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Thursday, December 20,2007

Mexican cattle linked to drug cartel

by WLJ
The U.S. Department of Treasury (Treasury) Aug. 18 announced that two Mexican cattle companies are among the front businesses for Mexican drug-trafficking cartels. Cattle sold to Texas ranchers by these suspect companies after Aug. 19 could be seized as evidence of a money laundering scheme, agency officials said. Cattle already purchased and owned before the suspect Mexican companies were identified are not going to be impacted by the announcement, Treasury officials said. The department also plans to inform cattle associations and other groups of the action taken against the Mexican companies, officials said. The Treasury also will provide other information, such as the brands used by the cattle companies linked to the drug cartels. For now, buyers are expected to practice due diligence when purchasing cattle. The two Mexican cattle companies named by the Treasury Department are Corrales San Ignacio S.P.R. de R.L. de C.V. and Del Nortes Carnes Finas San Ignacio S.A. de C.V., both of Mexico’s Chihuahua state. A U.S. company in Presidio, TX, Corrales San Ignacio L.L.C., was identified by the Treasury Department as a “mirror” entity, which is an organization that exists on paper to give a foreign company a U.S. outlet. Treasury officials said it was unlikely that company actually has any pens or feed lots. The two suspect cattle companies are linked to the Arriola Marquez group, which is associated with Mexican drug kingpin Joaquin “El Chapo” Guzman. Guzman is a leader of one of the factions fighting for control of Nuevo Laredo and its smuggling routes into Texas. The U.S. cannot seize cartel property outside the country. But once the companies have been identified as having links to drug cartels, federal law prohibits anyone from doing business with them and allows the federal government to take any property of the groups that is “in the possession or control of U.S. persons.” It is not clear how many Mexican cattle owned by companies linked to drug cartels have been sold in Texas. The two cattle companies are part of approximately 30 total companies and individuals that have been linked to the Arriola Marquez and Arellano Felix organizations.

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Thursday, December 20,2007

Plaintiffs must pay Tyson’s trial costs

by WLJ
The three judge panel unanimously supported a district court decision, ordering the plaintiffs — five individuals and one corporation — to pay Tyson Fresh Meats more than $70,000 in expenses related to the trial held last year in Montgomery, Alabama. Last week the appeals court affirmed Judge Lyle Strom’s decision to reverse a jury verdict against Tyson Fresh Meats, a subsidiary of Tyson Foods, Inc. They found Tyson did not violate the law through its supply agreements with independent cattle producers and has legitimate business reasons for entering into such agreements. In the subsequent ruling on trial costs, the appeals court rejected the plaintiffs’ argument that the case was “close” and that they should be exempt from paying Tyson’s expenses. The appeals court wrote “this case was not a close and difficult one” and noted the plaintiffs “lost every aspect ...” The court found that “witnesses for both parties agreed Tyson had a number of competitive justifications” for using marketing agreements. “The legal issues were not particularly novel or difficult. Although it took a long time to try, the case was not especially complicated.”

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Thursday, December 20,2007

Texas TB testing reaches halfway mark

by WLJ
“We’ve completed the dairy herd testing and have passed the halfway point for testing purebred and seed stock herds. More than 750 of these have been tested since late April when herds were randomly selected for the disease surveillance. We plan to complete the remainder of the testing of the randomly selected herds before the end of the year. Volunteers still are welcome to have their purebred or seed stock herds tested,” said Dr. Dee Ellis, who heads up field operations for the Texas Animal Health Commission, the state’s livestock and poultry regulatory agency. “Accredited private veterinarians who are TB-certified conduct the testing on a fee-basis reimbursement, which covers the cost of the test, so ranchers do not have out-of-pocket expenses,” Ellis said. “Regaining TB-free status is a time-consuming and expensive endeavor, but after fighting this disease since l917, the U.S. cannot allow this disease to regain a foothold,” said Ellis. Tuberculosis (TB) is caused by the Mycobacterium bovis bacteria and is a major concern to the U.S. cattle industry. This contagious, infectious and communicable disease can affect not only cattle, but bison, deer, elk, goats and other animal species and humans. “We’ve worked closely with the cattle industry to develop and follow this five-point plan in order to ensure all TB infection has been detected. Fortunately, we have been able to work with the USDA funding through TB cooperative agreements to assist with program funding. We anticipate completing this last leg of the TB plan—the targeted herd testing—by the end of the year, so we can reapply for TB free status,” Ellis stated. Dr. Ellis said testing dairies, purebred and seed stock herds so far has resulted in finding and depopulating only one infected herd, a dairy, in 2003. “We cannot tell by looking if a herd is infected, so we have selected herds for testing based on statistics and science. We targeted all dairies and about 2,400 purebred or seed stock herds for testing because, in the past two decades, TB has been detected in 15 Texas dairies and six purebred cattle herds in nine counties, including El Paso, Karnes, Comanche, Pecos, Uvalde, Fayette, Culberson, Grayson, Zavala and Hamilton counties.” Only Texas and Michigan currently do not have the coveted TB-free status. Texas earned TB- free status in 2000, with the exception of dairies in the El Paso Milk Shed, which have been purchased by the USDA and are being depopulated. In 2002, Texas lost its status after two TB- infected cattle herds were detected. Michigan, he explained, is coping with cattle TB infection in wildlife, and officials examine hunter-killed deer and require yearly TB tests on cattle herds in affected areas. California, which lost TB-free status in 2003, tested nearly a million cattle in a three-county dairy area prior to regaining free status in April 2005, said Ellis. New Mexico regained TB-free status in July 2005, with the exception of Roosevelt and Curry Counties along the state’s eastern border, where testing still is being conducted.

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Thursday, December 20,2007

Labor day meat sales create cautious market

by WLJ
September 4, 2006 Again, fed cattle markets were slow to develop last week. Packers were reluctant buyers looking into the Labor Day weekend, the last big grilling holiday for summer. Labor Day is a pivotal point for market direction and strong meat sales are often required for the market to advance into positive territory during the following weeks. Packers are at break-even levels and will be trying to get some positive margin back into the picture. Packers were bidding $86 for cattle and feeders were looking for $90 as of last Thursday. The boxed beef markets were significantly softer last week, down $5 on the Choice cutout at $145, which is considered a market threshold. Ironically, packers are keeping processing lines moving rapidly, slaughtering 384,000 head midway through last week. This was 3,000 head more than the week before. The last major fed trade was Friday, two weeks ago, trading at $87-88 live and $138 dressed. As of Thursday, it looked as if trade would continue the same pattern and any significant trade wasn’t expected to take place until Friday at $88. Slaughter volume, too, remained strong and had some perplexities going into the Labor Day weekend. Most recently, slaughter data shows that kill numbers are up 3.9 percent from a year ago. Much of that additional slaughter is from increased cow slaughter. In addition, data shows beef production up 6.1 percent. Futures markets remain strong with a large cash discount. Across the board, on the Chicago Mercantile Exchange, (CME) last Thursday, contracts were down with the exception of August. August contracts traded at $90.40, which was up 53 points from last Wednesday’s trade. October and December contracts dropped five points. October settled at $92.83 last Thursday and December closed at $92.85. Market watchers have been waiting for the spread to correct itself, which was expected last week, but wasn’t very dramatic. Andy Gottschalk at HedgersEdge.com said the squeeze on August cattle continues and should provide plenty of fireworks this week as the contract expires. The squeeze on August has the “tail wagging the dog and it appears the dog likes it that way.” Gottschalk also said that the basis between the cash market and the October board is the second largest in history, currently at $4.80. He said the large commodity funds have invested heavily in cattle keeping this basis wide. “If the funds become bearish, it could get ugly and they don’t pay attention to the fundamentals of the cattle industry.” Packers held what some called distressed meat sales last week, which essentially go unreported on the cutout. This would indicate that packers are forced to move product before it spoils. The cold storage index showed that supplies were significantly larger. It was also mentioned that packers were attempting to price November product to wholesale buyers at substantially higher prices—$165 based on the cutout. There were no takers, sources said.   The Choice/Select spread has narrowed quite a bit over the past few weeks. Now at $10, the volume of Choice product hasn’t expanded at all since the spread was at $22. The grading report has been fairly steady, showing the industry is producing only 50 percent Choice product, leaving packers to search for enough Choice product to fill demand, which continues to grow. However, as prices continue to climb, retail buyers may begin to look for values in the Select product rather than continuing to pay higher prices for Choice cuts. The choice cutout was at $145.61 and Select at $135.44.   Feeder cattle Most auction markets across the country last week reported higher prices for feeder cattle. Renewed rainfall and reports that the corn crop yields are less drought stressed than anticipated added optimism at auction markets last week. Rain in the southern Plains has improved the grazing picture slightly as well as hopes that there is more on the horizon. Also helping support higher prices was the continued strong fed cattle market. As a result, most classes of feeder cattle moved $1-3 higher with some instances as much as $10 higher than the previous week on lightweight steers and heifers. On the CME, last Thursday’s feeder cattle contract trade was lower across the board despite firm fundamentals early last week providing support and a spillover effect from the live cattle contract trade. According to Virginia Tech commodities marketing agent Mike Roberts, live cattle prices, tight feeder supplies, and firm cash feeders lent support to the market last week. Feeder supplies outside feedlots remain tight amid improving grazing conditions in the southern Plains due to rain. The CME Feeder Cattle Index for Aug. 25 was placed at $117.02/cwt., up 82 cents per cwt., its highest level since Nov. 28, 2005. Last Thursday, the August contract went off the board at $116.90, just 15 points lower than the prior day. September feeders shed 47 points to close at $116.37 and October feeders were down 65 points, closing at $116.50. November contracts posted the day’s largest drop, losing 80 points to close the session at $116.32. In Oklahoma City, OK, last week, feeder steers and heifers sold $1-2 higher. Steer and heifer calves were generally steady although buyers were being very selective for kind and flesh condition. Demand moderate to good, especially good for thin fleshed steer calves. A cool front pushed through the state over the prior weekend lowering temperatures some 20 degrees and much of the state saw from one-half to seven inches of much-needed rain. Maybe a little late for the hay crop, but definitely beneficial to ground that will soon be planted in wheat. In West Plains, MO, steers and heifers sold $2-3 higher last week, with the majority of 350- 450-lb. heifers $2-4 higher. The exception was 700-lb. class steers, which were no better than steady, yet several unweaned bull calves sold steady to $3 lower. Supply was called moderate to heavy on good demand. Good rains had been hampering movement of cattle, but according to reports from West Plains, several producers took advantage of a break in the weather last week to use stockyard facilities to begin the weaning process of their calves, while others elected to use the new buyers’ labor and blade to steer their bull calves. In Dodge City, KS, last Wednesday, feeder steers from 300-600 lbs. were $2-5 higher, with those 600-900 lbs. selling $3-4 higher on a light test. Heifers 350-600 lbs. were called steady to $5 higher, and those 600-900 lbs., $2-3 higher on a light test. In Philip, SD, where producers struggling through the severe drought finally received some beneficial rain last week, steer and heifer calves sold steady to firm. Feeder steers and heifers were called steady to $2 higher. Buyer demand was best for load lots of calves, and moderate on part loads. Out west in Famoso, CA, last week, stocker cattle were called $2-3 higher and feeders were steady on a good quality run of cattle. Stockers met with excellent demand, especially the greener kinds in the 500- 600-lb. range. Feeder cattle were also highly sought after, particularly the 650- 800-lb. steers and heifers.

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Thursday, December 20,2007

Montana Angus Association hosts tour

by WLJ
September 4, 2006 The Northern Montana Angus Association welcomes you to the Big Sky Country of Northern Montana for three fun filled days where you will tour some of Montana’s finest Angus Herd operations. This annual event of combined association and membership activities will kick off on September 20, 2006 with a golf scramble tournament that will start at 9:30 am and is being hosted by Universal Semen Sales of Great Falls, MT. Tour Registration will begin at 2:00 pm at this year’s headquarters, the Best Western Heritage Inn in Great Fall, MT. Other Wednesday activities will include a social with meal and entertainment, plus a CAB presentation starting at 5:00 pm. Thursday’s activities will feature the bus tour with the breakfast stop going to Harrison Land and Livestock of Belt, MT. Other producers displaying livestock at this stop will include Saddle Butte Ranch, Harrer’s Lost Lake Ranch, Alpine Meadows and Windy Ridge Angus. Prior to going to the lunch stop at the Montana State Fair Grounds the tour will visit the Lewis & Clark Interpretive Center in Great Falls. The lunch stop will have cattle being displayed by 7 Bar Heart Conservancy, Granger Angus and Malek/Konen Angus operations. Thursday afternoon the tour will visit the Broken O Ranch near Augusta, MT and will offer displays by Big Coulee Angus, Birdtail Ranch Angus, Brooks Angus, Skogen’s GK Angus Ranch, Tom McInerney Angus and Van Der Hagen Angus. Following this stop the buses will travel to Ox Bow Ranch near Wolf Creek, MT for the supper stop. Display presentations will be made by Ox Bow Ranch, McDonough Angus Ranch and Novotny/Assman L & C. The start of the second day of touring will involve traveling to Shelby, MT where Flesch Angus will be hosting the breakfast stop. Additional breeder displays will be provided by Bobcat Angus, Enneberg Angus Ranch, Hawks Angus and Turner Angus. Friday afternoon activities will start with Connelly Angus hosting the lunch stop at their Valier, MT, operation; also on display on this stop will be cattle from Rice Angus. Apex Angus will be the next Friday destination of the tour. The last stop of the tour will be hosted by Diamond D Angus near Valier, MT and will include the supper stop and a drawing for a custom made saddle. The tour registration fee is $75.00 andincludes buses, meals and entertainment. For details contact Don & Wendy Connelly at 406/279-3569, connelly@3rivers.net or view Tour details at www.mtangus.org.

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Thursday, December 20,2007

BEEF TALK

by WLJ
September 5, 2005 So much of the discussion today in the beef business concerns itself with the application of an eartag followed by the systematic ability to track the movement of the animal. To avoid confusion, other uses of the tag are deliberately not discussed or simply ignored. Eartags are the seeds of numbers that evolve into data. Data trends are what managers look for. In fact, there are large organizations that do nothing but manage data. Hidden within the depths of most data sets is an answer to a question. The answer may not be very profound; however, day-to-day operations of most businesses are made cost effective by continually going through data. The often overlooked numbers are mined by people who have an uncanny ability to take the numbers apart and put them back together in a better order, with more meaning. Most of us can remember, perhaps with a frown, the hours spent learning addition, subtraction, multiplication and division tables followed by algebra, geometry, trigonometry and maybe even calculus. These early times prepared us for the heavy task of understanding the world around us through numbers. For fine-tuning, statistical courses have been added to the schedule, starting with the conversion of simple averages to means and placing with the mean a measure of variation around the numbers. Of course, by this time, the numbers are no longer numbers, but are now data. The data takes on a life of its own and regression equations began to ooze from the newly created pot based on an understanding of probability and mathematics. All of this, in essence, now runs the world. For most beef producers, the concept of managerial manipulation really comes in two forms. The first is a more “seat of the pants” approach. The current situation is evaluated and a logical solution or enhancement is pursued. The second approach is to measure the variables needed, return to the office and calculate a solution or enhancement. Most operations are actually somewhere between these two scenarios. These two extreme examples, however, make the point easier. The answer to the question, “What approach works the best?” really lies in the numbers or lack of numbers, whatever the case. “Seat of the pants” or best-guess approaches are usually considered right because there was no measurable data or numbers going into the decision. Since there is no measurable data or numbers to evaluate the decision, the decision is subjectively evaluated based solely on one’s opinion. In the number-based approach, not only is the decision itself based on numbers, but the ability to evaluate the outcome also is based on numbers. Accuracy now legitimately can be part of the conversation. The numbers show us that an opinion is not always right. People making decisions want to know managerial facts, not opinions. Managerial gut feelings remain important, but there is a huge difference between a production change made based on opinion versus a decision based on well- organized and analyzed data followed by a pinch of opinion. A change may be in the wind, but the wind has been blowing a long time. Standing and watching a group of calves grazing across the pasture is still a managerial privilege, but the ultimate outcome of the operation may well be hidden in the numbers, and the conversion of those numbers to data is a managerial expectation. May you find all your NAIS-approved eartags —Kris Ringwall (Kris Ringwall is a North Dakota State University Extension beef specialist, director of the NDSU Dickinson Research Center and executive director of the North Dakota Beef Cattle Improvement Association. He can be contacted at 701/483-2045.)

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Thursday, December 20,2007

COMMENTS

by WLJ
September 5, 2005 It is absolutely amazing the punishment mother nature can dish out. This last hurricane, Katrina, wiped out an entire socio-economic system and it certainly won’t stop there. The economic system in that region has come to a screeching halt and it has been suggested that it will have a negative impact on the entire U.S. economy to the tune of one-and-a-half percent. Much of that impact is to be felt through higher oil and gas prices. The energy industry has become a very complicated business and the effects this one storm has had, in just a few days, on energy production and processing are enough to gag a horse. A couple weeks ago we talked about $3 diesel and $3.10 per loaded mile trucking rates. Over the next few weeks that might suddenly look cheap. The last I heard, there were seven oil platforms either sunk or adrift in the Gulf. The amazing thing is these rigs weigh in at 12,000 tons—they would be hard to lose. Katrina may have been the mother of all storms. I saw the damage that hurricane Ivan caused in the Florida Panhandle last spring and that was devastating enough. The damage from this storm looks 10 times worse. Our prayers go out to those people in need, and we’ll send a few bucks as well. As a direct result of the storm, crude oil futures were on a run last week, above $70 a barrel until the Bush Administration decided to open up oil reserves, which brought crude futures down ever so slightly to $68.85. Gasoline futures were a much different story. Last Wednesday, NYMEX gasoline futures were at $2.57; a week earlier they were around $1.90. I’m one of those who believes in the virtues of supply and demand, which is very real, but I remember learning in a college marketing class that the two biggest motivators for the human-being are fear and greed. We, as consumers, fear higher prices and oil traders are bidding up futures markets because of greed. Sometimes we talk about the speculators in the cattle markets and the idea that they shouldn’t be there unless they can deliver a load of cattle. Today it looks like the oil speculators are on a feeding frenzy with gasoline futures. I guarantee you that family fortunes have been made over the past month on oil futures. My friend, Andy Gottschalk, said that the speculators have put $15 on crude oil prices, and it looks much worse for gasoline and diesel. Ironically, disasters like this make all the issues that we debate in this cattle industry look pretty small. I guess some times we need to have things put in perspective to realize just how good we have it. These oil prices are absolutely an indirect burden on the cattle and beef industries. Trucking is a major issue and as I’ve discussed in earlier columns, the ultra rapid increase in energy prices takes billions away from consumer spending. The estimate at the first of the year was $135 billion. Since the first of August, Gottschalk has updated his estimates to be just more than $155 billion and $50 billion has come since the middle of July. When beef costs are twice that of pork and six times the price of chicken, it will suffer some impact. Consumers will make alternative lower cost choices. Perhaps it will simply be a shift from the restaurant to home and beef tonnage will stay respectable. But keep in mind over half of the modern day family meals are consumed away from home. The Texas Cattle Feeders Association announced late last week that they are donating $25,000 to the Cattlemen’s Katrina Fund. To make a donation, send a tax-deductible check made out to “Cattlemen’s Katrina Fund” to TCFA, 5501 I-40 West, Amarillo, TX 79106. For information, contact TCFA at 806/358-3681 or by email at info@tcfa.org. With the losses many have realized from this disaster, it really makes fuel prices pale in comparison. But, now we have to move on and ship the cattle, cut the corn and get it to markets so people can eat. Be thankful that farm fuel doesn’t have the taxes that road fuel does. It seems like a good time to place a moratorium on fuel taxes. — PETE CROW  

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Thursday, December 20,2007

Feds down on beef projections

by WLJ
— Energy prices curtail restaurant demand. Early optimism for a steady to $1 stronger fed cattle market was eroded last week when trade occurred Thursday at prices mostly $2-3 lower dressed, $1 lower live. Packing plants were starting to see profitable margins decrease and projections for late summer and fall beef demand decline as rising energy prices start to take a toll on consumer demand. By Thursday, Nebraska cattle feeders had traded approximately 55,000 head at $127-128 dressed, while Kansas feedlots had traded 30,000 head at mostly $81-81.50 live. Texas cattle feeders were still holding out for $82 at press time, however, packers were holding steady, offering $81 live. Last Thursday, the packer margin index was positive $2-3 per head, in comparison with $15 per head profit the prior week. According to analysts, that deterioration was related to an increase in fuel prices and lackluster beef demand in the restaurant sector. “It’s our estimation that about 40 percent of all beef middle meats are consumed away from the house,” said Jim Robb, chief analyst at the Livestock Marketing Information Center. “Most of that consumption is at mid-range priced restaurants that dot themselves along interstates.” Robb said that recent spikes in fuel prices are really starting to weigh on peoples’ travel habits and the slowdown in travel numbers will impact beef demand pretty profoundly if high fuel prices prevail. Reed Marquotte, M&Z Livestock Analytics, said energy costs are also beginning to weigh on feedlot and packer profit margins. “Transportation and cold storage costs are both escalating at a very rapid pace due to gas and oil prices skyrocketing,” he said. “We didn’t see much of a rally in (boxed) beef prices through the week, and that resulted in packers pulling the reins back on both the volume of their cattle purchases and the price paid for those cattle.” After rallying about $3 through Wednesday, boxed beef prices saw a $1.50 turnaround on Thursday. Choice boxed beef was selling for $134.62 per cwt, while Select was at $124.70. Trade volume was moderate last week, which analysts felt was disappointing, citing the lack of forward post-holiday buying as a reason for concern. Packers were in need of fewer cattle last week due to a short kill week coming up because of the Monday holiday. As a result, 115-120,000 fewer cattle are needed by packers to fill their demand for the week. Slaughter volume last week was steady with the previous week, at 486,000 head through packing houses last Monday through Thursday. For the week ending Aug. 27, 661,000 head of cattle were processed, steady with the previous week, and about 40,000 head higher than needed to meet current level of beef demand. “Last week’s kill certainly curtailed any need for extra cattle this week or next, particularly if Labor Day beef movement is as low as some projections indicate,” said Marquotte. Heavier finishing weights of cattle also continue to reduce the number of cattle needed by packers, analysts said. For the week ending Aug. 27, the average live weight of all cattle processed was 1,266 pounds, three pounds heavier than the week prior. The average carcass hanging weight was 780 pounds, two pounds heavier than two weeks ago and 15-20 pounds heavier than the same week last year. Feeder markets Solid was the best word to describe feeder markets last week. Despite dwindling margins and optimism in the fed market, and in the face of stories of devastation from the south, buyers were purchasing feeder calves at prices generally above the prior week throughout the west. With few exceptions, analysts noted that demand was good for loads of uniform thin to moderate flesh cattle. Quality appears to be improving as larger lots start heading for the sale barns. Grazing prospects throu-ghout winter wheat country appear to be very good and stockers are sourcing cattle now. However, the good grazing conditions are also allowing producers to keep cattle on pastures longer, resulting in supply shortage, particularly in the northern-tier where demand has been strong on rising prices for the past several weeks. Corn prices also helped strengthen the feeder cattle market last week, as cash corn, last Thursday, was between $2.05-2.10 per bushel, or $3.65-3.80 per cwt. Prices were down from beginning of the month range of $2.25 per bushel or $4-plus per cwt, which added support last week. Prices in the southern tier continue to rise as supplies hold steady and dry conditions ease. In Oklahoma, markets for feeder steers and heifers were $1-3 higher on solid demand and stronger attendance at sales. Because of the long, dry stretch of weather during mid-summer, cattle are arriving at the sale in good feeding condition, noted as slightly thin to moderate flesh. In Joplin, MO, prices for steers were $2-4 higher for mid-weight steers and $3-5 higher for heifers with some lots selling as much as $8 higher. At other markets across the southern tier, prices were noted to be at least firm and steady. Most sales noted prices $1 or more higher. Supplies across the north are still moderate at best, however, some good volumes are just starting to be seen at steady to slightly higher prices. Continued good weather is allowing cattle producers the opportunity to graze longer; the result is a slow trickle of calves into the markets which is keeping prices higher for producers. As long as supplies don’t overwhelm the northern markets, feeder prices should stay solid. Working against producers will be continuing feedlot losses. Analysts are still predicting short-term supplies in September will continue to exceed demand, meaning lower prices for the fed market. Feeder losses will weigh on the feeder market as supplies start to increase toward their annual peak. Also, transportation costs, which are rising out of control, are going to affect every segment of the beef industry and create a great deal of uncertainty as every sector of the economy tightens its belt to absorb the impact. Analysts last week said fuel costs can also trigger a radical spike in fertilizer costs, particularly ammonia and other liquid nitrogen-based compounds. Robb said because those chemicals are used greatly in southern pasture grazing situations, some stocker operators may have to pay less for calves and lighter feeder animals late this year. “There’s a direct correlation between fuel prices and these fertilizer costs, and that correlation is about one to one, meaning that the jump seen in gas and oil prices is what can be expected from a fertilizer standpoint,” said Robb. He also said, however, that producers who have poultry waste available can help themselves out from a cost standpoint. Chicken manure is as rich in nitrogen as many liquid fertilizers and is much more cost effective. “If application of chicken waste becomes more prevalent, maybe the calf market won’t soften up as much as we think,” he said.

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Thursday, December 20,2007

KAY'S KORNER

by WLJ
September 5, 2005 The other day, I struck gold when I went to my local Costco store. That’s where I buy most of my beef because Costco sells only USDA Choice beef at the best everyday prices I’ve come across. I was scanning “in-the-bag” items in the meat case when I spotted whole strip loins (about 10-11 pounds per bag) at only $5.15 per pound. Then I turned the bag over and saw the words “USDA Prime” printed on the original packer bag. It seemed to be the only Prime bag in the case so I quickly put it in my cart. Then I sidled up to the meat manager and asked him if this was “for real.” He assured me it was and that packers occasionally throw in Prime to fill an order. Or they do it by mistake. Anyway, I went home a happy beef eater, positively salivating at the thought of buying ten pounds of Prime beef at such a good price. Yet I couldn’t help also wondering about the vagaries of beef merchandising. After all, only 3% of all beef that is graded hits Prime. And in the summer, it can drop to as low as 2.5%. In contrast, 57.5% of the beef is Choice and 39% Select (based on 2004 grading). Only a few weeks earlier, I had spent the day with a Southern California meat company that has a thriving business supplying white tablecloth restaurants in one of the nation’s most affluent markets. Several times, they told me how much of a struggle it was to get enough Prime beef. So finding Prime beef at Costco reminded me of how imperfect our beef marketing system is. Packers mostly do a good job of maximizing the value of what they produce. But companies, large and small, sometimes get “caught” with product. Or distributors do. And once product gets some age on it, it tends to decline in value. Understandably, packers and others live and die by the old adage of “sell it or smell it.” So why isn’t a lot more research being done into extending beef’s shelf life? Remember the enthusiasm several years ago about the advantages of feeding Vitamin E to cattle while they’re on feed. Studies clearly showed that it improved beef’s color and shelf life. Some cattle feeders and beef marketing programs made the use of Vitamin E a requirement. But any notion of it becoming an essential part of every animal’s feed ration simply evaporated. Why? Because no one in the commodity beef chain was prepared to pay any more for it. Retailers didn’t seem to care. And packers are in the business of squeezing out pennies to make profits. So they weren’t going to pay a producer if they couldn’t sell the beef at a higher price. This attitude is prevalent throughout the beef chain and is the main reason why there’s still insufficient focus on improving beef quality. There are companies large and small that are doing a lot with producers and end users. But that appears to be more than balanced by a growing trend in the industry, which I find both fascinating and potentially rather disturbing. When Wal-Mart entered the grocery business (in the late 1980s), it sold little beef for a number of years. A turning point came in 2000 when it decided to eliminate butchers in its meat departments (in its SuperCenters) and go 100% case-ready. I don’t know how many of its divisions are handling only case-ready, but I do know that major supplier Tyson Foods is building a huge new case-ready plant in Texas that will double its CR production. Wal-Mart is the nation’s largest buyer and seller of beef, by a huge margin. It bought more than 2 billion pounds of beef in 2004, twice as much beef as McDonald’s bought. Wal-Mart bought nearly all Select beef. To reach its price points for its customers, and of course make money, Wal-Mart asks its beef suppliers to pump the beef. Ostensibly, this is to tenderize the lower- grading beef and make it more “fail-safe” when being cooked. But it’s a stretch to say that pumping beef is improving the quality. Trouble is, more packers and other people now believe the only way to improve beef’s quality is to inject it with some solution or other. The way I see it, that’s a slippery slope that the pork and poultry industries have already slithered down. The beef industry should take heed of the moves to take the moisture out of pork and chicken, and renew its focus on improving beef quality in other ways.— 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

Futures give fed market optimism

by WLJ
— Calf, yearling market widely varied. Fed cattle trade last week was just starting to get charged up before press time Thursday, at prices $1 stronger live, $2-3 higher dressed. Volumes, however, were very slight as packers were trying to control the market from being much more than steady with the previous week. In addition, volumes were hampered somewhat because of Labor Day. As of Thursday afternoon, 10-12,000 head had traded hands in Nebraska at $128-130 dressed, some $82 live. The same prices were paid on limited volumes of cattle in both Iowa and Colorado, also. Southern Plains trade still hadn’t started last Thursday, with producers asking mostly $84, and packers coming in with bids mostly around $81, some $81.50. Texas market sources said that $83 might get some cattle traded, but it would be at the last minute on Friday. “They really think $84 is doable,” said Brent Snyder, analyst with Texas Cattle Feeders Association. Live cattle futures contracts added some bullishness to producers’ thoughts last week. At close of business Thursday, October live cattle were at $83.45, December $86.55 and February $88.37. Prices were up $2.25, $2.15 and $1.60 from settlement prices the previous Friday, respectively. Also adding some strength to the market complex was a stronger boxed beef market. Choice boxed beef was $1 higher through most of last week, compared to the end of the previous week. In fact, Choice almost got back to $135 per cwt. Select stayed mostly steady with the previous week. Boxed beef strength was also noted in the movement from packers to retail outlets. Spot cash movement topped 500 loads both last Wednesday and Thursday. Analysts with Cattle-Fax called Labor Day beef demand better-than-expected, as good weather was reported across the large majority of the U.S. The one exception, of course, was in the Deep South and Gulf Coast areas, where recovery from Hurricane Katrina was beginning. Last week’s continued increase in Choice boxed beef prices also gave analysts the feeling that demand for higher quality middle meats is stronger than once thought, thus improving the profitability for retailers. That extra profit is being used to buy more meat on the wholesale market. Fed trade volumes last week weren’t expected to be very large due to packers having one less slaughter day and being able to hold on to a one- or two-day supply of cattle into the third week of September. Between Tuesday and Thursday, 376,000 head of cattle were processed, 4,000 head more than the same week a year ago. On a daily average basis, last week’s slaughter volume was 125,300 head, about 4,000 head more per day than the previous week. Additional optimism was being shown by producers because of the three-week-long stretch of profitable margins being reported by packers. The packer margin index last Thursday was around $5 per head, down $3-4 from the previous few business days. Double-digit packer profits were being reported during much of the second half of August. Feeder market Feeder cattle volume is starting to increase in the north, however, that didn’t deter prices paid for cattle being offered from that area of the country. However, some pressure could be expected in upcoming weeks due to high fuel prices and lackluster demand. Prices at Torrington, WY, were $2-3 higher for steers and heifers over 700 lbs. Light feeder cattle in La Junta, CO, were lightly tested, however, 700-lb. steers were $1-2 higher. Billings, MT, reported light tests, but strong demand for the first loads of cattle for the season. In the southern tier, cattle were also trading at higher volume and prices. Feeder steers in El Reno, OK, were selling for prices as much as $4 higher and demand was considered strong for steers in the 650-750 lb. range. Feeder heifers were also steady to $2 higher. In Dodge City, KS, feeder steers in the 400-700 lb. range were lightly tested, but nonetheless sold $1-3 higher, heavy feeders, 850-950 lbs. sold as much as $3-4 higher. Feeder heifers across all weight classes were noted to be $1-3 higher. The Superior Video Auction last week brought mixed results. A number calves still on cows were offered. Those lots were heavily discounted by buyers, and several “no-sale” lots were noted by analysts. Producers offering weaned calves were receiving a $6-9 premium for uniform loads. Southern tier cattle brought an average price of $126.44 for calves in the 400-700 lb. range, with one instance of $157 for a load of lightweight 400-lb. calves in the southern tier. Fuel prices were beginning to moderate late last week as the impact of the hurricane was alleviated some by an opening of the Strategic Petroleum Reserve and a return to production of some of the refineries and pipelines knocked off-line by the storm. Several analysts have noted concern edging toward bearishness on feeder cattle prices as supplies begin to increase going into fall. Strong fall grazing prospects combined with good corn prices for feedlots are lending support for the feeder market right now. Going forward, market conditions are likely to soften some as supplies increase. The uncertainty for cow/calf producers right now lies in the weak fed market and high transportation costs, both of which continue to put downward pressure on the feeder markets which continue to exhibit good resiliency. According to Jim Robb, chief analyst with the Livestock Marketing Information Center, fuel costs are likely to add $1 per cwt to both cattle and grain transportation costs. In addition, fuel increases will be seen in the feed mills of most feedlots. As a result, prices to be paid for cattle coming into feedlots this fall could be pressured another $2-5 per cwt. — WLJ

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