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Monday, March 14,2005

McCraine named AZ Cattleman of 2005

by WLJ
Arizona cattleman, Swayze McCraine of Prescott was named 2005 Cattleman of the Year by the Arizona Hereford Association at ceremonies opening the organization’s 31st annual bull sale during Cattlemen’s weekend. McCraine, raised in Baton Rouge, LA, and a Louisiana State University animal science degree graduate, worked for Great Plains Western Corporation a mutli-faceted company with ranches in six states. He became vice president in five years. In 1978 he took over his family’s ranching operation in Mississippi, raising registered Brangus and commercial cattle. Six years later he moved to Prescott to be involved with his wife’s family ranch. In 1986 the Arizona Hereford Association asked McCraine to manage its annual bull sale. He was instrumental in adding a ranch horse sale to the bull sale, and in 1988 he and Richard Smyer of the Prescott Livestock Auction put on the first Prescott All Breed Sale. McCraine’s vision turned it all into Cattlemen’s Weekend 14 years ago. It has become northern Arizona’s largest livestock event. McCraine and his wife Kathy own and operate Camp Wood Cattle Company at Prescott and raise commercial cattle and quarter horses. — WLJ

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Monday, March 14,2005

South Dakota Governor signs beef marketing law

by WLJ
South Dakota Gov. Mike Rounds hopes people across the nation and around the world will soon walk into grocery stores and choose to pay more for steaks that carry his state's seal of approval. When they take those steaks home, they can visit an Internet site and use codes on the labels to find out where the meat came from, even the ranch where a calf was born. Electronic records will track the critters from birth, through feedlots and to meatpacking plants. "We believe consumers will step forward and they will be paying premium prices for this premium product," Rounds said Tuesday. A week after the Legislature passed a bill to start the South Dakota Certified Beef Program, the governor signed the measure into law. The program is the result of an idea Rounds first suggested when he campaigned for governor in 2002. Various businesses and organizations have promoted high quality beef, but South Dakota officials said the state program marks the first time a government has put its seal of approval on beef products. Only meat from South Dakota cattle that are tracked electronically and raised according to certain standards will qualify for an official state trademark or seal, which features an image of Mount Rushmore National Memorial and declares "The World's Best Beef." The purpose of the branded-beef program is to improve cattle prices for South Dakota farmers and ranchers by assuring customers that steaks, roasts and hamburger are of the highest quality and safety. A few years ago, Congress passed a law requiring that meat be labeled according to its country of origin, but the law has never been implemented. After the discovery of BSE in a few cattle from Canada, consumers will demand more information about how and where meat is produced, South Dakota officials believe. "We're going beyond country of origin labeling here. We're going right down to the producer who raised that calf," Rounds said Tuesday. Dwight Scott of Letcher, the first farmer to register for the branded-beef program, said he now signs affidavits assuring buyers his cattle have been raised a certain way. The new program will certify those claims and back them up with records, he said. Cattle in the program must be raised, fed to market weights and slaughtered within South Dakota. Farmers, ranchers and processors who join the program must follow state standards in raising and slaughtering cattle. All cattle in the program will carry electronic identification tags. Rounds also signed into law a second measure that allows the state to start an identification program that will work in conjunction with the South Dakota Certified Beef program and also be used to help stop the spread of livestock diseases. Farmers and ranchers who voluntarily enroll in the Certified Beef program will pay licensing fees, which will be used to finance marketing efforts and monitoring of the livestock. Enrollees will be required to follow state standards in raising their cattle. They must keep careful records that the state can check to ensure adherence to the program. The program initially will market premium beef products, but it eventually will distribute natural beef products from cattle raised without certain hormones or drugs. Rounds said the natural beef products could sell particularly well in Europe. South Dakota has long claimed its beef is as good and as safe as any produced elsewhere in the world, the governor said. "We not only will brag about it, but we're going to prove to consumers out there that what we're talking about is reality today," he said. State Agriculture Secretary Larry Gabriel said the beef branding program should improve agricultural income in South Dakota by switching farmers and ranchers away from producing a raw commodity to selling a branded product, Gabriel said. He has said for years that far too many cattle born in South Dakota are sent to other states to be fed and processed. "I think this is a big step in revolutionizing the way we market our products," said Gabriel, who also raises cattle on a ranch in western South Dakota. The program should increase the number of calves born in South Dakota and the number of cattle fed and slaughtered in the state, officials said. Gabriel, who was preparing Tuesday to leave for a nine-day agricultural trade mission to Japan and South Korea, said 850 farmers and ranchers have expressed interest in the branded-beef program. Emergency rules for the program should be done in a few weeks, he said. Don Ward, owner of Bad River Pack, a small meatpacking plant in Fort Pierre, believes the branded-beef effort is a chance to sell quality beef products across the nation and in other countries. "I don't know how large a premium we'll be able to demand," Ward said. "I do know people are willing to pay for quality in most markets."

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Monday, March 14,2005

Stay moves feds higher

by WLJ
The Canadian border situation played a role in advancing cattle trade last week, with both fed and feeder cattle markets turning sharply higher last week. Fed cattle moved up $3-4 live, to $94, and dressed cattle were $6-8 higher, hitting $150 in the Northern Plains. Nebraska feeders moved 64,000 head on Wednesday. Southern Plains feeders were slower to trade and started trading Thursday afternoon at $92-93.50 and moved 90,000 head. Feeders were pricing cattle at $94-95. There was a great deal of anticipation that the Canadian border would be open to cattle trade on March 7, packers were clearly waiting for a fresh supply of fed cattle and meat traders were also expecting to see some better buys on boxed beef. Canadian feeders were starting to get over their initial market impact, fed cattle were trading at $92 Canadian two weeks ago. Just after the injunction was announced fed markets quickly moved down to $80. Feeder cattle took a similar hit and the heavier the cattle the bigger the hit. There was speculation that this injunction may take as long as nine months to get the legal process started. The boxed beef markets turned stronger as Choice product advanced to $153.06 at the close of business Wednesday, and Select was trading at $147.58 on good volume. Meat buyers looking to fill Easter holiday beef specials were expecting the market to move lower but were caught on the wrong side of the market and had to pay more for boxed beef, which advanced several dollars last week. Higher boxed beef values gave packers the opportunity to enjoy a few days of positive margins with their average breakeven at $91 against an average buy for Wednesday’s slaughter at $89.49; they were earning $18.55 per head, however, that was expected to be short-lived. Estimated slaughter for the week ending March 4 was 598,000 head, up 24,000 head from the prior week. This was also reflecting a seasonal increase in beef demand. Slaughter through Thursday of last week was running 4,000 head larger than the week earlier, which should push weekly slaughter over 600,000 head for the first time in several weeks. As a result of the border remaining closed, several packers have announced slaughter reductions. Excel announced slaughter reductions in seven of its slaughter plants. Swift also indicated some reduced slaughter levels. Andy Gottschalk at Hedgersedge said that he “ fully expects other packers to reduce their weekly slaughter levels. The demand base for March is estimated to be 548,000 head a week” Gottschalk also said the judge’s ruling disallowing the resumption of Canadian live cattle imports served as catalyst to the higher fed cattle prices achieved last week. He said the net of this action will be to reduce annual domestic beef production approximately 400 million pounds. The reduction in annual domestic beef production resulting from the judge’s ruling will add approximately $2 to the average annual fed cattle prices. It is now likely that fed cattle prices should not trade under $87 through mid-May. Wayne Purcell, ag economist at Virginia Tech, said, “The courts are in charge in the cattle markets right now, and it is hard to offer advice in this type of environment. I have been bullish on cattle, live cattle and feeder cattle futures, and perhaps we can just look to what has happened and stay off short hedges on the live cattle contracts starting with June and beyond and stay on long hedges in the feeder cattle, both the March and the August.” With the federal court action blocking the scheduled opening of the Canadian border on March 7, it may be months before the border issue is resolved, Purcell added. “If by that time we have seen beef shipments to Japan starting again, we could see fed cattle prices in the summer months near $100 again, perhaps even higher. But if the Canadian border is opened and there is a reserve of cattle ready to come into the U. S., then we could see prices pushed down again. It is a difficult time to be trying to read these cattle markets.” USDA lowered its beef production forecast partially because of the court injunction keeping the border closed. USDA is expecting beef production to move down to 25.69 billion pounds. Also weather related feedlot performance has reduced slaughter levels and carcass weights. Jim Robb, chief economist at the Livestock Marketing Information Center (LMIC), said he anticipates beef imports to increase to four billion pounds this year, roughly a 20 percent increase. Robb said that he expects markets to be volatile for the next several months. Ron Plain, economist from the University of Missouri, said BSE continues to dominate beef trade. Plain said, “The U.S. exported $3.9 billion of beef and beef variety meats in 2003 but only $808 million worth in 2004. In 2003, 9.6 percent of U.S. beef production was exported, but only 1.9 percent of 2004 production. U.S. beef imports increased from the equivalent of 11.6 percent of 2003 beef production to 15 percent of last year's production.” Calves, yearlings rally $2-5 Feeder and stocker steer and heifer prices trended anywhere between $2-5 stronger last week, as demand was called very good for moderate to light offerings of calves and yearlings nationwide. On the calf side, Southern auction barn managers indicated that weather in the Southwest and southern portions of the Far West continue to be abnormally wet and spurring thoughts of extended spring grazing of calves and yearlings. Similar grazing prospects are being touted in the eastern half of the central Plains in the Midwest, with several auction barn reports from those states reporting not nearly enough cattle to meet demand. Texas and Oklahoma auction barns said that supplies were short last week due to wet weather making it difficult for producers to get into their cattle, load them and ship them to town. Northern Plains and Intermountain West auction facilities are reporting “very few” calves and stocker cattle being offered for sale, and those that are being sold are moving to buyers in the Southwest or Missouri and further east. Heavier, more feedlot-ready prospects, were also seen bringing stronger money last week as cattle feeders are starting to need more U.S. cattle to make up for what they were anticipating buying from Canada. Auction managers and sale reports from Colorado, Nebraska, the Dakotas and Montana especially indicated that cattle feeders in those areas were starting to feel short of cattle for spring entry into feedlots. Market analysts credited the delay in Canadian feeder cattle entering the U.S. for 50-60 percent of last week’s price rally on yearlings and other placement-ready cattle. Stocker cattle prices weren’t affected by that ruling, according to analysts, because USDA had not planned on allowing feeder calves to go anywhere but feedlots. Feeder cattle futures rallied last week, and that also helped cash prices for heavier yearlings and calves. The March and April contracts both got back over the $106 per cwt mark last week, while May found itself eclipsing $105. Thursday’s market was a little softer. However, analysts said that was the result of southern state fed cattle trade being slow to get started. In addition, cattle feeders in more northern areas of the country were starting to report $25-50 per head profits, which helped them justify spending a little more on feeder cattle. Southern cattle feeders were still struggling to meet breakevens, market analysts said, and that was slowing demand on heavier, more-placement ready cattle. The CME feeder cattle index, for 700-850 pound steers, was at $103.16 last Tuesday, compared to $101.60 the previous Wednesday. Slaughter cows & bulls The prices paid for slaughter cows and bulls last week followed a similar trend as most auction barns across the country reported $2-4 gains on all classes of slaughter cows and bulls. The cow beef cutout was stronger at $111.41 up $6 from the prior week and the 90 percent lean was $152.09. Retailers are expecting demand to pick up on ground beef products, particularly with the “grilling season” starting over the next couple weeks. There is also expected to be a seasonal increase in fast food demand, especially for burgers, as colleges and universities start to send students off for spring break and a larger number of families plan vacations over the next few weeks. — WLJ

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Monday, March 14,2005

Senators to meet with Japanese envoy

by WLJ
Two U.S. senators were scheduled to meet Japan’s envoy separately last Friday and the following Monday to directly press Japan to lift the 15-month-long import ban on U.S. beef. Sen. Wayne Allard, R-CO, and Senate Finance Committee Chairman, Charles Grassley, R-IA, were scheduled to meet Japanese Ambassador to the U.S. Ryozo Kato. Allard initiated a joint letter of 20 bipartisan senators sent last month to Kato, threatening to pursue retaliatory economic actions if Japan fails to quickly resume beef imports. On March 4, 59 members of the House of Representatives submitted a resolution urging the Office of the U.S. Trade Representative to “immediately” impose economic sanctions on Japan for failing to lift the ban despite an agreement reached last October to resume imports of beef from animals up to 20 months of age. Japan was the largest importer of U.S. beef before it imposed the ban in December 2003. The Japanese government has repeatedly said it is waiting for an outcome of the ongoing deliberations by the Food Safety Commission over whether to stop the current domestic blanket testing of slaughtered cattle and exclude animals aged 20 months or younger. The independent commission’s go-ahead will pave the way for Japan to partially resume imports as agreed to with the U.S. back in October. In addition to senators meeting with Kato, U.S. Secretary of State Condoleezza Rice is expected to discuss the issue when she is over in Tokyo the week of March 14, federal officials said. It is expected that Rice may have a brief meeting with Japan Prime Minister Junichiro Koizumi to discuss the issue.

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Monday, March 7,2005

Bank sues Tyson board

by WLJ
Amalgamated Bank, trustee of a mutual fund owning nearly 89,000 shares of Tyson Foods, filed suit on Feb. 16 against the Springdale-based company charging directors benefitted fiscally at the expense of shareholders. The lawsuit—which was filed in Delaware and seeks class action status—lists the world's largest meat processor and most current and some former members of its board of directors as defendants, including Chairman and CEO John Tyson. One of the charges of the complaint is that the company tied giving stock options to executives and board members to events that the company believed would increase the value of shares, such as an improved earnings outlook. Tyson spokesman Gary Mickelson said as of Wednesday afternoon the company had not been formally served the complaint and "was unable to respond." Jay Eisenhofer, attorney with Grant & Eisenhofer, the firm representing union-owned Amalgamated Bank, said in a release he predicts greater scrutiny regarding certain stock options. "There is no doubt in my mind that timed options represent the next big wave in corporate governance reform," he said. Other allegations listed in the suit by Amalgamated Bank, trustee of LongView MidCap 400 Index Fund, include: • Certain present and former members of Tyson's board favored personal interest of the Tyson family, who held a controlling stock interest in Tyson; • The defendants entered into wasteful and excessive consulting contracts with Tyson family members, some of which can continue posthumously; and • The defendants allowed family members to "run roughshod" over the company's finances by causing the company to enter into unjustified related-party transactions with interests of family members. The firm is calling for Tyson to compensate financial injuries suffered by the company as a direct result of the breaches of management duties by the individual defendants. Amalgamated Bank also criticized Tyson's dual-stock corporate structure, which gives former Senior Chairman Don Tyson more than 80 percent of voting power on items such as shareholder proposals, executive compensation and board members. In proxy statements filed with the federal Securities and Exchange Commission, the company's board has defended the dual-class system, saying it is in the best interest of the company. Many analysts and Martha Carter, senior vice president and director of U.S. research for Institutional Investor Services, a provider of corporate governance services, are critical of the structure. "Dual-class systems—where one class has super-majority voting rights—disenfranchises the class with lower voting rights and is not consistent with good corporate governance practices," Carter said. "If the allegations are true, the management of the company is putting their own interest ahead of their shareholders." The company said in its most recent proxy statement it has chosen not to comply with certain New York Stock Exchange corporate governance rules, taking advantage of a provision allowing family-controlled companies to do so. Last year, it did increase its number of board members independent of the company to five out of 10 total seats, a move analysts called for. Standard & Poor's in July upped the company's short-term credit rating after a review of its management practices, and S&P analyst Jayne Ross said in a report, "Tyson is making strides in improving some issues" concerning corporate governance. In December, Tyson said it would pay $1.5 million to end an investigation by the SEC regarding perks given to top officers, including Don Tyson. The company said it will pay the civil penalty without admitting or denying wrongdoing. Don Tyson agreed to pay $200,000 to the SEC under the same conditions. Amalgamated Bank filed suit Wednesday against technology firm Cisco Systems under charges similar to those levied against Tyson. — WLJ

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Monday, March 7,2005

Beef operations break even

by WLJ
Smithfield, VA-headquartered pork and beef processor Smithfield Foods Inc. announced that net income for its fiscal 2005 third quarter was $97.5 million—versus income last year of $42.1 million. Sales were $3.1 billion compared with $2.7 billion last year. The substantial increase in earnings is attributable to the continued success of Smithfield’s vertically integrated pork operations, enabling the company to realize improved profitability during this period of increased livestock cost, the company said in a news release. In the quarter, the company’s hog production operations benefitted from a 48 percent increase in live hog market prices year over year. Raising costs remained about the same as last year, but down about $1.50 per hundredweight from the second quarter. Despite the sharply higher livestock prices, fresh pork margins remained solid as the result of continued strong export and domestic pork demand. The company’s beef segment operated at near breakeven levels due to the continuing difficult market conditions in the beef and cattle industries. Pork exports continued strong in the quarter, running 26 percent ahead of the same period last year and increasing 23 percent year-to-date, after adjusting for the additional week last year. Price increases in fresh pork, however, were not sufficient to fully recover the much higher raw material costs. Processed meats margins also were down from a year ago on considerably higher input costs. The company continued to drive volume, however, in value-added, pre-cooked categories, including bacon, entrees and ribs, which grew at double-digit rates. Smithfield’s beef segment earnings were at a break-even level in spite of weak demand, closed export markets, tight cattle supplies and high cattle costs. Beef volume was down four percent compared with a year ago, after adjusting for the additional week a year ago. Last year’s third quarter was adversely impacted by $11 million in pre-tax costs and inefficiencies in the beef segment related to the reported case of bovine spongiform encephalopathy in Washington state. “Through our vertical integration strategy, our pork processing and hog production operations combined to produce a record quarter from operations, even though we had no earnings contribution from our beef business,” Joseph Luter, III, Smithfield chairman and CEO ,said. “I am confident that this combination of businesses should produce improved fourth quarter results over a year ago, despite a relatively strong fourth quarter in fiscal 2004.” Luter said the company recently announced an important transaction that will strengthen substantially the latest addition to its business model, cattle feeding. Smithfield has signed an agreement in principle to form a 50/50 stand-alone joint venture cattle feeding business with ContiBeef LLC, a subsidiary of ContiGroup Companies, Inc. “This will be a significant transaction that further supports our growth in the beef and cattle industries,” Luter said. “The financing for the venture will come from equity investments by ContiGroup Companies and ourselves and a non-recourse bank credit facility. More importantly, we will be partnering with management, whom we believe, are the best operators in the cattle feeding industry to run the business.” “I continue to be optimistic about our future,” Luter said. “It appears that the pork export market will remain at high levels, which will drive the domestic pork market and live hog markets. The futures markets confirm the positive live hog market outlook. Additionally, the U.S. hog breeding herd remains stable. We are positioned for consistent, future growth.” — WLJ

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Monday, March 7,2005

Beef Bits

by WLJ
Safeway posts Q4 turnaround Safeway moved from a $695.9 million loss in the fourth quarter of 2003 to a gain of $202.7 million in the fourth quarter ended Jan. 1, mostly as a result of the strike that crippled its California business in 2003 and significant write-offs involving its Randall's and Dominick's divisions. For the year, sales were flat at $35.8 billion, but profits jumped to $560.2 million, compared with a net loss of $169.8 million in 2003. Sales for the quarter increased three percent, from $11 billion to $11.4 billion. Same-store sales increased 1.5 percent, excluding results from strike-affected stores. Alberta invests in prion research The Canadian province of Alberta will spend $38 million to fund advanced research into the ultimate cause of bovine spongiform encephalopathy. The research will look into how otherwise healthy prions become misfolded, leading to the disease in cattle, and will also study the genetics, diagnosis and treatment of prion-related diseases, including variant Creutzfeldt-Jakob disease in humans and scrapie in sheep. Alan Hall, managing director of the Alberta Agricultural Research Institute, said that among the possible results of the research are a more accurate and affordable test for BSE that can be conducted on live cattle, treatments that may produce a BSE-resistant animal and insights that may eventually lead to a cure for vCJD or Alzheimer's disease. Carl's Jr. intros new burger Carl's Jr. is adding some heat to its Six Dollar Burger line with the launch of the Spicy BBQ Six Dollar Burger. The new burger features a 100-percent Angus beef half-pound patty, two slices of American cheese, lettuce, tomato and barbecue sauce on a toasted sesame seed bun. The sandwich also includes a generous layer of Texas Toothpicks, spicy batter-fried slivers of onions and jalapenos. Participating Carl's Jr. restaurants will offer the Spicy BBQ Six Dollar Burger for a suggested retail price of $4.59. Uruguay exports jump Uruguay exported 25,300 metric tons of fresh and frozen beef during January, a 37 percent increase compared to January 2004. The increase in Uruguayan beef exports for January 2005 was primarily driven by the record January cattle slaughter, which surpassed 200,000 head. Uruguayan frozen beef exports totaled 21,400 metric tons during January, a 52 percent increase on the previous year. The U.S. was the main market for the increased exports, receiving 17,700 metric tons, up 119 percent compared to last year. Uruguayan chilled beef exports during January declined by 506 metric tons to 3,850 ton. The decline was primarily due to the loss of the Chilean market, which in January 2004 accepted 911 tons. Whole Foods intros super store Whole Foods Market opened its newest store and world headquarters last Feb. 24 in Austin, TX. The store—the company's largest at 80,000 square feet—is being touted as a shopping experience, complete with cooking demonstrations, food sampling, enhanced take-out operations and sit-down dining complete with wine list. Innovations will include natural and organic meats aged in-house and an on-site smoker for preparing ready-to-go items and special orders. Customers will have 70 cuts of fresh meat, 32 varieties of fresh-made sausage and more than 50 chef-prepared, oven-ready dishes from which to choose. The new facility houses the company's new headquarters. New UK BSE case born in 2001 BSE has been diagnosed in a Holstein Friesian cross cow born on Oct. 3, 2001. The case was identified under the compulsory TSE surveillance program, which includes a requirement to test all animals aged over 24 months which are slaughtered. Its farm of origin was in Pembrokeshire, where it remained until it was submitted for slaughter on January 17. The disease was officially confirmed on March 1. This is the most recently born case of BSE confirmed in the UK. The previous most recent cases were born in April 2000 in Great Britain and May 2000 in Northern Ireland. Winter family adds Riverton, WY Winter Livestock, with livestock auction locations in Dodge City, KS; LaJunta, CO; and Enid OK, recently purchased the livestock auction in Riverton, WY. Winter livestock was founded in 1936 by Karl Winter in Dodge City. The firm has been in continuous operation for 69 years. Annual sales average 400-500,000 head of cattle. In recent years Winter Livestock has expanded marketing opportunities for customers by adding video and Internet sales. Sale day at Riverton is every Tuesday. Winter plans to add video and Internet auctions to the new location. A live Internet feed at www.CattleUSA.com has already been installed.

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Monday, March 7,2005

Beef fat helps lower cholesterol

by WLJ
A nutrition scientist at the University of Nebraska-Lincoln, recently found that combining beef tallow and soybeans can improve the health of humans. According to Dr. Tim Carr, the beef fat helps in allowing a vegetable-derived cholesterol-lowering sterol to be added to food without being wasted near as much as normal. The dilemma has been that blood cholesterol-lowering sterols can be extracted from soybeans and added to other foods. However, the extract stuck to manufacturing equipment. However, Carr discovered that the combination of extract and tallow can be made into a powder, making it more applicable as a food additive. He further explained that sterols do not dissolve in liquids. However, mixing them with oil or fat makes them more soluble and useful in foods, such as margarine. “My research is grounded in biochemistry, and I've worked many years with how cholesterol is transported in the bloodstream,” he said. “In recent years, I've focused more on how the diet influences cholesterol in the body, and we have discovered that not all fatty acids are created equal. That caused us to take a look at beef tallow.” Carr said he wanted to create a "synergistic compound" that would work with the sterols in soybeans to create an effective cholesterol-lowering additive. Research revealed that stearic acid, a saturated fat found in beef tallow, could also lower blood cholesterol concentrations. His research focused on a method to combine stearic acid with plant sterols. The challenge was to develop a process to make the combination soluble. In trials at the University of Nebraska, Carr found his additive reduced the low-density lipoprotein, or “bad cholesterol,” by 70 percent in hamsters, compared with just 10 percent with a commercial sterol additive. Now, he needs to duplicate the results in humans. “We're very close to starting up a human study,” he said. The most probable mechanism of action of the beef tallow-soybean sterol combination is blocking the absorption of cholesterol from the digestive tract. Approximately 60 percent of the consumed cholesterol is absorbed from the human gastrointestinal tract. Carr said the new additive will reduce that percentage to five percent or less. “This passes right through and takes the cholesterol with it," he said. — WLJ

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Monday, March 7,2005

Canada feed ban working

by WLJ
Approximately one month after USDA experts returned from their investigative mission to Canada in which they sought to determine the effectiveness of that country’s ruminant-to-ruminant feed ban, the agency released an official report of the findings. Overall, USDA found Canada to be in compliance and just as proficient as the U.S. with a similar feed ban. The results answered many of the industry’s questions that arose after two cows from separate herds were discovered to be infected with BSE within the first few weeks of January. “After the two recent BSE finds in Canada, it was important to get a team up there to conduct a firsthand assessment of Canada’s compliance with the feed ban,” said Dr. Ron DeHaven, administrator of USDA’s Animal Plant Health Inspection Service (APHIS). “This assessment affirms our science-based decision to begin lifting the ban on live ruminants and ruminant products from Canada that have virtually no risk to human or animal health.” There was speculation that the release of this report would have an impact on the Montana District Court case seeking a temporary restraining order to keep the border closed. But, after last Wednesday’s ruling from the bench, industry officials felt as if the findings were not even considered by District Judge Richard Cebull. USDA assembled a team of experts and arrived in Canada on Jan. 24. Representative’s from USDA’s APHIS, Foreign Agriculture Service, Agricultural Marketing Service, and the Food and Drug Administration traveled around Canada and evaluated processes and procedures related to the feed ban, including: the structure and authorities of Canada’s Food Inspection Agency (CFIA), feed ban implementation, inspection and compliance activities, proposed future activities, and CFIA’s plans for auditing of the current feed ban. The experts even went so far as to review verification programs and procedures. This included a review of all documents currently stored at CFIA, training documents, inspector checklists, program plans and projections, and Feed Inspection Review reports. USDA’s verification activities were focused on actual inspections of commercial feed mills and rendering facilities. USDA said these efforts were warranted as an additional step to ensure Canada was in compliance with the feed ban measures and ensure that opening the border to Canadian cattle on March 7 would be safe. In a hearing on Feb.3, Secretary of Agriculture, Mike Johanns said USDA would be “absolutely transparent” with the results of the investigation and would release those results as soon as available. USDA did appear to be transparent in its 130-page report. The inspection team’s report stated, “Canada has a robust inspection program, that overall compliance with the feed ban is good and that the feed ban is reducing the risk of transmission of bovine spongiform encephalopathy in the Canadian cattle population.” The report also said the Canadian feed ban is not substantially different from the U.S. feed ban. Two minor differences between the U.S. and Canadian feed bans, as reported by the investigative team, were that the U.S. allows plate waste and poultry litter to be used in ruminant feed, whereas Canadian feed regulations make no such allowances. In both the feed ban assessment that USDA released last week and the risk assessment conducted by APHIS as part of the BSE minimal-risk rule, USDA found that compliance by feed mills and rendering facilities in Canada to feed ban regulations is good and, just like the U.S., Canada is continually looking for ways to improve it. USDA added that it is confident that the animal and public health measures that Canada has in place to prevent BSE, combined with existing U.S. domestic safeguards and additional safeguards provided in the final rule, provide the utmost protections to U.S. consumers and livestock. USDA wanted to remind producers and consumers that when Canadian ruminants and ruminant products are presented for importation into the U.S., they become subject to domestic safeguards as well. The National Cattlemen’s Beef Association (NCBA) conducted an investigation similar to that of USDA APHIS. Nine U.S. cattlemen traveled to Canada last month about the same time as the USDA experts. The NCBA team reported, “The Canadian feed industry appears to be in compliance with its feed ban, based on visual inspections and audit reports.” In response to USDA releasing the report, Jamie Willrett, leader of the NCBA delegation to Canada, said, “This report validates the findings of our trade team. Questions remain about specific aspects of the proposed Canadian rule, but we appreciate the release of this report and our government’s willingness to address our concerns.” A report was given to NCBA members by the investigative team at its annual convention last month. NCBA members then adopted an 11-point directive regarding resumption of trade with Canada. NCBA said the release of USDA feed ban compliance report met one of the criteria of that directive. The criteria was: “Assurance that all Canadian firewalls to prevent BSE, specifically adherence to the feed ban, are functioning properly.” NCBA President Jim McAdams added, “NCBA supports taking steps toward normalizing global trade as a means to increase profitability for U.S. cattle producers. Our priority remains focused on resuming trade with our own export markets such as Japan and South Korea, but we are clearly making progress in all these trade areas.” For a copy of the feed ban assessment, the final rule, and other documents pertaining to BSE, producers are encouraged to visit the APHIS BSE website at http://www.aphis.usda.gov/lpa/issues/bse/bse.html.

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Monday, March 7,2005

Cash feds rally back to $90

by WLJ
— Futures gains cited. — Calves, feeders steady to firmer. A strong rally in live-cattle futures last Thursday prompted packers to come to the trading table with significantly more money than they used the previous week. That resulted in cash cattle trade being $4-5 stronger. As of press time last Thursday, Kansas and Texas cattle feeders had sold 40-45,000 head each within a range of $90-91.50, with the majority bringing $90.50. Northern trade tallied 50-55,000 head at mostly $90 live, $142-144 dressed. Early week packer bids were mostly $85 live, $140 dressed and prospective sellers were asking at least $90 live, $143 dressed. A fourth straight week of Friday trade was avoided, however, when April live cattle futures jumped $1.90 Thursday, closing at $88.70. June followed closely behind, closing at $84.35, up $1.42. Market analysts said cash cattle prices historically hold a $1.50-2 premium to futures during this time of year and that once “the board” jumped higher cash cattle prices were destined to follow. The jump in futures was attributed to packers having to find more domestic slaughter cattle in the coming weeks after a federal district judge granted a restraining order against USDA plans to reopen the border to U.S. live cattle on March 7. Andy Gottschalk, analyst with HedgersEdge.com, told WLJ the futures jump was the result of most nearby contracts being oversold on thoughts that the border would be open to Canadian cattle and demand for U.S. feds would be depressed. However, with the injunction, Gottschalk, said packers had to readjust their thinking and work on buying from a smaller-than-expected pool of slaughter-ready animals. Some additional market optimism resulted from projections that domestic beef demand would start to pick up over the next couple of weeks, with consumers from the eastern half of the country starting to get in the “grilling” mode. The last few months, demand in the eastern half of the country has been depressed due to extremely cold, windy and wet weather curbing much desire to visit restaurants or buy beef from retail shelves. “Seasonally, one would expect improvement in beef demand, particularly as grilling starts up,” Gottschalk said. “However, we are already seeing boxed beef resistant at $142, and that doesn’t bode well right now.” Gottschalk said he thought Choice boxed beef could have tested $144 per cwt last week, but that didn’t happen. Choice boxed beef closed Thursday at $141.99, while Select was at $138.55. Recent boxed beef volume was called moderate with last Thursday’s load count of 565 being the only 500-plus load day since Feb. 21. From a beef production standpoint, Gottschalk said the continuation of the ban against Canadian live cattle would result in about 400 million pounds fewer in total U.S. beef supplies for the year. Instead of 25.5 billion pounds in U.S. beef being produced, Gottschalk said his revised figure is for about 25.1 billion pounds in 2005. “That’s about a $1.50-2 (per cwt) jump in live cattle price for the year,” he said. Packers appeared hopeful that the normal spring upswing in beef demand was about to hit as they picked up their processing chain speeds last week. Through Thursday, 474,000 head of fed cattle ran through packing facilities, 23,000 more than the same period in the previous week. Several sources thought a 600,000-head slaughter week was possible last week, compared to 576,000- and 574,000-head during the previous two weeks, respectively. Slaughter cow and bull prices were also up last week, with most reports showing gains of $2-3 compared with the previous week. Cutter cow and cow beef cutouts were all up last week, with the cutter cow index at $112.28 last Thursday, up $2.50. On the cow beef cutout, 90-percent lean was bringing $144.76, up $4 from the previous Thursday, and the 50s market was at $71.80, up almost $6. Retail meat buyers indicated that they are banking on burger demand picking up over the next few weeks and that they are sending that message back down the production chain to their cow and lean beef suppliers. Denver- and Minneapolis-based meat buyers both said last week that they ordered 30 percent more grinding product for delivery for March 9 advertising features and that other retailers are giving similar orders throughout most of the country. Calves, yearlings Futures and cash-feeder cattle prices started to show significant gains last Thursday following the announcement concerning Canadian live cattle reentry being further delayed. The March futures contract gained $2.30, to close at $102.62 per cwt on Thursday. April closed at $101.50, up $2.27; and May was up $1.77, settling the day at $100.10. Cash feeder cattle gains were also reported last Thursday. After getting close to the $100 per cwt mark earlier in the week, last Thursday’s CME feeder index was back up to $101.66, up 25 points from the previous day. Market sources said that removing Canadian feeder cattle out of the mix in the short term helped domestic placement-ready cattle. The average weekly influx of Canadian feeder cattle entering the U.S. was expected to be 5-7,000, based on an informal WLJ survey of seven different analysts. However, with those cattle not coming in now, and supplies being very tight, analysts said a slight up-tick in feeder cattle could be expected. Gottschalk, however, disagreed somewhat saying that the number of feeder cattle outside of feedlots right now is unseasonably large, and that 5-7,000 fewer feeder cattle in the mix (weekly) shouldn’t be that big of a deal. Deferred feeder cattle futures contracts were said to be helped by last week’s USDA projection that almost 82 million acres of corn could be planted, with 76 million or more acres of that being for grain production. That acreage figure is 1.1 million acres more than last year, when a record 11.8 billion bushel harvest was reported. Gottschalk added that significant gains in feeder cattle prices is probably unlikely until feeders start showing some significant profit margins. “At $90 some feeders are still showing negative margins. There are a lot of break evens in the $92-94 range,” he said. Negative margins could range mostly between $25-50 per head. Calf prices remained mostly stronger to $2 higher last week, as stocker operators continue to see not only good grazing conditions, but also from cheap supplemental feed, specifically corn and other feed grains. Weather has also been conducive to bringing in cattle and getting them through a transition period without too many extra health problems arising, which means extra expenses are minimized. Higher-quality heifers continued to bring a $4-7 premium compared to their poorer-quality counterparts, with a lot of that extra demand being because of prospects for continued herd expansion in the Southwest and Midwest, sources said. — WLJ

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