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Monday, April 2,2007

Market continues to trade lower

by WLJ
Cash fed cattle trade got underway early last week at prices lower than the previous week. Trading was light to moderate in all feeding regions last Wednesday. Compared to Tuesday, live sales in the southern Plains sold in a narrow range from $95-95.50. There were more than 35,000 head traded in Kansas at $95-95.50 live basis and $152.50 dressed. Compared to the prior week, live sales were $1-1.50 lower in Nebraska where 29,639 head had been traded as of Thursday and in Colorado, cattle traded in a range of $96-97.50. In the western Corn Belt, dressed sales were called $2-2.50 lower at mostly $96. Dressed sales in the northern Plains and western Corn Belt were $1-3 lower from $153-156. The cattle on feed report issued by USDA on March 23 showed market support for the next few months in the form of lower cattle on feed numbers and a reduction in the number of front-end ready cattle in feedlots. Cattle feeders have done a good job moving cattle over the course of the last two or three months and the current state of feedlots should help support the market in the mid-$90 range or better, according to market analysts. Interestingly, the report did show a shift in the placement pattern, with northern tier feedlots placing larger numbers of cattle than southern states. High corn prices have fueled a debate about whether cattle feeding areas would shift to the north in favor of cheaper and more readily available corn supply. Although it remains to be determined whether the shift will be long-lived, it will certainly add a new dynamic to the markets over the next few years. This could be the beginning of several new opportunities for the northern Plains region. Meanwhile, beef product movement remains soft and is expected to remain so for the near-term. However, as spring weather begins to warm things up across the nation and buyers begin to seek beef products for grilling, retail sales should pick up again. Once that begins to occur, many market analysts expect fed cattle prices to move from the mid-$90 range back toward the $100 level by mid- to late-April. Last week, boxed beef prices were showing the signs of some of that market weakness as poor weather conditions spread across the nation. Choice boxed beef lost $1.47 to trade at $152.63 by mid-day last Thursday. Select was trading $1.05 lower at $143.51. Packers were reporting fairly good boxed beef movement, with 468 loads of cuts, trim and grind shipped on heavy offerings of product. Despite the slow movement of beef out of warehouses, packers had not reduced kill levels much from prior week or prior year levels. Last Thursday, packers harvested 120,000 head. That number was 4,000 head fewer than last week and last year. For the week to date total through last Thursday, packers had harvested an estimated 484,000 head, down from 499,000 the previous week, but above the year-ago tally of 482,000 head. The cow beef market also worked its way lower last week, losing $1.01 last Thursday to trade at $104.54. The 90 percent lean was selling at $124.46, down $1 from the previous day and the 50 percent trim was trading at $55.68. Continued heavy slaughter of cull cows has pressured prices lower. Prices are now well below last year’s levels when the cow cutout value was over $114 during the same week. The 90 percent lean was nearly $20 below last year’s level, while the 50 percent lean was above last years price of $45.24. On the Chicago Mercantile Exchange (CME), trade last Thursday closed mostly higher with the exception of April and May 2008 contracts, which closed down slightly. The up front contracts were slightly higher, with April adding 20 points to close at $96.37. June was up 52 points, closing at $93.95 and August posted the session’s largest gain, closing up 70 points at $91.72. Feeder cattle It’s easy to appreciate the sight of pastures greening up in the spring, especially after a long and hard winter. It’s even better for many cow/calf producers as the coming grass and a variety of factors continue to positively influence the feeder cattle market. This is good news for producers who have some fall calves to sell. The demand for cattle ready to go to grass remains very good. Thin cattle brought significantly more money at auction markets across the West when compared to their heavier conditioned counterparts. “These thin cattle are worth quite a bit more to me as the pastures around here are beginning to green up,” said Roger White, northeastern Colorado cattle producer. “I plan to turn out several hundred head and graze them through the summer. At least that's the plan.” In addition to the bout of spring fever that is hitting the western regions as many areas are already making it to 70 degrees, the corn futures dropped sharply last week. May corn futures settled at $3.91 per bushel. This is a decrease of almost 40 cents since the beginning of March. The CME feeder cattle index also increased last week from $104.71 to $105.54. “I’m sure with the decrease in corn futures and the optimistic outlook regarding the fed cattle market, cattle buyers are given a little more money to work with,” said White. “These feedlot owners can finally pay a little bit more for these feeder cattle and not take so much risk. From a cow/calf standpoint, this sure is nice to see.” In Galt, CA, feeder steers and heifers were $2 to $3 higher. Steers averaging between 500 and 600 lbs. ranged between $107 and $118.50. Their heifermates sold between $100 and $109.50. Heavier steers averaging between 700 and 800 lbs. sold for $90 to $99 while heifers of a similar type and kind sold between $86 and $94.25. There were several heavier weight heifers. Those weighing between 900 and 1,000 lbs. sold between $72 and $86.25. In Billings, MT, the overall quality was less attractive than the previous week and feeder steers were $2 to $4 lower. However, on thin fleshed five weight steers, there were instances of $4 higher. Feeder heifers were steady to $4 lower. There were instances of thin fleshed 500 lb. heifers being $4 higher. Demand was good for thin fleshed, high quality cattle. There was less demand for plain types. Steers averaging 535 lbs. called for $126 and thin heifers averaging 512 lbs. sold for $116.50. In Fort Collins, CO, stocker steers and heifers sold with a firm undertone noted. A lower undertone prevailed on feeder steers and heifers over 650 lbs. Buyer demand was good on grazing classes and moderate to light for cattle entering the feedlot. Steers averaging 522 lbs. sold for an average of $119.25 while those weighing 695 lbs. sold for $105. Five weight heifers sold for $108 and the heavier females weighing 686 lbs. called for $92.25. Just to the south in Dalhart, TX, feeder steers and heifers were mostly steady except for 500 to 700 lb. heifers which sold mostly for $1 to $2 lower when compared to the previous week. Trade was active and demand was good. Steers weighing between 500 and 550 lbs. sold for an average of $130. Similar females averaged only $107. Oklahoma City, OK, had another large run last week with 7,330 head. Feeder steers were $1 to $3 higher and heifers were lightly tested but were $1 higher. Stocker cattle and calves were $4 to $6 higher. Demand was very good for all classes. There were many consignments of thin cattle offered with weighing conditions attractive to cattle buyers with grass cattle orders. Steers averaging 519 lbs. sold for $131. Fleshy steers at a similar weight only sold for $123 while thin cattle weighing 508 lbs. called for $139.50. Heifers weighing 524 lbs. sold for $115 while females averaging 625 lbs. sold for $111.75. In Lexington, NE, over 2,400 head of steers and heifers trended mostly steady to $3 higher. Offerings with low flesh scores brought a significant premium. Thin steers averaging $524 lbs. sold for $139.93 while fleshy steers weighing 577 lbs. averaged $131.80. Heifers averaging 526 lbs. sold for $121 and heavier weight, fleshy heifers weighing 748 lbs. sold for $97.50. To the north in West Fargo, ND, feeder steers weighing 650 lbs. and less sold $1 higher while heavier steers weighing 650-900 lbs. sold $2 to $3 lower. Feeder heifers sold unevenly steady. There was good demand, especially for lighter weight cattle. Five weight steers averaged $119.91 while those weighing 750 lbs. were worth $106.75. Heifers averaging 480 lbs. sold for $109.75 and the heavier females, which averaged 807 lbs., sold for an average of $93.19.

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Monday, March 26,2007

COMMENTS

by WLJ
Prioritize what’s important It was a great week last week because I was able to take the entire week off and go to bull sales, get out in the country, and visit with you all. Bull sales are, for the most part, quite strong. Cattlemen are being a bit more selective about the bulls they buy, but the discussions are still focused on moisture and snowpack which is now concerning western producers a great deal. Many producers in California never received their winter rain, which grows the bulk of their feed. There is speculation that cowherds will be culled very hard this year. Speaking of cows, the comment period for the Canadian cow import rule is closed. Although, USDA will need some time to review the comments and make their decision, it seems pretty clear that they will elect to open the border to this class of cattle trade. The big question on many producers’ minds is what will the market impact be when these cattle start to enter the U.S.? Other than hearing a lot of country speculation, we haven’t heard much. I spoke with market watcher Andy Gottschalk last week and he said we need to focus on the volume that we already slaughter in the U.S., which is around 4.8 to 5 million head of cows. The volume of cattle expected from Canada is around 600,000 head, which will be beef and dairy cattle and aren’t going to come at once. However, on the other hand, the Canadian feed ban doesn’t necessarily bestow any confidence that the feed ban protocol has been effective. But, then again, we’re talking about just a few head and it does seem that we may need another lesson on the real threat from bovine spongiform encephalopathy, which is essentially zero. As far as the World Animal Health Organization is concerned, beef from cattle over 30 months of age with specified risk materials removed is safe for human consumption. The only real threat from Canadian cows is in the market. According to Gottschalk and other market analysts, little, if any, market impact will be realized. This next cattle on feed report looks like it will be awfully bullish. Cattle on feed is expected to be 4-5 percent below a year ago. Marketings are expected to be up 4-7 percent and placements up just a few percent. All in all, it appears we have put the industry in a very positive posture for the second quarter to expand the market. Carcass weights are down 19 pounds and slaughter remains strong. I certainly didn’t expect to see $1 cattle so soon. We knew the late winter and spring months would be pretty good, but I think a dollar fooled everyone. The weather markets have kept production in check and 80 cent cost of gain has helped cattle feeders maintain an aggressive marketing program. Some profitability on the packers’ side has also helped them maintain an aggressive buying posture. Now that we know that the market is going to remain strong for awhile, we can focus some attention on other aspects of our industry. I suppose we need to comment on the trials and tribulations at R-CALF USA, which is becoming entertaining. I’m sure for some, this is serious business; for others, amusement. Anyway, the rogue board of directors at R-CALF has taken control and they will pursue their efforts on mandatory Country of Origin Labeling, Rule 2, packer ownership and other market disrupting legislation that the industry really doesn’t need. Ironically, this R-CALF board is getting a shot of its own medicine. Call it a coup, call it treason or anarchy, but the departed members of the board of directors decided that their only recourse was to create a new cattlemen’s organization. United States Cattlemen’s Association will attempt to pick up the pieces and advance the moderate causes of the former R-CALF Board. This situation with cattlemen’s organizations is out of control. One would think that with as many groups as we have representing the industry, our voice in Washington, D.C., would be stronger. However, that’s not the case. It appears to me that the multitude of cattlemen’s groups will confuse the issues and create more frustration for legislators. So, keep in mind, we have a good market for now. We have high feed costs and feeder cattle have maintained a very strong market, but it is vulnerable. My suggestion would be to focus your efforts on the market and what you can do to take advantage of it. Creating another cattlemen’s association seems more like a problem than a solution.

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Monday, March 26,2007

Fed cattle market backs away from $1

by WLJ
Cash fed cattle trade stalled out early last week as boxed beef cutout values and choppy trade stalled the market slightly ahead of the cattle on feed report due out on March 23. Both feeders and packers were holding firm on their positions last week, neither willing to give ground to move cattle. As of press time last Thursday, asking prices were firm at $100-102 in the south and $162 plus in the north, while packers were holding steady with offers in the range of $94 in the south and $95-97 in the north on a live weight basis. Dressed offering prices in the north were in a range of $154-157, with some very light trade reported at $157, although it was not enough to call a trend for the week. Most analysts expected trade to come in a range of $1-2 lower than the prior week when live sales in the south Plains traded at $98 and dressed sales were at $154-158. In the northern Plains and western Cornbelt, live sales ranged from $97 to $100, dressed sales from $158-160. Boxed beef prices were quickly working their way lower last week after posting two-year highs the previous week. As of Thursday, wholesale buyers were beginning to show some interest after Choice shed $2.36 and Select dropped $2.26 to trade at $160.06 and $149.15 respectively at mid-day. Buying was evident as the load count inched higher after a lull following the previous week’s high prices. By mid-day last Thursday, packers had managed to move 238 loads of cuts, trim and grind product. Packers have continued to harvest good numbers of cattle in an effort to take advantage of positive margins. According to Glenn Grimes and Ron Plain, University of Missouri agricultural economists, calf slaughter under federal inspection has been up substantially since September of 2006. The first month that showed a larger calf slaughter than a year earlier was October, which was up 14.5 percent from 2005. November was up 19.3 percent, December was up 14.1 percent, January of 2007 was up 45.4 percent, and February through Feb. 24 was up 19.6 percent. “This is another sign that producers are currently reducing the size of the cattle herd due to the short supply of forage, which is very expensive in some areas,” Grimes and Plain said. The increase in domestic slaughter has caused a decreased need for cattle and beef imports from abroad. According to Grimes and Plain, beef imports in January 2007 were down 7.1 percent from 12 months earlier. “All of our major suppliers of beef showed some reductions in their sales to the U.S.,” they said. “Feeder cattle imports from Mexico during January were down 63.5 percent from 12 months earlier and live cattle imports from Canada were up 17 percent from a year earlier. Total live cattle imports for January 2007 were down 25.2 percent from 2006.” One additional cause for the higher slaughter is the decline in carcass weights and overall beef production from those slaughtered cattle, according to Grimes and Plain. “Dressed carcass weights continue to run below a year earlier. For the week ending Feb. 24, steer carcass weights at 815 lbs. were 10 lbs. lighter than a year earlier. Heifer carcass weights under federal inspection were at 759 lbs., down 12 lbs. per head from 12 months earlier,” they said. “More stress than a year earlier from weather and high corn prices are the major reasons for the lighter weights. With the tighter supply of cattle coming out of feedlots in coming weeks, fed cattle prices are likely to continue strong.” That expectation was also evident in the analyst estimates in advance of the USDA cattle on feed report. Estimate for the number of cattle on feed spanned a range of 5.6 percent to 2.1 percent below March 1, 2006, for an average expected decline of 3.7 percent. February placements were expected in a range of 4 percent below to 7.1 percent above 2006, for an expected average of 2.5 percent above 2006. The number of cattle marketed was placed in a range of 2 to 8 percent above 2006 for an average guess of 5.5 percent above February 2006. The cattle on feed report and its expected positive news was eagerly anticipated on the Chicago Mercantile Exchange (CME) last Thursday. Traders pushed live cattle contract prices higher across the board with up-front April contracts realizing the largest gains of the day. April live cattle gained 67 points, closing at $98.40, while June rose 42 points to settle at $95.35. August was 22 points higher at $92.55 and October settled 25 points higher, closing at $96.37. The day’s positive tone corrected some early week declines after cash trade faltered slightly the prior Friday. Many traders expected to see more $1 cash fed cattle trade, however, after topping $1, trade quickly backed off to end the week at mostly $97-98. However, that won't be the end of the good times for the cash fed cattle market. Last week, some market analysts said the fed cattle market hasn’t put in the spring highs and likely won’t until perhaps April or early May. Feeder cattle Spring is in the air and with the promise of fresh grass, the demand for stocker cattle has sharply increased. The good news is, so has the value of lighter weight cattle ready to go to grass. Cattle that can be classified as thin were the most in demand as cattle buyers are showing a very strong interest. “These greener cattle are just going to bring more at the auction markets,” said Joe Bollers, an independent cattle buyer. “If we get some more moisture (in the northern states), it’s going to green up in a hurry. The grass will be a huge relief as hay prices are killing everybody.” There are many factors working to the cow/calf producer's benefit right now. The warmer temperatures with the promise of grass is a significant driving factor but so is the fed cattle market. With the fed cattle market increasing to over $100 two weeks ago, cattle buyers were more comfortable with the increase in prices of feeder calves. It doesn’t hurt that corn prices and corn futures have stayed relatively steady over the past few weeks. This is compared to the dramatic increase seen in corn prices the last several months. Regardless, the increase in the fed cattle futures market is giving feedlot owners the option to lock in a high price for fat cattle and, as such, they are more willing to risk paying more for feeder cattle. In addition, the CME cash feeder cattle index, which closed at $103.92 on Wednesday two weeks ago, continued to show strength, closing at $104.71 last Thursday. In Billings, MT, feeder steers and heifers weighing under 650 lbs. were $5 to $10 higher when compared to the previous week. Steers over 650 lbs. were $2 to $5 higher with too few heifers of the same weight to test. The demand in Billings was excellent for stocker cattle and good for feeder cattle. Five weight steers averaged $131 and their heifermates called for an average of $110.50. Fleshy steers weighing an average of 726 lbs. sold for $103 and heifers of a similar type and kind sold for $94. La Junta, CO, had a fairly large run last week with almost 5,000 head trading hands. In comparison to the prior week, steers and heifers sold steady with the exception of calves weighing 400 to 500 lbs. which sold as much as $5 lower. Trade was active with good demand on all classes. Five weight steers ranged from $110 to $118 while heifers averaging 500 to 550 lbs. sold between $95 and $101. Heavier weighted cattle were up some as steers weighing an average of 623 lbs. called for an average of $99.81 and heifers averaging 631 lbs. sold for an average of $95.63. To the south in Dalhart, TX, feeder steers and heifers weighing between 300 and 500 lbs. were steady to strong while those over 500 lbs. were $2 to $3 lower. Steers weighing between 500 and 600 lbs. sold between $115 and $125.75 but steers at the same weight, classified as thin, sold for an average of $127.50. Heifers of the same weight sold between $110 and $113.75. Oklahoma City, OK, boasted another large run last week with over 9,000 head of feeder cattle, sharply higher compared to last year when only 3,800 were sold during the same week. Feeder steers were mostly steady when compared to the previous week except those weighing 800 to 825 lbs. Those steers sold $1 to $2 lower. Feeder heifers over 650 lbs. were $1 to $2 lower while stocker heifers under 650 lbs. sold steady. Stocker steers were $4 higher. Demand was called moderate to good for cattle headed to grass or graze out wheat. The feeder cattle were in medium to fleshy conditions, however, several consignments of thin fleshed stockers were actively supported by grazing buyers. One lot of thin steers averaging 541 lbs. sold for an average of $129.20. Steers that averaged 737 lbs. called for an average of $108. Heifers that averaged 532 lbs. were sold for an average of $122 while the heavier females at an average of 778 lbs. sold for $109.10. Joplin, MO, also sold more feeder cattle than the same week in 2006. Steers and heifers under 600 lbs. sold $3 to $5 higher while those weighing over 600 lbs. were $1 to $3 lower when compared to the prior week. The supply was heavy and the demand was best for yearlings and calves suitable for grazing. Fleshy, new crop calves took the heaviest discounts. Five weight steers sold for an average of $124 while their heifermates called for $108. Heavier steers weighing in at 750 lbs. sold for an average of $107.25 and heifers of a similar weight sold for an average of $93. To the west in Valentine, NE, steers weighing in over 650 lbs. sold for $2 to $3 higher. There were numerous lots of green, grass calves and replacement heifers with good demand and buyer competition. Steers weighing an average of 531 lbs. sold for an average of $133.44 and a fancy lot of steers at 606 lbs. called for $127. Heifers averaging 529 lbs. sold for $117 while fancy five-and-one-half weights called for $123. In Sioux Falls, SD, feeder steers sold mostly steady to $2 lower. Feeder heifers remained steady to $3 higher. The best demand was in the heifer class of females over 700 lbs. There were many offerings of replacement quality females. Spring fever was in the air with a lot of conversations regarding the need for moisture in western South Dakota. Six weight steers average $111 while heifermates called for an average of $107.75 Females of replacement quality at an average of 627 lbs. were purchased for $115.75.

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Monday, March 12,2007

Fed cattle trade $4-7 higher

by WLJ
Relatively active, and substantially higher fed cattle trade took place last Wednesday, bucking the trend of late week trade over the previous few months. Fed cattle prices on approximately 20,000 head were trending as much as $4-7 higher last week, with prices reportedly in the range of $98 live basis in the southern Plains, an increase of $4 over the prior week. In the north and Corn Belt, dressed prices were reportedly as much as $7 higher in some areas, with prices in a range of $154-155 dressed in Colorado, Nebraska, Iowa and Minnesota. Last Thursday, in the wake of $98 trade the day earlier, feedlots were busy raising prices on their remaining showlists to take advantage of the bullish movement in the market. Particularly in the southern Plains, feed yards were asking $99-100 for slaughter-ready cattle. The prior week’s blizzard conditions in the central and northern Plains, as well as portions of the Corn Belt, also helped move the market as conditions prevented the movement of cattle in some areas and caught some packers short bought. However, much of the upward movement was spurred by an anticipated shortage of Choice-grading cattle in the weeks ahead as a result of winter weather conditions in cattle feeding areas early this year. Although prices are moving higher, grading percentages remain above early expectations. Last week, USDA reported that 53 percent of all slaughtered cattle were grading Choice, although most analysts expect that to drop as packers move in to the spring supply. That expectation has buyers forward purchasing to meet the increased demand for Choice middle meat products as grilling season gets underway in the southern states. The forward purchasing last week was pushing boxed beef prices, for both Choice and Select product, markedly higher. Last Thursday, Choice product was trading at $158.34, up $1.19 and Select gained 65 cents to trade at $147.87. Prices were as much as $7 higher than the previous week. Those gains were helped by a $4.38 jump in the Choice cutout and a 68 cent rise in Select boxed beef prices last Wednesday. Middle meats, in particular Choice rib primals, benefitted from the active buying spree at the wholesale level, gaining $19 per cwt. last Wednesday. Choice loin primals gained $8 during the day. End meats also got a boost as buyers look for any available bargains to meet rising demand going into spring. In an effort to capitalize on rising boxed beef prices last week, packers were ramping up their slaughter volumes. On Thursday last week, packers harvested an estimated 126,000 head which was 8,000 head more than the previous week and 4,000 more cattle than the same day last year. For the week through last Thursday total harvest was 495,000, up from the prior week’s total of 488,000 and above the same period last year, which totaled just 484,000 head. Cow beef cutouts were pressured last week by high slaughter volumes at cow processors’ last week. The cow beef cutout value declined 66 cents last Thursday to settle at $109.37. The cow beef cutout value was more than $2 lower than the previous week and down $3 from last year’s prices. The 90 percent lean was at $133.80 last week, while the 50 percent trim traded at $44.64, up from $38.42 the previous week. The sharply higher cash prices gave commodity traders reason to push live cattle contracts higher on the Chicago Mercantile Exchange (CME) at the close of the session last Thursday. Prices were 35 points to 247 points higher across the board. Up front contracts received the biggest boost. April 2007 live cattle contracts were the biggest gainers on the day, rising 247 points to settle at $101.02. June issues added 192 points, closing at $98.75, and August closed 177 points higher at $95.32. Feeder cattle Feeder cattle markets last week showed a sharp increase due to several factors. Many cattle buyers showed some optimism for spring grass and as a result, feeder cattle prices for thin steers and heifers ready to go to grass soared. “The light end of the feeder calves is really up because we have conditions that are suggesting much of the U.S. will have green grass going into the spring,” said Jim Robb, director of Livestock Marketing and Information Center. In addition to the optimistic outlook cattle buyers have for grass, the CME cash feeder cattle index rose to $100.48 last Thursday, up from $98.70 the previous week. One of the biggest factors that resulted in increased feeder cattle prices was the huge increase in the cash and futures fed beef market. Feedlots are receiving more for fed cattle and can afford to pay more for feeders. “The futures market for beef is really on fire this week,” said Robb, last Thursday. “The fed cattle market has really had a spark lit under it and has pulled the feeder cattle prices up.” Fed cattle were trading an average of $98 last Thursday with some averages going as high $99 to $100 in the southeastern region of the U.S. Interestingly, corn prices have only come down a little and have probably not had much of an effect on the market. “Corn prices certainly haven’t come down enough to support the feeder cattle market and that’s a little strange,” he said. “With the corn coming down just a little, cattle buyers are turning a blind eye and focusing on the fed cattle increase.” In auction market trade in Davenport, WA, feeder cattle sold from $1 to $4 higher. The trade was active with good demand. Five weight feeder steers called for $116 while their heifermates sold for $95.25. Fleshy, 700 lb. steers sold for $94 and heifers of similar type and weight sold for $89. Torrington, WY, had more cattle consigned last week when compared to the previous week with 3,100 head. Steers and heifers were steady to $3 higher. The overall quality at the sale was attractive and the demand was moderate to good. Steers weighing 510 to 540 lbs. sold for an average of $140.25 and steers weighing 700 to 785 brought an average of $104.25. Five weight heifers sold for $110 while the heavier consignments, weighing 715 lbs., sold for $98.50. Compared to the previous Wednesday, steer calves in La Junta, CO, under 500 lbs. sold for $3 to $5, and in some instances, $8 higher. Steers over 500 lbs. were steady to $1 higher. Yearling feeder heifers were $2 higher. One lot of fancy 435 lb. steers brought $149. Five weight heifers sold for $125 to $130 and yearling heifers of replacement quality sold for an average of $100. In Amarillo, TX, feeder steers and heifers were mostly steady except heifers under 600 lbs. which were $1 to $3 higher. Steers averaging 530 lbs. sold for $117 and heavier weights of 713 lbs. sold for $103. Heifers weighing 539 lbs. sold for $100.75. The auction market in Oklahoma City, OK, had a large sale last week with a run of more than 15,500 head compared to 11,685 the previous week. Feeder steers and heifers were mostly $1 to $3 higher last week. Demand was reportedly very good for such a large run. Some cattle were in thin to gaunt condition which was in the buyer’s favor. Demand was very good for thin cattle suitable for grass. Thin steers weighing 440 lbs. averaged $140 and thin five weights sold for an average of $134. Seven-hundred-fifty pound steers, also in thin condition, sold for $106. Nine weight steers sold for an average of $95.62. Five weight heifers sold for an average of $107.40 while their value added counterparts brought $109. Heifers weighing an average of 724 lbs. sold for $93.87. Just north in Dodge City, KS, feeder steers and heifers weighing between 300 and 600 lbs. were steady to $3 higher. Steers weighing 600 to 650 lbs. steady to $1 higher and seven to ten weights were steady to $2 higher. Heifers weighing between 600 and 750 lbs. were steady to $4 higher and 750 to 900 lb. heifers were steady to $1 higher. The state of Nebraska boasted over 16,000 head of cattle receipts last week. Steers trended $1 to $4 higher with some instances of $6 to $7 higher. Heifer offerings traded $2 to $4 higher. Demand in the state was very good and trading was moderate to active. Weigh-in conditions were definitely in the buyers' favor after cattle endured extremely frigid temperatures and adverse weather conditions the previous week. Steers weighing 500 lbs. sold for $127.56 while a lot of fancy steers at the same weight brought $139.75 and thin steers averaged $135.26. Steers averaging 807 lbs. sold for $100.67. Heifers averaging 524 lbs. averaged $109.89 and thin heifers weighing in at 506 lbs. called for $127. One lot of value-added heifers weighing 783 lbs. sold for $101. In Ft. Pierre, SD, feeder steers and heifers calves under 700 lbs. sold steady to $2 higher with most improvement on cattle suitable for grass. Feeder steers over 700 lbs. sold $2 to $4 lower. Feeder heifers and heifer calves sold mostly steady. Demand was called moderate to good.

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Monday, March 12,2007

Landowners counter sue in fight over sage grouse

by WLJ
Three prominent organizations filed to intervene in litigation, brought primarily by environmental groups, to list the Gunnison sage grouse under the Endangered Species Act (ESA). The Colorado Cattlemen’s Association (CCA), Partnership for the West (Partnership), and the Western Conservation Coalition (WCC) will represent the interests of agriculture, landowners, and industry in the suit in the U.S. District Court in Washington, D.C. Colorado producers, landowners, and business owners have been struggling with lawsuits such as this one, filed by special interest groups, to list species under the ESA. The Gunnison sage grouse inhabits primarily southwestern Colorado, northern Arizona and New Mexico, as well as eastern Utah, and was added as an endangered species candidate in 2000. “Since then, we have been diligently working with the U.S. Fish and Wildlife Service (USFWS), the Colorado Division of Wildlife (DOW), and other key parties to find alternative solutions to the potential endangered species listing. Producers, land owners, and businesses have stepped up to the plate to volunteer in the process. The agreements allow ranchers and landowners to continue to use their land, while providing benefits for the grouse,” said CCA President Mark Roeber. According to DOW, Gunnison sage grouse numbers are on the increase. “The collaboration has worked at the local level; the bird’s population has improved, and it will continue, as our conservation efforts continue,” said Roeber. Many of CCA’s members have placed their own lands under conservation easements and entered into conservation agreements with DOW to benefit Gunnison sage grouse. “Landowners faced with civil and criminal penalties under the Endangered Species Act will find it more difficult to enter into these agreements that currently benefit all parties, wildlife, public, agriculture, etc.,” said Roeber. The ESA was signed into law in 1973 and was designed to bring endangered species back from the brink of extinction. Over the past 32 years, according to USFWS, only 10 of over 1,300 species on the ESA’s list have recovered. “Study after study shows the ESA simply doesn’t work,” said Paul Poister, executive director of the Partnership. “Less than 1 percent of all listed species have ever been recovered, and the regulatory straight-jacket of the ESA simply gets in the way of good conservation work,” Poister added. The Partnership is a nonprofit alliance of more than 600 companies, associations, coalitions and individuals who support a common-sense balance between economic growth and environmental conservation. “The grouse was petitioned for listing before it was even recognized as a species,” said Joe Puchek of WCC, a nonprofit coalition of landowners, realtors, agricultural producers, contractors, and businesses. The coalition supports local and state conservation efforts, high scientific standards, private property rights, agriculture, and a strong economy. The WCC commissioned a review of the Gunnison sage grouse that questions its status as a species separate from other sage grouse. The groups are represented by Kent Holsinger, of Holsinger Law, LLC, based in Golden, CO. “The people most impacted by a listing should have a voice in this process,” said Holsinger.

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Monday, January 29,2007

Trade awaits cattle on feed report

by WLJ
Despite increasing harvest levels in packing plants, the standoff between packers and cattle feeders continued into late last week. Meanwhile, feeders struggled with rising costs of gain and packers awaited the cattle on feed report due out last Friday. Ask and offer prices last Thursday remained several dollars apart, with feedlots looking for $89-90 live and $138-$142 dressed for their cattle. Most analysts expected trade to develop at levels steady to $1 lower than the previous week’s trade of $87 in the south and dressed sales in Kansas at $138-139. In the north Plains, live sales traded $86-86.50 and dressed sales traded at $139-140. In the western Corn Belt, live sales traded at $87-87.50 and dressed sales at $140. Packers were taking advantage of the downward fed cattle price movement to slaughter larger numbers of cattle and capitalize on positive margins for the week. HedgersEdge.com estimated packers were earning $16.05 per head last Thursday. Despite the week-over-week increase in harvest, slaughter through the week remained below normal. Last Thursday’s harvest was estimated at 125,000 head, 10,000 more than the prior Thursday and 1,000 fewer than the same day in 2006. For the week-to-date kill through Thursday, packers had slaughtered 485,000 head, 17,000 more than the prior week and 4,000 fewer than the same period last year. However, despite the lower than year-ago kill levels, the boxed beef market continued its multi-week decline for much of last week due to weak movement at the retail and wholesale levels. Middle meats were under pressure for most of last week and only a few of the end meats, such as the chuck complex, were propping up prices to prevent an even lower downward trend. In Thursday trade, Choice boxed beef cutout values were trending 75 cents lower to trade at $148.82. Select dropped 11 cents, trading at $137.66. Both Choice and Select values were well below the prior week when Choice boxed beef traded at $153.54 and Select at $141.22. Mike Roberts, commodity marketing agent at Virginia Tech, said last week beef demand for the past few months hasn’t been particularly good, which is adding some uncertainty to the beef market. “Pork and poultry seem to be competing for consumer red-meat dollars for beef at the retail level. Overall demand for beef is not seen as particularly strong over the past few months. Packers are expected to keep slaughter rates down while bidding cash cattle lower hoping to keep margins in the black,” Roberts said. He encouraged cash cattle sellers to push marketings if feedlots are able to get them “out of the pens at the right weights. It is still wise to consider protecting a portion of third quarter 2007 marketings at this time. Corn users should hold off pricing more near-term corn inputs now. Corn users may want to protect against rising prices over the next few weeks,” Roberts said. On the international trade front, according to USDA’s Foreign Agricultural Service (FAS) published U.S. red meat trade data for November 2006, the latest numbers available, U.S. exports of beef and veal cuts and beef variety meats during November totaled 58,644 metric tons, nearly unchanged from the previous month but 11.2 percent higher than November 2005. Exports of fresh, chilled product rose 4.2 percent over the previous month to 25,655 metric tons. Mexico remains the largest beef trading partner, accounting for beef exports totaling 339,039 metric tons, 32 percent greater than a year ago. Overall, total year-to-date U.S. beef and veal exports equaled 597,985 metric tons, 39.6 percent higher than the corresponding period a year ago. U.S. beef and veal imports during November equaled 77,886 metric tons, up 1.5 percent over October, but down 1.6 percent from November 2005. Overall U.S. beef and veal imports from were 14 percent less than the same period a year ago, amounting to 923,092 metric tons. Australia was the largest supplier, shipping 271,122 metric tons to the U.S., down 1.5 percent from 2005. The U.S. also imported 23,053 metric tons of beef from Canada, down 10.6 percent from the previous month. Year-to-date beef imports from Canada were 21.7 percent less than last year, totaling 267,100 metric tons. On the Chicago Mercantile Exchange (CME) last week, the trend was mostly higher as a result of large fund traders moving money out of the up-front February contract. Firms were moving money to deferred months, accounting for much of the very light volume in the live cattle issues. The movement helped prices slightly and live cattle contracts ended the day higher across the board as the market awaits news of cash trade and the pending USDA cattle on feed report. February issues were up 27 cents, closing the day at $90.12. April gained a nickel to finish at $92.97 and June contracts gained 32 cents during the session to end at $89.42. Feeder cattle The upward movement in the live cattle pit was a benefit to feeder cattle contracts on CME. Combined with some weakness in the grain market, it was enough to allow contract gains across the board in last Thursday’s trade. Nearby January gained two points to close at $94.72, while March and April both added 60 points, closing at $94.30 and $95.95 respectively. However, despite higher contract trade, prices in the country were not nearly as optimistic. The CME cash feeder cattle index on Jan. 23 was $94.79, nearly $2 lower than the prior week. Rising cost of gains, along with the currently spotty conditions in feedlots throughout the central U.S., is keeping a lid on feeder cattle prices. Utah State University Agricultural Economist Dillion Feuz said last week that the current price situation is likely to persist and create problems for cow/calf producers in the year ahead. “Between the rising corn market and this winter’s weather, cattle producers in Kansas and Nebraska, as well as other areas of the Midwest, have been hit with a big double negative as far as net returns are concerned,” said Feuz. “Feedlot cost of gains are likely over $75/cwt. for most pens of cattle now. For those cattle that were purchased with an expectation of a cost of gain around $60/cwt., feedlots are likely looking at a sizeable loss when they market those cattle.” Those losses are likely to be passed along to cow/calf producers who have held on to calves from the 2006 crop and will also carry over to impact the 2007 calf crop as well, he said. “Cow/calf producers are seeing the price for calves dropping with each new surge in the corn market. For those producers who held their calves until after the first of year, they probably are looking at losses on that decision,” Feuz said. “Likewise, cow feeding costs will be higher this winter as more supplemental feed is being purchased, at a relatively high cost, to supplement winter grazing. Cow/calf producers may see their costs increase by $50 per head and their revenues decrease by $50 per head relative to 2006. That is a large swing and may alter the expansion plans that some producers may have had in place prior to the new corn market and this winter's storms.” Last week’s feeder cattle trade in the southern Plains was very lightly tested as a result of the poor weather conditions for the prior two weeks. Runs of cattle in large markets were just a fraction of their year ago numbers. In Oklahoma City, OK, fewer than a thousand head were sold, just 10 percent of year ago numbers. However, market reports indicated that the undertone was lower than the sale two weeks earlier. In West Plains, MO, compared to the previous week, steers under 650 lbs. were $3-5 higher, those over 650 lbs. were weak to mostly $2 lower. Heifers under 500 lbs. sold $2-4 higher, and those from 500-600 lbs. were, at best, steady. Heifers over 600 lbs. were called steady to $2 lower. The day’s supply was called light, with a high percentage of weaned calves on the market, especially those heavier calves weighing 600-750 lbs. Demand was called uneven, with moderate to good demand on steers under 600 lbs. and heifers under 500 lbs. and light to moderate on heavier weights. Strongest demand continues for higher quality, lighter weight weaned calves in a “quick start” start condition, with all their shots. Farther north, in areas which have been spared the winter storms which ravaged the central and southern Plains, prices were no better last week. In Sioux Falls, SD, last week, feeder steers sold mostly $2-4 lower. Feeder heifers sold mostly $4-6 lower despite good buyer demand for lots on offer. In Mandan, ND, a run of more than 3,600 head of feeder steers and heifers sold steady to $1 lower then the previous week. Buyer demand was called good for all classes of offered cattle. To the west in Billings, MT, feeder steers under 500 lbs. were called steady to $2 lower, while those over 600 lbs. were $5 lower in a light test. Feeder heifers sold steady to $3 higher. Buyer demand was called moderate to good for cattle under 600 lbs. and light for cattle over 600 lbs. On the West Coast in Famoso, CA, higher corn prices and lack of rain lowered calf prices $3-5 and feeders $2 last Monday. Demand for stockers was called good on the quality greener kinds as a result of stocker operations being forced to stockpile calves in grow lots on higher priced feed compared to grass. Demand for feeder cattle was called excellent, especially for the 650-725 lb. quality steers and heifers.

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Monday, January 29,2007

Property rights case headed for Supreme Court

by WLJ
NCBA, Public Lands Council, state affiliates unite in fight for rancher’s rights. Among ranchers, one of the most passionately held principles is the defense of property rights. That’s why the National Cattlemen’s Beef Association (NCBA), the Public Lands Council (PLC), the Wyoming Public Lands Coalition, the Oregon Cattlemen’s Association, and the Nevada Cattlemen’s Association have joined in filing an amicus brief with the U.S. Supreme Court in the case of Wilkie v. Robbins. The central issue for NCBA and PLC is the right of private property owners to deny federal access to their property and the legal options available to property owners for holding federal officials accountable for inappropriate actions. “We’re fighting for individuals against government abuse,” says Jeff Eisenberg, NCBA’s director of federal lands and executive director of PLC. “There needs to be checks in place to prevent federal officials from abusing their positions and violating the civil rights of property owners.” Harvey Frank Robbins owns the High Island Ranch near Thermopolis, WY. A dispute between Robbins and the Bureau of Land Management (BLM) began over ten years ago when Robbins purchased the ranch. The 80,000 acres involved in this case are partly public and partly private lands, and at issue is whether Robbins had a right to deny BLM access to his property. In court cases over the past decade, Robbins won two preliminary victories in the U.S. district and circuit courts. “We’ve heard many stories of government officials failing to respect the Fifth Amendment rights of people in ranching communities,” says Eisenberg. “But what really strikes a chord with us in this case is the blatant abuse and harassment of Mr. Robbins at the hands of federal officials.” In response to Robbins’ refusal to grant a right-of-way across his property, BLM reportedly refused to maintain the road providing access to his property, cancelled his right-of-way across federal lands, stated they would “bury Frank Robbins,” cancelled his recreation use permit and grazing privileges, brought unfounded criminal charges against him, trespassed on his property, and interfered with his guest cattle drives. The harassment eventually forced Robbins to shut down his dude ranch business. “NCBA and PLC are deeply concerned about the brazen disrespect for private property and the extent to which the federal government can improperly intimidate private citizens. This issue strikes a blow against the most fundamental principles under which ranchers and westerners exist,” says Eisenberg. “Our western producers interact extensively with government officials and we want to put the government on notice that continued abuses of this kind will not be tolerated.” NCBA and PLC plan to submit briefs Feb. 21, and oral arguments are scheduled for March. “Protecting private property rights is one of the founding principles of NCBA dating back to 1898,” says Eisenberg. “Our involvement in this case is based on our respect for property rights principles and the need for checks on conduct by government officials. We’re proud to be part of this effort.”

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Monday, January 15,2007

Boxed beef prices jump

by WLJ
Harvest cutbacks and storm market provide boost. Packing plants last week greatly reduced kill levels as a result of poor weather which has been hampering the Plains since mid-December. That weather caused mud, ice and significant weight loss in feedlots and prevented cattle shipments from making their way to packers. As a result, there were reports of dark plants, including National Beef, and last week’s kills were very light. Last Monday’s harvest was only 86,000 head. Last Thursday’s harvest was estimated by USDA at 123,000, bringing the weekly total to 433,000 head, which was well below the same week in 2006 when 475,000 head were slaughtered. As a result of the cutbacks in kill level, boxed beef cutout values gained rapidly last week, moving packer margins above the breakeven level last Thursday. HedgersEdge.com estimated packers were earning $11.40 per head. Despite the lower kill levels and stress-related weight loss in fed cattle, beef production last week remained very close to year ago levels because of high carcass weights. Total beef production for the week ending Jan. 6 was 405.9 million lbs. That compares with 406.1 million lbs. a year earlier. Average live weights, however, have increased from 1,279 lbs. in 2006 to 1,300 lbs. last week. Likewise, dressed weights have grown from 776 lbs. on average a year ago to 788 lbs. for the week ending Jan. 6, 2007. The lower volume of market ready beef drove boxed beef prices sharply higher last week. Choice boxed beef traded at $154.05 last Thursday, moving $1.14 higher during the day’s trade. The Select cutout rose 63 cents to $130.09. In comparison, the week prior Choice cutout was $147.10 and Select traded at $132.06. Because of the reduced kill level, packers appeared in no hurry to buy cattle last week with ask and offer prices remaining well apart in most areas as of Thursday. There were a few thousand head traded in Iowa and Nebraska, last Wednesday and Thursday, at $140-142 dressed basis. Prior to that trade, the last established prices were set the week of Jan. 1 when cattle traded at $90 live basis in the Texas Panhandle; in Kansas, live sales traded at $89 and dressed sales traded at $142. In the north, live sales traded at $87-88.50 and dressed sales at $140-142. The cow beef market was also rallying last week, largely as a result of an upswing in demand for ground product and the weather issues affecting the fed cattle market. Retail movement of ground beef has been reported to be fairly strong and with reduced product available, the prices for 90 percent lean and 50 percent trim have also gained. Last Thursday, 90 percent lean traded at $136.39, while the 50 percent product was selling for $53.13. That compares with last year's price of $133.47 for the 90 percent lean and $56.79 for 50 percent product. The overall cow beef cutout value last Thursday was up 27 cents to $110.17, compared to $105.69 on the same day last year. The futures market was wildly unpredictable last week as commodities traders on the Chicago Mercantile Exchange (CME) attempted to out guess the cash market and the weather. Last Tuesday, the market sold live cattle contracts sharply lower on improvements in the weather forecast and corn market strength. However, during Wednesday's trading session, the market move sharply higher and erased the prior day’s losses. In fact, the February contract made new highs during the session. Last Thursday, as the CME traders awaited word of cash trade, the market drifted sideways and up front contracts lost ground, while deferred months made small gains. The February contract dropped 35 points to settle at $93.60 and April was 42 points lower, closing at $94.35. August and October live cattle contracts gained 22 points, closing at $87.95 and $90.20 respectively. Feeder cattle Demand for feeder cattle remains moderate in the face of winter weather and higher corn prices. Feedlots are dealing with significant mud and ice problems and, as a result, are delaying deliveries of cattle until weather conditions moderate somewhat. Corn prices last week rallied on analyst expectations that USDA would revise corn usage numbers and ending stocks. If last Friday’s report shows numbers as low as expected, it would mean numbers lower than 1995/1996 when corn topped $5 per bushel. USDA’s Chief Economist Keith Collins said last week during Congressional testimony that corn to be utilized for ethanol production could increase to 1.0 billion bushels in 2007. In 2006, an estimated 1.6 billion bushels of corn were used to produce ethanol. The December 2006 USDA Supply/Demand report estimates that in 2007, corn usage for ethanol will be at 2.15 billion bushels which equals an increase of 550 million bushels. However, since the report, Collins has made a statement suggesting that in 2007, corn usage for ethanol could increase by another 450 million bushels. This makes the total bushels of corn expected to be used to produce ethanol 2.6 billion. As a result, it is expected that corn prices will exceed $5 per bushel. In addition to the rising costs of corn. The western coast is experiencing a drought that is lowering feeder cattle prices “We are having a bad feed year,” said Betsy Noell of Producers Livestock Market in Madera, CA. “We just haven’t had any rain. On the West Coast, cattle are quite a bit lower. It's just so dry here.” Cash prices at auction markets across the western region were mostly lower. Last Thursday’s CME cash index declined 20 cents to settle at $98.94. Oklahoma City, OK, feeder cattle remained steady to $2 lower. Demand was moderate to good for feeder cattle with the best interest for steers over 800 lbs. Some feeders are currently going into growing yards as feedlots to the north and west continue to dig out from the recent storms. Many of the feedlots are not in a position to receive new cattle. Steers averaging 530 lbs averaged $114 to $122 while heifers at the same weight averaged $97.50 to $107.25. However, steers that averaged 833 lbs. called $95 to $100 on average. In Lexington, NE, comparable offerings compared steady to weak from last week's sale. Demand in Lexington was light to moderate where 5 weight steers averaged $125.93 and heifers of the same weight averaged $104.81. The number of cattle sold was down by 2,000 head when compared to last week. Abilene, TX, feeder steers sold higher while heifers sold steady to firm. Feeder steers weighing under 500 lbs. averaged $4 to $7 higher while steers over 550 lbs. averaged $1 to $3 higher. Heifers weighing over 500 lbs. sold $3 to $6 higher. Trade and demand were labeled good. Steers that weighed between 500 and 600 lbs. sold for $98 to $107. Their heifermates sold for $94 to $104. In Madera, CA, feeder cattle prices continue to drop as the state continues to feel pressures made by drought. Feeder cattle sold at steady to $2 lower when compared to the previous week's sales. Steers weighing 500 lbs. averaged $92 to $100 and heifers of the same weight averaged $85 to $94. Joplin, MO, had feeder steers and heifers open steady while demand and supply remained moderate. Steers weighing 600 to 700 lbs. sold for $97.25 to $105 while heifermates sold for $93.75 to $97. Steers over 800 lbs. sold for $94.25. In Billings, MT, there was little comparison but the demand was good for all classes of feeders. Five and one-half weight steers averaged $112 and heifers of the same size averaged $100. Steers weighing 700 to 760 lbs. called for $93 to $94.50 while heifers at 720 lbs. averaged $87.

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Monday, January 8,2007

Cutout rises on harvest dip

by WLJ
Fed cattle trade remained at an impasse last Thursday as cattle feeders held out for higher money, despite larger showlists. Bid prices last Thursday were at $89 live and $145 dressed. Most analysts expected that packers would have to pay at least $90 live and $143 dressed basis to get cattle purchased. Last established market was Dec. 29. In Nebraska, live sales traded at $87-88 and dressed sales at $140; in western Corn Belt, live sales traded at $87-88 and dressed sales at $138-140; in Texas, live sales were at $89; in Kansas, live sales traded at $88-88.50 and dressed sales at $140-140.50; and in Colorado, live sales traded at $87-87.50 and dressed sales at $138-140. Packers last week had significantly reduced kill levels and for the week through last Thursday, had harvested only 347,000 head as a result of the holiday-shortened week. That total was 4,000 head more than the previous week and 36,000 head less than the same week in 2006. The reduction in harvest helped packers move the cutout values higher last week, a key to the higher asking prices at feedlots. Last Thursday as a result of the lower kill, Choice cutout values moved $1.46 higher to trade at $147.01. Select was up $1.14 to trade at $131.90. Those prices were nearly $8 below last year’s prices during the same week. Some of the downward price pressure has been a result of the continued increase in carcass weights. According to USDA, steer carcass weight continues to rise and the increase is adding to beef production. According to Utah State University Agricultural Economics Professor Dillon Feuz, the downturn in carcass weights has not occurred as expected this year. “The price of corn at Omaha, NE, is now over $3.50 per bushel; feedlot costs of gain are higher than they have been in 10 years; and cattle were placed into feedlots at lighter weights in the last few months. Normally, I would think those factors would all tend to reduce fed cattle slaughter weights,” Feuz said. “Yet, feedlot weights are at record levels. The 882 pounds for this past week is the largest weekly average on record. This past year, the five-market steer weight averaged 851 pounds, which was 16 pounds above 2005 and 25 pounds greater than the 2001-2005 average. Late this fall when weights typically decline, they did not.” Feuz attributed the increase to the fact that it may still be profitable to feed to higher end weights, especially for those selling on a carcass weight basis, despite the higher cost of gain. Secondly, he said, in an effort to minimize the losses being experienced by feedlots, cattle feeders spread that loss over more weight at the time of sale. Finally, with the future market at a premium to cash as it has been late this year, there was incentive to hold cattle longer in the hope the cash market would rise from week to week. “Ultimately though, this added weight results in added beef in the marketplace. This year, for every 34 head of cattle sold, there was the equivalent carcass weight of 35 head,” said Feuz. “Essentially, for every potload of cattle sold, one more head of total weight was sold.” He said unless packers shift the upper end of acceptable carcass weight, cattle feeders might be at or near the point when they start getting penalized for heavy carcasses. “With an average steer weight of 882 pounds, there had to have been more than a few steers that exceeded 1,000 pounds of carcass weight and many that exceeded 950 pounds. Most packers use one of those two weights to start applying steep discounts to prices,” Feuz said. “When feedlots experience those sharp discounts, it is no longer economical to push higher weights.” The added carcass weights meant a 5.7 percent increase in total beef production in 2006 over 2005. That is despite an increase of 3.9 percent in total harvest from 31.8 million head in 2005 to 33.1 million head in 2006. On the Chicago Mercantile Exchange (CME) last week, prices were mixed after five days without trade. Last Wednesday, prices were higher throughout the session. February live cattle contracts closed up 60 points at $93.10, while April moved 50 points higher to $94.27 and June gained 30 points, closing at $89.60. On Thursday, however, prices fell, correcting their overbought condition in sharp early session losses. At the closing bell, February contracts were off 87 points at $92.22. April was down 67 points at $93.60 and June live cattle shed 75 points to close at $88.85. Feeder cattle Like live cattle, feeder cattle contracts also dropped in last Thursday’s trading session despite weakness in the grain market last week. March corn contracts on the Chicago Board of Trade fell 8.2 cents per bushel during the day, closing at $3.62 per bushel last Thursday. However, feeder cattle failed to rally on the news. January feeder cattle contracts closed down 37 points at $99.47, while March closed 40 points lower at $98.60 and April contracts dropped 7 points, closing at $99.32. The CME feeder cattle index settled at $99.14, up $1.18 from the prior day. Meanwhile, as a result of the holidays, many livestock auction markets were closed last week. Several others cancelled sales in the Plains as a result of the weather that imperiled cattle across the central Plains. Transportation was difficult, if not impossible in some areas, and many producers chose not to transport cattle in those conditions. Feedlot buyers were also waiting out the weather rather than bringing in new feeder cattle to icy, wet and muddy conditions commonly reported in the areas hit by the storm. In the markets where cattle were sold, trends were mostly steady to slightly higher. In El Reno, OK, last week, feeder cattle were lightly tested and the few steers on offer sold steady to firm. Feeder heifers were not well tested, but steer and heifer calves sold for prices steady to $2 higher; heifers had the most advance. Demand was reportedly moderate to good for all classes, with the auction full of buyers and sellers ready to see what the new year will bring to the markets. In Clifton, TX, feeder steers and heifers were called steady, with some instances of $1-3 higher. Trade was called active and demand good on all classes of feeder cattle. In Joplin, MO, compared to the previous sale, steers and heifers were $1-3 lower on a light test. Demand was reported to be moderate with a light supply. Expectations of a heavier run were curtailed by the winter storm and producers in western Kansas and the Texas panhandle did not make the sale. In Bassett, NE, there was no trend available, however, market reports said a firm undertone was evident at last week’s sale. There was limited buyer attendance, but the established order buyers put in an appearance with good demand. Overall cattle quality was good, with the majority of offerings being long-time weaned calves carrying average winter condition. In Billings, MT, feeder cattle were lightly tested with steady to higher undertones noted during the sale. Demand was called very good for all classes and weights.

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Monday, January 8,2007

Southwest ranch properties remain affordable

by WLJ
—Prices appreciating, but buyers can still find good values. Property values in the Southwest continue to climb, despite rising interest rates and challenging conditions for producers. According to many real estate professionals in the region, sales have picked up after a slowdown last summer. Properties in the Southwest region still represent one of the best values available on the market. Lower than average operating costs, combined with reasonable land costs, have made the area a destination of choice for many ranchers who are looking to take advantage of rising property values to expand or relocate their operations. Arizona According to Harley Hendricks of Harley Hendricks Realty in Marana, AZ, the demand for ranches in the region is strong. “We are showing properties four days a week right now,” he said, although according to Hendricks, the type of ranch in demand has shifted from large deeded parcels to properties which will run a good number of cows on mostly leased land. He said the highest demand in recent months has been for properties with small deeded parcels. “It used to be that a ranch with 2,000 deeded acres and 30,000-50,000 leased acres was the norm. Now, the best demand is for ranches with small deeded acreage and large leased allotments,” he said. “I had a property listed which had a large Forest Service lease and only 50 deeded acres. That property generated the most interest and sold the fastest of any listing lately,” Hendricks said. He said inventory in the state was pretty good, with most offered ranches tending toward the small side. “We need bigger ranches. There is a good demand for the larger parcels, but there just aren’t very many out there right now in this area.” There are still good values to be found in the Southwest U.S. despite a population boom. Hendricks said the region’s growth was understandably attractive, particularly for producers in what he called “cold country.” “Down here, cattle ranchers are amazed to hear that they won’t have to put up any hay or feed any hay. It takes them awhile to believe it, but once they do, they can’t believe how easy the living is down here,” he said. Hendricks said ranchers from “cold country” are a driving factor in the market right now. Of course there is a trade off; carrying capacity in the Southwest is greatly reduced from other parts of the country. Hendricks said in some areas, properties might be able to maintain 16 cows per section. “In others, it might be one cow per two sections. It just really depends on the area and how much rainfall they get during the year,” he said. According to him, the spring rains in 2005 were very good for producers in the region and forage production was outstanding. So far this winter, he said precipitation has been a little below normal, however, he expects that it won’t take much to make this spring’s grazing season a great one. That kind of optimism, along with the climate, has moved Arizona to the top spot on the list of fastest growing U.S. states, edging out neighboring Nevada which held that title in 2005. “Arizona’s now the fastest growing U.S. state. There’s a lot of money flowing in here from everywhere,” Hendricks said. “That means that a lot of these ranches that used to be remote are now right on the outskirts of a city. Instead of being three hours from a hardware store, now they are just 45 minutes from one. That’s both good and bad.” He said land in the state has been gaining in value, making it both a good investment and an attractive buy for both ranchers and recreational buyers alike. In fact, according to USDA data, in Arizona last year, average agricultural land values rose 43.8 percent from 2005, reaching an average of $3,350 per acre. “There’s nothing less than $1,000 an acre in Arizona now. In fact, deeded land is now closer to $10,000 to $20,000 an acre in the area around us,” Hendricks said. Even pasture value in the area is experiencing explosive increases. According to the same USDA survey, pasture value rose 72.3 percent last year, reaching $1,120 per acre. However, compared to some neighboring states, that’s still a very good bargain. In California, pasture value is nearly double Arizona’s rate at $2,160 per acre. In Utah, pasture prices average $1,160 per acre. New Mexico value However, one of the best land values to be found anywhere in the country still exists in neighboring New Mexico. Tim Gipson, a broker with United Country Professional Realty in Tularosa, NM, said the state, particularly the portion he deals with, has been overlooked by buyers searching for “trophy” ranches. “The Sacramento Mountains in northeast New Mexico are often overlooked by people looking for a high quality ranch property. People think of New Mexico as mostly desert, but we have mountains, trees, water, and really good quality mule deer and elk hunting. So buyers who are looking for property for either ranching or hunting are able to find those kinds of ranches here,” Gipson said. Like many other parts of the country, inventory of ranch real estate in New Mexico is in short supply, according to Gipson. That has led to a very good sellers’ market for properties in the area. “We are always looking for good quality listings in the mountains. It seems like right now, there are a lot more buyers than there are listings, and I always tell people, the higher the altitude, the higher the price,” he said. “Because 85 percent of the region we work in is government owned, there is a shortage of deeded land. The inholdings in the forest are rare and they come at a higher price than land down on the desert floor. If you can find a piece of deeded land in the Sacramento Mountains for under $1,000 an acre, that’s a good price. Most are closer to $2,000 to $3,000 an acre.” According to Paul Taylor, a real estate agent based in Roswell, NM, land in the state represents one of the best values available in the ranch real estate market today. “For us, 2006 was a strong sales year and we anticipate that the year ahead will also be very good for both buyers and sellers in New Mexico,” Taylor said. “Buyers from all over the country are taking advantage of the property appreciation in their markets, selling and relocating to New Mexico. Property values are rising here too, but it is still one of the best values around.” According to USDA, property values in New Mexico rose 44.4 percent from 2005 to 2006 to an average of $520 per acre. Property value for pasture land saw an even bigger increase in valuation. Last year alone, prices rose 60 percent, to average $400 per acre across the state. That was the second highest percent jump in valuation in the U.S., second only to Nevada. “People from both Texas and Arizona have seen their property increase in value and are taking advantage of that to purchase large tracts of land here in southern New Mexico,” Taylor said. He said that buyers in his particular market have a wide variety of interests and are all looking for different attributes when considering a purchase. “There are a number of people looking for recreational properties. We also see a large amount of 1031 exchange money. There are also a number of investors and ranchers in the market for ranch land in southern New Mexico. What makes a good piece of ranch real estate really varies, depending on the buyer and what they intend to use it for,” Taylor said. “However, the highest demand is for the large tracts of deeded land.” According to him, there has been a limited supply of ranches meeting that criteria available on the market in recent months. “It seems like whenever one of those large deeded ranches comes on the market, it’s sold very quickly. There is a lot of demand right now.” Texas/Oklahoma According to Bill Bowen, president of Southwest Ranch and Farm Sales located in McKinney, TX, the ranch real estate market in both Texas and Oklahoma is also very strong. He said the majority of his market is working cattle ranches, while 10 percent is in the form of hunting properties. “The east and southeast Oklahoma and northeast Texas region receives an average of about 40 inches of rain a year,” Bowen said. “That makes for a pretty good cow ranch. Down here, we are able to run one animal per three to seven acres. When you compare that to any other area, I think we probably have the best cost per animal unit of any area in the country.” He said the highest demand for ranches in the area is for those that will run 200 to 1,500 head of cattle. “About 90 percent of our clients are working on a 1031 exchange. We have buyers from a lot of outside areas such as Arizona, Florida, California and Nevada. We have had them from as far away as Oregon,” he said. “Buyers in other areas are taking advantage of the rise in land prices by selling out and moving down here where they can still find a good working cattle ranch that is easy to operate.” According to USDA, the average property values in Texas rose 24.3 percent between 2005 and the middle of 2006. Pasture value now averages $1,080 per acre, according to the most recent report. Farm real estate value is slightly higher, averaging $1,250 per acre, a 21.4 percent increase over 2005. In Oklahoma, farm real estate values are slightly lower, averaging $970 per acre, a 7.8 percent rise over 2005. Pasture costs were $760 per acre in 2006, an 18.8 percent increase over 2005 in the Sooner state, according to USDA. Bowen said that much of the savings in operating costs is the result of a low feed bill for producers in the area. While ranchers still have a need to feed hay, the requirements are much lower than in other states farther north. “The rule of thumb around here is one to two round bales per cow per winter,” he said. Despite normally good rainfall, stories of drought over the past two years hurt the region slightly, according to Bowen. However, since early fall, the area has received good rainfall and has recovered from the drought nicely. “We have had good rains since fall and I think we ended the year about six inches of rain below normal this year,” Bowen said. “The drought the previous two years was the second worst in our history, but things have recovered well and this year is looking better already.” Bowen, who started his professional career as a cattle buyer and formed Southwest Ranch and Farm Sales 21 years ago, said the strong market the past several years has led to a shortage of listings in his area. “We normally carry about 40 to 45 listings at any given time, but right now, we are down to something like 25 properties in our inventory,” he said. “Inventory is short, which is pretty much the case everywhere. There is strong demand for good working ranches.” — John Robinson, WLJ Editor

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