from $96-97, with dressed sales unevenly steady from $153-155. Feedlots in Iowa and Minnesota sold a few cattle on a live basis at prices steady with the prior week at $96-97. Dressed sales in the region were called $1-2 higher, from $155-156. Trading in the southern Plains last Thursday was reportedly light to moderate at $97- 97.50, which was 50 cents to $1 higher than the prior week when live sales developed in a range of $95.50-96.50. What a difference a year makes—during the same week last year, fed cattle prices averaged $78.37 live and $124.14 dressed. Cow slaughter rates have started to drop off slightly from the higher than normal number seen over the past several months. Last week, that drop added additional support to the surging cow carcass cutout values. Last Thursday, the cutout added $1.24, to trade during the day at $118.57. The 90 percent lean was also higher, trading at $149.24, and the 50 percent at $79.59. Those prices compare with a cow beef cutout at $107.43 with the 50 percent at $49.27 and the 90 percent at $132.22. The volatility in the fed cattle markets is expected to continue through the summer. Weather and beef demand are going to be key considerations going forward. USDA reported last week that 53 percent of the corn crop had been planted. However, rainfall totals in the Midwest, which exceeded seven inches in some places, mean that the crop is going to be replanted due to erosion and seed rot. These setbacks and delays are likely to work against the end of the year yields once they are tallied. Corn prices last week were moving higher and many traders were reportedly waiting on the first 2007/2008 supply and demand report due out last Friday. Analysts expected the planting number to remain steady with the planting intentions report at 12.7 million acres, although many now believe that number is higher than what will actually make it in the ground this year as a result of weather issues. December new crop corn futures last Thursday on the Chicago Board of Trade were trading slightly lower for the day at $3.61. Meanwhile, cattle futures last Thursday were doing better. After downward movement early in the day as a result of funds rolling out of the June contract, prices moved higher to end the day in positive territory. The higher cash trade and the upward trend in boxed beef were the major market factors during the session. June live cattle issues ended the session up 30 points, closing at $92.70. August gained 40 points and October closed up 65 points, ending at $92.40 and $96.40 respectively. Feeder cattle Now that most producers have secured the cattle needed to graze summer pastures and the spring runs in most areas have ended, feeder cattle prices have stagnated slightly. Although the trend remains higher in some areas and the Chicago Mercantile Exchange Feeder Cattle index remains above last year at $106.99, compared to $99.40, numbers of cattle moving through auction markets have slowed and trends have become more difficult to calculate. According to Darrell Mark, agricultural economist at University of Nebraska-Lincoln, the improvement in pasture conditions over last year has helped sustain the market in recent weeks with more strong demand for lightweight cattle for grazing ahead. “Across the U.S., pasture and range conditions were slightly better than last year at this time,” Mark said. “Recent rains and good growing conditions in drought-stricken areas have resulted in some of the best grazing conditions in years in some localized areas. This should lend support to the feeder cattle market over the next few weeks as demand for lightweight calves for grass improves.” He noted that the good demand and strong prices are despite a 20-cent rally in the corn market from a sell-off two weeks earlier. “Last week, however, feeder cattle prices in Kansas were $1.50-2 lower, but Nebraska prices were stronger, with steer calf prices steady and yearling steer prices advancing more than $4,” he said. “Interestingly, the price of dry distillers grain (DDG) in Iowa averaged $2.50/ton lower last week even as corn increased. Expressed as a percentage of corn price on a dry matter basis, this is the cheapest DDG price relative to corn so far in 2007.” In California, conditions remain much drier than normal and wild fires have been plaguing the southern portion of the state this spring. According to Jake Parnell, manager of Cattlemen’s Livestock Market (CLM) in Galt, CA, grazing conditions in the central valley have deteriorated to the point that producers are shipping butcher cows and pairs to the market earlier than normal. “Out in the west part of the valley, it's been very dry and the grass is pretty much done. To the east, they got a little rain last week and their grazing conditions are a little better,” he said. “The runs have been pretty good, with most of the cattle heading out of state to places in the central U.S.” Parnell said prices at CLM have been good for much of the spring and continue to average relatively high. “Prices paid for heavy cattle have been very good; light cattle prices this week were steady,” he said. Farther to the north in Vale, OR, prices paid for grass calves and yearling cattle were also reported to be fair and steady. Cattle in the 500-600 lb. range sold between $109 and $121. Those in the 600 to 700 lb. class were $105-115 and seven to eight weight yearlings brought $93-100. In Billings, MT, last week, feeder cattle were too lightly tested to offer any price comparisons. However, demand was reportedly good for stockers and feeders of all weights. There was also moderate to good demand for cow/calf pairs. Many of the young pairs were in thin to very thin flesh condition, however. In Aberdeen, SD, a good run of more than 2,500 head of feeder steers and heifers brought prices steady to $1 higher than the previous week with good demand across all classes of cattle. Feeder cattle prices in La Junta, CO, were called steady with the prior week. Yearling feeder steers and heifers were also steady to $1 lower. To the east in Dodge City, KS, there were not enough steers or heifers of any weight class for an accurate market test. However, in a very limited test, steers in a range of 750-900 lbs. were called firm to $2 higher; heifers 700-800 lbs. were reported to be firm to $1 higher. Despite heavy rain and widespread flooding in Missouri, prices for cattle on offer last week remained strong. In Joplin, MO, compared to the previous week, steers under 650 lbs. were steady to $2 lower, those over 650 lbs. sold steady. Hheifers under 600 lbs. were also steady, while those over 600 lbs. were $2-3 higher. Demand was called moderate to good for weaned, vaccinated calves and yearlings, moderate to light for new crop calves on moderate supply. In Oklahoma and other portions of the southern Plains, continued heavy rainfall last week added to the already good pasture conditions and supported the prices being paid for feeder cattle. In Oklahoma City, OK, feeder steers and heifers sold mostly steady last week. Stocker cattle and calves were steady to as much as $4 lower, with a full decline on six weights. Weigh ups average to gaunt early in the day and mostly average later, contributing to the price swings. The day's supply included a larger percentage of number two muscled cattle compared to recent weeks. Demand good for feeder cattle and light weaned calves, moderate for others. The weather picture was similar farther down in Texas, where severe weather dropped several inches of rain last week. In Abilene, feeder steers under 600 lbs. were $1-2 higher; those over 600 lbs. sold $1-3 higher. Feeder heifers under 600 lbs. were steady, while those over 600 lbs. brought prices called $1-3 higher.

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Thursday, December 20,2007

Dressed trade holding steady at $155

by WLJ
A moderate to fairly active trade developed in the northern Plains last Thursday with dressed trade in a range of $154 to $155.50, steady to $1.50 higher than the prior week. The southern feedlot asking prices of $99 and higher remained well above packer bids of mostly $94-94.50. Market analysts last week said they expected much of the week’s trade could hold off until USDA’s cattle on feed report was issued on May 18. With pre-report estimates spread all over the board, the direction the report would provide was unclear. The average estimate for the number of cattle on feed as of May 1 was 97.9 percent, with a range of 95.7 to 100 percent of May 1, 2006. The expectations for April placements were much wider. The average estimate for the number of cattle placed was 96.1 percent of last year, with a broad range of estimates from 83.8 percent to 106 percent of April 2006. According to Erica Rosa, agricultural economist for the Livestock Marketing Information Center, much of the variation between estimates is a result of the differences in pasture and range conditions across the U.S. “There are a lot of people who are looking at forage conditions that are much better than last year, and they are taking advantage of it by holding calves back. On the other hand, there are those areas where range conditions haven’t improved or have gotten worse. Forage supply is tight right now and, in those cases, they are sending calves to feed earlier than normal,” Rosa said. An already tight supply of feeder cattle is also adding to the issue. “Pasture and range conditions across much of the country are well ahead of where we were last year but in some places like the southern Plains, feeder cattle supplies are relatively tight,” Rosa said. “There are some additional factors as well. Feeder cattle imports from Canada are up over last year, and imports from Mexico were up last month; so those factors are all figured into the pre-report numbers and are causing the wide range of estimates.” In the near-term, those factors were giving a boost to feedlots, which have been enjoying solid margins since the start of the year. Packers last week, too, were enjoying profitability. HedgersEdge.com estimated that packer margins were positive at $59.40 per head as of Thursday. In an effort to take advantage of those margins, packers sped up processing chains over the prior week’s level. For the week to date through Thursday, packers had harvested 503,000 head of cattle, 20,000 more than the previous week and even with the same week a year earlier. Retail demand has improved seasonally ahead of the start of grilling season. Rosa said beef cutout prices were strong after some strong fill-in trade before the Memorial Day holiday and graduation. Choice cutouts last week leveled out on Thursday at $166.54 on the Choice, down 63 cents from the prior day, while Select gave back 38 cents, to trade at $153.62 at mid-day. “The Choice cutout has been fairly strong lately,” she said. “We haven’t seen the big gains that we saw a week ago, but the interaction between beef, pork and poultry has been supportive of the cutout values. Chicken is nearly double the level it was at this time last year which has added to the attractiveness of beef for consumers and added to the cutout,” she said. According to National Cattlemen's Beef Association Chief Economist Gregg Doud, another factor supporting the cutout is the continued expansion of Asian trade. According to USDA figures, the amount of beef being shipped to South Korea has exploded in the past month. “Shipments totaling 7,200 metric tons, or 15.9 million pounds, have added as much as $40 to $48 million in sales to the industry. According to the same USDA report, short ribs and short plate ribs sent to Korea have put $16/head on each and every head slaughtered over the past month,” he said. Doud estimates that's approximately $38 million that has been injected back into the industry as a result of Korea alone. On the Chicago Mercantile Exchange (CME) last week, prices were mainly pushed by commodity fund trading and spreads were the main feature for much of the week in advance of the cattle on feed report. At the bell last Thursday, contracts were lower across the board. June was down 52 points, at $92.42. August was the biggest loser of the session, dropping 92 points to close at $91.80, and October shed 52, closing at $96. Feeder cattle Cattle ready to go to grass are still in high demand but futures prices on fall feeder cattle do not look quite as promising as they were a year ago. Feeder cattle prices remained steady throughout last week. The CME index remained unchanged, closing at $107.91 Monday and Tuesday. However, last Thursday, May futures dropped 12 points to close at $109.20, August remained steady, and September futures dropped 22 points to close at $112.65. Encouraged by the increase in fed cattle prices, feedlots paid up to $106 last week for eight weight steers and $111 for mid seven weights. “With the increase in the fed cattle prices, we are able to lock in some decent prices for cattle that will be harvested down the line, so it’s a little less risky to put some extra money down for feeder cattle right now,” said Tom Johnson, northeast Colorado cattle feeder. “My only concern is the decreased futures market for feeder cattle. That is going to be a tough deal when guys around here get ready to sell calves this fall.” Grazing conditions remain good in most of the western U.S., prompting an increase in demand for lightweight, thin cattle ready to go to grass. “It’s been a blessing. We’ve got plenty of grass and we’re going to need it,” said one producer in Yuma, CO. “With the increased cost in corn prices, these feedlots are just not going to want these cattle until they are a lot heavier than what we’ve sent in the past.” Rosa agreed, saying that many producers were opting to hold cattle back from the feedlot for a longer period of time, a trend she predicted would continue as long as corn prices remain high. “Plantings have really ramped up in the past week, which should cause corn prices to weaken some. Breakeven prices for commercial feedlots have been in the black since March when they were seeing returns averaging about $40 per head. In May, returns were in the mid-$70s and we expect them to remain in the black through at least mid-June,” She said. That positive news is creating good demand for light stocker cattle and has held prices strong as cattle feeders continue to purchase light calves that are thin in type. With the recent moisture, many herds are looking to rebuild, driving up the value of replacement quality females. In Davenport, WA, feeder cattle were steady to firm in a light test. Trade was moderate with good demand on all classes. Feeder steers averaging 541 lbs. sold for $124 and females that were similar in weight were worth $102. There was an offering of heavier replacements, females weighing 805 lbs., and they sold for an average of $94.82. To the east in Billings, MT, feeder cattle offerings were also limited but the demand on all classes was good. Steers averaging 560 lbs. sold between $119 and $122.50 while heavier weights, averaging 850 lbs., called for $104.50. Heifers averaging 550 lbs. sold for an average of $110. Further east in West Fargo, ND, steers weighing less than 650 lbs. sold $1 higher. Heavier steers weighing 650 to 950 lbs. were $2 to $3 lower. Feeder heifers sold unevenly steady. There was good demand, especially on lighter weight cattle. Five weight steers averaged $119.91 and seven weights sold for an average of $106. Six weight heifers were worth an average of $103.44 and eight weights sold for $93.19. In Torrington, WY, steers and heifers sold for $2 to $3 higher with most of the advance on six and seven weights. Demand was good with the best noted for thin fleshed cattle suitable for grass. Steers averaging 506 lbs. sold for $130.76. Another set of fancy steers that weighed 538 lbs. were worth $151. One thin set of steers averaging 653 lbs. sold for $132 while their value added counterparts were only worth $128. One group of fleshy seven-and-one-half weights sold for $105. Another group of thin females weighing 559 lbs. sold for $124.50. Thin six-and-one-half weight females were worth $117.25. Further south in La Junta, CO, steer calves were steady to $1 higher. Heifers were steady to $2 higher with the advance on six and seven weights. Trade was moderate to active and demand on all classes was good. Steers weighing 510 lbs. were worth $128 and seven weights called for $106. Heifers weighing between 500 and 545 lbs. sold between $114 and $117. Those averaging 670 lbs. were worth $106.50 to $108. In Oklahoma City, OK, with over 7,400 head last week, feeder steers and heifers were steady to $3 higher. Demand was very good for feeder cattle, especially those over 800 lbs. Steers weighing an average of 546 lbs. in fleshy condition sold for an average of $123.21. Steers averaging 831 lbs. were worth $106.18. Five weight heifers sold for an average of $118.70 and their fleshy counterparts only called for $112.76. Eight weight females were worth an average of $98.09. South in Dalhart, TX, feeder steers and heifers under 600 lbs. sold $2 to $4 lower while those over 600 lbs. were $3 to $5 higher. Trade was active and demand was good. Steers weighing between 400 and 500 lbs. sold between $133 and $134. Those averaging 650 lbs. were worth $107.13 and their heifermates sold for $101.50. Five and six weight females sold between $105.50 and $110.50.

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Thursday, December 20,2007

State meat inspection bill introduced

by WLJ
A bill introduced in the U.S. House of Representatives last week would allow state-inspected processing plants to ship beef across state lines just like federally inspected plants. Reps. Earl Pomeroy, D-ND, and Roy Blunt, R-MO, introduced H.R. 2315, the New Markets for State-Inspected Meat and Poultry Act of 2007, along with 15 other cosponsors.   Federal law requires USDA to inspect all meat products. In the 1960s, Congress created state inspection programs that are mandated to be “at least equal to” the federal inspection program. Perishable products—including milk and other dairy items, fruit, vegetables, and fish—are freely shipped across state lines after state inspection. But standard meat products, like poultry, beef, and pork, are prohibited from interstate commerce despite decades of meeting or surpassing the federal inspection standards. This bill would remove that prohibition. “It’s unfair that smaller beef producers are not able to ship and sell their products outside their own state when interstate sales of other food products aren’t restricted at all,” says Colin Woodall, National Cattlemen’s Beef Association’s executive director of legislative affairs. “This outdated policy hurts many of our country’s small businesses who deserve an equal right to compete in the national market.” Currently, state-regulated inspection programs exist in 28 states. These programs serve about 2,000 small or very small establishments. Blunt says the existing law penalizes smaller companies while companies from 30 foreign nations are permitted to sell meats freely in any state. “If my family in Texas enjoys safe, delicious beef from a local, state-inspected business in Amarillo, why can’t a family in Oklahoma buy the same beef?” asks Woodall.

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Thursday, December 20,2007

USDA clears swine for processing

by WLJ
Human health risk assessment updated. Testing confirms that meat from swine fed rations supplemented with pet food scraps containing melamine and related compounds is safe for human consumption, prompting USDA to allow swine held on farms to be released and approved for processing. Testing of meat from swine exposed to the feed in question confirms that melamine and melamine compounds do not accumulate in pork and are filtered out of the body by the action of the kidneys. The testing also bolsters the conclusions reached by a human health risk assessment that there is a very low risk of human illness from the consumption of meat from animals exposed to the feed in question. Swine known to have eaten this feed appear healthy, which will be confirmed as these animals undergo the rigorous inspection that USDA’s Food Safety and Inspection Service (FSIS) provides for all meat and poultry prior to processing. There were approximately 56,000 swine that consumed the feed in question and were held on farms in California, North Carolina, South Carolina, New York, Kansas, Utah and Illinois. USDA will provide compensation to producers for certain additional costs incurred as a result of voluntarily holding the animals. Approximately 100 million swine are processed each year in the U.S. The process for testing meat from swine was validated by FSIS. Human health risk assessment The human health risk assessment announced by the Food and Drug Administration (FDA) and USDA last week has been updated. It still concludes that there is very low risk of harm to humans from eating food containing low levels of melamine or related compounds. The updated risk assessment concludes that in the most extreme risk assessment scenario, when scientists assumed that all the solid food a person consumes in an entire day contained melamine and the melamine compound cyanuric acid at levels potentially present in the meat, the potential exposure is about 250 times lower than the dose considered safe. Translated to consumption levels, this means that a person weighing 132 pounds would have to eat more than 800 pounds per day of pork or other food containing melamine and its compounds to approach a level of consumption that would cause a health concern. Previously, the agencies reported that the potential exposure was about 2,500 times lower than the safe level. The initial human risk assessment assumed that tests of swine meat detected melamine and its compounds. The testing validation process, completed on May 12, revealed that while the swine meat test detects melamine, it cannot detect melamine related compounds. The updated assessment calculates risk based on the new updated laboratory information that accounts for the presence of melamine and cyanuric acid, a melamine related compound detected in the contaminated feed. In addition, the original risk assessment assumed that testing could detect levels of melamine and related compounds as low as 10 parts per billion (ppb) in pork. The new assessment assumes that testing can detect levels only as low as 50 ppb in pork, a more conservative assumption, and an even higher level of 100 ppb is assumed in order to account for the potential presence of cyanuric acid, in addition to melamine. FDA and USDA are in the process of identifying scientific experts who would be charged with reviewing the updated risk assessment. They will be asked to provide their views to FDA as quickly as possible, with the intent of finalizing the risk assessment within several weeks. Update on other affected products Approximately 80,000 poultry continue to be held at USDA’s request at farms in Indiana while a validated test for detecting melamine in poultry meat is developed. That test is expected later this week. FDA is continuing its investigation into the presence of melamine and its compounds in fish feed manufactured by the Canadian company Skretting. The company is recalling all fish feed from all commercial fisheries and fish hatcheries that may have received it, including those in the U.S. FDA has confirmed there are two U.S. commercial aquaculture establishments that received the feed. The fish in those two establishments are on hold and samples of the fish and the feed are being tested for melamine levels. Based on the human risk assessment, there is very low risk from eating fish that consumed feed containing melamine. USDA and FDA continue to conduct a full and comprehensive investigation. As additional information is confirmed, updates will be provided and decisions will be made using the best available science to protect the public’s health.

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Thursday, December 20,2007

Holiday pushes fed market up

by WLJ
Fed cattle trade got started mostly $1 higher last Thursday. Trade occurred at $126-127 dressed in the north and a few live sales at $79, steady with the previous week. Packer demand increased as they upped the harvest level and were looking to procure cattle to fulfill the Memorial Day demand. Packers came out early in the week offering $74-75 live and $124-126 dressed. However, projections for packer margins at a positive $60 per head, combined with good boxed beef trade and lighter fed cattle weights, helped feedlots gain the upper hand last week. Support was added to fed cattle trade by the Chicago Mercantile Exchange (CME) which traded mixed last Wednesday, with June closing up seven points at $77.72 and August closing lower at $78.77. Thursday, CME trade in the live cattle pit was higher across the board with a gain of eight points on the June contract, which closed at $77.80, and a gain of 32 points on the August contract, closing at $79.10. Markets have been gaining strength on solid retail demand. Last Wednesday, retail movement of boxed beef was near 700 loads. That movement pushed the Choice cutout value slightly higher to $145.05. Select cutout values were 70 cents lower, at $124.71, at the end of last Wednesday. The Choice/Select spread continues to hover near $20 as a result of limited Choice product availability. Movement of boxed beef weakened slightly on Thursday although volume was still considered good at 548 loads on moderate demand and offerings. Beef trim was sharply lower on moderate demand and very heavy offerings. Last Thursday’s Choice value declined 44 cents to $144.61, while Select closed the day down 55 cents, at $124.16. Packers were doing their best last week to take advantage of the good demand and higher cutout values in an effort to move through some of the front-end ready supply of fed cattle. Harvest levels for the week were estimated by USDA at 708,000 head last Thursday. That number is well above the previous week’s estimated harvest of 627,000 head and the previous year’s harvest of 654,000 head. The higher kill level is good news for cattle feeders who need to work through large numbers of fed cattle in an orderly and rapid fashion to avoid a backlog of slaughter-ready cattle as a result of heavy placements over the past several months. The cattle on feed report due out last Friday was expected to shed light on the state of the industry. Pre-report estimates were for another monthly record number of cattle on feed for May 1. Prior to the release of the USDA report, Andy Gottschalk at HedgersEdge.com estimated the May 1 cattle on feed numbers at 11.512 million head, 8.2 percent ahead of May 1, 2005. If his number is correct, the May 1 number will be 342,000 head above the previous May record set in 2001. Gottschalk estimated placements would be 6.6 percent lower than May 1, 2005 and marketings, with one fewer marketing days than the prior year, would be 1.9 percent below 2005. Last week’s higher cash fed trade could be difficult to sustain once the Memorial Day demand is met. According to Mike Roberts, commodity marketing agent at Virginia Tech, most traders expect these markets to top out soon as Memorial Day buying is completed among lower-than- expected exports. Roberts said U.S. cash cattle are expecting pressure for the rest of the year because of plenty of meat supplies in general, with beef carrying a large portion of the increase. Feeder cattle CMA and auction market feeder cattle trade shrugged off reports of continued dry weather, record high temperatures and higher commodity corn prices last week to trade mostly higher across the country. Last Thursday on the CME, feeder cattle traded in a narrowly mixed range. Nearby May and August contracts closed five and two points lower, settling at $103.50 and $106.45 respectively. September gained 25 points to close last Thursday at $106.12. Much of the positive trade was attributed to a lower close for the day’s corn market, which slid to close the day at $2.85 a bushel on the December contract. At feeder cattle auctions across the country, cattle prices moved decidedly higher last week. Even in drought stricken Texas, markets gained momentum after some locally heavy rains fell across the southern portion of the state alleviating problems slightly. In Abilene, TX, feeder steers and heifers under 500 lbs. sold $2-3 higher; those over 500 lbs. sold $4-6 higher last week. In Oklahoma City, OK, much of the spring run of feeder cattle has already been marketed, although last week’s auction saw good numbers of cattle in good condition. According to market reports, two weeks of good precipitation in the area added optimism and brought buyers back to the market. That optimism helped move prices higher last week. Feeder steers and heifers sold $2-4 higher, while stocker steers and heifers moved $5-10 higher last week. Yearlings and short yearlings coming off of wheat that was rapidly maturing are actually carrying less flesh than the runs that occurred a month ago, according to reports. In Missouri, at Joplin Regional Stockyards, buyers seemed content last week with the current weather pattern, as it was not a major topic of conversation among those on the seats. It was noted, however, that most purchased cattle were loaded on trucks bound for pastures farther north. Feeder steers over 500 lbs. sold steady to $3 higher with those weighing under 500 lbs. selling $3-5 higher. All weights of feeder and stocker heifers traded $2-4. Demand was called good for all classes with competitive bidding on every weight group. West of there, in Dodge City, KS, lightweight steers and heifers from 350-600 lbs. were in short supply and no comparison was available although a higher undertone was reported. Heavyweight steers from 650-1,000 lbs. sold $1-4 higher, with most up $2-3. Heifers from 650-900 lbs. were called firm to $2 higher. In Bassett, NE, 3,000 head of mostly light to moderately fleshed fall calves were met with good demand, although no recent comparable sales allowed for a trend. Market reporters noted very strong demand for 500- 650-lb. cattle in grass ready condition. At Sioux Falls, SD, last week, feeder steers and heifers sold $2-4 higher. Demand was called very good on all classes, with several load lots of high quality steers in the offering. It was noted last week that dry conditions throughout the central and southern Plains were contributing to a sell-off of cows in areas which won’t currently support grazing through the summer. This sell-off could slow national herd growth, which will have an impact on both cow slaughter and the cattle cycle as a whole. How significant the impact, and how long it will last, is unknown. However, if drought persists in many areas, buyers are likely to increase the number of cattle headed to northern pastures during the summer.

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Thursday, December 20,2007

Cattle on feed report supports prices

by WLJ
USDA’s May 1 cattle on feed report showed that the number of cattle being placed on feed in the Corn Belt states continues to grow, while feedlots in other areas, particularly Texas, cut back on the number of cattle being fed. According to USDA’s National Agricultural Statistics Service (NASS), cattle on feed as of May 1 totaled 11.3 million head. The inventory number was 2 percent below May 1, 2006, but 6 percent above May 1, 2005. This is the second highest May 1 inventory since the series began in 1996. Placements in feedlots during April totaled 1.57 million, 3 percent below 2006 and 5 percent below 2005. Net placements were 1.47 million. During April, placements of cattle and calves weighing less than 600 pounds were 375,000, 600-699 pounds were 263,000, 700-799 pounds were 430,000, and 800 pounds and greater were 505,000. Troy Vetterkind, cattle analyst for Ehedger LLC, said the report showed a friendly placement pattern for the market from the October through first of November time frame. “I think we will continue to see a level of placements below year ago levels through August,” he said. However, after that, the picture may not be as rosy for the fed cattle markets into early 2008. “Where I think the problem is going to be is the number of cattle that have been sent to grass because of the improved grazing conditions across the West,” Vetterkind said. “The problem is that the placement of lightweight cattle is declining because of the high cost of gain. When the cattle come off grass in August and September for placement into a late fourth quarter, early first quarter harvest slot, it is going to create a situation were we have a really large supply of slaughter-ready cattle.” He said last Thursday that situation, combined with current December 2007/February 2008 contract prices, created a very good hedging opportunity for fed cattle. “It’s something that needs to be monitored and considered,” he said. Overall, in addition to the decline in lightweight placement, there was also a shift in the placements of cattle in some major feeding states. Numbers in portions of the five-state feeding area were well below year ago levels. Texas, in particular, showed a significant decline. Placements there were 16 percent below year-ago levels. Much of the decline is a result of much improved grazing conditions, however, analysts noted that a short supply of feeder cattle in the southern Plains, along with rising corn prices, also played a role in the decline. Kansas and Iowa placements dropped 5 percent from last April, Nebraska saw placements fall 9 percent, and New Mexico feedlot placements fell 23 percent from last year as grazing conditions in the state improved. The placement pattern also suggests that a shift in where cattle are fed is underway as many analysts expected. The rising price of corn and the ready supply of distillers grains in the Corn Belt region has prompted some operations in that area to ramp up their cattle feeding efforts. What is not clear is how many smaller cattle feeders, those under 1,000 head capacity, are also feeding cattle now. States which don’t report cattle feeding activities to USDA may also hold a large supply of cattle. Those cattle add to the uncertainty in the industry. Cattle in small lots or those owned by farmer-feeders are typically marketed at heavier than average weights in the late summer or fall and have, in the past, caught the industry by surprise, greatly impacting fed cattle prices. It remains to be seen if that may be the case this year, although several analysts believe it is a significant possibility. Vetterkind said the marketing number was very positive for the industry in the nearby period. “That marketing number looked awfully good; it shows that feedlots are very current with their marketings,” he said. “If you look at the current basis of $4-5, it is a wonderful situation for guys who were hedged earlier this year. It has provided a big incentive for feeders to pull cattle forward and I think we’re seeing a lot of that right now.” According to NASS, marketings of fed cattle during April totaled 1.82 million, 2 percent above 2006 and 1 percent above 2005. Much of that increase was the result of one additional slaughter day during the month of April this year, however, the marketing rate for the month was also positive. “The fact that cattle feeders have remained current through the spring means that this market is probably going to remain a little better than a lot of analysts, including myself, predicted even just a few months ago,” Vetterkind said. “I was predicting a summer low in the low- to mid-$80 range. Now, I expect that we will probably see a summer low in the mid- to upper-$80s.” Looking ahead into next year, USDA's Economic Research Service released its first estimates for U.S. herd projections. The picture remains mostly unchanged for next year. The report predicted that heavy cow and calf slaughter, early placement of cattle in feedlots, probable reduced heifer retention due to poor forage and high grain prices from ethanol, will all combine to keep the U.S. cattle herd steady through 2007. More specifically, for cow/calf producers and feedlots alike, it means that similar, or perhaps improved, market conditions can be expected next year. Continued improvements in the export market or the domestic retail market will only serve to further boost profitability well into 2008. — John Robinson, WLJ Editor  

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Thursday, December 20,2007

Market slips back before holiday

by WLJ
Trade was active at midweek last week in the northern Plains with Nebraska feeders trading cattle $2-3 lower at $150-151 dressed and live trade down to $94-95 on moderate trade. Southern Plains feeders were slow to trade and appeared that they would be waiting until late week before serious trade. Beef cutouts have held their own, with the Choice cutout holding strong at $161.35 and Select at $149.09. Trade volume was good and there was a solid amount of trade in the ground product. The Choice/Select spread last Thursday was $12.26, and the packer margin index showed packers earning $20.60 a head. The market for ground beef has been especially good up to this point. Good trade in the boxed beef grind and the cow beef markets are very strong. The 90 percent lean beef was trading at $152.14, very near record territory, and the 50 percent trim was at $69.07. The cow beef cutout, which represents the same cuts as the boxed beef cutout, was trading at $120.75. You can see these markets trickling down to the auction market trade. Many markets have reported the price for slaughter cows at very strong levels. In Montana, high dressing cows were selling for as much as $58, on the West Coast $55, Wyoming $60, and in Joplin, MO, $63. This may be the strongest the slaughter cow market has ever been. One northern Plains auctioneer said he has never sold cows this high. Another element adding to the value of fed cattle is the drop credit which, last week, was $10.44. This market has been stuck in the $8 range for quite some time and has seen some very good movement in recent weeks. The $2.50 up tick in this market adds $32.50 to a 1,300 lb. animal. Mike Roberts, extension economist at Virginia Tech, said that, “Cash cattle and boxed beef prices are seen as declining into early summer now that the Memorial Day meat buying by retailers is seen as done. Only time will tell. USDA on Monday put Choice beef cutout values at $166.49/cwt., up 54 cents/cwt. Packer margins were pushed further into the black. August/June spreading by funds was noted as lifting the August contract. Cash sellers are strongly encouraged to get cattle sold again this week. It is suggested to hold off pricing more short-term corn needs at this time.” The export picture is starting to have some impact on the markets. Ron Plain, economist at University of Missouri, said beef and veal exports during March were up 14.9 percent with the increase at 20.6 percent for the first three months of 2007 compared to a year earlier. Japan’s purchases are up sharply, percentage-wise, but are still quite small compared to 2003 before bovine spongiform encephalopathy. For January to March of 2007, Japan’s imports of beef from the U.S. were only 13 percent of the first quarter of 2003. Beef exports were up 32 percent to Canada, down 8.2 percent to Mexico, up 15.4 percent to the Caribbean, up 54.4 percent to Taiwan, and up 151.3 percent to other for the first three months of 2007 compared to 12 months earlier. Beef imports for January to March were down 8.6 percent from a year earlier. Our purchases were down 13.8 percent from Australia, down 8.3 percent from New Zealand, about the same from Canada, down 13.3 percent from Brazil, down 51.7 percent from Argentina, up 19.9 percent from Central America, down 13.3 percent from Uruguay, and up 29 percent from Mexico. The U.S. net import of beef as a percent of production declined from 10.2 percent in 2006 to 8.0 percent in 2007 for the first three months of the year. This is the major reason for the stronger demand for live cattle rather than beef. Feeder cattle Feeder cattle prices across much of the country remain strong as a result of good pasture and forage conditions in most areas and a continued shortage of available cattle. Last year's drought conditions had many producers culling deeply and the winter stress on cow herds means that in some areas, this year's calf crop is smaller than normal. There have been reports that some producers lost half or more of their calves this spring. The result is a U.S. herd which is expected to be stagnant to just slightly larger in terms of growth this year. That translates to a shortage of feeder cattle and strong prices through most of this year. Feeder cattle prices are expected to strengthen some through the summer months, despite the fluctuations in the corn market, which will likely limit any substantial upward price moves in feeder cattle contracts on the Chicago Mercantile Exchange (CME). Derrell Peel, professor and livestock marketing specialist at Oklahoma State University, said the corn crop, now that it is mostly planted, will continue to impact feeder cattle prices through most of the year. “I think the feeder cattle market will continue to be very sensitive to corn prices,” he said. “However, for the time being I don’t foresee many changes, but it hinges on a lot of factors.” One of those factors was evident in the most recent cattle on feed report, which showed the trend toward the placement of heavier cattle in feedlots. The cost of gain is causing feeders to reduce the number of days on feed in an effort to remain profitable. "I think we are starting to make a transition in the feedlot industry to increasing the weight of placements,” Peel said. “There is a trend toward heavier placement weights, more yearlings instead of weaning age cattle.” Adding to the tight supply of feeder cattle is the improved forage situation which, in many parts of the country, has herd owners starting to think about heifer retention. “There isn’t any data yet to indicate that, but I expect that more heifers are being retained this year, tightening the supply even farther,” Peel said. He also expects the U.S. will see a decline in the total number of cattle being imported to the U.S. Already, USDA data shows that feeder cattle imports from Mexico for the first three months of the year were down 29.5 percent from the same period in 2006. Imports from Canada were up 8.3 percent over last year, however, the import totals from either side of the border are down more than 11.2 percent from the first three months of 2006. If those numbers remain at current levels, the prices being paid by feedlots for available cattle is set to increase substantially, adding to breakeven prices already pushed higher by rising feed and fuel costs, spelling rough times ahead later this year. However, the same scenario holds a much different outlook for cow/calf producers who can expect good prices into the fall. CME feeder cattle futures prices for September, October and November 2007 contracts remain strong, despite some losses across the board last Thursday. September dropped 70 points last Thursday to end at $111.50, while October lost 95 points, closing at $110.45 and November lost 102 points, closing the session at $109.97. In cash markets last week, the trade was widely mixed with lightweight cattle headed for grass selling sharply higher in many cases. Heavier weight cattle also sold well, heading for short feeding periods. In Salina, UT, feeder steers were mixed last week with weights under 400 lbs. and cattle in the 600-750 lb. range $4-5 higher. Cattle in the 400-600 lb. class were reportedly $1-2 lower. Feeder heifers were also mixed with weights under 400 lbs. called $6-8 higher. Heifers in the 400-650 lb. range were mostly steady. Those over 650 lbs. were $1-2 lower, except 750 lb. cattle moving $1-2 higher. At Belen, NM, compared to the previous week, feeder steers sold $2-4 lower, while heifers were reportedly steady. Trends across much of the Intermountain region, from Idaho and Montana, through Wyoming and Colorado were difficult to determine due to the lack of feeder cattle being marketed at this time of year. Light runs meant that most auction markets did not have enough cattle for accurate comparisons. Farther east, however, runs continue in good numbers from the Dakotas through Oklahoma. For example, at Hub City Livestock Auction in Aberdeen, SD, feeder steers and heifers sold steady to $2 higher with large consignments of high quality backgrounded calves making up the bulk of the offering. Feeders under 600 lbs. were reported to be lightly tested at the market. Farther south in Ericson, NE, compared to the most recent feeder sale of three weeks ago, good quality, grass type calves under 600 lbs. trended $6-8 higher, while weights over 600 lbs. trended fully steady. Overall cattle quality was good, with very aggressive demand. In Dodge City, KS, last week, feeder steers in a wide weight range of 300-750 lbs. and heifers from 300-700 lbs. were not sold in a high enough quantity to determine an accurate market. However, a steady undertone was noted at the sale. Steers from 750-1,000 lbs. were reportedly steady. Heavyweight heifers, from 700-850 lbs., were called weak to $1 lower; those in the 850-950 lb. class sold for steady money. To the east in St. Joseph, MO, compared to the prior week, yearling feeder cattle and all weights of steer calves sold steady in active trading, but demand was light for heifer calves under 600 lbs. as they traded weak to $7 lower. Receipts were fairly light but the offering included several large drafts of heavy yearlings which were not fully tested at the previous sale. The market for most classes was well supported but the price spread between lighter weight steer calves and their sister mates was much wider than normal. Farther south, at the auction market in McAlester, OK, last Tuesday, steer and heifer calves under 400 lbs. sold $3-5 higher. Those in the 400-600 lb. class were reported to be steady to $3 higher. Feeder cattle were called mostly steady on limited trade. There was good attendance of buyers, an increase in the number of fleshy new crop calves along with more plain quality cattle noted in the day’s run. In Three Rivers, TX, feeder steers and heifers were called steady to $3 higher. A special replacement sale combined with the regular weekly sale made trade excellent with excellent demand. — WLJ  

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Thursday, December 20,2007

State approves expanded loan forgiveness for vet students

by WLJ
Veterinary students who agree to work with farm animals in parts of rural Missouri would be eligible to have some of their student loans excused under legislation sent to the governor last week. The bill would allow six vet students at the University of Missouri-Columbia to get an $80,000 loan. It would forgive $20,000 for each year the students work in a rural area and focus on treating farm animals after they graduate. Tuition for veterinary school in Missouri costs about $60,000 over four years. The measure was approved 157-0 in the House and 33-0 in the Senate.   Sponsoring Rep. John Quinn, R-Chillicothe, said Missouri has a shortage of veterinarians and the bill is needed to entice more veterinary students to focus on large animals rather than pets. Across the country, farmers and veterinarians have complained that there are not enough new large-animal practitioners to meet increasing demand and replace older vets who are starting to retire. But even as legislators consider a loan incentive, veterinarians and educators acknowledge that part of the solution is attracting more veterinary students. The state’s sole veterinary school on the Columbia campus admits fewer than 100 students each year, of whom about half in 2005 and 2006 said they wanted to work in Missouri. John Dodam, associate dean for academic affairs for the College of Veterinary Science at the University of Missouri-Columbia, said the department found that over the last two years, about 30 percent—or roughly 22 students annually—said they wanted to work with large animals. Congress and several states around Missouri, including Kansas and Oklahoma, have proposed scholarships and other programs to recruit veterinarians to the farms. The American Veterinary Medical Association predicts that nationwide, demand for food-supply veterinarians will increase by about 12 percent through 2016. But current increases in new vets foretell an annual 4 percent or 5 percent shortfall. Those figures count all food-supply veterinarians, from those who work with farmers to those in federal regulatory agencies and those who inspect butchered meat. But the group’s president, Roger Mahr, said there is a particular need at the ground level.

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Thursday, December 20,2007

Operating committee recommends 2008 Beef Board budget

by WLJ
The Beef Promotion Operating Committee has recommended a $48.87 million Cattlemen’s Beef Board budget for fiscal year 2008, reflecting a sharp 9 percent decrease from the $53.28 million budget for fiscal 2007. The budget for the Beef Board, which administers the national checkoff program, includes projected revenue of $45.7 million for fiscal 2008, plus money to be available from programs costing less than originally estimated in fiscal 2006. “While getting better at estimating costs is most definitely a good thing,” said Cattlemen’s Beef Board Chief Executive Officer Tom Ramey, “it does result in a decrease in the budget for next year because the contractors spent a higher percentage of their budgets.” The breakdown of the budget recommendation, which must be approved by the full Beef Board and USDA before any funds are expended, includes the following budget elements: promotion ($22.7 million); research ($7.4 million); consumer information ($6.2 million); industry information ($2.4 million); foreign marketing ($5.15 million); producer communications ($2.27 million); evaluation ($240,000); program development ($125,000); USDA oversight ($210,000); and administration ($2 million). The 2008 fiscal year begins Oct. 1, 2007. “We faced a substantial challenge in determining where to decrease expenditures to meet the smaller budget in the coming year,” said Ken Stielow, a producer from Kansas and chairman of the Cattlemen’s Beef Board which met May 17. “Many of us arrived in town early to spend the week with state beef council executives and leaders of the checkoff’s joint program committees as they developed strategies for investing the limited checkoff dollars in the most efficient manner possible in fiscal 2008,” Stielow said. Stielow said that making the cuts in the promotion area was particularly difficult. “It is, of course, the most visible area of checkoff investments, but we also understand that areas such as research and foreign marketing are extremely important as we try to stay ahead of disease and pathogen challenges and tap international markets where the majority of our growth potential lies.” In the coming stages of the fiscal 2008 budgeting process, the full Beef Board will be asked to approve the budget at its meeting in Denver in July. Joint industry advisory committees and subcommittees also will meet in Denver to prepare recommendations for specific program proposals that are funded with that budget. Those proposals will be considered by the Operating Committee in September, before the Oct. 1 beginning of the fiscal year, and must finally be approved by USDA before any checkoff dollars may be spent. Funds from the Beef Board for national checkoff programs will be augmented by about $10.5 million in voluntary contributions from state beef councils to their national Federation of State Beef Councils, a division of the National Cattlemen’s Beef Association.

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