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Thursday, December 20,2007

Consumer demand supports market

by WLJ
Slaughter numbers last Thursday were estimated by USDA at 698,000 head, 10,000 below the previous week, but still well above 2005’s harvest of 661,000 during the same week. Despite the higher harvest, boxed beef values remained strong most of last week as order buyers were busy filling demand with immediately available Choice rib cuts bound for holiday barbeques. That demand created a strong rise in the Choice/Select spread last week. On Wednesday, the Choice product added $2.30 to trade at $147.48. Select cutout values rose 95 cents to close the day at $126.17. Thursday trade was steady for Choice, Select; Select traded 60 cents higher to $126.77. Despite strong retail demand for steaks, the 50 and 90 percent boneless markets were showing weakness last week as cow processors were having no trouble filling production chains with cull cows from drought afflicted areas. This over abundance of available grind product put pressure on the market causing a decline of more than $1 on the 90 percent lean last week. The rise in available beef supply in the months ahead is likely to cause a similar pressure on the boxed beef complex as packers and feedlots attempt to work through fed cattle supplies in a timely manner. Regardless, through the summer, packers are likely going to have the upper hand as the market begins to soften, even if export markets are opened in the next 30 to 60 days as expected. Feeder cattle Feeder cattle contract trade on the CME last week moved higher, helped in part by strength in fed cattle contracts and a positive tone to cash feeder cattle trade. According to Virginia Tech Commodities Marketing Agent Mike Roberts, feeder cattle prices were nearly neutral in movement from last Monday. Feeders were supported at the beginning from lower corn prices on the Chicago Board of Trade then held onto gains despite a rally in corn. Several traders noted no market enthusiasm on the floor. Roberts said cash sellers should still consider being forward priced to protect some third quarter marketings. He said hedgers could think about some protection but could hold to a “wait-and-see” attitude while staying ready to take action. Meanwhile in auction markets around the country, good runs of spring cattle in many areas are being met with strong demand. In California where spring runs delayed by excess moisture are in full swing, buyers are pushing calf prices upward. At Western Stockman’s Market in Famoso, CA, last Monday’s sale brought prices as much as $4 higher than the prior week. Stocker cattle met excellent demand. Feeder cattle also saw big demand with many lots selling to out of state buyers. Feeder steers in the 600- 700-lb. range sold in a wide range from $90-114.50. Feeder steers in the 825- 900-lb. range sold for $80-97. In Salina, UT, feeder steers from 350-600 lbs. traded $5-6 lower, with heavier weights trading downward $2-3. Feeder heifers under 600 lbs. traded $3-4 lower, while those over 600 lbs. were $1-2 higher. Feeder cattle trends were difficult to find last week farther north where calves are scarce this time of year, however, in West Fargo, ND, offered lots sold for prices steady to $2 lower than the previous week. Demand was reportedly strong for thin-fleshed lighter-weight feeders suitable for grass in the area as a result of abundant moisture. In Hub City, SD, compared to the prior week, feeder steers and heifers sold $2-3 higher. Farther south, in Joplin, MO, the cattle on feed report released on May 19 had little effect on the nation’s largest livestock auction. Feeder cattle and calves sold firm to $4 higher. Demand was good for all classes, but best for yearlings as the full advance was just as evident on 8 weights as it was on the 4 weights. Calves were plentiful and mostly unweaned but discounts were minimal. In Oklahoma City, OK, temperatures in the region soared above 90 degrees last week and the weather wiped any moisture gains from the past few weeks away and threatened crops and pasture once again. Despite the decline in the moisture conditions, feeder cattle traded $1-4 higher. Stocker cattle and calves were steady, except 600-lb. steers which dropped sharply to trade $4-8 lower. Demand was called good for all classes on moderate demand, at best for heavier weight unweaned calves. Market reports told of numerous cows in the area headed to town as producers begin to cull in the face of the drought. In Texas, reports of culling were numerous and reported auction numbers indicate a number of cattle are being culled to save grass for the best of the herd. Several auction markets did not report feeder numbers as a result of large cow sales. However, in Coleman, TX, feeder steers and heifers under 500 lbs. were called steady, those over 500 lbs. were also steady. Yearling feeders were steady to $1 higher.

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Thursday, December 20,2007

International beef exports up, imports strong

by WLJ
Red meat exports The report was published by USDA’s Foreign Agricultural Service (FAS). The documents display data for March 2006. According to the recent report, U.S. exports of beef, as well as veal cuts and beef variety meats during March, increased nearly 21 percent from February, totaling 47,228 metric tons. This figure is up 48.5 percent from a year prior, when almost all Asian borders refused U.S. beef. In addition, exports of fresh product totaled 19,614 metric tons, up nearly 24 percent over February. Exports of frozen product also increased to 4,396 metric tons, which calculates into a 118.5 percent jump. As Asian markets began to allow imports, the demand for “variety cuts,” such as tongue, liver, heart and tripe, drastically increased. During March, the U.S. exported 21,410 metric tons of beef variety meats. This was up 10 percent over the previous month and up 19.1 percent over March 2005. Through the first quarter of 2006 thus far, U.S. beef variety cuts exported increased 11.2 percent more than a year ago, totaling 62,804 metric tons. Canada received 5,200 metric tons of U.S. beef in March, which was 8.5 percent less than in February. However, year end exports increased 81.7 percent above 2005, totaling 16,678 metric tons. Although many suspect the rise in international beef exports to be attributed mainly to the resumption of some Asian trade markets, analysts say that’s certainly not the only reason. “Some of it is due to Asian markets, but the majority of the increase is attributed to the growth of Mexico’s market,” said Lynn Heinze, U.S. Meat Export Federation spokesman. Despite some Asian trade partners resuming trade, the largest variety meat export market was Mexico, receiving 33,538 metric tons, over half the grand total exported. All beef exported to Mexico increased 31.9 percent in March compared to February. More specifically, 29,255 metric tons of beef were exported to Mexico. As of March, Mexico was the U.S.’s largest export market with 59.9 percent of beef going to Mexico. The total was 80,561 metric tons, which was 42.3 percent greater than last year. “The markets in the Middle East are also experiencing rapid growth, particularly in Egypt,” said Heinze. The report showed beef exports to Egypt in the first quarter totaled 14,037 metric tons. This figure is significant, due to the drastic increase from last year’s mere 49 metric tons. Overall, during the first quarter of 2006, U.S. beef, veal and beef variety meat exports totaled 134,430 metric tons, 37.3 percent higher than a year ago. “We are continuing to get back to previous levels,” said Heinze. “We are getting back on track with Taiwan and Hong Kong, despite recent problems. As far as Japan, there are just a bunch of assumptions being made. As we already know, it will happen when it happens.” Heinze said Japan, once the largest export market, will make a dramatic difference in export figures once trade is resumed. Red meat imports Beef imported into the U.S. is up, but remains below last year’s levels. During March, the U.S. imported 100,116 metric tons of beef and veal. This was 26.9 percent higher than February, but 7 percent lower than a year earlier. Fresh beef imports jumped 18.4 percent, totaling 32,117 metric tons. This figure was down 14.4 percent from last year. Frozen beef imports were up 35.7 percent over the previous month, but decreased 2.6 percent from March 2005, amounting to 58,410 metric tons. Beef imports from Canada during March were 27,287 metric tons. Although this was 13.9 percent more than February, it was 21.4 percent less than last year. During the first quarter of 2006, the U.S. imported 74,698 metric tons of beef from Canada. This was 15.8 percent less than 2005. These figures translate into Canada serving as the largest source of beef imported to the U.S., consuming 27.4 percent of the grand total. In March, beef imports from Australia rose 149.5 percent over the previous month to 29,023 metric tons. This was also 27.3 percent higher than a year ago. This year, Australian beef imports totaled 64,219 metric tons, up 72.2 percent from that a year prior. Imports from New Zealand were up 8.8 percent from February, at 19,239 metric tons. However, from a year ago, New Zealand imports were down 17.8 percent from March 2005. During the first quarter, imports from New Zealand were 6.5 percent less than last year, totaling 55,016 metric tons. The U.S. imported less beef from Uruguay than in February or last year. Imports equaled 11,623 metric tons in March, which was 16 percent less than a month prior and 14.5 percent less compared to last year. The imports totaled 41, 216 metric tons, dropping 11.4 percent. Overall, however, U.S. beef and veal imports during the first quarter of 2006 totaled 272,681 metric tons, which was up 1.6 percent over the same period a year ago. Live cattle imports The U.S. is expected to receive 2.2 million head of cattle from other countries in the current year, which is a jump of 21 percent. Last year, 1.8 million head entered the country. The 2006 increase is due, in large part, to the allowance of a full year of Canadian imports. Last year, the Canadian border was closed until July. The forecast, however, assumes no imports of Canadian cattle over 30 months of age for 2006 and 2007, consistent with government policy currently in place. Already in the first quarter of 2006, imports from Canada totaled 342,383 head. About 62 percent were fed cattle and 38 percent were feeders. The difference between U.S. and Canadian fed cattle prices has narrowed significantly in the past several weeks, in part due to slippage of the U.S. dollar against the Canadian dollar. Canada has been contributing about 25,000 head per week to U.S. slaughter totals, counting both fed cattle imported for immediate slaughter and imported feeder cattle placed earlier in the year. “Canada continues to reduce the surplus of cattle that accumulated following its initial case of BSE (bovine spongiform encephalopathy) in May 2003,” said FAS analyst, Mildred Haley. The Canadian cattle inventory at the beginning of 2006 was approximately 14.8 million head. This figure was actually down from January 2005, with a record 15.1 million head imported. As the U.S. reopened the border to Canadian cattle, their slaughter patterns have shifted to include more non-fed cattle, as packer margins remain higher on these animals compared with the fed cattle for which U.S. packers also compete. The Canadian International Trade Tribunal ruled on April 18, 2006, that duties imposed last December on U.S. corn entering Canada were not justified on antidumping grounds. These duties were $1.65 per bushel of corn imported from the U.S., although producers who exported livestock back to the U.S. could apply for rebates. The tribunal ordered duties charged in the interim to be refunded. Cattle imports from Mexico in the first quarter of 2006 totaled 366,196 head, surpassing 2005. Drought conditions also exist in northern Mexico, although the severity does not appear to match that in adjacent areas of the U.S. Total imports from Mexico in 2006 are expected to compete with the 1.3 million head imported last year. However, that figure may come short in the near future as babesia, commonly referred to as Texas fever, worsens in Mexico, worrying some cattlemen. Cattle imports for 2007 are forecast at two million head, which is down 9 percent from 2006 calculations. Live cattle exports The projections for U.S. cattle exports in 2006 are 30,000 head. So far, 8,721 cattle have been exported, of which 97 percent went to Canada. Exports in 2007 are projected to increase by 50,000 head, with most going to Canada. International trade is on the right track, according to Heinze. According to industry leaders, cattle producers, feeders and packers have reason to be optimistic. — Mike Deering, WLJ Editor

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Thursday, December 20,2007

Drought worsens, but producers have options

by WLJ
— Drought means more than just limited grass, poisoned livestock.   Livestock auction markets are being flooded with cattle, in large part due to the worsening drought conditions in virtually all prominent cattle states, especially in the southern Plains states. Many cattlemen are already hauling cattle elsewhere and/or spending extra dollars to feed cattle early where grass is marginal to sparse. The USDA’s drought monitor shows conditions to be the worst in Arizona, New Mexico, Oklahoma and Texas. Unfortunately, relief is not projected for the near future, leading cattlemen to make critical decisions. Although precipitation cannot be forecasted with 100 percent accuracy, ranchers can hedge with an effective drought plan. Besides selling out and relocating cattle, industry leaders say there are alternatives and cattlemen need to have a plan in place now to prevent last minute decisions, which often whiplash into regret. In fact, in Arizona where drought has been persistent for the last several years, only 50 percent of the cattle population remains from 10 years ago, according to University of Arizona, livestock specialist Bob Kattnig. More than sparse grass When thinking of drought, the first thing often coming to mind is limited natural feed sources, which means less profit and more costs. Although this is a true and logical thought, according to cattle and range specialists, the problem far exceeds grass shortages. Drought may not only discourage grass growth, it also increases plant toxicity, creating a potential for poisoning livestock. “Stressed pastures bring out toxic plant problems in several ways,” said Dave Sparks, food and animal health extension specialist in Oklahoma. “At these times, toxic plants become more prevalent. Many toxic plants are able to withstand the stress of overgrazing better than more palatable forage plants. As the stress on the pasture continues, decreased competition (from grass) means greater populations of toxic plants. Many of the toxic plants even become more toxic under stress conditions such as drought or overgrazing.” He said drought conditions can also result in protein, energy, mineral and/or vitamin deficiencies, which escalate the problem due to increasing ruminants’ vulnerability to plant toxicity. Unfortunately, there are not just a few toxic plants to look out for during this summer’s drought. In fact, there are over 100 plants that could cause problems, including cockleburs, johnsonsgrass and milkweed. Kattnig said cattle are currently eating toxic plants they wouldn’t normally eat due to limited feed sources. He said the most problematic plant in Arizona is burrow weed. Symptoms as a result of toxic plants can include diarrhea, abortion, birth defects, colic, nitrate poisoning, the inability to rise, the inability to eat or drink and many others. Sudden death can also occur. To prevent drought-thriving toxic plants, Texas A&M range specialist Charles Hart and livestock specialist Bruce Carpenter said producers must first learn to identify the plants. From there, said the duo who has researched the topic for several years, producers need to implement effective grazing and livestock management practices and then take action to control the plants before they consume the grazing area. Alternatives: Supplementing Carpenter, located in Fort Stockton, TX, said he hasn’t seen any significant precipitation since October, aside from spotty rainfall. As a result, he is currently guiding producers through an array of alternatives, including protein and energy supplementing. He said when talking about feed alternatives, producers often think of hay, cubes and/or cottonseed hulls. However, he said these sources are not an economical avenue to pursue, encouraging producers to look elsewhere for feeds that are similar in nutrient value and content to the expensive options. For example, Carpenter recommends corn gluten as a cheap, readily available alternative, but warns producers of possible sulfur problems, suggesting caution with all alternative feeds. He said to always read labels before selecting a feed alternative. He said cattle require a minimum of seven percent crude protein in their diets, just to keep the digestive system microbes alive and working on forage digestion. He said protein supplementation can actually stimulate forage intake and suggests having mineral available at all times. Since bringing in actual supplemental feed on public grounds in Arizona is prohibited, Kattnig strongly recommends free choice protein supplements. He said it is best to select protein that is all natural, as problems are more likely to occur when urea is included. Carpenter said higher density energy supplements can make up for short grass, but said large quantities of energy in any form for extended periods of time are often uneconomical. “Protein should be first priority because energy, pound for pound, costs more,” Carpenter said. In addition to feed supplementing, Kattnig said the other situation is water. “In the places we have forage, we don’t have water,” said Kattnig. While protein and energy supplementing is not as labor intensive, “hauling water is both expensive and difficult.” Another unpopular topic with producers is determining how thin cattle can get before they are too thin. “Although some disagree, body conditioning can be allowed to drop to a score of three,” said Kattnig. “Producers should be more concerned with keeping the cattle alive. If she’s young and thin, but still alive, the asset still exists. When moisture finally comes, it will bring her profit potential back.” Culling Culling should be done now, according to both Carpenter and Kattnig. However, their culling strategies differ. They agree open and older broken mouth cows should be the first on the trailer. Next, however, Carpenter said cull yearling heifers, then 2-year-old heifers. Carpenter said the last thing to go should be good conditioned females ranging from 5 to 8 years of age. Kattnig suggests selling calves after the broken mouthed cows, but in contrast, said keeping the yearlings and 2-year-old cows is wise. “If you cull your young cows now, all of a sudden you have an old herd,” Kattnig said. “You must retain young cows. If the drought ends in four years and you have culled your young cows, all of a sudden you have a pasture full of 8- or 9-year-old cows. Then you are left with high replacement costs.” He said another reason young cows should stay is genetics. “If you continue to liquidate young females, you eliminate your herd’s hardiness. You eliminate your genetics consisting of cows adaptable to your environment. The herd’s grazing knowledge is gone,” said Kattnig. “Cow’s adapted to your grazing conditions know where the water is and know where the grass is and they go find it.” Early weaning Early weaning can be done several different ways, depending on the producer’s goals. Carpenter said producers who simply want to take stress off the cows to enhance body conditioning and are willing to accept lighter weight calves would be best served by weaning two months early. However, he said producers wanting to get the calves off the cows in order to ensure breeding success should wean at 2 to 3 months of age. “To do this, better have creep ready and a place to put them; if you don’t, it may not be worth it,” said Carpenter. Glenn Selk, Oklahoma State University animal scientist, said weaning at 2 months of age should be the last resort. “When you are not willing to sell cows because you have spent a lifetime building the herd genetics the way you want them and there is no rain and fires keep spreading, then it may be the way to go,” said Selk. “Like I said, this is a last ditch resort, not the easiest.” Kattnig said Arizona cattlemen seldom wean early. “It would a good strategy if you have the facilities. Out here on public lands, there is nowhere to put them that lends itself well,” he said. “If they wean early, they have to sell them right off the cow, which may be an option.” Kattnig, who is a Colorado native, said the strategies used in Arizona can also be used in other western states. He said “drought is drought,” and the same strategies can be applied throughout all regions. He said strategy usually depends on financial limitations. “When you choose a strategy for dealing with drought, you need to look three to four years down the road to see what effect the decisions made now will have on capital in the future. Questions such as, ‘can you afford to buy replacements later,’ need to be answered,” said Kattnig. “The big challenge in drought seasons is figuring out a way to maintain capital.” — Mike Deering, WLJ Editor

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Thursday, December 20,2007

Ethanol import tax opposed in Congress

by WLJ
President Bush made clear his desire to boost ethanol supplies and to try to generate more imports at a meeting on energy with a bipartisan group of lawmakers. Energy Secretary Samuel Bodman said that while the administration “will continue to consider” ways to boost imports, including removing the tariff, “it’s largely a congressional matter.” “The President has encouraged Congress to examine all alternatives for increasing the available supplies of ethanol, and we will continue to do that,” Bodman said. Oil companies have attributed part of the recent increase in gasoline prices as much as eight cents a gallon, according to some estimates of refiners shifting from MTBE as a gas additive to corn-based ethanol. MTBE, or methyl tertiary butyl ether, has been found to contaminate water supplies, which prompted a rash of lawsuits. Last summer Congress required a ramping up of ethanol use to four billion gallons this year and 7.5 billion gallons by 2012. The sudden switch caused some ethanol supply concerns from refiners and, in turn, more talk about finding ways to increase imports, which totaled 135 million gallons last year. “Congress can bring down prices by cutting the tax on imported ethanol,” Rep. John Shadegg, R- AZ., maintains. Shadegg has introduced a bill that would suspend the 54 cent import tax for the rest of the year. Congress seems in no mood to tamper with the tax, which is strongly supported by farm-state lawmakers, including some of the most powerful on Capitol Hill. “It’s a step in the wrong direction,” Sen. Charles Grassley, R-IA. He is chairman of the Finance Committee, which would consider any change in the tariff. “It would send a signal that we’re backing away from our own efforts to seek energy independence.” The panel’s top Democrat, Sen. Max Baucus, D-MT, also said a change in the tax would be a mistake. House Speaker Dennis Hastert, R-IL, whose state has the biggest ethanol producer, Archer Daniels Midland, also opposes a tax change. If the administration tries to move on its own, says Sen. Byron Dorgan, D-ND, whose state is another center of ethanol production, “they would run into a big fight in Congress.” Sen. Pete Domenici, R-NM, said at the White House and in some corners of Congress “there’s positive sentiment” for finding ways to get more ethanol imports but “nothing precise.” A leading producer of ethanol is Brazil, which presumably would be the source of more supply. But Brazil has its own gasoline supply concerns and it’s not certain how much additional fuel it would be able to provide. Many energy experts also believe the ethanol concerns are temporary and the problems have had less to do with a shortage of the additive than other factors associated with the switch. It “required changes all along the supply chain, different suppliers, different transportation, and different locations for blending. Normally, a change like that is done over several years,” says energy consultant Daniel Yergin of Cambridge Energy Research. Yergin predicted the transition and any resulting price impact of the ethanol shift is likely to be over before the heavy summer driving season sets in. “Right now we don’t seem to be having any problems,” said Charles Drevna, executive vice president of the National Petrochemical and Refiners Association. He said the group hasn’t taken a position on the ethanol import tax. The ethanol industry says there’s plenty of the fuel and more is on the way with new plants to come on line this year. “We don’t need increased imports,” said Matt Hartwig, a spokesman for the Renewable Fuels Association, which represents the ethanol producers. Hartwig said that nearly five billion gallons of ethanol will be produced this year and that the industry capacity is expected to approach six billion barrels by the end of the year, more than enough to meet refinery demands.

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Thursday, December 20,2007

North Dakota places restrictions on some Montana cattle imports

by WLJ
State officials in North Dakota have announced more testing and entry requirements for Montana cattle after an outbreak of brucellosis in that state. The North Dakota Board of Animal Health issued an order last week, calling it a precaution, after seven cows from a ranch near Bozeman, MT, were diagnosed with brucellosis. North Dakota has been certified as brucellosis-free since 1982. Dr. Susan Keller, the state veterinarian, said the requirements for cattle from Montana include a health certificate and identification number. Cattle and bison 18 months or older that are capable of reproducing must have tested negative for brucellosis within 30 days of import, she said. The Animal Health Board President, Nathan Boehm of Mandan, ND, said the board will take up the issue again next month. Keller said border counties may be considered for an exemption from the test requirements because of the movement of cattle during grazing season. “There is also an allowance in there for about two counties on the other side of the border, or eastern part of Montana, so that our office can look on a case-by-case basis to determine if we can waive that requirement for a brucellosis test for those counties,” Keller said. Brucellosis can cause infected cows to abort their offspring. It also causes decreased milk production, weight loss, infertility, and lameness. Keller said the infected Montana animals came from a ranch near Yellowstone National Park, home to bison and elk herds with a high incidence of brucellosis in some areas. Pasteurized milk and properly cooked meat are safe, she said.

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Thursday, December 20,2007

Fed cattle prices fall $2-4

by WLJ
Despite packers being somewhat short-bought last week, the country trade got started off early last Wednesday with feedlot managers in Nebraska taking lower money for more than 55,000 head of fed cattle at a weighted average price of $147.42 dressed basis, nearly $4 lower than the previous week’s trade. Live trade was off $2-2.50 at $92-92.50 in Nebraska. Colorado live sales sold $1.50 to $2.50 lower at $92.50 and dressed sales sold $3-4 lower from $146-147. Live sales in the western Corn Belt sold $1-3 lower at $93 and dressed sales sold $2 lower from $148-149. Trade in the southern Plains was mostly inactive as of last Thursday, with feedlots holding onto inventory and asking $96. Analysts expected trade to wait until Friday before occurring in earnest. Southern sales the previous week came at $94-95, and most expected last week to trend $2-3 lower. Given the very current marketing state of most feedlots, many market analysts were questioning the decision to sell cattle at a discount last week. Some of the weakness in the market is a direct result of the slipping beef cutout values and lackluster fill-in trade following the Memorial Day holiday weekend. Cutout prices last Thursday were down sharply at mid-day, despite a shortage of available Choice grading carcasses. Choice cuts were down $1.67 to $155.55, while Select lost $1.49 to trade at $146.34 with good movement. Packer margins, estimated by HedgersEdge.com, were still in the black last week at $14.15 per head and processing chains were running at full speed to take advantage of profitability during last week’s holiday shortened schedule. The kill for the week through last Thursday was estimated at 386,000 head, down from the prior week’s level of 507,000 head, and 1,000 more than the same shortened week in 2006. The calf-feds are now pouring into the market, dropping the number of Choice grading cattle available to fed cattle buyers. The percentage of Choice grading cattle has dropped sharply in recent weeks. According to USDA data for the week ending May 29, steer carcasses grading Choice were nearly two percentage points behind last year, while heifers are running a point behind last year's percentage. As that number drops farther going into the summer, the Choice/Select spread will continue to increase, favoring the more sought after Choice product as the summer grilling season gets underway. One additional area of market support could be found in last week's cull cow market. The prices paid through this spring for cow beef have been tremendous and although prices have slipped some from the highs of a few weeks earlier, producers who have been shipping cows to town are still receiving good prices throughout most of the country. The cow cutout value last Thursday was $121.02, well above the same week a year earlier when it was hovering at $107.41. The 90 percent lean market was at $152.78, well above the year ago price of $132.65. The 50 percent trim was also well above year earlier levels at $75.29 compared to $42.54 the same week in 2006. One of the primary reasons for the climbing cow beef market is a lack of cull cows coming to market. Despite drought conditions in the southeast, which is sending feeder cattle to market early in that region, producers are holding onto culls as herd building efforts begin. Herd building has been stagnant in the wake of two years of dry conditions and although market analysts expect the first half of the year to show flat to slightly positive herd growth, many expect it to pick up in the second half of 2007. On the Chicago Mercantile Exchange last Thursday, live cattle contracts closed higher across the board. June ended up 45 points at $91.15, August was up 37, closing at $91.47, and October closed 45 higher at $95.22. Those prices bode well for feedlots which have been in positive territory for closeouts for the past three months, according to Dillon Feuz, agricultural economist at Utah State University. “By my estimate, the average return to feedlots in Nebraska since March of this year has been $25 per head. A moderation in feed prices and fairly strong fed cattle prices has helped feedlots this spring. Lighter slaughter weights, which has reduced total beef tonnage, has likely kept the box beef market a little higher and this has helped fed cattle prices,” Feuz said. “Looking into the future, it would appear that prices for fed cattle in Nebraska would need to average over $90 per cwt. for June, July and August for feedlots to be able to show positive returns throughout that time frame. Current June and August live cattle futures are at $90.70 and $91.10 per cwt. If basis follows historical levels, that would imply fed cattle prices for June, July and August of $92, $90.50 and $90.75 per cwt.” Feuz said the next three months appear to be breakeven months for feedlots. The result could be a lack of exuberance when it comes to contracting for fall feeder cattle. “While this is preferable to red ink, there probably won’t be enough black ink for feedlots to get very aggressive with fall feeder cattle purchases. With uncertain feed prices, I would expect feedlots to be conservative in buying feeder cattle this fall,” Feuz said. Already, there are reports that fall contracts are being signed in cow/calf country, and although prices are difficult to come by, there are rumors that contract prices are running near last year's levels. The implication is that those who sign delivery contracts early on could be seeing the best prices of the year for feeder cattle. Those who hold out are likely to see pressure and fluctuation from the corn market and an uncertain summer for cattle feeders facing slim margins. Feeder cattle Meanwhile, in cow/calf country, most auction markets had a limited offering last week as most calves have moved out to grass and numbers are not expected to pick up until August. However, demand still remains high for thin type cattle ready to go to grass. Fleshy new crop cattle continue to take a hit at most markets. With the decrease in supply last week, feeder cattle prices remain strong. Grazing conditions are generally good and many cattle placed on grass were weighing close to 600 lbs. There's still good demand for light stocker cattle and that has held prices steady as stocker operators see good margins for summer grazing. With the continued moisture throughout a large portion of the western states, producers are feeling very comfortable with increasing summer stocking rates. “We’ve had a lot of moisture in this area this spring and we are certainly thankful for it,” says Tom Johnson, a cattle producer from northeastern Colorado. “I am planning to increase my stocking rates on a lot of these pastures this summer. I haven't been able to do that for awhile but I might as well use it while I've got it.” Many operators are offering cattle for fall delivery at par with the board and finding bids a couple dollars under the board delivered to feed yards on the southern plains. In Billings, MT, compared to the previous week, feeder cattle offerings were too limited to allow any price comparisons. Demand was good for both the stockers and feeders that were offered. Steers averaging 550 lbs. sold for $134 while their heifermates were worth $115.50. One set of seven weight heifers sold for $104. East in Jamestown, ND, with over 1,300 head, feeder steers and heifers sold unevenly steady. Demand was good. Steers that averaged 521 lbs. sold for $125.78. One lot of seven weights in fleshy condition were only worth $100 while another lot of steers weighing 782 lbs. sold for $104.29. Five weight females called for $121. A large lot of heifers averaging 792 lbs. sold for $94 while their fleshy counterparts were only worth $90. Moving south to La Junta, CO, feeder steers and heifers were once again too lightly tested for a comparison. However, one lot of steers weighing 555 lbs. brought $125 while their female counterparts only averaged $115. Steers weighing 835 lbs. sold for $104. One lot of six weight heifers brought $111. Further south in Clayton, NM, on a light test, feeder steers and heifers were steady when compared to the previous week. One package of steers averaging 522 lbs. sold for $132 while the heavier steers weighing 823 lbs. brought $98. Heifers that averaged 535 lbs. sold for $114.50 while those weighing 690 lbs. were only worth $98.50. In Salina, KS, steers weighing between 750 and 1,000 lbs. were steady last week with heifers ranging from 650 to 850 lbs. steady to $1 higher. Steers that weighed 528 lbs. sold for $131 and seven-and-a-half weights brought $110. Heifers weighing between 650 and 700 lbs. averaged $106.41. One lot of 69 females weighing 818 lbs. sold for $102.10. In Amarillo, TX, feeder steers and heifers over 700 lbs. were steady to $2 lower with most of the decline on steers over 800 lbs. Steers under 700 lbs. were limited but there was a higher undertone noted. Five weight steers brought $121 while those ranging between 750 to 800 lbs. averaged $107.50. Heifers weighing between 500 and 550 lbs. averaged $115.50 while their fleshy counterparts were only worth $103. One package of heifers weighing 640 lbs. sold for $92. Further to the east, in Joplin, MO, with almost 6,000 head, feeder cattle and calves sold steady to $2 higher with heifer calves as much as $3 higher. Demand was good for all classes, but best for the numerous load-lots of yearling feeder steers weighing over 800 lbs. Quality of the good-sized offering filled the range from plainer quality odd singles to large strings of top quality consignments. Buyers remained aggressive with many of the top prices posted late in the afternoon. Steers weighing between 500 and 550 lbs. called between $122 and $132. One package of fleshy 870 lb. steers sold for $102.25. Heifers averaging between 550 and 600 lbs. sold between $104.50 and $113. One load of females averaging 815 lbs. sold for $98.

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Thursday, December 20,2007

Congress approves disaster aid funding

by WLJ
Nevada ranchers and farmers plagued by two straight devastating wildfire seasons will receive millions for livestock loss compensation under a war spending bill approved by Congress and sent to President Bush for his signature. Senate Majority Leader Harry Reid, D-NV, who worked to include the funding in the measure, said it would help to cover increased feed costs, fence repairs and rehabilitation of private fire- damaged rangelands. While the legislation designates $1.2 billion for livestock loss compensation nationwide, no breakdown by state was immediately available. “In Nevada, more than 3 million acres were burned by wildfires in the last two years, creating untold damage to critical rangeland,” Reid said in a statement. “Nevada needs this money, and it needs it as quickly as possible. That’s why I’m doing everything I can to expedite the process to get this funding into the hands of the farmers, ranchers and first responders who need it the most,” he said. For ranchers and farmers who lost the use of private land or who face public land allotment closures due to wildfire damage, Reid said it could be years before rangeland is suitable for grazing again. To try to restore the land, state and federal agencies, along with conservation and wildlife groups, seeded roughly 400,000 acres, or 625 square miles, in Nevada after the fires. But with little moisture this spring to germinate seeds and establish seedlings before the heat of the summer, officials were not optimistic. The $1.2 billion in compensation for ranchers was among $3 billion for agriculture disaster relief nationwide. The bill, which also contains $95 billion for the wars in Iraq and Afghanistan and billions in other domestic projects, passed both houses of Congress before Congress adjourned for the Memorial Day holiday. Despite the best efforts of several farm state congressional members, the money in the final bill was about $1.9 billion less than a version circulated earlier this year. In addition to the money set aside for Nevada producers, the funds in the measure will also help framers and ranchers in other areas, including those in Colorado and North Dakota. In Colorado, farmers and ranchers suffered heavy losses in this winter’s blizzards, which followed several summers of drought. “Colorado’s farmers and ranchers are grateful that their voices have been heard,” said Rep. John Salazar, D-CO. “This funding will go a long way to supporting our small farms in southeastern Colorado.” The bill includes assistance for farmers who lost 35 percent or more of their crop in 2005, 2006 and the first two months of 2007, as well as those who lost livestock in counties that received natural disaster declarations by the Agriculture Department in the same years. Farmers can receive a disaster payment for only one of the three years, and only farmers who insured their crop or were covered by the Non-Insured Assistance Program are eligible. The amount of money that would go to Colorado farmers was not immediately available.   “After working for months to get disaster aid to these producers, I am glad we have provided a funding bill that will reach the president’s desk soon,” said Rep. Marilyn Musgrave, R-CO. In North Dakota, agriculture officials welcomed the passage of the bill, saying approval by Congress and President Bush of $3 billion in agriculture disaster aid is welcome, and a long time in coming. “Finally the stars aligned in the right fashion to allow disaster assistance to be accepted by Congress,” said Mike Martin, president of the North Dakota Grain Growers. “I would hope that the money from this fund be distributed expeditiously so it can be put into the hands of farmers and ranchers.” “Farmers across the nation ... really need the help,” said North Dakota Agriculture Commissioner Roger Johnson, who is president-elect of the National Association of State Departments of Agriculture. “The weather in 2005 prevented planting of more than 1 million acres. Drought and crop disease also took their toll.” Johnson said that in 2006, every North Dakota county was declared an agricultural disaster area. Crop and livestock losses in the state from the 2006 drought were estimated at more than $141 million, he said. “Disaster assistance may be the deciding factor for many producers who are facing a make-or-break situation, especially with rising energy and chemical costs,” Johnson said. The legislation will compensate farmers who have sustained at least a 35 percent loss in either 2005, 2006 or before March 2007. Recipients must pick a year for which they want to be paid. Gov. John Hoeven said the effort to get the disaster aid approved involved both Democrats and Republicans. “We worked to get broad bipartisan support from a large part of the nation for the effort to help our farmers and ranchers, and now it has come through,” he said.

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Thursday, December 20,2007

Colorado State University welcomes Beef Improvement Federation meeting

by WLJ
Nevada ranchers and farmers plagued by two straight devastating wildfire seasons will receive millions for livestock loss compensation under a war spending bill approved by Congress and sent to President Bush for his signature. Senate Majority Leader Harry Reid, D-NV, who worked to include the funding in the measure, said it would help to cover increased feed costs, fence repairs and rehabilitation of private fire- damaged rangelands. While the legislation designates $1.2 billion for livestock loss compensation nationwide, no breakdown by state was immediately available. “In Nevada, more than 3 million acres were burned by wildfires in the last two years, creating untold damage to critical rangeland,” Reid said in a statement. “Nevada needs this money, and it needs it as quickly as possible. That’s why I’m doing everything I can to expedite the process to get this funding into the hands of the farmers, ranchers and first responders who need it the most,” he said. For ranchers and farmers who lost the use of private land or who face public land allotment closures due to wildfire damage, Reid said it could be years before rangeland is suitable for grazing again. To try to restore the land, state and federal agencies, along with conservation and wildlife groups, seeded roughly 400,000 acres, or 625 square miles, in Nevada after the fires. But with little moisture this spring to germinate seeds and establish seedlings before the heat of the summer, officials were not optimistic. The $1.2 billion in compensation for ranchers was among $3 billion for agriculture disaster relief nationwide. The bill, which also contains $95 billion for the wars in Iraq and Afghanistan and billions in other domestic projects, passed both houses of Congress before Congress adjourned for the Memorial Day holiday. Despite the best efforts of several farm state congressional members, the money in the final bill was about $1.9 billion less than a version circulated earlier this year. In addition to the money set aside for Nevada producers, the funds in the measure will also help framers and ranchers in other areas, including those in Colorado and North Dakota. In Colorado, farmers and ranchers suffered heavy losses in this winter’s blizzards, which followed several summers of drought. “Colorado’s farmers and ranchers are grateful that their voices have been heard,” said Rep. John Salazar, D-CO. “This funding will go a long way to supporting our small farms in southeastern Colorado.” The bill includes assistance for farmers who lost 35 percent or more of their crop in 2005, 2006 and the first two months of 2007, as well as those who lost livestock in counties that received natural disaster declarations by the Agriculture Department in the same years. Farmers can receive a disaster payment for only one of the three years, and only farmers who insured their crop or were covered by the Non-Insured Assistance Program are eligible. The amount of money that would go to Colorado farmers was not immediately available.   “After working for months to get disaster aid to these producers, I am glad we have provided a funding bill that will reach the president’s desk soon,” said Rep. Marilyn Musgrave, R-CO. In North Dakota, agriculture officials welcomed the passage of the bill, saying approval by Congress and President Bush of $3 billion in agriculture disaster aid is welcome, and a long time in coming. “Finally the stars aligned in the right fashion to allow disaster assistance to be accepted by Congress,” said Mike Martin, president of the North Dakota Grain Growers. “I would hope that the money from this fund be distributed expeditiously so it can be put into the hands of farmers and ranchers.” “Farmers across the nation ... really need the help,” said North Dakota Agriculture Commissioner Roger Johnson, who is president-elect of the National Association of State Departments of Agriculture. “The weather in 2005 prevented planting of more than 1 million acres. Drought and crop disease also took their toll.” Johnson said that in 2006, every North Dakota county was declared an agricultural disaster area. Crop and livestock losses in the state from the 2006 drought were estimated at more than $141 million, he said. “Disaster assistance may be the deciding factor for many producers who are facing a make-or-break situation, especially with rising energy and chemical costs,” Johnson said. The legislation will compensate farmers who have sustained at least a 35 percent loss in either 2005, 2006 or before March 2007. Recipients must pick a year for which they want to be paid. Gov. John Hoeven said the effort to get the disaster aid approved involved both Democrats and Republicans. “We worked to get broad bipartisan support from a large part of the nation for the effort to help our farmers and ranchers, and now it has come through,” he said.

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Thursday, December 20,2007

Fed market steady, beef demand strong

by WLJ
Memorial Day beef sales were good, and the post Memorial Day trade was better than expected. The boxed beef cutout was at $154.66 at mid week with the Select product $23.35 behind at $130.34, a very wide Choice-Select spread which is indicating a good supply of calf fed cattle in feed lots. Boxed beef trade volume was moderate but very steady with 300 loads trading every day last week. Slaughter volume remains very good. The week before Memorial Day, packers processed 698,000 head of cattle and were obviously down a day’s worth of slaughter during the holiday- shortened week. It appeared packers would process close to that 700,000 head mark last week, and were encouraged to do so with their margins staying in the $60 a head range. The last several weeks have represented the longest period of positive packer margins over the past two years. Beef sales have been much better than expected, however, many market watchers are expecting the boxed beef cutout to soften soon. Memorial Day always represents a big spike in the market and Fathers Day and 4th of July also have the same effect. Many are expecting to see the cutout lose ground some time this next week. Even though the cutout has been quite strong, the middle meats are keeping the index high as the chuck and round portions of the market are trading lower than they were a year ago. The ground beef market is also at a lower level than a year ago which should change some fast food restaurants’ attitudes about featuring hamburgers rather than the recent flurry of chicken breast products. The 90% lean beef market was at $125.58 and the 50% trim markets were at $41.52. A boneless, skinless chicken breast was trading at $1.25/pound, a solid 30% higher than it was a month ago. Futures markets have been remarkably strong and remain bullish to the beef industry. The June live cattle traded at $79.70, fairly steady from the prior week, and the August feeders were trading at $109.40, also relatively steady with the prior week. Feeder cattle Feeder cattle markets have been stronger with most auction markets reporting good demand on limited offerings due to a holiday-shortened week. The West Coast may be the only area moving seasonal volume. The June 6 Chicago Mercantile Exchange feeder cattle index was at $107.60. A month ago, the index was at $99.41. Dry conditions are prevailing in many areas of the south and southwest as well as in much of the western Plains states. Much of the north and west are in good shape and have ample grass. Derrell Peel, extension economist at Oklahoma State University, said the feeder cattle markets are pretty slow right now and grazing conditions are in poor shape in much of the U.S. Many of the cattle which would normally be on grass are in the feed lots. Oklahoma City had a good run, offering 14,500 head last week and saw both placement ready steers and heifers trading $2-4 higher. Calves, on the other hand, were $1-3 lower and 500- to 550-pound steers were averaging $1.25 with heifers trading about $8 lower. The ultralite steers, under 300 pounds, were trading at $160.

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Thursday, December 20,2007

Comments

by WLJ
June 6, 2005 The summer doldrums have arrived as beef movement for Memorial Day, one of the first “bellwether” weekends for summer, came up shorter than expected. Aside from just a poor beef holiday and a bad beef weekend, analysts are starting to indicate that beef demand is undeniably down. This summer market is starting to develop some normal seasonal bumps. Perhaps one of the big surprises was the number of heavy-weight cattle placed in feedlots last month. Cattle placements in the 800-pounds-and-over category were up 43 percent. Cattle-on-feed numbers were three percent up over a year ago. Beef demand showed its first official decline during the first quarter of this year, and it is expected that the second quarter of 2005 will be flat at best. The balancing act of slaughter volume and carcass weights are starting to weigh on the market, showing that cattle are staying in feedlots a little too long. Carcass weights bottomed earlier than normal and are now nine pounds over the average for this time of year. Cattle feeders are resisting marketing cattle at below breakeven levels, and a familiar story is starting to emerge again in the cattle markets. Slaughter may have the most profound effect on demand. Without the export markets, the normal expected weekly summer time slaughter of 700,000 head per week will not happen. Andy Gottschalk, analyst at HedgersEdge.com, is projecting a weekly slaughter demand base of 625,000 head, while he estimates weekly slaughter supplies at 660,000 head. For the year, the industry is 575,000 head behind last year’s slaughter level. With numbers increasing, carcass weights starting to grow and beef demand starting to level off, many market analysts are expecting to see a summer low develop around $82. Some of the more pessimistic analysts said the market could move into the $70s, and this is without any Canadian market influence. Speaking of Canada, the Ninth Circuit Court of Appeals announced that they will hear arguments on the temporary injunction regarding Canadian live cattle imports during the week of July 11. This was the injunction that Federal District Court Judge Richard Cebull granted R-CALF last March. Cebull will hold court on July 27 on whether to grant R-CALF’s request for a permanent injunction, which may include beef imports. Beef imports have been crossing the border for nearly two years. If the Canadian border opens sometime in August or September it could compound the pressure on the market, where it wouldn’t have had much effect in March, when U.S. fed cattle inventories are generally at their low point. Beef imports from Canada for the first quarter of 2005 were a whopping 32 percent over the first quarter of 2004; actually it’s only 20 million pounds, but 32 percent sounds more dramatic. However, Canadian beef imports are still not as high as they were the first quarter of 2003, which was 271.8 million pounds. Total beef imports for the first quarter of 2005 were down 6.4 percent. I spoke to auction market owner Bob Balog from Lethbridge, Alberta, last week and it was his opinion that most of the talk about new packing plants was just that, mostly talk. There was one new plant underway, but for the most part it was the major packers just getting bigger. Tyson is following through with their plans to increase output to 900 head a day at its Brooks, Alberta, plant. It’s the American packing companies that are doing the expanding. Meanwhile those dirty rotten packers are taking advantage of the situation, but there’s no reason to get angry at them because it’s only business. So with that said, the quickest way I can think of to fix that lopsided profiteering by opportunistic packers is to open the border to live cattle. In the event the border does open, I would expect the market to balance out very quickly and take the easy money out of the Canadian packing industry. Then those packers wouldn’t be so eager to expand those plants and ship all that high margin beef to the U.S. Regardless of what happens with all the legal issues with Canada, we still have the normal summer situation of stimulating beef demand and getting some of these cattle cleared out of the feedlots. — PETE CROW

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