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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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Thursday, December 20,2007

Kays Korner

by WLJ
June 6, 2005 It was just a coincidence that news of the Supreme Court’s decision in favor of the beef checkoff came as Japan and South Korea move closer to a resumption of beef trade with the U.S. It will probably be several months before that trade begins. But when it does, the industry will need every promotion dollar it can muster to buy its way back into its two most important export markets. Important they certainly are. The two in 2003 took 623,000 metric tons of beef worth $2.2 billion. That’s more than $62 for each animal commercially slaughtered in the U.S. in 2003. With this and other export trade halted throughout 2004, the total value of U.S. beef exports fell to $809 million, compared with $3.86 billion in 2003. The math says that Japan and Korea in 2003 accounted for 57 percent of all exports in value terms, $43 million per week. Once trade resumes, there will be hurdles at home in terms of the number of cattle that will qualify. Much was made of using carcass maturity scores to determine age. But packers won’t be able to track by-products for export purposes if they use this method. So it’s doubtful that 15-20 percent of all fed cattle will qualify. Packers will also have to evaluate how to make it economically feasible to segregate cattle for export. The number of product SKUs (stock-keeping units) they produce could double in the process. Then comes the even tougher part. Packers and the industry will have to convince Japanese and Korean consumers that U.S. beef is safe and not “tainted”. It will be even tougher to do this if Japan continues to test all its cattle for BSE. Consumers will see “BSE-tested” beef alongside non-tested U.S. beef in retail stores. Given their skittishness over food safety, it’s not hard to imagine what they will choose initially. Then there’s the “shutout factor.” The longer the U.S. is out of these markets, the tougher it will be to regain market share. In Japan, Australia’s market penetration is deeper than ever before. Its 2004 exports to Japan rose 41 percent to 393,500 metric tons (higher than the U.S.’ 376,000 metric tons in 2003). Its 2005 exports will be an estimated 430,000 metric tons. Significantly, Australia’s grain-fed beef exports to Japan in 2004 were up 55 percent to 172,000 metric tons. So it will remain a formidable competitor in Japan for some time. As for the Supreme Court’s ruling on the beef checkoff, I suspect we haven’t heard the last from those who challenged the checkoff’s constitutionality. That’s because the Court, notably Justice Clarence Thomas, seemed to suggest the checkoff could still be open to challenge for potentially infringing First Amendment rights. At this point, I have a couple of observations. First, the entire legal marathon, and the bitterness that accompanied it, would have been avoided had greater efforts been made to assuage the Livestock Marketing Association’s early complaints. LMA for a long time said it just wanted a vote on the checkoff so it began its petition drive. But what I believe LMA was really saying is this—livestock markets are required to collect the majority of the checkoff dollars and send them on, yet they get no recognition for this role that was imposed on them by Congress. In fact, all they get is complaints from producers about the dollar per head taken off their check from the market. Markets are still collecting dollars so the issue remains central to the future of the checkoff. I don’t know what will make livestock markets feel more “valued”. But the industry and USDA needs to consider what will, whether it’s giving LMA formal representation on the Beef Board, paying markets a fee for collecting the checkoff dollars or supporting livestock markets in some other way. My second observation is that the industry (by which I mean the Beef Board and NCBA) needs to act quickly to offer something real to LMA and its members. The four-year legal battle clearly does not want to be repeated. Only when LMA feels less aggrieved can the healing of old wounds begin. Then, the industry might be able to start talking about how to increase checkoff dollars. The $1 per head is clearly a pittance in a $40 billion industry. I’ve long believed that the most important issue about the checkoff is whether it should be $2 or $3 per head. It may be wishful thinking but wouldn’t it be great if, in a couple of years, that was the only debate about the checkoff. — 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

Feds begin summer slide

by WLJ
Fed cattle trade was active last Wednesday and Thursday in the northern Plains on moderate demand from packer buyers who were still moving heavy numbers of cattle through plants, despite slipping margins and rumor of cutbacks. Lackluster beef movement has kept beef cutout levels on the defensive for the past several weeks and last Thursday was no exception. During morning trade, Choice boxed beef slipped more than $2, to $150.51, and Select fell nearly $1, to $144.05. However, at those levels, there was some sign of renewed buying interest and 363 loads of fabricated cuts and grind were moved early in the day. Those factors caused feedlot sellers to come to the table early last week and accept lower money for showlists. In Nebraska, live sales last Wednesday were $1-1.50 lower at $91-91.50 and dressed sales came in $2-3 lower at $144-145; in Colorado, live sales were mostly $1-2 lower at $91.50, with dressed trade $2 lower at $144-145; in the western Corn Belt, live sales traded 50 cents to $1 lower at $91.50-92 and dressed sales were reportedly $2-4 lower at $144-145. Trade and demand was light in Kansas last Wednesday. Dressed sales traded $2-3 lower at $144-145. Trading was inactive in the Texas Panhandle last Wednesday and not expected to develop until sometime late in the day last Thursday. The last established market in the Texas Panhandle live sales traded at $93. By mid-Thursday last week however, prices were still slipping for live cattle and the day’s sales were $1-2 behind the previous day. Slaughter volume for the week was still relatively robust as packers continued to take advantage of positive margins, which were estimated by HedgersEdge.com at $6.75 per head. Harvest last Thursday was estimated by USDA at 128,000 head, even with week ago and year ago numbers. For the week through last Thursday, packers had slaughtered 507,000 head. That figure was well above last week’s holiday shortened week-to-date total of just 386,000 head, but below year ago totals of 509,000 head. The retail demand for Choice cattle and the seasonal slump in the number of cattle hitting that quality level has added some support to the market, however, the temporary loss of the Korean export market hurt clearance of some end meats like the chuck and forced more product onto an already heavy supply flowing into the market. There is still some support from advanced buying for Father’s Day, however, once that is wrapped up, look for additional weakness in the boxed beef market which, in turn, will trigger an additional slide in the fed cattle market toward the coming summer low. If feedlots fail to reach good clearance levels, the current marketing state could evaporate quickly, removing one of the few remaining bargaining chips available for cattle feeders. Competing proteins are also going to impact the beef market. The poultry industry is increasing egg sets and pork continues to be very competitive in price. The values to be found in both those markets are making the competition look very attractive for consumers, particularly those who are already struggling with this year’s record-high fuel prices. The cash market slide last week spilled over into the commodity trading on the Chicago Mercantile Exchange (CME). Live cattle contracts last Thursday settled lower on the up front months as a result of the day’s lower cash trade. June lost 32 points, falling below the $90 mark, closing at $89.67. Meanwhile, August shed 20 points, closing at $89.52 and October fell 32 points, ending the session at $93.45. Deferred months were mostly positive at the end of the day last Thursday, with December moving slightly higher to close at $94.72 and February and April 2008 tacked on gains, closing at $96 and $96.50 respectively. Feeder cattle In the CME feeder cattle pit last Thursday, contract traders followed the lead of the live trade lower. Contracts were down across the board for the day. August lost 92 points, closing at $108.85, while September fell 70 points, closing at $108.75. October was down 75 points at the close of business at $108.70 and November lost 72 points, closing at $108.57. For the most part, feeder cattle trade appears to be ignoring the wild weather market swings in corn trade and is trading in a relatively narrow range ahead of fall contracting. Prices in the past several days appear to be running at levels near last year as a result of the tight supply. Herd building in the second half of this year will increase heifer retention and cut farther into the available supply, meaning that feedlots will have to come to the table to meet offers from cow/calf country. Cash trade in the country last week remained steady with the previous week. The CME cash index at midweek last week hovered at $107.64, down slightly from the prior week.  Corn prices through the summer will continue to fluctuate with the changing weather, however, it seems that feeder cattle buyers are able to block that influence and have been staying the course, a trend which appears to be in place for the next couple of months now that the bulk of the runs have fallen off. In Oklahoma City, OK, the largest run of cattle reported last week brought prices mostly steady for cattle over 800 lbs., while those in the 600-800 lb. range were called steady to $1 lower. The limited supply of light calves sold steady, while 500-650 lb. stockers were not well tested, although there was a lower undertone noted. Demand was reported to be moderate to good for all classes, although the overall kind and conditions were not as attractive to buyers, with several Brahman influenced and number two muscled cattle in the mix, along with a number of cattle being shipped in from outside the area. In Joplin, MO, compared to two weeks prior, steer and heifer calves sold steady to $2 lower, while yearlings were steady. Demand was reported to be moderate on a moderate to heavy supply. A combination of no sale last week and rain across the four-state area contributed to the heavier receipts at the sale. Farther north and west, feeder cattle trends were difficult to call as a result of the light runs of cattle, however, most markets reported steady to firm prices on offered lots with strong buyer demand. Precipitation in the region continues to promote good grass growth and grass cattle are in high demand. In Billings, MT, feeder cattle offerings were also very limited again last week, with too few offered to fully establish the market. Demand remains good for stockers and feeders. In Clovis, NM, last week, feeder steers and heifers sold unevenly steady, however, the Holstein special sale saw prices for offerings steady to as much as $3 higher. Trade was called active with good demand at the sale. In Salina, UT, feeder steers of mixed weights under 350 lbs. were $8-10 lower. Those in a wide range of 350-550 lbs. were called $1-2 higher, while weights over 550 lbs. were $2-3 higher. Feeder heifers were mixed but mostly weak to $1 lower, with some instances of $3 lower, while Holstein steers were weak to $1 lower.

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Thursday, December 20,2007

Jim Caswell to head BLM

by WLJ
President George W. Bush announced last week that he plans to nominate Jim Caswell to head the Department of the Interior’s Bureau of Land Management (BLM). If confirmed, he would succeed Kathleen Clarke as BLM director. Clark resigned from the post in February. Jim Hughes has served as acting director since then. Caswell is currently the administrator for the Office of Species Conservation for the state of Idaho where he won the state legislature’s approval for two highly contentious issues: the state’s wolf management plan and a Yellowstone grizzly management plan. He previously served as forest supervisor for Clearwater National Forest in Idaho and also as acting deputy regional forester for the northern region in the U.S. Forest Service. In addition, he has held prior posts in BLM and Bonneville Power Administration. Interior Secretary Dirk Kempthorne, former governor of Idaho and a former U.S. senator representing the state, spoke highly of Caswell following the announcement. “I’ve known Jim Caswell personally and admire his ‘can do’ attitude, pragmatic leadership style, and outstanding management skills,” Kempthorne said in a statement. “His proven expertise in coordinating endangered species programs on public lands and his ability to build strong, effective partnerships make him well-qualified for this position.” Kempthorne has been Interior secretary since June 7, 2006. He was nominated to the post by Bush in March 2006 and later confirmed by the U.S. Senate. Caswell’s nomination will require Senate confirmation before he assumes the post. BLM manages 258 million acres, about one-eighth of the land in the U.S., and operates on an annual budget of about $1.8 billion. Most of that land—grasslands, forests, high mountains, arctic tundra and deserts—is in the West. It also oversees about 700 million acres of minerals below the land’s surface.

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Thursday, December 20,2007

Operation: Blizzard Benefit to distribute aid

by WLJ
Despite four feet of snow on the level and little to no assistance from the federal government, southeast Colorado’s December blizzard victims are at last going to receive some help. The support is from the Operation: Blizzard Benefit fundraiser that was put together by the Colorado Farm Bureau (CFB), Colorado Cattlemen’s Association (CCA), Colorado Livestock Association (CLA), Colorado Department of Agriculture, and the Colorado State Fair. “We know that the devastating losses incurred by the agriculture community during the blizzards will be felt for years to come. The funds raised by Operation: Blizzard Benefit will by no means cover each and every loss, but it is our hope that the efforts will help lessen the financial burden that so many faced,” said Alan Foutz, president, CFB. The fundraising efforts netted approximately $680,000 in total contributions and far exceeded organizer goals and expectations. Of the total, $225,000 was in the form of “in-kind” donations and another near $200,000 was in the form of hay and feed contributions. The major fundraising event was a benefit concert held in Pueblo, CO, on March 18 featuring Michael Martin Murphey and many other talented artists. More than $300,000 in cash was able to be distributed to the victims of the storm.  Organizers incurred approximately $50,000 in expenses to host the concert event, raise funds and deliver feed and hay to the affected area. Approximately 25 percent of the cash contributions will be retained to establish a permanent Colorado Agriculture Disaster Relief Fund to be jointly managed by CFB, CCA and CLA. The permanent relief fund will be able to continue to receive tax deductible donations and will make it easier to get farmers and rancher assistance in a more timely fashion when another catastrophic natural disaster strikes the Colorado ag community. The Operation: Blizzard Benefit advisory committee received some 650 applications for aid. The 650 applicants estimated $22 million worth of un-reimbursed loses. The applicants also reported 3.4 million acres affected, 13,000 head of cattle lost, and 41,000 head of other livestock cost. “Over $22 million in estimated losses from only 650 producer applicants is a staggering figure for a non-USDA declared disaster,” said Troy Bredenkamp, executive vice president, CFB. The state of Colorado and Gov. Ritter had requested federal disaster assistance for agriculture but it was ultimately denied by USDA. The applicants with losses over $300,000 will receive the maximum amount decided on by the advisory committee, $5,000. Those with losses below $3,200 will receive $50. All other applicants will receive 1.61 percent of their estimated losses. Checks will be sent in Operation: Blizzard Benefit printed envelopes by no later than Wednesday, June 6 to all who applied and qualified their need. “While the amount this effort raised is not enough considering the magnitude of the losses, no benefit would have been realized without the hard work of CFB, CCA, CLA, Colorado Department of Agriculture and the Colorado State Fair,” said Mark Roeber, CCA president. “The Operation: Blizzard Benefit organizers would like to thank all the businesses, organizations and individuals who contributed to this cause,” stated CLA President Kent Bamford.

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Thursday, December 20,2007

LEGALLY SPEAKING

by WLJ
June 13, 2005 Perhaps the earliest tax case that made a serious impact on the manner of conducting activities in the livestock and horse industry was Bessenyey v. Commissioner Internal Revenue (2nd Circuit; l967). This case was unusual because it was a decision by the Second Circuit Court of Appeals concerning an appeal from a Tax Court case insofar as it denied the deduction of losses incurred in the breeding and raising of horses. There are only a handful of appellate court cases on this subject. The tax law is substantially the same for both the livestock and horse industries. The taxpayer, a resident of New York, bought a group of broodmares via a veterinarian who attended a liquidation sale for some “Hungarian Half-Breds” that were owned by the U.S. Army. She bought nine horses for about $150 each in the early 1950s. She had the horses placed on a ranch in Montana and then, hearing that the horses were not receiving proper care, the taxpayer went to Montana, placed them at another property, and returned to her home in New York. The mares were bred and by 1959 the initial herd increased to 31 horses. Some of the horses were transferred to the taxpayer’s farm in Maryland especially during the winter months. The taxpayer spent considerable time visiting her trainers, comparing notes with other horse breeders, viewing competitions and shows, and attending horse management courses. The taxpayer sold only one of the horses, a seven-year-old gelding, for $3,000 in 1964. The Tax Court judge had ruled against the taxpayer, ruling that “although petitioner’s horse enterprise has some of the trappings of a business, ... she did not in fact have a bona fide intention to conduct her activities for a profit,” and that her rewards from her work with the horses and the expenditures upon them “consisted of personal satisfaction in the activity.” He based this conclusion in part on “the impression from observation of her during her testimony that figures and financial matters even bored her,” an attitude which led him to believe “that she gave little or no thought to whether her horse enterprise would ever be profitable, or whether the large losses that were being sustained annually would ever be recouped.” Thus, the idea of “recoupment” of losses entered the Tax Court arena as a factual inquiry. Since that case, many judges have sought to find out whether the taxpayer, engaged in a horse or cattle activity, has some reasonable prospect of recouping previous losses. This is inherently unfair, as other businesses are no required to show how they might “recoup” previous losses. Also, the problem with this is a matter of evidence. Most taxpayers fail to have cost projections or other formal backup figures that will help support the argument that they are moving closer to a profit and that at some time in the future they will actually be able to recoup prior losses. In order to be able to withstand IRS scrutiny in the livestock industry, it is necessary to have a proper, formal analysis that will indicate how the enterprise will show a profit in proper time and that the taxpayer is proceeding as expeditiously as possible in a long-range plan. This case seemed to mark the end of an era in which the Tax Court had more readily sided with taxpayers on the question of profit motive despite significant losses. For example, an earlier case, Ellsworth v. Commissioner Internal Revenue (1962), involved a wealthy taxpayer whose source of income was dividends. The court found that he was engaged in a horse activity for profit despite 13 years of losses aggregating $700,000. The taxpayer also acknowledged that when he entered the “business” at age 65, he believed he would not make a profit before attaining 75 or 80, and that his primary interest in breeding was “scientific.” Today, the IRS seems to take the view that if the taxpayer is wealthy enough to absorb the losses, this automatically results in findings that the taxpayer’s rewards consisted primarily of personal satisfaction in the activity, rather than a profit motive. — John Alan Cohan (John Alan Cohan is a lawyer who has served the livestock and farming industry since l98l. He serves clients in all 50 states, and can be reached by telephone at (3l0) 278-0203 or via e-mail at JohnAlanCohan@aol.com.)

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Thursday, December 20,2007

COMMENTS

by WLJ
June 13, 2005 We all have opinions on the issues and communicating those thoughts to government is relatively easy. For instance, debates surrounding the Central American Free Trade Agreement (CAFTA) have been very free in coming from both sides of the issue. The consumer group Public Citizen, which has been in the news lately as aligned with R-CALF on the BSE issue, also has an opinion about CAFTA. They don’t want it, which is not really a big surprise. As far as the beef industry is concerned, CAFTA appears to be about the same as the North American Free Trade Agreement (NAFTA). After NAFTA went into effect, beef sales to Mexico skyrocketed, and they became one of our largest export markets for beef. With the passage of CAFTA, beef trade to Central America is expected to grow from $12.5 million to $40 million. The big fear for some in the beef industry is the expectation that those Central American countries will export more manufacturing beef to the U.S. And, frankly, that’s all they can produce in that region—lean bos indicus, grass-fed cattle. There is also the fear that CAFTA will set a precedence for the Free Trade Agreements of the Americas, which some think will simply create a threat from the big South American beef machine. The big road block for much of South America is still going to be hoof-and-mouth disease. Brazil ships no fresh beef to the U.S. The U.S. pretty much has ownership of the grain fed beef markets around the world, which should be back to normal soon. There is a fear that Brazil will tranship beef to CAFTA countries, which will process that product into ground beef and other meat products and then ship it to the U.S. However, transhipping and origin issues appear to be addressed in detail in those trade agreements. The debate over these trade agreements are full of conjecture and speculation, and the groups that are engaging in the debate need to bring more to the table other than a few sound bites that are not supported by any facts. The National Farmers Union (NFU), a liberal farm group, told the Senate Agriculture Committee last week that CAFTA is yet another empty promise that continues the failed trade policies of the past. Estimates of sizable trade gains for U.S. farmers and ranchers are overly optimistic. The CAFTA countries have a combined population of approximately 40 million people with limited resources that can be used for the purchase of agricultural products. That comment might have some credibility if everyone in that region were in poverty, and that is absolutely not the case. Once market issues are addressed in the debate, opponents always seem to turn to the labor issue, and that we will just be exporting jobs. The irony is that manufacturing jobs in the U.S. have been declining, on a percentage basis, steadily since 1944 when 38.5 percent of the entire U.S. work force was manufacturing for the war effort. Today manufacturing jobs are only 11 percent of the U.S. workforce. Total manufacturing jobs in the U.S. peaked in 1979 at 19.4 million jobs and the most recent number shows that there are 14.2 million manufacturing jobs today. The manufacturing portion of our economy was in decline way before NAFTA and other trade agreements. While total jobs have gone down, the level of productivity has gone up two percent a year since 1950, which has created higher-valued manufacturing jobs that have more purchasing power. I’m confident that the job issue really doesn’t have that much weight in the debate on whether Congress should ratify this agreement. Expanding our trading opportunities is always a positive element and comparing beef products from Central America to the U.S. is no comparison. The entire issue on these trade agreements is about creating markets and expanding sales, and beef sales are what we’re concerned about. Forty million dollars really isn’t a lot of money in the beef arena, but every bit helps and all anyone can ask for is the opportunity to access the markets. These agreements do go both ways, but I don’t see much on the down side. I have confidence that U.S. cattle producers can compete and make it work. I would say that fear of change is our only obstacle. — PETE CROW

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