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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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Thursday, December 20,2007

BEEF TALK

by WLJ
June 13, 2005 The National Animal Identification System (NAIS) Draft Strategic Plan, as proposed by the USDA, has three key components: premises registration, individual animal identification and animal tracking. These three key components have only one purpose, which is to assist the Animal and Plant Health Inspection Service (APHIS) “establish the animal information foundation necessary to support animal disease monitoring, surveillance, control and eradication programs.” As stated in the plan, the principal work involved with the plan will be the responsibility of the individual states, allowing for local direction. APHIS will monitor individual state performance. The first critical component is the national implementation of premises identification. Within the plan, the concept of premises is simply an address, essentially a surrogate address for computer storage and retrieval. At times considerable debate surfaces, but in the world of modern-day technology, computer bytes still count and efficiency of operation simply demands an efficient, space-saving process to track location data. Computer data may seem infinite, but data storage can be overwhelming and a small number that connects to a reference file makes sense. Several options are available for producers to register their premises. Simply contact your local state veterinarian or local producer association with your 911 address or physical map description of the livestock premises and the process should be complete. The second key component is a much more complicated issue. The NAIS plan calls for the assignment of a unique identification number to every animal in the country, unless the animals are always grouped with no possible opportunity for commingling with outside animals. The plan states that "animals will be identified either individually with a unique animal identification number or, if they are managed and moved through the production chain as a group, with a group/lot identification number." Once placed on the animal, the individual animal data requested (perhaps eventually mandatory) includes the following: a documentation of why the animal is being handled, the premises identification of the animal holder as well as premises identification of the destination, the event date and time, the animal identification number, the species, type of identification, birth date, age of animal, gender of animal, breed of animal, additional remarks relating to the animal, status of the animal and four potential alternate animal identification numbers. Alternate animal identification numbers could be used, but the plan appears to require that the animal be tattooed if an alternate identification is used. The third key component of the system is the combining of components one and two into a workable system "to achieve the 48-hour traceback objective." This is no small task. Is this achievable? It seems workable. The sun is, as yet, not shining on the end of 2008, the goal to have the plan in place. The closing date for comments is June 6. Since the draft plan was made available for public comment, 47 people have responded to the listening sessions. This is your chance to comment, so why not step up? The plan and submitted comments, as well as the ability to submit a comment, is available at http://animalid.aphis.usda.gov/nais/index.shtml. The primary contact for the USDA is Neil Hammerschmidt, eradication and surveillance team animal identification officer, APHIS, 4700 River Road, Unit 43, Riverdale, MD 20737-1231. Now is the time to read and comment. May you find all your NAIS-approved ear tags. — 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

Cattle continue trend toward seasonal low

by WLJ
Trading and demand was moderate in the northern Plains and western Corn Belt by Wednesday last week. Trade and demand was reported in Kansas late Wednesday and Thursday. Compared to last week, Nebraska live sales traded $1-2.50 lower at $89 and dressed sales $4 lower at $140-141. Colorado live sales were reported $2-2.50 lower at $89 and dressed sales $4-5 lower at $139-140. In Kansas, early live sales last Wednesday traded mostly $2 lower at $89 and dressed sales traded $2-3 lower at $141. Texas trade last Thursday was reported at $90-90.50. Clearance levels were reportedly good, with most analysts calling the fed cattle trade complete for the week by mid-day last Thursday. Fed cattle prices continue to trend toward the seasonal low and boxed beef prices are contributing heavily to the slide, said Livestock Marketing Information Center Director Jim Robb. “We haven’t seen very good boxed beef movement since prior to Memorial Day. That’s resulted in additional pressure on fed cattle prices recently,” he said. “We expect that the industry might reach the seasonal low in late June or early July at the rate it’s going.” Last week, the boxed beef market continued to slide lower, however, it appeared to be reaching a price level that was promoting some movement. Thursday trade on the Choice boxed beef was down $1.47, to $146.11, while Select dropped 76 cents to trade at $139.94. Movement for the day, at 461 loads of fab and grind product, was called moderate on heavy offerings as packers tried to spur buying interest. Robb noted that demand for middle meats has been lackluster so far this year, particularly when compared with the same time period last year. That decline in consumer demand has been a significant drag on the cutout and a hand-to-mouth buying pattern at the wholesale level. “Packers have been less than willing to forward price beef until recently, particularly against the June live cattle, which was in the $96 range until just a few weeks ago,” he said. “We are starting to see an increased interest in buying now that the fed cattle market has ratcheted down some. The next two weeks will be very indicative of where the market is headed.” Robb said he expects some packers to begin cutting back harvest levels in an effort to support the cutout prices from sliding too much farther. Last week’s tally through Thursday was still running relatively high at 508,000 head, compared with 507,000 the prior week and 503,000 head for the same period in 2006. Although the market has softened faster than many analysts had expected, Robb said most economists aren’t ready to blame the trend on rising consumer prices, particularly fuel costs. “Middle meats are softer, in part, because there been some trading down in the meat complex and that has been supportive of the trim markets, despite heavy cow slaughter this year. Buyers are trading down from middle meats to hamburger.” He also noted that reports from restauranteurs are also adding some uncertainty to the beef market. “If you look at the results from the restaurant chains and talk to the restauranteurs, the reports aren’t looking very good right now. Nearly all of them are reporting same store results below year ago levels,” Robb said. “That drop has also led to a lack of buying interest from that sector, which is also a drag on the market.” However, despite sliding prices, Robb said feedlot closeouts have been particularly good for cattle feeders since early spring, with per head profits reaching as high as $150 per hedged steer during certain weeks. “Guys that were hedged on both their cattle and corn are looking pretty smart right now,” Robb said. “Even cash to cash feeders during the March to May time period were profitable by $54-67 per head.” The fall hedging opportunities for fed cattle have evaporated and Robb said September closeouts are projected in the range of $97. However, feed costs could take their toll as the corn market has been subject to wild swings as weather forecasts change. But, Robb said he expects it will take some serious deterioration in crop conditions to keep Omaha cash corn prices at the $4 level. Feeder cattle The positive margins being seen in feedlots have translated into some strong prices being paid for feeder cattle for fall delivery. Last week’s first big video feeder cattle auction featured more than 100,000 head from 28 states. According to market reports from Superior Livestock Auction’s Council Bluffs, IA, sale, demand was excellent on all classes of cattle. Yearling steers were called steady to $2 higher with heifermates bringing steady prices. The lighter weights brought prices $1-3 lower. Northern calves were called steady to $2 higher, while southern calves sold steady on the better kinds, while average brought prices $1-3 lower. Some examples from the sale include a weighted average price of $109.11 for 435 head of yearlings in the 800-840 lb. class, while 320 head of cattle in the 900-925 lb. range brought an average of $104.10. Meanwhile in the lighter weights, 190 head of steers in the 610-640 lb. class sold for an average price of $111.54 and 400 head of 485 lb. steers brought a weighted average of $137.44. Elsewhere, runs of cattle in much of the country remain light, with good pasture conditions being reported in much of the west, Plains, and Midwest. The two notable exceptions are the southeastern U.S. and California. Last week’s pasture and range condition report for California showed pasture and range conditions rated at 95 percent poor to very poor. Much of central California never received the needed spring rains and there are reports of a good deal of supplemental feeding in the area. In the southeast, some much needed rain fell two weeks ago after a tropical depression from off the Florida coast moved inland. However, pasture conditions there have improved little, with 70 percent of pasture rated at 70 percent poor or very poor. To the north in Georgia, 74 percent of grazing land was rated 74 percent poor or very poor. Those conditions have led to early sales of feeder cattle as well as heavy culling in many cow herds. Because conditions in much of the region are poor, a good number of those cattle have been showing up far from home, with producers opting to pay trucking costs to places like Oklahoma City, OK, where grass is more readily available. At Oklahoma City last week, where good rains have prompted a solid market for stocker cattle, prices paid for feeder cattle and calves were mostly steady to $2 higher last week. Joplin, MO, also added to the rainfall total last week. Prices at the sale were $1-3 lower for steers, while heifers sold steady to $1 lower on moderate supply. Meanwhile, in Hub City, SD, load lots of quality feeder steers and heifers were called steady last week, while the remainder sold $1-2 lower than the prior week. In Riverton, WY, as in much of the rest of the West, price trends were in short supply last week, although the few offered feeder cattle brought prices mostly steady with higher undertones noted in most markets with good demand for most classes of cattle on consignment.

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Thursday, December 20,2007

Japan finds no problems at U.S. plants

by WLJ
Trading and demand was moderate in the northern Plains and western Corn Belt by Wednesday last week. Trade and demand was reported in Kansas late Wednesday and Thursday. Compared to last week, Nebraska live sales traded $1-2.50 lower at $89 and dressed sales $4 lower at $140-141. Colorado live sales were reported $2-2.50 lower at $89 and dressed sales $4-5 lower at $139-140. In Kansas, early live sales last Wednesday traded mostly $2 lower at $89 and dressed sales traded $2-3 lower at $141. Texas trade last Thursday was reported at $90-90.50. Clearance levels were reportedly good, with most analysts calling the fed cattle trade complete for the week by mid-day last Thursday. Fed cattle prices continue to trend toward the seasonal low and boxed beef prices are contributing heavily to the slide, said Livestock Marketing Information Center Director Jim Robb. “We haven’t seen very good boxed beef movement since prior to Memorial Day. That’s resulted in additional pressure on fed cattle prices recently,” he said. “We expect that the industry might reach the seasonal low in late June or early July at the rate it’s going.” Last week, the boxed beef market continued to slide lower, however, it appeared to be reaching a price level that was promoting some movement. Thursday trade on the Choice boxed beef was down $1.47, to $146.11, while Select dropped 76 cents to trade at $139.94. Movement for the day, at 461 loads of fab and grind product, was called moderate on heavy offerings as packers tried to spur buying interest. Robb noted that demand for middle meats has been lackluster so far this year, particularly when compared with the same time period last year. That decline in consumer demand has been a significant drag on the cutout and a hand-to-mouth buying pattern at the wholesale level. “Packers have been less than willing to forward price beef until recently, particularly against the June live cattle, which was in the $96 range until just a few weeks ago,” he said. “We are starting to see an increased interest in buying now that the fed cattle market has ratcheted down some. The next two weeks will be very indicative of where the market is headed.” Robb said he expects some packers to begin cutting back harvest levels in an effort to support the cutout prices from sliding too much farther. Last week’s tally through Thursday was still running relatively high at 508,000 head, compared with 507,000 the prior week and 503,000 head for the same period in 2006. Although the market has softened faster than many analysts had expected, Robb said most economists aren’t ready to blame the trend on rising consumer prices, particularly fuel costs. “Middle meats are softer, in part, because there been some trading down in the meat complex and that has been supportive of the trim markets, despite heavy cow slaughter this year. Buyers are trading down from middle meats to hamburger.” He also noted that reports from restauranteurs are also adding some uncertainty to the beef market. “If you look at the results from the restaurant chains and talk to the restauranteurs, the reports aren’t looking very good right now. Nearly all of them are reporting same store results below year ago levels,” Robb said. “That drop has also led to a lack of buying interest from that sector, which is also a drag on the market.” However, despite sliding prices, Robb said feedlot closeouts have been particularly good for cattle feeders since early spring, with per head profits reaching as high as $150 per hedged steer during certain weeks. “Guys that were hedged on both their cattle and corn are looking pretty smart right now,” Robb said. “Even cash to cash feeders during the March to May time period were profitable by $54-67 per head.” The fall hedging opportunities for fed cattle have evaporated and Robb said September closeouts are projected in the range of $97. However, feed costs could take their toll as the corn market has been subject to wild swings as weather forecasts change. But, Robb said he expects it will take some serious deterioration in crop conditions to keep Omaha cash corn prices at the $4 level. Feeder cattle The positive margins being seen in feedlots have translated into some strong prices being paid for feeder cattle for fall delivery. Last week’s first big video feeder cattle auction featured more than 100,000 head from 28 states. According to market reports from Superior Livestock Auction’s Council Bluffs, IA, sale, demand was excellent on all classes of cattle. Yearling steers were called steady to $2 higher with heifermates bringing steady prices. The lighter weights brought prices $1-3 lower. Northern calves were called steady to $2 higher, while southern calves sold steady on the better kinds, while average brought prices $1-3 lower. Some examples from the sale include a weighted average price of $109.11 for 435 head of yearlings in the 800-840 lb. class, while 320 head of cattle in the 900-925 lb. range brought an average of $104.10. Meanwhile in the lighter weights, 190 head of steers in the 610-640 lb. class sold for an average price of $111.54 and 400 head of 485 lb. steers brought a weighted average of $137.44. Elsewhere, runs of cattle in much of the country remain light, with good pasture conditions being reported in much of the west, Plains, and Midwest. The two notable exceptions are the southeastern U.S. and California. Last week’s pasture and range condition report for California showed pasture and range conditions rated at 95 percent poor to very poor. Much of central California never received the needed spring rains and there are reports of a good deal of supplemental feeding in the area. In the southeast, some much needed rain fell two weeks ago after a tropical depression from off the Florida coast moved inland. However, pasture conditions there have improved little, with 70 percent of pasture rated at 70 percent poor or very poor. To the north in Georgia, 74 percent of grazing land was rated 74 percent poor or very poor. Those conditions have led to early sales of feeder cattle as well as heavy culling in many cow herds. Because conditions in much of the region are poor, a good number of those cattle have been showing up far from home, with producers opting to pay trucking costs to places like Oklahoma City, OK, where grass is more readily available. At Oklahoma City last week, where good rains have prompted a solid market for stocker cattle, prices paid for feeder cattle and calves were mostly steady to $2 higher last week. Joplin, MO, also added to the rainfall total last week. Prices at the sale were $1-3 lower for steers, while heifers sold steady to $1 lower on moderate supply. Meanwhile, in Hub City, SD, load lots of quality feeder steers and heifers were called steady last week, while the remainder sold $1-2 lower than the prior week. In Riverton, WY, as in much of the rest of the West, price trends were in short supply last week, although the few offered feeder cattle brought prices mostly steady with higher undertones noted in most markets with good demand for most classes of cattle on consignment.

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Thursday, December 20,2007

Broseco Ranch is 2007 BIF Comm’l Producer of the year

by WLJ
The Beef Improvement Federation honored Broseco Ranch with its Commercial Producer of the Year Award, June 7, during the organization’s 39th annual meeting in Fort Collins, CO. Broseco Ranch is owned by Broventure Co. Inc. and managed by Tom Woodward. At 30 feet of elevation, Broseco Ranch is sandwiched between the Sulphur River and White Oak Creek in northeast Texas. In 1961, Paul Pewitt sold his 45,000-acre spread to Broventure Co. Inc. During the past 46 years, Broventure Co. has operated a commercial cow/calf operation under the banner of Broseco Ranch. The bottomland hardwood timber and a pine farm have been sold, 11,000 acres were taken by the Corp of Engineers, and another 10,000 acres of upland have been sold, leaving 10,000 acres of upland improved pasture in the current operation. The cow herd consists of 2,700 cows that are exposed for a 60-day spring breeding season. Yearling replacement heifers are exposed for 45 days. Prior to turning out bulls, they synchronize and artificially inseminate. A normal year will have a breeding herd consisting of 300-400 yearling heifers and 300-400 mature cows. At weaning time, all cows are pregnancy-tested, and all open cows are rebred for fall calving, sold or removed from the herd. In 1981, the ranch infused Brahman genetics into its primarily English-cross cow herd. Then, in 1984, a three-breed rotational-crossbreeding system was established to stabilize the Brahman influence and optimize heterosis. Currently, the genetics used include Red Angus and two composites (SimAngus and Hollander). A 200-head Red Angus herd produces bulls for use on replacement heifers and “balance bulls” for mature cows. They balance the adaptation, maternal, growth and carcass traits to optimize performance at all phases of production. Since 1988, Broseco has retained ownership on a majority of its production. Calves are individually weighed, preconditioned and electronically identified at weaning. The calves go to a wheat stocker program in the rolling plains of Texas and are then finished in the southern Plains. The operation is Quality Systems Assessment qualified. Finished cattle are sold through a value-based grid-marketing system. Through the Ranchers Renaissance cooperative in partnership with Cargill Meat Solutions, the beef is marketed in the Ranchers Registry product line to several major food store chains. For more about Broseco Ranch, visit www.brosecoranch.com. The Red Angus Association of America nominated Broseco Ranch.

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