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Thursday, December 20,2007

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by WLJ
August 8, 2005 With all the attention being paid to bovine spongiform encephalopathy (BSE) and the resumption of live cattle trade with Canada, several other items of importance to the industry have “flown under the radar.” It was interesting to note that USDA released its mid-year cattle inventory report in late July to very little fanfare. In addition, there was surprisingly very little reaction to the news that herd expansion continues on a nationwide basis. According to the report, there are 33.8 million productive beef females across the country and another 9.05 million head of dairy cows. Both of those figures were a full one percent larger than the same figures last year. In addition, five million replacement beef heifers were said to be held back by producers as of July 1, four percent more than last year. Three percent more dairy replacement heifers were also noted. I found the report fascinating and it propelled me to ponder whether or not cattle producers are starting to expand their herds a little too prematurely. I don’t ask that question because export markets are still closed to U.S. beef, because that will change in the very near future, probably within the next two months. Nor does the reopening of the border to Canadian cattle bother me much. What perplexes me about the desire to expand herds right now is that a majority of the West is still trying to recover from five to seven years of drought, which means pasture and rangeland is still in the process of getting back to “normal” production levels. In talking with extension personnel and rangeland specialists across the country, there is a fear that stocking rates are growing at a rate beyond sustainability and that drought in several of those areas is just a couple dry weeks away from recurring. This past winter, spring, and even very early summer, were abnormally wet and by mid-June a lot of climatologists were indicating the drought across most of the western U.S. appeared to have subsided to very minimal levels. In some states, those experts said the drought no longer had any foothold. However, in its Aug. 2 “Drought Monitor” report, the National Oceanic and Atmospheric Administration indicated that Oregon, Washington, Idaho, Montana, Wyoming, western and southern Nebraska, eastern Colorado, and parts of New Mexico and Arizona appear to be firmly entrenched in drought conditions again. A lot of that deterioration was the result of those states being hit by one of the hottest and driest Julys ever. In the case of Wyoming, Colorado, Nebraska and New Mexico, this past July was the second hottest and third driest on record. While USDA didn’t provide a regional or state-by-state breakdown of cow distribution, market analysts indicated that a lot of the expansion happened in the states mentioned above. Now questions are arising about whether or not there will be enough pasture, grass and other forage to sustain those increased cow numbers. The desire to expand one’s interest in the cattle business is understandable, particularly for those producers who have spent their lifetime in the industry and rely on cattle as a primary source of income and financial stability. However, if the resources aren’t there to support those animals, then there is a major problem. Are things better than they have been since the very late 1990s? Absolutely—grazing prospects are much better than they have been the past five, or more, years. However, producers still have to remember that it takes a lot more than one or two wet seasons to get back to normal, and right now normal appears even further away than just six weeks ago. How quickly things can change for the worse. It never seems to work that way when it comes to improvement. — STEVEN D. VETTER

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Thursday, December 20,2007

Kay's Korner

by WLJ
August 8, 2005 Wow, has the USDA ever got a bad rap over its BSE measures, particularly its testing program. If you believed some of the critics, you’d think a BSE epidemic was lurking beneath the surface and was ready to overwhelm the beef industry, if only USDA would admit it. Nothing could be further from the facts. To date, USDA’s enhanced BSE surveillance program has tested more than 426,000 of the cattle that are most likely to harbor BSE. That’s 61 weeks since the program began. Just one animal has tested positive for BSE. One case out of 460,000 doesn’t exactly suggest an epidemic. Nor does it suggest that USDA is doing anything less than a superb job in testing all most at-risk cattle in the U.S. Before USDA launched the enhanced testing program on June 1, 2004, it tested 8,992 cattle for BSE from January to May. That was 428 cattle per week. All samples went to USDA’s National Veterinary Services Laboratory (NVSL) in Ames, IA, where they were tested using the so-called gold standard IHC (immunohistochemistry) test. NVSL’s experience in using the IHC test was one reason why USDA decided to continue using this test as the confirmatory test on samples that might be deemed inconclusive under the enhanced program, which uses the Bio-Rad rapid test for initial testing. USDA then began its enhanced program. Understandably, it took USDA and the accredited laboratories involved in the program several weeks to come up to speed. Test samples initially were only 1,000 or so a week. But the program began to blossom as more samples came from various sources and labs got their testing techniques perfected. After 61 weeks, the program had tested an average 6,986 samples per week. The tests didn’t average more than 6,000 per week until Week 19. So, achieving that weekly average is nothing short of remarkable. It’s even more so when you consider that the average number of tests per week is 16 times larger than before the program began. Yet, none of this has deterred USDA’s critics. All they have focused on is the fact that USDA found its first domestic case of BSE after a sample was retested, and the fact that a hard-working country vet forgot to send in a brain sample for three months. Again, to believe these critics, you would think USDA’s BSE testing protocols were in disarray. I see things differently. USDA was exceptionally open (it has used the word “transparent”) in explaining the circumstances of these two cases. It explained in great detail exactly what happened, the rationale for its action on each occasion and what it was doing in light of what had occurred. Regarding the sample that was retested in June and was deemed positive, I would make a couple of points. USDA and Ag Secretary Mike Johanns were obviously blind-sided by their own Inspector General who ordered the retesting. The question still remains unanswered as to whether the IG had the authority to make such an order. That question gets to the heart of what occurred regarding this positive test, much more than whether USDA’s testing protocols were okay. Ordering the retest did not invalidate what USDA had been doing up to that point. I mentioned earlier how NVSL had been using only IHC tests in its testing prior to the start of the enhanced surveillance program. No one questioned then whether that was sufficient or not. So why was there such criticism of the retest? Well, it involved a sample that turned out to be positive. But the critics had savaged USDA even before this result was known. Perhaps the real answer is that consumer activist groups for months had been hammering away at previous Ag Secretary Ann Veneman about BSE, including testing. When she resigned, they transferred their attention to USDA’s Inspector General, one Phyllis Fong. Lo and behold, a few months later she orders the retest. Remember, these are the same activist groups that have campaigned for years for Americans to eat less beef. As for the non-definitive sample, how can USDA be held responsible for the fact that a vet forgot to send in a sample? It didn’t even know the sample existed until it suddenly turned up. Contrary to what USDA’s critics claimed, there was no breakdown of USDA’s testing protocols. I happen to think USDA’s enhanced BSE testing program has been a remarkable achievement, especially when you consider the logistical challenges of collecting and testing so many samples across such a huge area. Rendering plants, plants that handle dead or dying cattle, beef processing plants, producers and others have played an important role in providing samples. The labs have done a great job in testing them. USDA’s management has been exceptional. It deserves credit for making this vital program such a success. — Steve Kay (Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533; Petaluma, CA 94953; 707/765-1725. His monthly column appears exclusively in WLJ.)

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Thursday, December 20,2007

Market Advisor:

by WLJ
August 8, 2005 The USDA's National Agricultural Statistics Service released two important cattle supply-related reports on July 22. The July 1 cattle inventory report and the July 1 cattle-on-feed report help give some indication of cattle and beef supplies for the next six months. The July 1 cattle report confirmed the expected increase in the U.S. cattle inventory. All cattle and calves totaled 104.5 million head, which is 900,000 head, and slightly less than 1 percent more, than in 2004. This is the first time the July report has shown an increase in cattle numbers since 1995, which was the previous cyclical peak. The July report is an abbreviated report, compared with the more in-depth, state-by-state analysis that is included in the Jan.1 USDA cattle report. The number of beef cows, at 33.75 million head, was up 250,000, or less than 1 percent from last year. That number supports the expectation that herd expansion, although modest, is under way. Beef cow numbers peaked cyclically in 1995 at 36.1 million head, so numbers are still more than 2 million head less than they were 10 years ago. The higher numbers were not a surprise to cattle market observers because of the much improved moisture conditions in many cattle-producing states. Much of the northern Plains, which has suffered with severe drought for several years, has returned to near normal precipitation levels. Another indication that beef herd expansion is under way was noted in the heifers kept for beef cow replacement category. Beef replacement heifers increased 200,000 head from last year, the second straight year with a 200,000 increase. The 5 million head of beef heifers was the largest number to be retained since a similar number was reported in 1998. The USDA cattle-on-feed report indicated that the number of cattle being fed to slaughter weight in feedlots with more than 1,000 head capacity was 3 percent above last year. All of the year-to-year increase was due to steers. As of July 1, steers on feed were up 7 percent, compared with heifers reported at 4.5 percent below last year. Cattle herd expansion will have both long- and short-term price implications on feeder calf prices. In the long run, as offspring from increasing cow numbers and heifer retention are marketed, beef production will increase and prices will decline cyclically. If good to normal precipitation patterns continue, cattle numbers will likely increase through the end of the decade. The timing of the cyclical price highs and lows will be different from the past. Observers of the cattle cycle will recall that prices have been low and numbers high in the mid decades of the past, especially in years ending in 5 ('65, '75, '85, '95). The extra long liquidation during the previous nine years, instead of the typical four-year liquidation, caused relatively high prices and low beef production in 2005. If the next cycle is the typical 10-year length, low prices likely are to occur in 2009 through 2010, with cyclical high prices again in 2015. In the shorter term, historically low feeder cattle supplies will be supportive to feeder-calf prices in the next six months. The 2005 calf crop is projected to be 37.8 million head, up slightly from 37.6 million in 2004, but down slightly from 37.9 million in 2003. This year's calf crop will be almost 2.5 million head less than 10 years ago. Continuing heifer retention also will reduce supplies available to the feedlot sector. The demand for feeder calves and heavier-weight feeder cattle this fall will depend on the size of the corn crop and the resulting prices and the price of fed cattle. Parts of the Corn Belt are experiencing dry conditions, so corn-futures prices have been volatile. Fed-cattle prices likely will average several dollars per hundredweight less than last year in the fourth quarter. If a good corn crop materializes and fed-cattle prices average more than $80 this fall, calf prices should average near last year's levels. Reduced corn production or lower fed-cattle prices would pressure calf prices lower. — Tim Petry, livestock marketing economist, NDSU Extension Service

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Thursday, December 20,2007

Cutout, trade woes drag market lower

by WLJ
Good trade volume broke out early last week at mostly lower prices after a sharp sell-off on the futures market early in the week. According to reports, trade as of last Thursday was light to moderate in the southern tier and light in Nebraska, Colorado and Iowa, with light to moderate demand from packer buyers after Texas feedlots came to the table last Tuesday to accept lower money. Prices in Texas were mostly steady to $1 lower from $90-91.50 live basis. Sales in Kansas were mostly $1.50 lower at $91 live and dressed sales sold $2.50-3 lower from $142.50-143. The few live sales in Colorado sold $1 to $1.50 lower at $91. In Nebraska and the western Corn Belt, sales were in a range of $90-90.50 live basis and $143-144 dressed last Thursday. Falling beef cutout values and a steep drop were responsible for the unexpectedly lower cash market last week. Many analysts had been expecting trade to develop in steady to higher territory before the sell-off in the Chicago Mercantile Exchange (CME) live cattle issues last Tuesday. However, by Thursday, the market had stabilized at $91.40 for the August contract. The October and December contracts, which had been selling over $100 for a brief period allowing a good hedge opportunity, were also lower last Thursday. At mid-day, October was down slightly at $95.50 as was December, which ended the session at $97.90. Futures markets last week showed that good prices for fed cattle are likely well into 2008, however, corn remains the wildcard. Last week’s USDA crop estimates, due out Aug. 10, were expected to be a major market mover. If corn prices remain in check into next year, sustained fed cattle prices over $1 in the spring are not out of the question. This year’s small calf crop combined with the currently ample pen space in the country is going to translate into a good fall marketing season for cow/calf producers as well. The beef cutout, which suffered last week from ongoing retail demand, was further hampered by the fire sale pricing of products which were initially intended for the South Korean market. Since the sudden stop implemented after officials with the Korean Agriculture Ministry found prohibited beef products, some end meats have been piling up in cold storage. Chuck, loin and round were all noticeably weaker last week as a result of the heavy offerings as packers tried to clear some of the inventory. Select and Choice ribs were about the only bright spot last week when even the recently popular beef trimmings moved lower, despite very light offerings. Beef slaughter for the week was still running relatively strong, despite the lower cutout and packer margins estimated at $11.60 per head in the red by HedgersEdge. com. The weekly harvest through last Thursday totaled 497,000 head, even with a week earlier and 6,000 lower than last year’s pace. Despite the soft market for domestic product and the packer’s ability to push the cutout higher, cow beef prices remain at comparatively high levels when viewed from a historical perspective. Last week, the 90 percent lean was moving at $141.60, compared to $130.74, while the 50s were holding steady with 2006 levels at $57.17. The cow beef cutout price has been well above year ago levels as well. Last week it was steady at $115, compared to the same day in 2006 when it traded at $105.33. The high prices being paid for cull cows is a result of a combination of factors including the apparent consumer demand for ground beef and a decline in cow slaughter. With an expected increase in herd growth on the horizon, many analysts believe that cull cow prices are heading higher over the course of the next year, possibly hitting record prices early next year. Feeder cattle The Superior Video Auction sale, held two weeks ago in Winnemucca, NV, once again provided good prices for calf sellers. In addition to the high prices being paid for yearlings that have been typical this year, ultralight calves also sold well, with prices into the $160s being paid for 3 and 4 weight calves. Five-weight steers in the north central region were in the mid $120-130 range, while farther west, the price of trucking kept prices closer to $120. University of Utah Economist Dillion Feuz said last week that the corn market will continue to be the biggest driver of calf prices. “In mid June when December corn was trading at $4.20 per bushel, October feeder cattle were at $107 per cwt. December corn declined to $3.36 on Aug. 1 and October feeder cattle had increased to $118 per cwt. The expectations for winter and next spring fed cattle prices also increased during that time which also provided added strength to the feeder cattle market,” he said. “Since Aug. 1, December corn has been increasing again, live cattle contracts have been declining, and not surprisingly, feeder cattle have also declined and closed at $115.25 on Aug. 8.” Feuz said the historical tie between corn and feeder calf prices remains true today despite the changes in market dynamics created by the ethanol industry. “The old adage of a dime increase in a bushel of corn will lead to a dollar decrease in the price of a 5 weight calf still seems to hold true. I recently completed an analysis of feeder cattle prices from 1991-July 2007 and that was the relationship I found,” Feuz said. “Obviously, as the price, or expected price of fed cattle increases/decreases, feeder cattle prices also tend to increase/decrease. Right now in the corn market there is equal money bet on December corn prices being below $3.30 or above $4 per bushel this fall. That is a swing of $.70 per bushel which could swing calf prices $7 per cwt. The next few weeks’ weather in the Corn Belt will help determine where the corn market will end up this winter.” Last week, it appeared as though the traders on the CME were anticipating that feeder prices might slip back as they pushed contract prices into what some analysts believed was oversold territory. Last Thursday there was some sign of recovery however, as the market moved higher. August feeder cattle contracts closed the day up 37 points at $114.95, while September contracts added 52 points to close at $114.97 and October feeders gained 45 points to end the day at $115.70. November calves were also higher, moving up 25 points to finish the session at $115.30. Meanwhile in auction markets across the country, the trend also worked higher last week in many sales, despite continued seasonally light runs of cattle, as producers continue to busy themselves with summer projects like haying. In El Reno, OK, last week, feeder steers sold steady to $2 higher, except for those thin enough for grass which were $5-10 higher as cattlemen with ample grass worked to take full advantage. Feeder heifers, which were present in limited quantity, sold steady. Demand was reportedly extremely good for feeder cattle, especially for those in thin flesh. The few available steer and heifer calves were called steady to $2 lower. Demand was called moderate to good for calves as summer’s heat is taking its toll on the short weaned calves. To the north in Joplin, MO, compared to last week, steers under 600 lbs. were $1-2 higher despite 100-degree heat and a lack of precipitation in the region. Heifers under 600 lbs. were steady to $2 higher; steers and heifers over 600 lbs. were steady after last week’s sharp upturn. Demand was reported to be moderate to good on moderate supply.   In Hub City, SD, last week, feeder steers and heifers sold mostly steady to $1 higher on a run which was reportedly made up of heavier fleshed cattle. The offering also included several loads of feeders off grass, as well as several consignments of backgrounded cattle. In Davenport, WA, compared to the prior week, feeder cattle were steady to firm in a light test on active trade and good demand. South along the coast in Famoso, CA, market prices were steady for stockers and feeders. There was reportedly big demand for the stockers and feeders on offer, particularly the quality greener kinds in the 450-550 lb. class. There was also strong demand for feeders in the 700-800 lb. range.

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Thursday, December 20,2007

Feedlot odors can be controlled

by WLJ
The recent hot, humid weather is bringing out odors at some North Dakota cattle feedlots. “Feedlots do not need to smell,” says Karl Hoppe, area Extension Service livestock specialist at North Dakota State University’s (NDSU) Carrington Research Extension Center. “Feedlots may have a slight odor, but they do not have to have an overwhelming odor.” Proper feedlot design and management are the keys to keeping smells to a minimum, he adds. One of those management tools is pen stocking density. “Don’t overcrowd the pens,” advises Ron Wiederholt, NDSU’s nutrient management specialist at the Carrington center. “This may not be easy since most producers want to maximize pen space, but during hot weather, this may not be good for the cattle nor the condition of the pen.” High stocking rates lead to wetter pen surfaces from the cattle’s urine. Overcrowding also can degrade the pen’s surface, resulting in wallows and potholes that stay wet. Rainfall that collects in pens is another odor causer, according to Hoppe. “Whenever you have water mixed in with manure, you have odor,” he says. Wiederholt recommends keeping pen surfaces uniform so they don’t develop low spots where rain and urine can collect. Feedlot operators also should scrape and remove manure from pens more often during hot weather. “Frequent scraping and removal of manure from pens is probably the most effective management tool for odor control,” he says. “If you can’t afford to decrease pen stocking density, then you must increase the frequency of pen scraping and manure removal.” However, feedlot operators have to find a place to put all that manure. They’ll need to have a temporary manure stacking area since they won’t have a place to spread it at this time of year. The temporary storage area can be in the corners of fields where the manure will be spread after the crops are off. But producers will have to make sure the sites they chose for the piles have a low risk of runoff, Wiederholt says.

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Thursday, December 20,2007

Not too late to beat high fall nitrogen costs

by WLJ
There is a way to beat high nitrogen fertilizer costs for pastures when it comes to putting pounds on calves. This is according to a four-year study comparing different pasture management systems with cows and calves by the Texas Agricultural Experiment Station. Based on average daily gain of calves, the study found that adding a cool-season clover to a warm-season perennial grass was more profitable than applying high amounts of nitrogen. “Adding a cool-season clover to a warm-season perennial grass was more profitable than the high- and no-input systems because the clover extended the grazing season, had higher nutritive value, and provided summer weed control in addition to adding N (nitrogen) to the pasture system,” wrote Dr. Gerald Evers, experiment station researcher, in his formal report. Evers compared three systems: A high-input system on dallis grass pastures using 150 pounds of nitrogen per acre and herbicides for weed control; a medium-input dallis grass system where winter clover was over-seeded into a stand of warm-season grass pasture; a no-input pasture system, using no nitrogen, no herbicide and no clover. Evers, who is now based at the Texas A&M University agricultural research and extension center at Overton, TX, originally conducted the study at a site near Angleton, TX, in the 1980s. At that time, however, nitrogen fertilizer was relatively cheap, he said. And other than summer weed control, the economic benefits to using cool-season clovers were not clear. With nitrogen costs topping 55 cents per pound in 2007, that situation has changed, Evers said. Average daily gains for the calves were 1.57, 1.82 and 1.66 pounds per day for the high-, medium- and no-input systems. “Using 2007 costs for pasture and animal inputs, production costs per pound of calf gain were $1.12, $0.58, and $0.81 for the high-, medium- and no-input pasture systems respectively,” Evers wrote. Additionally, using clover in the medium input system proved “as effective as applying herbicide in April for controlling summer weeds” in the high-input system, he said. “Average daily gain for the cows on the clover-grass system was even higher, being twice that of the other two grass-only systems because of the longer grazing season and higher nutritive value of the clover,” explained Evers. The original study was using dallis grass and white clover, both of which are well adapted to the upper Texas Gulf Coast region. The system is just as applicable to more northern regions of Texas, though different grasses and legumes would need be used, he said. North of Interstate 10, soils are sandier and better drained. Bahia grass and Bermuda grass are better adapted to these areas than dallis grass or white clover, he said. As for the clover component, arrowleaf, crimson and ball clovers are better adapted. “Instead of only planting pure clover, I would mix annual ryegrass with that clover,” Evers said. “If you mix rye grass with the clover, you don’t worry about bloat. In that (Angelton) study, we had to feed bloat guard blocks for six weeks when most available forage out there was white clover, so you could eliminate that expense of having to buy bloat guard blocks by just putting annual rye grass with the clover. “By adding clover, we started grazing five weeks earlier than if we didn’t have clover, so that helped us by about $60 per cow,” Evers said. “So if you add ryegrass to the clover, we could even start grazing another four to five weeks earlier than when we started grazing clover, and that would give you another $50-$60 in winter feed cost savings per cow.” The one issue many east Texas producers must attend to before they rush into over-seeding clover this fall is soil acidity, Evers cautioned. Raising soil pH by liming takes four to six months. Unamended east Texas soils often have a soil pH of 5.5 or lower. “You like to see the pH at six or higher, but now, here we are the early part of August,” he said. “If they do a soil test and the pH is 5.5, they could put on two tons of lime and raise the pH some by fall. It might not reach a pH of six in two to three months, but it would be closer to six than 5.5.” Though producers might not see optimum clover production until spring, they could still get could results. “The only thing you worry about if the soil is real acid in the fall when you plant is you may not get a good stand of clover,” he said. Since 1970, Evers has worked on forage production problems throughout the eastern half of Texas. He is the primary author or co-author of papers presented at the International Grassland Congress in Kentucky, France, New Zealand, Canada, and Brazil, and the International Herbage Seed Conference in Oregon, East Germany, Italy and Australia.

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Thursday, December 20,2007

Obituaries: Gerald Barry and Craig Owens

by WLJ
Gerald Brice (GB) Barry Gerald Brice (GB) Barry passed away in his home July 31, 2006. Barry was born Sept. 13, 1923, in Kansas City, MO, to Gerald Francis and Alice Schaub Barry. GB enlisted in the U.S. Marine Corp in April 1942. He was honorably discharged in May 1946 after he proudly served his country in the consolidation of the Solomon Islands, the New Guinea Operation and defense and capture of Guadalcanal. GB came to California and worked for the largest commission firm in the U.S., Producers Livestock Marketing Association. Before becoming an owner-operator of his own company, he worked for the Tom Gallagher Livestock Commission Company. GB started his company, The California Livestock Commission Company, with Ed Beard and Ken Bishop. In the 1950s, GB partnered with Raymond Cornelius, Jake Copass, and Gerald Donati, leasing some of the biggest ranches on the Central Coast. In the1960s, he and Ernie Richards established the Viking Cattle Company in the San Joaquin Valley. His friendships were strong and many, and each one held a unique and special place in his life. He will be greatly missed. He was preceded in death by his son, Brice Francis Barry. He is survived by daughter and son-in-law, Caroline and Bob Hill; grandchildren, Scott and Bryan, and Bryan’s wife, Dawn; and his devoted companion, Theta Mae Long, and her family. Special thanks to his physicians and their staff, and Hospice Partners of the Central Coast for their understanding, compassion and assistance. In lieu of flowers, his loved ones request that donations be made in his memory to Hospice Partners of the Central Coast, 277 South Street, Ste. R, San Luis Obispo, CA 93401. A celebration of his life will be held at 11 a.m. on Aug. 20, 2006, at the Santa Margarita Ranch, 9000 Yerba Buena, Santa Margarita, CA. Craig Russell Owens Craig Russell Owens, 77, died July 28, 2006, at his home in Red Bluff, CA. Memorial services were held Aug. 2, 2006, in Red Bluff, CA. He was born Oct. 3, 1928, in San Francisco, CA, the youngest and twelfth child of eminent cattle-ranchers Roy and Josephine Owens. He was raised and worked on the family cattle ranch, moving from his parent’s residence to the ranch bunk-house when he was 10 years old. A graduate of Red Bluff Union High School, he also served in the U.S. Marine Corps. After his marriage to his wife Maxine, they purchased their home ranch west of Red Bluff. This served as the base of their ranching business until his death. During his lifetime, he ran large, successful cattle operations in northern California and Oregon. In addition, he was also involved for a time in the sheep industry, running sheep in Glenn County, CA, and in Klamath County, OR. Craig was an excellent horseman and always prided himself on having good cow horses and the best stock dogs. He and his brothers were widely known and respected in the cattle industry. He served on the Red Bluff Bull Sale Committee and Red Bluff Round–Up Association Board for many years. He is survived by his wife of 54 years, Maxine Owens; son and daughter-in-law Dan and Amy Owens; daughter and son-in-law Betty Jane Owens and Dave DeMulder; daughter Maryann Owens; three step grandchildren and three step great-grandchildren; sisters Bernadine Van Loan, Katherine Cassel, and Yvonne Kirchenbauer. He also leaves numerous other relatives and many long time friends. He was preceded in death by his parents, one sister and seven brothers.

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Thursday, December 20,2007

BeefTalk

by WLJ
August 15, 2005 The telephone rang yesterday morning. “Can I have some of those electronic identification tags?” the voice on the telephone asked. The call was like many already received and more will come. “What are you going to use them for?” I asked. “I need to put them in the calves when I sell so they will be age and source verified,” the voice on the telephone responded. I could feel a headache coming on. I couldn’t help but moan for a non-mutable industry, an industry filled with old cowboy mentality that spends extraordinary amounts of energy resisting change. A common point of discussion is, “You don’t have to take all those production measures because the tag is going to be used only to record the movement of cattle.” Livestock identification is not about the type of eartag. It’s about the use of data. For an eartag to mean something, the data must be recorded. The most difficult piece of data is the first piece of data. A known and defined database needs to be generated to hold data. The input, compilation, manipulation and storage of the data are huge. Take inventory numbers as an example. For years, the most difficult pieces of data to collect have been and still are cattle inventory numbers. Often the numbers presented are quoted as being estimates primarily because the actual numbers are not easy to get. The cattle are tagged, but that doesn’t mean the count is right. A universal and misleading comment is that a simple notation on the calendar is all that is needed. At the Dickinson Research Extension Center (DREC), a quick review of the inventory is needed to answer a simple question such as how many cows you have. The answer changes throughout the year. The Jan. 1 inventory at the DREC showed 307 head of mature cattle, which consisted of 291 cows and 16 bulls. The end-of-June inventory showed 269 head of mature cattle: 243 cows and 26 bulls. The change in inventory can come about because of purchases, transfers, harvest, sales or death. To enter, verify and store the data that calculates the current mature-cow inventory from Jan. 1 to June 31, 96 individual entry points on the data sheet must be entered and verified. Each inventory category needs to be entered and checked for accuracy. If nothing happened in a particular data field, the data still needs to be checked. To note no change, a zero, a blank or a null space could be entered in a data field, all resulting in a different interpretation by the computer. Again, just to fill in the inventory data for the first six months of 2005, 96 different numbers were generated. If your wall calendar has all the appropriate spaces to generate correct counts in all categories, then perhaps a simple number can work. However, history would say that a simple number only would generate more questions than answers. Did you mean this? What about so and so? Did you count the heifer in pen 23? What about the cow you were going to take back to the neighbors? Each question confounds the world of simplicity and strains the memory that is more selective than broad. The best solution is that producers need to keep accurate, well-understood data records that stand the test of time. The tag does not cost much, but the additional people, time and skills required is where the work is. Someone needs to do the data work and that someone needs a paycheck as well. Data is the truth and work behind the tag. May you find all your NAIS-approved eartags. — Kris Ringwall (Kris Ringwall is a North Dakota State University Extension beef specialist, director of the NDSU Dickinson Research Center and executive director of the North Dakota Beef Cattle Improvement Association. He can be contacted at 701/ 483-2045.)

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Thursday, December 20,2007

COMMENTS

by WLJ
August 15, 2005 The National Cattlemen’s Beef Association (NCBA) has been concerned about membership for quite some time. But it appears they were very concerned about that during their last meeting in Denver, at least that was what much of the talk was about and a few special meetings were set to address it. In a membership forum, members from the various state associations all had the chance to tell the leadership their concerns and how to correct them. The past few months, rival association R-CALF has been touting a membership of 18,000 and stating they are the fastest growing cattlemen’s association. At the same time, NCBA is claiming 23,000 members and is concerned because that number has fallen from a high of 41,000 in the early 1990s. Add them both together and it would seem there are only about 40,000 folks who are even concerned about the cattle business. There are two things these numbers are saying to me. First is that we have lost a lot of cattle producers from the business in 15 years. Secondly, we have a severe split in our industry. We all know that everyone wants the same thing, tall grass and higher cattle prices. But there are clearly several schools of thought on how to get there. If you take a look at the two groups, you’ll notice very different methods of furthering their cause. NCBA has been very successful at lobbying their concerns in Congress and getting issues passed into law. On the other hand, R-CALF doesn’t lobby, they litigate. To date, their litigation has not been successful. One uses legislative means, the other uses judicial avenues. One operates on fear and conspiracy theories, and the other works on fact and the desire to change the tax climate and expand markets. I’ll be the first to say that NCBA has had a difficult time communicating with “grass roots” cattle producers and I think that they expect the member state associations to do most of that since their technical structure is a federation of state cattle groups. Now it’s time to change the subject—the slaughter cow market is starting to fall and some have cited the Canadian border as the problem, which indirectly, it may be. Last week, Swift & Company announced it closed their Nampa, ID, plant for good. The company said it was due to market conditions and that it wasn’t able to find enough cows to process. It might also have something to do with the plant being extremely old, and located in the midst of encroaching residential neighborhoods in Nampa. Since this Canadian border rub, two cow plants have closed as a direct result of the border closure. Several years ago, a cow plant in Rapid City, SD, burned down and no attempt was made to rebuild it, which may tell us a little about the economics of cow processing. The cow market has started to take its usual summer dip as cattle producers are starting to find open cows and shipping them. Cow prices have dropped into the lower 50-cent range and, in the big picture, cow slaughter is down. Swift has been out of the market for the last three weeks and I would imagine that most market operators have missed seeing them on the seats, taking turns with the other cow buyers. The situation in Canada has changed and cow prices are going up. Over the last month, they have moved from 20 cents to 41 cents. Until just recently, Canadian packers have been barred from processing cattle under 30 months of age in the same plant as cattle over 30 months old. Slaughter cow numbers in Canada are large and they have been desperately trying to find processing for them. Now that Tyson and Cargill are able to process cows in their fed cattle plants, the market is stronger. You might say that Canadian packers just got their second windfall, the first being the 40-cent fed cattle market when BSE first raised its ugly head. Now they can buy cheap cows and sell cow beef primals. Can-Fax doesn’t keep a cow beef cutout value index as we do in the U.S., but our last figure was $111, which represents a pretty good trade on cow beef ribs and loins. But, make no mistake about it, there is no cow beef coming to the U.S. However, that could change as the cow and cow beef rule is expected sometime this fall from USDA, with it possibly taking effect next year. — PETE CROW

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Thursday, December 20,2007

Legally Speaking

by WLJ
August 15, 2005 One of the main hurdles that many taxpayers face in an audit with the IRS is showing an effort to change methods of operation or procedures that could result in an improved profit picture. Often taxpayers in the livestock or other farming industries will fail to document legitimate changes they have made to enhance operations, and this can be a problem, among others, in withstanding IRS scrutiny. If you are audited, you will be expected to show how you keep records in connection with the day-to-day business of your activity. Today IRS enforcement has stepped up the level of competency expected with respect to such records. I have previously pointed out the need to keep files showing the number of animals owned at a given time, the date of purchase, sale prices, breeding data, appraisal reports of farm realty, and so on. But you will also be expected to show underlying invoices or other proof of expenditures incurred, in addition to canceled checks and credit card statements. It is always advisable to have a separate checking account used exclusively for the activity, for otherwise the IRS will claim you are “commingling” funds. The IRS takes the view that if you have not made a profit within the first few years of operating a livestock activity, you are not engaged in a trade or business, but instead you are trying to reduce your taxable income from other sources by declaring business deductions from the farm activity. In addition to examining the records you keep, the IRS may want to visit your ranch or farm to see whether it appears to be conducted in a professional, businesslike manner. This invariably is the key. If your farm operation is unprofessional, it will be readily apparent. If it is operated in a businesslike manner, that will be something you can demonstrate with a detailed viewing of your operations. Buying your own farm is usually a plus, in that you would normally expect that asset to appreciate in value while being used for the farming activity, and you would understandably want to make improvements to enhance the fair market value. Numerous Tax Court cases, as well as IRS audits, have hinged on this point. I unfortunately get inquiries from people who ask, “Is there a form you could send me for a business plan?” I’m afraid I have little patience for such inquiries! As I have previously stated, one of the best measures of your overall business objectives is that you consult with experts and obtain appropriate documents, such as a tax opinion letter, to help support your endeavors and to recommend changes, etc. It is not sufficient to have ideas in your mind that you are implementing, even though I understand that makes sense to most of us. The reality is that the IRS is trying to raise revenue for the government, and people who take deductions for their farm losses are an easy target. A tax opinion letter can be used in evidence in your favor to prove that you have sought out expert advice with a view towards enhancing the prospects of making a profit, and that you have followed the advice given. A tax opinion letter becomes part of your permanent records, and should be updated periodically to address changes and developments in your activity. The IRS also may inquire about animals that are not productive or which are not being used for breeding or for marketing purposes. For example, if an animal has become ill and has incurred significant veterinarian fees, the question is whether this animal is going to be laid up for a long time, and whether it might be prudent to sell the animal or donate it to a school or other charity. By doing so, you are showing that you are mindful of the costs of keeping an animal that might not be productive, and that you are reducing your costs by culling the animal from your inventory. Someone I know was audited and got into quite a quagmire. What happened was that he filed a statement in a divorce proceeding saying, under penalty of perjury, that various animals were owned by his daughter and were her “pets.” At the same time, he was declaring these as a business deduction on his tax returns. Needless to say, the IRS issued a deficiency notice claiming back taxes due. When he went to Tax Court to contest the deficiency notice, he was questioned by the government attorney about the affidavit in the divorce case. He blamed his former attorney for the situation, but that failed to save the day. People who make false statements under penalty of perjury have no one to blame but themselves. This person failed to take personal responsibility for his failings, and ended up with a judgment against him for taxes due. This would come as no surprise, given the contradiction between his statement in the divorce proceeding (under penalty of perjury) and his statement in his tax return (also under penalty of perjury). I am pleased to work with clients who are honest, hard working and who do not blame others for their problems. — John Alan Cohan (John Alan Cohan is a lawyer who has served the livestock and farming industry since 1981. He serves clients in all 50 states, and can be reached by telephone at 310/278-0203 or via e-mail at johnalancohan@aol.com.)

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