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Thursday, December 20,2007

KAY’S KORNER

by WLJ
July 11, 2005 All eyes and ears will be focused on a courtroom in Seattle this Wednesday. That’s where three judges from the Ninth Circuit Court of Appeals will hold an oral hearing in USDA’s appeal against the preliminary injunction that has kept the border closed to Canadian cattle under 30 months of age. It’s anyone’s guess as to when the judges will issue their decision. There’s also great uncertainty as to how they will rule. So both supporters and opponents of a border reopening will have to endure a nervous waiting period. As I’ve sifted through the mass of legal filings the past two months (I counted at least 38 legal briefs), I can’t help reflecting on the disparity between the two sides involved, producer group R-CALF and USDA. It’s tempting to portray the fight as a battle between the little guys and the mighty U.S. government. But it’s way more complicated than that because science and the law have collided with a loud crash. In essence, the three judges will have to decide whom to believe on the science. That makes me a little concerned as I wonder how three people, even as well versed in the law as they are, can decide which side has the stronger “scientific” case. On the surface, it seems a no-brainer that USDA should prevail. On the weight of evidence I’ve read, USDA appears to have followed all the guidelines recommended by the World Organization for Animal Health (the OIE) regarding BSE. It employed world leaders in risk assessment to help make its case for the final rule that would have reopened the border on March 7. It has explained how Canada’s BSE mitigation measures are almost identical to those in the U.S. Now that the U.S. has its first homegrown BSE case, the argument is even more compelling that both countries have a similar level of risk regarding BSE (a very low level, incidentally). This appears to reinforce the argument that there’s no scientific justification for keeping the border closed. Canadian cattle and beef would appear to be as safe as U.S. cattle and beef. Arguing that Canadian cattle and beef are unsafe admits by default that U.S. cattle and beef are also unsafe. I don’t know many in the U.S. industry who believe that. Our second BSE case may not play a part in the judges’ determinations regarding USDA’s appeal. That’s because they will be focusing on the legal merits of the U.S. District Court’s March 2 opinion that put the preliminary injunction in place. But from where I sit, our BSE case at the least morally undermined R-CALF’s argument. As to timing, the key question is whether the appeals court will render its decision before another district court hearing on July 27. That’s when Judge Richard Cebull will hear arguments from the two sides over R-CALF’s request for a permanent injunction to keep the border closed both to all cattle and to all beef from Canada. Several people have asked me if Cebull might grant R-CALF summary judgment before the appeals court issues its decision. I haven’t got a definitive answer to that question but most people believe he either cannot or will not do that. So what happens if the appeals court sets aside the preliminary injunction? Presumably, the border could reopen the day after the decision. If that occurs before the July 27 hearing, Judge Cebull would be faced with the prospect of having to make a decision knowing that it would likely be immediately appealed and overturned. He’s had at least 10 decisions reversed by the Ninth Circuit since he became a U.S. District Court judge in August 2001. This record suggests he might not want to be overturned again. Conversely, should the Ninth Circuit find for R-CALF and deny USDA’s appeal, Cebull would feel legally emboldened to issue a permanent injunction. He might even issue that from the bench on July 27, as he did with the preliminary injunction on March 2. USDA would likely appeal again. But in practical terms, it would be back to “square one” in its attempt to get the border reopened. With this in mind, some members of Congress who support a border reopening have already talked about the need to develop a legislative alternative. So the whole border issue could get a lot more bloody before it is resolved. What a terrible waste of energy and money. The only pockets being filled by all this are those of the lawyers. The border will reopen at some point. At what cost to the beef industry and beef demand is the real question. — Steve Kay (Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533; Petaluma, CA 94953; 707/765-1725. His monthly column appears exclusively in WLJ.)

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Thursday, December 20,2007

Market Advisor:

by WLJ
July 11, 2005 The Chicago Mercantile Exchange (CME) has modified the way it computes its feeder cattle index. The change will affect the August 2005 feeder cattle futures contracts and all subsequent contracts. Two specific changes were made to the index calculations. First, USDA medium- and large- frame Number 1 and 2 steers have been added to the previous category of medium and large frame No.1 steers. Second, the weight range for feeder steers has been expanded to 650 to 849 pounds, from 700 to 849 pounds. The changes were made to increase the total number of price observations available to compute the index. The addition of the 1 an 2 steer category likely will have a downward impact on the index because No. 2 steers usually sell lower than the No. 1 category. However, the addition of 650- to 699-pound steers will tend to have an upward effect on the index because those steers typically sell for more than their heavier weight counterparts. The CME feeder cattle index is important. Instead of actual delivery to settle an open contract, all open contracts after the termination of trading on the last Thursday of the contract month are settled using the index price for that day. The index is a proxy for the cash market. The index and the closing futures price at contract maturity can be expected to be equal or within a few cents per hundredweight (cwt.) of each other. The feeder cattle index is based on all feeder cattle auctions, direct trades, video sales and Internet sale transactions within the 12-state region of Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming for which prices are reported by federal and state market reporters. The seven-day index is calculated Monday through Friday. The change actually was implemented during the first week in June. The new categories were added on June l and by June 7, the index included all observations from the new categories. An important question for producers who may be contemplating using CME futures or options, or the new Livestock Risk Protection insurance, is how the changes will affect the basis for feeder cattle to be sold in the future. Basis is the difference between a local cash market price and the index. I did a quick comparison of the daily observations for the old index with what the new index would have been for 2001 through 2004. The new index averaged 24 cents per cwt higher for that four-year period. The relatively small difference could be expected because of the downward and upward price impacts that were added to the index. Feeder cattle futures contracts are available for January, March, April, May, August, September, October and November, so those average monthly differences also were calculated. The new index averaged 68 cents per cwt higher for January, 73 cents for March, 67 cents for April and 15 cents for May. However, the new index averaged 11 cents per cwt lower than the old index in August, 3 cents in September, 29 cents in October and 6 cents in November. In December, the new index moved back above the old by 15 cents per cwt. Feeder cattle hedgers may see the basis decline about 70 cents per cwt. in January, March and April, with negligible changes likely in other contract months. The quality and geographic location of an individual producer's feeder cattle still will be more important in estimating the expected basis level than the small differences between the two indexes. For example, the average basis for 700- to 849-pound, medium- and large-frame No. 1 feeder cattle sold at the six markets reported in North Dakota historically has been very close to par (cash = index) at contract maturity. However, the range in cash prices has averaged about $8 per cwt., with higher priced cattle selling $4 per cwt above (plus $4 basis) the index and lower priced cattle bringing $4 per cwt below (minus $4 basis). The challenge for producers is to know how their feeder cattle sell compared with others when they are marketed. Granted, that can be difficult due to the many factors that affect the market prices of feeder cattle. — Tim Petry, Livestock Marketing Economist, North Dakota State University Extension Service

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Thursday, December 20,2007

COMMENTS

by WLJ
July 18, 2005 We were expecting big news last week as the Ninth Circuit Court of Appeals held its hearing on the temporary trade injunction concerning the Canadian border and BSE. I’m told that the issue will be more about whether District Court Judge Richard Cebull was within his means to grant R-CALF United Stockgrowers of America a temporary injunction on Canadian live cattle crossing the border. It’s a perplexing debate when you consider that the beef we import is fine but the live cattle that produce the beef are not. It seems that not letting Canadian cattle in the U.S. because of BSE is like “the pot calling the kettle black.” However, R-CALF is continuing to beat the drum that Canada has a far greater risk of BSE than the U.S. That may be so, but it seems that five cases in North America still is no comparison to Great Britain or Europe. Saying your BSE problems are worse than ours is a bit childish, especially when neither country has a problem. R-CALF sent Ag Secretary Mike Johanns and the director of Human Health Services (HHS) a letter asking them to strengthen BSE prevention efforts. R-CALF said USDA and HHS are correct that the most likely routes of introducing BSE into the U.S. are through the importation of infected live cattle already incubating the disease that are rendered into feed and mistakenly fed to cattle, or the importation of contaminated meat and bone meal. The group also said the discovery of BSE in a 12-year-old domestic cow demonstrated the basic BSE protection measures adopted by the U.S. more than 15 years ago failed to prevent BSE, a foreign animal disease, from entering the domestic cattle herd. R-CALF President Leo McDonnell said that “present evidence proves that our import restrictions, our fist line of defense against BSE, were and may continue to be inadequate.” R-CALF has proposed five measures to improve BSE protection measures. Those measures (verbatim) are: 1) Prohibit importation of any ruminant or ruminant products from countries known to have BSE, or any country that has inadequate BSE import restrictions, to ensure that BSE is not introduced into those herds; or countries that do not conduct BSE surveillance testing at a level that would allow the detection of BSE at the rate of less than one case per million head of adult cattle, and also seek upward harmonization of standards and practices to a reasonable standard of safety to ensure the U.S. does not become a dumping ground for products banned in other countries. 2) Allow private firms to voluntarily test cattle of any age for BSE to meet international and domestic demand as well as exports and the BSE testing program for the identification of BSE, and the elimination of any animals so infected from the food supply, and to accurately monitor any evolution of the disease. 3) Track, identify, and test all cattle previously imported into the national herd, and implement country-of-origin labeling so consumers can choose to purchase beef and beef products from the country or countries of their choice. 4) Strengthen the feed ban to exclude all animal protein and animal by-products from all livestock and poultry feed, including blood, poultry litter, plate waste, tallow, and specified risk materials (SRMs) and ban the use of ruminant blood meal, bone meal, and ruminant tallow in milk replacer and colostrum. 5) Prohibit Advanced Meat Recovery (AMR) systems on cattle over 12 months of age. This all sounds good but for the most part is already being done. Many of these proposals will be costly to the industry. Still, we haven’t applied the real risk to the proposed prevention measurements. BSE testing is fine, but to test all cattle isn’t necessary. If a company decides to test, would it imply that all other beef is not safe? If we treat all ruminant byproducts as suggested, it would kill any market for those products and ultimately cost producers a minimum of $75 a head on drop credits. The measure about AMR would simply put that process on the junk pile. Ultimately there is a cost to producers to implement every one of R-CALF’s proposals. The way I see it, the system is working. No BSE-positive animals have made it into the food supply, at least since the first case found in Washington. The only element in these proposals that we should pay attention to is the part about harmonization of BSE standards. The human and animal health risks associated with BSE is so small that it doesn’t require sacrificing the value of your cattle, and most of these measures will affect the value of live cattle. The current system is good enough. — PETE CROW

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Thursday, December 20,2007

Canadian cattle trade decision pending

by WLJ
— Ruling by permanent injunction trial date hoped for. The issue of Canadian cattle entering the U.S. remained unresolved as of press time last Thursday, as an appellate court panel was weighing arguments on the issue. The Ninth Circuit Court of Appeals’ was called “receptive” to arguments from both sides of the ongoing battle and was noncommittal about the pending decision, according to sources in attendance at last Wednesday’s hearing in Seattle, WA. Unlike a normal trial hearing, attorneys from both USDA and R-CALF United Stockgrowers of America fielded questions from the three judges on the bench for about 40 minutes. Hearing attendees indicated that most of the questions were originally directed at counsel representing R-CALF. The justices were particularly interested in R-CALF’s contention that USDA was inconsistent in its use of scientific justification when finalizing its rule to allow Canadian live cattle into the U.S. R-CALF attorney Russell Frye told the appellate court that District Court Judge Richard Cebull agreed with the allegations that USDA made its import rule on the basis of politics and then worked backward to justify the rule by incorporating science. He also said the arbitrary nature of USDA’s action was evident since the original rule allowed beef from all ages of cattle to enter the U.S. when only live cattle 30 months or younger would be allowed. There was an indication from the appellate panel that Cebull may have ruled against USDA and its final import rule because he didn’t agree with the decision, and that he may have not shown an appropriate amount of deference to USDA. Leaders from the Washington Cattlemen’s Association (WCA) said the panel was interested in analyzing Cebull’s decision further to see whether there was any factual basis or legal arguments that led to his granting a preliminary injunction against Canadian cattle entering the U.S. There was no time line for an appellate court ruling known as of last Thursday. Counsel from both sides were hopeful to have a ruling on the issue by July 27, which is when Cebull is scheduled to hear testimony on a request for permanent injunction against Canadian cattle and beef entering the U.S. Legal sources last week indicated that Cebull could issue a continuance in the permanent injunction suit if the appellate court hasn’t ruled on his preliminary injunction decision by that time. A continuance would delay the permanent injunction hearing until after the appellate court’s ruling is made. Cebull ruled in favor of R-CALF’s preliminary injunction request May 2, five days before USDA was scheduled to reopen the border to Canadian cattle 30 months or younger. The border was originally closed to Canadian cattle and beef in May 2003, after the country reported its first confirmed case of BSE. Beef from animals under 30 months of age with specified risk materials (SRMs) removed was allowed back into the U.S. several months later. However, cattle and beef without age restrictions and SRMs removed have not been granted access. — Steven D. Vetter, WLJ Editor © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Thursday, December 20,2007

LEGALLY SPEAKING

by WLJ
July 18, 200 An area of concern in IRS audits of farming, livestock and horse activities is the amount of time expended by the taxpayer in the activity. A recurring problem is that taxpayers do not keep contemporaneous time records, but instead “reconstruct” time records in the face of an audit. This can always be a hurdle because it suggests that you did not really conduct the activity in a businesslike manner, but instead simply prepared self-serving records after the fact, and only because the IRS has indicated its intention to conduct an audit. Another problem is that proper records of time should break down the time on a daily, or at least weekly basis, to be credible. The IRS and the Tax Court take the position that if your primary objective is to achieve profitability of your operation, you will demonstrate significant interest in monitoring and documenting the time expended. In judging whether the taxpayer spends sufficient time on the activity, it is relevant to examine the relative importance of the activity compared with the taxpayer’s other activities. The fact that the taxpayer devotes a limited amount of time to the activity can be used as evidence that there is a lack of profit motive. In some cases, the fact that the taxpayer devoted an insufficient amount of time to the farm was a significant element in ruling that the activity was not conducted for profit. For example, in Hambleton v. Commissioner, TC Memo 1982-234, the taxpayer was transferred to Washington, D.C. from New Jersey, where the farm was located, and he was able to work on the farm only weekends, holidays and vacations, which the court found to be insufficient time. In that case, the taxpayer’s activities on the farm during weekends, holidays and vacations, consisted of mending fences, cutting hay and operating cattle breeding. The taxpayer sought advice from local farmers, had soil classification tests performed on the property, and attended cattle meetings in an effort to obtain advice and information concerning cattle breeding. The farm was also used for recreational purposes: the taxpayer had a swimming pool, and maintained five Shetland ponies on the property, which were ridden by the taxpayer’s wife and children. After the taxpayer was transferred to Washington, he employed a farm manager to care for the farm during his absence. The duties of the farm manager consisted of feeding the animals (including the ponies), cleaning their stalls, mowing and harvesting the hay, spreading manure, cutting firewood, keeping trespassers out of the property, repairing fences, cleaning the swimming pool, sweeping the patio area of the house, and general caretaking. The farm produced very little income, primarily from the sale of hay and pasture rental, and generated 8 years of significant losses. There was one profit year. The taxpayer had significant income from other sources, and the court said that the farm losses served to offset substantial amounts of his other income. The court said that the enjoyment of the farm and its recreational aspects were contributing factors in the taxpayer’s decision to visit the property almost every weekend. His enjoyment of the farm environment itself is not inconsistent with a profit motive but, the court said that when viewed together with the economic output on the farm along with the effort expended to commute every weekend, “it appears that the enjoyment of being at the property and attending to it was more important to petitioners than the potential of supplementing their other income by realizing a profit from the farm operation.” The court made much of the fact that the taxpayer was only able to devote time on the weekends and holidays after his job transfer to Washington, D.C. Yet the court acknowledged that the taxpayer “worked diligently at clearing the fields, harvesting hay, and mending fences and buildings.” Moreover, he hired a caretaker to attend to the property during his absence. The court said that “the employment of a experienced farmer would be a factor pointing to a operation engaged in for profit.” However, the caretakers hired by the taxpayer also had outside full-time jobs and had no particular expertise in farming. Thus, the court held that the taxpayer failed show that the time he devoted was consistent with a profit activity. In another case, Pickren v. Commissioner, TC Memo 1981-52, the taxpayer spent only two or three weeks a year working on his new farm, and the court found no bona fide profit objective. In that case, the taxpayer purchased a 240-acre farm which he intended to work on during the summer months. For the first three years in question, he worked on the farm during the summers for a period of only 2-3 weeks. The farm was in poor shape and contained no habitable dwelling. He did such things as repairing fences and clearing land of underbrush. The farm contained mostly timberland. However, the taxpayer did not harvest any timber, nor did he raise or sell any crops, or did he buy any livestock to raise. During his absence, the farm was unattended. No income was earned from the farm. Rather, he claimed various business expenses for repairs, supplies, taxes, land clearing, depreciation, labor, and other items. The court said that the manner in which the taxpayer operated the farm was not indicative of a bona fide intent to make a profit. The main reason for this conclusion was that the taxpayer spent very little time or money in trying to change the condition of the farm. The taxpayer did not indicate that he had any intention or prospects of spending more time on the farm in the future, and he must have known that the amount of time he could devote during the summer would be insufficient to make the farm profitable. Moreover, the taxpayer spent only limited amounts on things that would positively affect the farm’’s conditions--such as repairs, seed, and land clearing. — John Alan Cohan (John Alan Cohan is a lawyer who has served the farming and livestock industry since l98l. He serves clients in all 50 states, and can be reached at: (3l0) 278-0203 or by e-mail at JohnAlanCohan@aol.com.)

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Thursday, December 20,2007

Hay mold a growing concern

by WLJ
— Negative impacts on calves cited. — Additional waste weighs financially. Forage and ruminant nutritionists are urging producers to be careful when it comes to buying their fall and winter hay and other harvested forages due to concerns that mold is more prevalent this year than the past several years. First and second cutting hay from the central and northern Plains, Intermountain West and Northwest are of the most concern because of the abnormally-heavy rains that inundated those areas during spring and very early summer. “A lot of early hay was already down when it got rained on,” said Kurt Leffler, hay specialist with LMO Agriculture, Inc., Decatur, MO. “Even with allowing it to dry several days, chances are the air was still damp enough to threaten hay quality and safety at baling time.” He also said the wetter-than-normal spring helped pre-harvest mold levels which usually accumulate on the under side of leaves where the sun can’t do its job of killing or minimizing mold colonies. Leffler said it appears that in several areas of Missouri, Kansas and Colorado, mold may have impacted 8-10 percent of the first and second cutting hay harvests, with some producers reporting 20-25 percent spoilage. Usually, Leffler said, mold rates are well under five percent, at two to three percent. “In one case, it was so bad a whole 4,000-bale stack went up in flames because the hay was wet, got overly hot, and spontaneously combusted. The odor was very bad, indicating the hay was also very moldy,” Leffler explained. Hay mold isn’t considered very toxic to mature open cows or bulls, particularly in very small levels. However, it is a concern when mold is fed to bred cows with calves on them or to the calves themselves. “The biggest problem with moldy hay is that calves can turn sickly from eating it directly or by drinking the milk from their mothers that have eaten the hay,” said Rick Turnbull, ruminant specialist with Wichita-based, HiPlains Livestock LLC. “Scours, lost appetite, reduced weight gains and lethargy are the most common impacts to young cattle.” Turnbull added that while palatability might not seem to be an issue with a lot of hay that shows just slight incidence to mold, the issue of hay waste becomes a financial burden in the case of heavy mold presence. “I’ve seen where heavy mold in hay can result in 30-50 percent of hay being wasted—that means not being eaten and being trampled on or used as bedding,” he said. “While prices are a lot cheaper than they have been the past few years, that waste still adds up and that’s a lot of extra money that needs to be shelled this winter for feed resources.” Moldy hay is most easily caught by smelling bales or loaves of hay. A rancid or mildewy smell is a good indicator that hay is at least somewhat moldy and should be avoided, or in the case of feeding older, unbred animals, bought at a reduced price, Turnbull said. If bales are also hot to the touch they should be avoided, because moisture has been trapped within the hay and is not only moldy but is rotting all the way through. — Steven D. Vetter, WLJ Editor © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Thursday, December 20,2007

Plains ranch lands at historical highs

by WLJ
The eastern Plains region of the U.S. is very rich in both farms and ranches, and brokers and realtors both say the current market for those entities is nearing or has exceeded historical highs. In addition, sources said the large majority of these properties that have been sold are being kept as agricultural operations, either in part or in their entirety. “The land market throughout the western Cornbelt and eastern Plains is very strong with most areas seeing land values at historical highs or setting new highs,” said Monty Meusch, head real estate broker with Farmers National, Omaha, NE. “Demand is being pushed by area farmers and ranchers wanting to expand their current operations, investors seeking to place cash in real estate for diversity, safety and income and IRS 1031 tax deferred exchange buyers who have sold land for development and now must re-invest the sale proceeds or pay capital gains tax.” According to Meusch, 60-70 percent of agricultural real estate for sale is currently being bought by active farm and ranch families. “We still have a good interest from active producers who are insuring their future by expanding,” he said. As far as “nonresident” buyers are concerned, Meusch said, “a majority of them already own land and are very comfortable in growing their holdings for a number of reasons.” Most realtors in the region indicated that anywhere between 25-40 percent of buyers have been 1031 purchasers, who need to purchase land in order to avoid paying capital gains taxes. Price ranges for ranch land in the region vary widely, even within states. In Kansas, Flint Hills grassland has been primarily selling within a range of $650-1,100 per acre, while pasture land in the western part of the state sells between $200-450 per acre. According to Meusch, the upper end of the range is hit when land has more water resources and adequate-or-better fencing. As a whole, Nebraska’s land values aren’t as high as the upper end of Kansas ranch land, but are very comparable to western Kansas prices. In the Sand Hills of Nebraska, ranch land has been selling between $250-525 per acre. In north-central Nebraska, values have reached historical highs between $500-750 per acre. John Childears, broker at Agri Affiliates, North Platte, NE, still indicated that prices are the highest he has ever seen in his 30 years of brokering farm and ranch land. “We are looking at ranchers spending $3,500-4,000 per cow unit right now, and that is just for the land itself,” he said. According to Meusch and Childears, demand for grassland in north-central Nebraska far exceeds availability, and that most available tracts are only “small acreages.” Childears added that the 1031 demand for ranches in the Sand Hills is around 40 percent and that a lot of that money is coming from previous owner/operators of ranches from other areas of the country. “We’re seeing a lot of Colorado mountain and Wyoming ranchers who sold their property over the past few years and are coming out here with that money and reinvesting it in other ranch properties,” Childears said. “We are also seeing a similar trend from farmers or ranchers from the Corn Belt that sold smaller properties for a lot of money and are coming out here and buying much more land than they had before.” In terms of outside investors, Childears said there have been some buyers that have come in and bought ranches and converted them into recreational properties, but the percentage is still very small. “What we have seen is that some of these investors start out with the hunting and fishing aspect of the ranch, and then start to lease out the ranch to ranchers on the off-season,” Childears said. “It’s the opposite of ranchers who raise their livestock, primarily, and then lease out their property for hunting, fishing or other recreational activities as a secondary business.” Childears said that situation is generally seen on ranches located on or near the Platte or Niobrara rivers that run along the Sand Hills. In the Dakotas, sources reiterated that the market for ranches and pasture land are very close to historical highs and that demand is exceeding availability. South Dakota has the stronger land values than its neighbor to the north, but most ranch brokers have said that range and pasture land in both states is bringing over $200 per acre. The average price for pasture in South Dakota is around $250, while North Dakota averages around $205. According to ag realtors licensed in either state, most buyers of pasture, range or a “balanced ranch” are existing livestock operators who are expanding their operations from neighboring states to the immediate south or east. Several sources indicated that 1031 money is also very prevalent in the real estate market in the Dakotas, and that most of it is going to purchase vast expanses of land in the central Plains, or mountain areas of the country. “I would say if it wasn’t for a lot of the 1031 buyers and those that are into recreational activities, this ranch market wouldn’t be one-third of what it is now,” said Bryce Nelson, Bryce Nelson Real Estate, Rapid City, SD. Nelson added that he sees animal unit values even higher than what they are in Nebraska and parts of Kansas. “We have a lot of 30 to 40 acre-per-cow areas in the Dakotas, and the cheapest we have sold ranch land has been $250 per acre,” he said. “I have sold a couple of properties this year where the value is well over $10,000 per animal unit.” In the eastern half of Colorado, pasture and rangeland values are still trying to recover after being hit by drought during the late 1990s and first few years of the 21st Century. However, those values are also said to be getting close to averaging $200 per acre now, compared to $140-175 per acre in 2002. “Drought eliminated a lot of pasture, and cows and stocker cattle were hard to come by the past five or six years,” said Daylynn Lindstadt, ranch realtor near Rocky Ford, CO. “A lot of that land became available down here over that time, but demand was very sporadic due to no livestock being able to graze it. Now we have revived interest from cow/calf or stocker operators and the (land) market is seeing phenomenal improvement.” The eastern Colorado market is expected to improve even more and could see a peak sometime next year, particularly if cattle herd expansion continues, he said. — Steven D. Vetter, WLJ Editor © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Thursday, December 20,2007

TB confirmed in Minnesota herd

by WLJ
For the first time in 34 years, bovine tuberculosis has been confirmed in a Minnesota cattle herd, and will result in approximately 900 cattle being euthanized in the northern region of the state. Last week the Minnesota Board of Animal Health said a five-year-old cow that was slaughtered Feb. 28 was found to have “suspicious internal lesions,” by a federal meat processing inspector. Laboratory tests confirmed the cow had TB. The animal was traced back to a herd in Roseau County, which is on the border with Canada. USDA bought a portion of the herd for further testing. Of the animals slaughtered, 18 cases of the disease were confirmed. Last Tuesday, USDA declared the herd infected and the started the process for destroying it. USDA will pay the owner a salvage value for all the animals. The name of the producer was not release. “Our surveillance system worked. The disease was detected," said Dr. Bill Hartmann, a veterinarian and executive director for Minnesota’s livestock board. "Now we'll focus on tracing any animals that left the herd in the last seven years as well as determining a possible source of infection.” The state will only lose its TB-free designation only if another infected animal is found within the next year, and if that animal was not related to the current investigation. The board said it was very unlikely that TB would get into the supply of milk or beef because inspectors watch for it. Also, cooking kills the bacteria. Because the disease is capable of jumping from cattle to deer, the Minnesota Department of Natural Resources announced it will test for the bacteria in deer killed in Roseau County during the fall hunting season. — WLJ © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Thursday, December 20,2007

Market provides hedging opportunity

by WLJ
July 23, 2007 Fed cattle trade was expected to move lower in most regions last week, although with the exception of a few scattered trades in the north at prices $2 lower than the previous week. Most trade was expected to wait until the release of last Friday’s cattle on feed and cattle inventory reports. Prices in the south, in particular, which were still $4-5 apart last Thursday, appeared to indicate late trade was likely. By mid-day last Thursday, there had been a few sales reported in Nebraska at $140, however, most feedlot showlists were still priced at $142-145 live basis, steady with prior week prices. The action on the Chicago Mercantile Exchange (CME) last week was lower in the live cattle pit Thursday in anticipation of lower cash trade. That said, the futures market was still trading at a premium, in some cases a significant one, to the cash market. Deferred months last week offered an excellent hedging opportunity for cattle feeders with cattle for the October through December fed market. “Current futures prices are even more optimistic than market fundamentals, scaling into hedging programs or contracting for slaughter steers and heifers to be sold in October through December looks like sound business management,” said Jim Robb, director of Livestock Marketing Information Center. Last Thursday, the market gave up some of the premium, however, prices for deferred months were still positive. August dropped 55 cents to $90.82. October contracts shed 82 points and December fell 62 points to close at $96.45 and $98.40 respectively. However, weakness was expected to be short lived ahead of USDA’s release of the two cattle inventory reports, which were expected to be supportive of the markets. In particular, the inventory report was expected to show that herd-building, typical for this point in the cattle cycle, has not occurred. This year’s calf crop was trimmed by sub-freezing temperatures during calving season. In addition, heifer retention has been hurt by drought in the southeast and calf prices which are making it attractive for producers to sell females into feedlots. The result will likely be a mid-year inventory report which shows near zero herd growth. Such a number will support both the live cattle and feeder calf markets which are already anticipating tight supplies ahead. On the other hand, beef movement out of packing plant cold storage has been mediocre for weeks and last week was no exception. Export products are providing support for the cutout values, while domestic demand lags. Last Thursday during early trade, the Choice boxed beef price dropped $1.16, to $142.36, while Select gained 19 cents to trade at $136.74. Movement was reportedly moderate with 115 loads of Choice cuts, 68 loads of Select cuts, 30 loads of trim and 39 loads of ground product heading for retail markets. Slaughter for the week through last Thursday remained robust with 504,000 head harvested, up from 497,000 head the previous week and 495,000 during the same period last year, showing that feedlots are doing a good job of remaining current and perhaps even pulling cattle forward. Meanwhile, the cow markets also remain strong. Last Thursday, cow beef cutout value shed 74 cents to trade at $114.76, while the 90 percent lean sold at $140.42 and the 50 percent trim remained near steady at $53.79. Continued strength in the cow beef market has supported the cull prices being paid in auction markets at the mid-$50 range for much of the year and prices are expected to remain strong into fall culling as consumer demand remains high for relatively inexpensive cow beef-derived products like ground beef. Feeder cattle Heavy feeder and yearling prices were the story of the week last week following strong video market sales on both Western Video and Superior. Prices for 900 lb. class cattle in the neighborhood of $1.10 were common at both sales. Light calves for nearby delivery, however, were discounted by buyers who aren’t ready to place them in feedlots. Relatively inexpensive grass is available in many parts of the country and buyers and sellers, alike, are taking advantage of the resource. Fall deliveries of calves also sold well with weaned calves in the 500-600 lb. range selling well, particularly at the Superior sale held in Steamboat Springs, CO. The prices paid for calves bodes well for producers who have consigned cattle to one of several upcoming video sales. Futures prices also indicate a solid market for feeder cattle through the end of the year. Last Thursday’s session on CME ended in mixed territory, with August and September contracts adding five points each to close at $115.45 and $116.47 respectively. October feeders were unchanged at $116.72 and November added 22 points, also ending at $116.47. Virginia Tech commodity marketing agent Mike Roberts encouraged feeder cattle buyers to lock in some price protection by hedging feeder purchases soon. Falling corn prices, which were spurred by improved moisture last week, continue to be subject to weather issues and will be for the next several weeks. The downward trend has allowed feeders to lock in supplies at what look to be good prices. With the wild fluctuations created by the weather market, it may also be wise to lock in near-term grain supplies at this time, according to Roberts. In auction market trade last week, the few reported sales with enough volume to call a trend were mostly higher as a result of the market fundamentals, including available grass and growing availability to stored forage. In El Reno, OK, last week, feeder steers were called steady to $1 higher, while heifer mates sold steady. Steer and heifer calves were steady to $2 higher in a light test on moderate to good demand. In West Plains, MO, last week, steers and heifers sold steady to $2 higher, with yearlings mostly $2 higher. Supply was called moderate and quality was reportedly down from previous weeks’ sales. Demand was also good as a result of good grass conditions, considering the time of year. However, demand was best for yearlings and weaned calves with at least one round of respiratory vaccinations, a trend which will become increasingly important as weaning time approaches. Farther north in Hub City, SD, compared to the prior week’s sale, feeder steers and heifers sold $2-4 higher on good demand in all classes. Offerings were made up mostly of load lots of feeders in larger consignments. On the West Coast, in Davenport, WA, no trend was available as a result of the light run for the week, however, trade was active with good demand for offered lots. Meanwhile, at Western Stockman’s Market in Famoso, CA, demand was called excellent for a good run of stocker cattle, with the best demand on the greener quality kind in the 500-600 lb. range. Feeder demand was called good, with a big string of Mexican steers sold to out-of-state buyers at excellent prices.

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Thursday, December 20,2007

Beef Talk

by WLJ
July 25, 2005  At times we become so focused on issues that we simply miss activities (and sometimes new rules) being advanced in the beef industry. The National Animal Identification System (NAIS) has captured much of our attention. Prior to the NAIS, country-of-origin labeling (COOL), North American Free Trade Agreement (NAFTA) and a multitude of other marketing or health-related issues provided spirited coffee shop talk. Most of these issues impact the producer and may lead to the modification of the producer’s associated business and management practices. A new issue sleeping in the shadows for many cow/calf producers is waste management. Often perceived as simply a feedlot problem, many cow/calf producers have skimmed the information, setting the material aside for a rainy day. The information eventually gets lost in the stack. After reviewing much of the information, the Dickinson Research Extension Center (DREC) is applying for a permit from the North Dakota Department of Health for animal feeding. The DREC does affect the environment. We have animals confined for periods more than 45 days during the year and some of these cow/calf lots do not sustain normal forage or crop growth throughout the year. Bridget Johnson and Ron Wiederholt, area livestock nutrient management specialists for the North Dakota State University Extension Service, developed an assessment tool to help producers get a handle on what impact their livestock operation might have on their local environment. More than likely, most livestock producers, particularly cow/calf producers, are animal-feeding operations as previously defined. Let that be repeated: Most cow/calf producers are animal-feeding operations as defined by the regulations in their respective states. In large operations, those with more than 1,000 beef cattle, for example, size alone makes the operation a large, concentrated animal-feeding operation (CAFO). However, most producers will fit into either a medium or small animal-feeding operation (AFO) and may or may not need to modify the operation. It is important for producers to become knowledgeable about animal-feeding operations and ask for an assessment of their operation. Along with university systems, most livestock or producer organizations, such as the North Dakota Stockmen’s Association, have information and people to help determine to what extent a beef operation impacts the environment. Medium or small animal-feeding operations, even those with one cow, may need a permit if the operation has a potential impact on the waters of the state. Like NAIS and COOL, the train is on the tracks and more than likely, as cow/calf producers, we are not the engineer. The regulations are still a year or two away, but there is no need to be caught short. For the center, like many operations, the early settlers located cattle in protected draws and coulees making winter feeding somewhat more pleasant and calf survival was enhanced. However, for now, many of the winter safe havens are simply conduits within a larger system of water drainage that ultimately affect the major water sources within the state. As a result, the center is moving cattle around, changing winter-feeding operations, keeping cattle on crop aftermath for longer periods and pulling cattle into more constructed windbreak systems in more exposed landscapes. These management changes create new challenges, including workload, more extensive feeding needs and greater calf death loss. These challenges have all pointed to more questions, but at least for now, the term “animal feeding operation” is taking on a new meaning. Make sure you read the fine print. 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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