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Thursday, December 20,2007

Holiday pushes fed market up

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

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Thursday, December 20,2007

Cattle on feed report supports prices

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

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Thursday, December 20,2007

Market slips back before holiday

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

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Thursday, December 20,2007

State approves expanded loan forgiveness for vet students

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

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Thursday, December 20,2007

Operating committee recommends 2008 Beef Board budget

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

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Thursday, December 20,2007

Consumer demand supports market

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

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Thursday, December 20,2007

International beef exports up, imports strong

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

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Thursday, December 20,2007

Drought worsens, but producers have options

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

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Thursday, December 20,2007

Ethanol import tax opposed in Congress

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

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Thursday, December 20,2007

North Dakota places restrictions on some Montana cattle imports

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

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