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Monday, November 5,2007

Colorado producer is Red Angus Breeder of the Year

by WLJ
Larry and Jean Croissant were honored by their peers by earning the Red Angus Association of America’s (RAAA) Breeder of the Year Award. The Croissants received the award at the 2007 National RAAA Convention held in Dodge City, KS, Sept. 26-29 at the historic Dodge House Hotel and Convention Center. They were presented the award by Donnell and Kelli Brown, RA Brown Ranch of Throckmorton, TX, long time friends, customers and one of the industry’s largest seedstock producers. Croissant Red Angus is a family owned and operated seedstock operation located in Briggsdale, CO. Larry and Jean, along with their son-in-law and daughter, Kevin and Sallie Miller, strive for disciplined and balanced trait selection. They are committed to raising efficient and maternal-based cattle whose progeny possess superior carcass traits. Croissant Red Angus has a standing policy of culling all open females, allowing no excuses as to the reasons why the animal(s) failed to breed. This has accelerated their cattle’s fertility and earned their program credibility from their customers. Other Red Angus producers have taken notice of Croissant’s breeding program and taken advantage by utilizing their genetics in their own seedstock operations. Croissant Red Angus hosts an annual sale in March—last year they sold approximately 50 head of bulls raised in their operation—and offer animals private treaty throughout the year. Croissant’s mission statement reads, “Our goal is to produce the best possible seedstock in a commercial production environment without excess feeding and pampering. We use proven AI sires, manage our cattle in large contemporary groups, and collect all data from birth to harvest, providing the best described seedstock possible.” The Croissants understand the needs of their customers, the commercial cattlemen. They treat their herd the same way their customers do, forcing their females to produce within the environment they are raised. This strict dedication to producing efficient cattle has allowed the program to receive the attention of the nation’s bull studs. They currently have two bulls, LJC Javelin M08 and LJC Mission Statement P27, being collected and marketed by Genex Cooperative, Inc. “We feed out all our non-selected registered seedstock and commercial calves to harvest at our ranch. We also purchase calves from some of our customers and add them to this group. This allows us to get performance data including carcass data to harvest. This data is invaluable to us, our customers, and the breed. It is not only tied to individual bulls, but is also tied back to our individual cows to more accurately describe their contribution to the calf crop,” states Larry. The quality of Croissant bred feeder cattle earned two RAAA GridMaster Carcass Awards this past year after being harvested on the Angus America Grid. Along with his dedication to their program, as well as their customers’ success, Larry has served on RAAA’s Board of Directors for multiple terms, taking a leadership role and personal commitment to the direction the RAAA is headed in the beef industry. His input and energy have been greatly appreciated by the association and his fellow producers. The RAAA is excited to have a member as progressive in their approach to producing better beef as Croissant Red Angus and honored to present them with the Breeder of the Year Award for 2007.

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Monday, November 5,2007

Cattle-Fax predicts little change in 2008

by WLJ
Prices for fed cattle will go up slightly in 2008, according to the prognosis offered at the 2007 Texas Cattle Feeders Association Annual Convention by Randy Blach, executive vice president of Cattle-Fax. Blach predicted the 2008 average price would be around $92 to $94 per cwt. “I don’t think you should be surprised if we sell cattle into the low dollar area into the spring and when we’re in our biggest supplies, we may very well be trading cattle in the mid-to-upper 80s. “With feeder cattle and calf prices, they’re likely to stay close to the same levels they’ve been at here in the last few years, too,” he said. Blach also advised cattlemen to expect to continue paying high prices for commodities like feed grains. “All these other markets are demanding more and more of our grains and protein supplies. That’s driven by the weak dollar. If you think we’re going back to the days when we had cheaper grains and cheaper protein sources, it’s not likely to happen any time soon,” he said. However, the weak dollar can also be an ally for cattlemen as more foreign markets for beef become open. “I would argue, if we had a level playing field, with the dollar where it is today, we may very well eclipse” the export levels projected for the next few years, Blach said. As for the size of the beef cow herd, Blach predicted it will be “down a couple hundred thousand head” on Jan. 1, 2008, when compared to Jan. 1, 2007. However, that decline is expected to be offset by an increase in dairy cow numbers. Meanwhile, the numbers of commercial steers and heifers headed to harvest will remain level, Blach predicted. “For the last couple of years, we’ve basically been sitting here at 27.7 to 27.8 million head. We don’t see that changing next year… We don’t have any more of them to feed; we don’t have any more of them to process. So, some of those challenges with excess capacity are going to continue,” Blach said. He also expects the trend toward heavier cattle to continue with cold carcass weights climbing by 12 to 14 pounds next year. “We’ve been incentivized with cattle trading in the $90s and cost of gains in the $60s to the low $80s depending on the region of the country. We’ve been incentivized to make them big. I don’t believe that incentive is going to go away,” Blach said.

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Monday, October 29,2007

Cattle on feed numbers up 9 percent

by WLJ
—Cattle 700 pounds and heavier account for 54 percent of total placements. Cattle on feed numbers were down again according to the Oct. 1 USDA cattle on feed report. According to the National Agricultural Statistics Service, total on feed numbers were estimated at 11 million head, 4 percent lower than a year earlier. However, the number remains 5 percent higher than 2005. Total inventory included 6.83 million steers and steer calves, or 62 percent of the on feed numbers, down 5 percent from last year. Heifers and heifer calves accounted for 4.07 million head, down 1 percent from 2006, an indication that U.S. herd numbers will grow only slightly, if at all, when the end of the year inventory report comes out in January. It is likely that high grain prices and a solid calf market are causing some producers to put off herd size increases for the time being. On feed numbers in key states continue to show a preference for states where there are large supplies of less expensive feedstuffs available, particularly those in the north. States reporting a decrease in the number of cattle on feed were led by Idaho, which was down 21 percent. Colorado numbers were down 11 percent, Kansas was down 6 percent, Nebraska was down 4 percent, and Texas was down 3 percent from 2006. Iowa led the way for states increasing in on feed numbers, with an increase of 11 percent. South Dakota and Arizona reported a 4 percent increase and California rose 3 percent. The placement figure was perhaps the only surprising portion of the report, exceeding analysts’ expectations. September feedlot placements totaled 2.43 million head, 9 percent more than September 2006 and 3 percent above the same month in 2005. The shift toward heavier placement weights continued last month. Placements of cattle under 600 pounds totaled 610,000 head, while those in the 600-699 pound range were 505,000 and cattle placed in the 700-799 pound class totaled 570,000. Placements of cattle weighing more than 800 pounds were 740,000 head. As a result of increased feeding costs, feedlots have been showing a preference for heavier weight classes to cut the number of days on feed. Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel noted that as of this most recent report, nearly all placements into feedlots are now yearling cattle. “In many ways, this (the Oct. 1 report) reflects the first chance that the market has had to respond to the signals that started one year ago. It was difficult to provide increased numbers of heavy feeders last winter and spring, especially given the dry conditions and lack of wheat pasture last year,” Peel said. “Placements were low this summer as the growing season provided the first significant opportunity for taking feeder cattle to heavier weights on forage and it is those cattle that were placed in September. Not only were placements higher in September, but placement weights were higher as well. Placements weighing over 700 pounds were up nearly 20 percent, while placements that weighed less than 700 pounds were down 1.5 percent. It has taken a year, but the industry has now transitioned almost entirely to a yearling based flow of feeder cattle.” He said the premium for adding pounds to calves in grazing programs will continue to be a preferred method of lowering feeding costs, particularly in areas where grass and other low-cost forage is available, although he noted there is likely to be a decline in the number of caves heading to wheat grass this year. “There will continue to be an incentive for forage-based gains as long as feedlots keep looking for heavy feeder cattle to place. The lack of wheat pasture in the southern Plains means that more cattle will remain in other stocker and backgrounding programs around the country this winter,” Peel said. American Farm Bureau Federation Chief Economist Jim Sartwelle said the number of lightweight placements will be important next month as producers work to find winter forage for calves, which may be difficult to come by this year as a result of high wheat prices. “Given how tight feeder cattle supplies have been since late summer, and with fall weaning fast approaching, I have to wonder if we may see a larger number of lighter-weight feeders going into the feed yards in the next 30 days,” Sartwelle observed. Further, “as reports come out of Oklahoma indicating less wheat pasture will be made available for grazing this winter, we will watch the placement weight sections of the next two monthly USDA Cattle on Feed reports carefully for indications that light-weight feeders are being diverted from the wheat field to the feed bunk.” Marketings remain a tough spot for the cattle feeding business as cattle are fed to heavier weights to spread expensive cost of gain over more pounds. At the same time, beef demand remains lackluster, making margins in the beef business tough to maintain. The result last month was a drop in marketings from September 2006 levels. Total marketings for the month were reported at 1.71 million head, 3 percent below 2006 and 6 percent lower than two years ago. Although analysts continue to predict tight supplies of fed cattle through the fourth quarter and well into the first quarter of 2008, the failure to market cattle in a timely manner could result in a backlog of fed cattle next summer, hurting prices. Sartwelle said that is the exact scenario analysts are watching for signs of trouble in the feeding industry. “Calf and feeder cattle prices will follow the strong fed cattle market only as long as demand for them remains high,” he said. “We do not expect the profit crunch cattle feeders have endured recently to relax any time soon. Continued red ink in the feeding sector will eventually spill over into the feeder cattle and calf markets. We continue to monitor this sector closely.” However, for now, Sartwelle said he expects the industry to benefit from the tight supply of fed cattle numbers expected through the end of the year. “The bottom line is the trade expects tight supplies to continue into the second quarter of next year, with the April 2008 fed cattle futures contract trading at a $3.50 premium to the June 2008 contract,” Sartwelle said. “I do not see any news in this report that has not likely been built into the recent $90 to $92 fed cattle trade.” — John Robinson, WLJ Editor  

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Monday, October 22,2007

Stockmen’s association supports checkoff changes

by WLJ
—Studies begin to question sustainability of the ethanol industry. FUSDA moved its corn crop expectations higher as part of the Oct. 1 Crop Production report. According to National Agricultural Statistics Service (NASS), the total national corn production will reach 13.3 billion bushels, up 26 percent from 2006. The number was on the low end of analysts’ expectations and the news spurred corn prices to move slightly higher following the report, according to Virginia Tech Commodity Marketing Agent Mike Roberts. Based on crop conditions when the report was compiled, yield will average 154.7 billion bushels of corn per acre nationally, up 5.6 bushels from last year’s average with much of the increase coming in the Plains, central Corn Belt and Mississippi Delta. According to NASS, there are 86.07 million acres planted to corn this year in the U.S., a substantial increase from last year’s 70.6 million acres, as farmers take advantage of the ethanol-fueled increase in corn prices. Already, as a result of favorable harvest weather conditions, corn harvest is well ahead of normal, reaching 53 percent complete last week, 14 percent ahead of last year and 12 percent higher than the five-year average. In the central Corn Belt where the crop maturity was promoted by favorable harvesting conditions, harvest was 20 percent ahead of 2006. In other regions, harvest progress last week was reported from 1 percent to 12 percent ahead of last year. In Kentucky, North Carolina, Tennessee, and Texas, corn harvest was reportedly near completion. Although harvest was looking good, wet weather in the forecast late last week threatened to derail farmers’ efforts. Across the Midwest, growers were working to get as much grain harvested as possible in an effort to avoid rewetting the crop and the potential for mold that comes with precipitation. Roberts said producers may want to lock in corn crop prices soon to protect profits from any downside pressure during harvest. “Producers having sold 60-70 percent of this year’s crop are in good shape as this market trades sideways. If you have any corn left un-priced, now would be a good time to consider locking it in,” he said. In addition to the crop condition report, NASS issued the World Agricultural Supply and Demand Estimate (WASDE) last week which added fuel to the bullish corn news. USDA raised its forecasts for U.S. corn exports, predicting U.S. corn exports could reach their highest levels in nearly two decades. The possibility that European Union nations could lift their ban on genetically modified imports could quickly build on that number if the news comes as expected in the next few weeks. According to the WASDE report, exports of U.S. corn are expected to increase by 100 million bushels during the 2007/2008 marketing year, which is likely to offset the reduced expectations for usage by the ethanol industry which has cooled off in the second half of the year. NASS lowered expected ethanol corn usage by 100 million bushels for the second month in a row. U.S. corn exports are expected to reach 2.35 billion bushels during the ’07/’08 marketing year as a result of a sliding U.S. dollar in the currency markets and poor growing conditions in several countries which impacted foreign production. According to Mike Woolverton, Extension grain economist at Kansas State University, China, in particular, was hit by weather related crop reductions. “China just announced they will export no more corn this year. Drought in the North China Plain reduced corn yields and even though China is not a large corn exporter, it leaves the United States as the major corn exporter in the world. By the end of the ’07/’08 marketing year, U.S. exports of corn may be far greater than the current WASDE projection,” he said. Woolverton also noted the reduction in expected corn usage by the ethanol industry in his report. Domestic ethanol plant usage of corn will need to be watched closely,” he said. “Higher corn price, given the low ethanol price, is pushing ethanol producers even more into the red. The USDA dropped projected ethanol purchases of corn by 100 million bushels in this report. Unless the profit picture improves, it could go lower.” That profit picture looks grim for much of the ethanol industry, according to several analysts. The news that several ethanol plants are either slowing their plans for expansion or cancelling construction altogether could further reduce usage estimates and cause farmers to shift acreage to other crops next year. According to a research note published by Wells Fargo analyst Michael Swanson, the corn usage by the ethanol industry, as calculated by USDA, could be overstated. “The USDA’s 3.2 billion bushel estimate implies another 2.1 billion gallons of supply. My estimate of balance ethanol production needs calls for 2.4 billion bushels of corn usage. And that estimate might be too aggressive to recover the historical (ethanol versus crude oil price) spreads,” Swanson said. He said a better estimate of ethanol usage of corn, which includes factoring in the usage of co- products by the animal feeding industry, indicates that only 82 million acres of corn will be needed next year to meet all demands. “That wouldn’t do anything to reduce corn stocks,” Swanson said. “I am sure that this represents the most bearish analysis in the market. Even so, I will put my detailed weekly analysis of gasoline with ethanol distribution up against most of the warm and fuzzy hopes for China to ride to the rescue with huge export demand.” He said that a swing of 15 million corn acres back into wheat and soybean production next year will cause rapid corrections in both markets. “This means producers need to be aggressively marketing on all fronts,” Swanson said. “If ethanol can’t pull the corn train at $4 a bushel, all bets are off.” — John Robinson, WLJ Editor  

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Monday, October 22,2007

Higher cash expected

by WLJ
—Studies begin to question sustainability of the ethanol industry. Fed cattle trade was off to a slow start last week as traders waited for the USDA cattle on feed report before exchanging cattle for cash. Expectations of increased placements and lower marketings did little to dampen hopes of higher cash for the week, however. As of Thursday, analysts were expecting cash trade to develop $1 higher, at $94 live and $141-144 dressed. Cash trade the week prior in the south came at mostly $92.50, while farther north, Nebraska and Colorado cattle traded from $90-92.50, with dressed sales from $140-143. Dressed sales in the western Corn Belt traded from $138-141 with live sales in the $88-90 range. Stagnant consumer demand and record protein production is creating a difficult situation for packers and cattle feeders alike. The Chicago Mercantile Exchange (CME) premium for October contracts vs. the August contract caused feeders to hold onto supplies longer, adding weight to already finished cattle. That has led to a short-term oversupply of very heavy animals which packers are discounting as they work through them. For the week ending Oct. 6, packers for the first time produced more than 1 billion pounds of red meat in a single week. For the week ending Oct. 13, the total was 975.5 million pounds, of which 503.5 million pounds was beef, well above the same period a year earlier when 486.8 million pounds were produced. Adding to the supply was a robust increase in pork production which, at 468.7 million pounds, was more than 36 million pounds more than a year earlier. The record pork production is driving prices lower, making “the other white meat” an attractive option when compared to beef at the retail level. However, despite lower prices, University of Missouri agricultural economists Ron Plain and Glenn Grimes noted last week that retail demand actually increased during the first three quarters of 2007, although beef showed the smallest gains of all proteins. “Demand for all meats at the consumer level for January-August was up but broilers. Beef demand was up 0.8 percent, pork up 1.9 percent, turkey up 3.2 percent but broilers were down 1.9 percent,” Plain and Grimes said. “The demand for both live fed cattle and live hogs showed strong growth for the first eight months of 2007. Live fed cattle demand was up 3.8 percent and live hog demand was up 3.3 percent.” They attributed the increased demand for fed cattle to growth in both domestic and export markets. However, it’s likely that competing meats will continue to drag on beef sales, making it difficult to maintain cash fed cattle prices in the mid $90 range. Without significant winter weather, hitting the $1 market, which seemed likely during late summer as a result of tight supply, may prove to be difficult. Packers, however, seemed little concerned about losses averaging $30 per head last week. Beef cutouts last Thursday were slightly higher on the Choice, moving up 37 cents to $145.64 and slightly lower on the Select, which was down 47 cents to $133.24. Slaughter volume remained strong for the week through last Thursday, totaling 516,000 head, 14,000 more than the previous week and 17,000 more than a year earlier. Live weights for the week ending Oct. 13 were five pounds heavier than a year earlier, averaging 1,295 lbs., four more than the prior year’s record. The increase in red meat production and the stagnant domestic consumption serves to illustrate the importance of improving export demand and market access for all U.S. meats, but beef in particular. Feeder cattle In auction markets around the country last week, the cash trade for feeder cattle picked up slightly in some places and was able to stop its downward slide to remain steady in others. A burgeoning corn harvest estimate was not enough to depress corn futures, although the bulk of the rise in corn markets last week was due to export speculation after China announced that it will not export any more corn this year. While the corn market, though higher, still had a positive effect on stopping the downward-spiraling prices on feeder cattle, the biggest price boost to the feeder cattle trade remains in the short supply. Demand both for fed cattle and cattle to place on feed is far outstripping the supply of cattle available, especially now as the largest runs of yearlings through sale barns have dwindled and buyers have mostly a few remaining new crop calves to wait for. “The feeder cattle trade and prices have certainly stabilized, but I don’t want to get too brave and say it’s going to go a lot higher,” says Troy Vetterkind of Ehedger.com. “There’s a lot of optimism among some buyers regarding what they are able to do with a few of these calves if they have forage, which is helping to keep things from sliding too far down. But right now, I think we’ve shown that the market has essentially broken and corrected itself just a bit,” Vetterkind explains. Vetterkind said that feeder cattle are more closely tied to fed cattle price swings than anything else. “When the fed cattle stopped going down, so did the feeders, so I think what the market is trying to tell us is that no matter what corn seems to do, the feeder cattle prices are affected more by the short supply than feed issues,” Vetterkind said. “After the cattle at auction markets have been picked through, we’re seeing more demand for specific types and kinds of cattle which can go straight to feed, because yards need to fill their pens right now.” In Oklahoma City last week at the Oklahoma National Stockyards, a large run of feeder cattle produced one of the few local auctions where any class of steers and heifers were lower, though not sharply. Of the 8,627 head run, the steer and heifer calves were $2-3 lower, where demand was moderate for calves but good for larger feeders. A group of 631 lb. steers brought $116.10 at this sale, with heifers of similar weight and condition bringing $10 less. Buyers were very selective for flesh and weighing conditions with the best action being on long-weaned calves and yearlings in thin flesh. The bulk of the supply has turned to calves with the majority going to feed yards. A line of rain storms went through the state late Sunday leaving most areas with beneficial rain, the exception being the far northwest part of Oklahoma. Compared to the previous sale, last week’s sale in Joplin, MO, at the Joplin Regional Stockyards saw prices steady except on 450-550 weight steers which were $3-6 higher. Demand was moderate to good on the moderate supply of 4,000 head. A group of 629 lb. steers sold for an average of $115.22 at this sale, and heifers of 620 lbs. sold for $106.66. The Bassett Livestock Auction in Bassett, NE, was one of the few places in the country last week which had a large run of yearlings. The 2,600 head that showed up at the sale consisted entirely of average to good quality yearlings, for which there was moderate to good demand. It was clear that buyers in attendance at this sale were ready for high quality, ready-for-feed cattle, as a six weight steer would have brought an average of $118.42, and a large number of steers weighing an average of 868 lbs. sold for $115.20. Heifers followed suit with strong prices as well, bringing a $113.26 average on 655 weight cattle, and $109.38 for heifers weighing 872 lbs. Steer and heifer calves under 500 lbs. were $2-5 higher at the Torrington Livestock Commission in Torrington, WY, last week, with 500-700 lb. feeders steady to $1 higher on good demand. An average of $114 was paid for 824 lb., ready-for-feed steers, while $116.02 was paid for small, weaned 568 lb. steers. A limited run of larger heifers was seen, but prices on 871 lb. cattle averaged $106.49. Last week in Davenport, WA, at the Stockland Livestock Auction, nearly 2,040 head sold in uneven fashion, with weights under 500 lbs. bringing $2-6 higher compared to the previous sale, while weights over 500 lbs. were $2-6 lower. Trade was active with moderate to good demand, with a limited test of heavy feeders ready for the bunk. An average of $97.09 was paid for unweaned calves weighing 638 lbs., and heifers of a similar condition weighing 622 lbs. brought $92.82. — WLJ  

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Monday, October 22,2007

Ethanol’s uncertain future

by WLJ
—Studies begin to question sustainability of the ethanol industry. The ethanol industry, the focus of much attention after corn prices skyrocketed last year, has been experiencing a massive slowdown in recent months. Reports of delayed construction or expansion have caused concern among investors and the industry’s usage of corn may not reach projected levels this year, according to some industry experts. In 2006, approximately 14 percent of the corn crop went toward the production of ethanol, compared with just 11 percent in 2002. Although there is much debate on the matter, this year, ethanol production could use as much as 20 percent of the total expected crop of 13.3 billion bushels, according to current USDA National Agricultural Statistics Service estimates. In fact, National Corn Growers Association (NCGA) says that by 2015, as much as 30 percent of all feed corn grown—a total as high as 5.5 billion bushels—will be allocated for ethanol. The Department of Energy already has set a goal which states that 30 percent of the fuel used as automobile fuel will be ethanol by 2030. To further that mandate, The House of Representatives recently passed legislation requiring 25 percent use by 2025. However, there are problems developing in the marketplace. Supply chain problems and rising costs are hampering growth in the industry despite an ethanol production subsidy and a federal mandate requiring increased usage of ethanol. There is trouble ahead for companies involved in ethanol production. Several recent studies have poked holes in what many had hoped was the answer to the U.S. reliance on foreign oil, which last week was nearing $90 a barrel. However, according to recent studies, including one released earlier this year by University of Minnesota (UM) researchers and a Congressional Research Service (CRS) Report, there may be more potential risk ahead for the industry. “We definitely believe that biofuels have a significant potential,” said Jason Hill, lead author of the UM study. But he added that ethanol should not be viewed as “a savior” to our energy problems and its rapid expansion as a motor fuel has its drawbacks, especially if it is dependent on food crops such as corn and soybeans as feedstock. If every acre of corn were used for ethanol, it would replace only 12.3 percent of the gasoline used in this country, Hill’s study said, adding that the energy gains of corn-produced ethanol are only modest and the environmental impacts significant. As a fuel source, ethanol, which produces just 25 percent more energy than it requires to make it—is inferior to feedstocks such as sugar cane which is as much as 400 percent more efficient. It also widely believed by the public that ethanol presents a environmentally friendly option to fossil fuels, however, both the Minnesota and CRS studies found that increased corn production causes the release of nitrogen, phosphorous and pesticides into waterways as runoff from fields. In addition, ethanol, especially at higher concentrations in gasoline, also produces more smog-causing pollutants than gasoline per unit of energy burned, the researchers said. In fact, in terms of alternative fuels, experts point out that biodiesel represents a far better fuel choice than corn- based ethanol. However, according to the UM report, “neither can replace much petroleum without impacting food supplies,” the researchers concluded. The study also examined the use of other feedstocks such as cellulosic ethanol produced from switchgrass and found it represents a better choice, but it, too, falls far short of meeting the needs of American consumers. Cellulosic ethanol production, which is only in the research stage, has proven to hold greater energy output with minimal impact on the environment or food sources such as corn or soybeans, the UM paper said. Biofuels such as ethanol are “not a practical long-term solution,” and their widespread use—even from non-food crop sources—could have a “devastating” impact on agriculture, two researchers at the Magleve Research Center of the Polytechnic University of New York argued as part of a white paper on the subject. Studies have shown that ethanol produced on as much as 300 million acres of switchgrass still could not supply our present gasoline and diesel consumption. In fact, 300 million acres of switchgrass, which would require shifts of land away from crop production, could be devastating for agriculture, particularly if problems develop in the ethanol industry to further hamper supply and demand. An example of such a problem would be a move by OPEC to lower crude oil prices closer to their current $60 per barrel target price. A downward trend in oil prices would remove the incentive for ethanol production. For the meantime, however, corn looks to be the primary feedstock for the ethanol industry and corn growers say there is plenty of supply to go around. As proof, they point to flat demand from the animal feeding industry and others which, up until recently, have been the main consumers of the crop. “There’s absolutely no shortage of corn,” Geoff Cooper, spokesman for NCGA said recently. NCGA representatives also point to increased yields over the past decade, which are largely the result of improved seed strains, better drought and pest resistance, and improvements in farming practices, as proof that there isn’t likely to be a shortage of corn now or in the future as ethanol production grows. According to a CRS study conducted earlier this year in advance of the Farm Bill debate, there were approximately 6 million vehicles in the U.S. capable of burning E85 fuel in 2004. Those vehicles consumed 22 million gasoline-equivalent gallons, less than 1 percent of total auto fuel usage in the U.S. One particular concern expressed by the studies’ authors was the distribution of that consumption, which was concentrated in the Midwest. Because ethanol cannot be shipped through the U.S. pipeline network due to its corrosive nature, it must be shipped by rail or truck to distribution points, often far away from manufacturing centers, a problem that isn’t likely to be remedied anytime soon despite plans to build ethanol plants in coastal areas where cities and states are more likely to mandate usage of the fuel. Although ethanol has been a boon to grain growers, there are significant issues on the horizon for the industry which must be resolved before its use as a replacement for a major portion of fossil fuel usage. “Although the use of fuel ethanol has been limited to date, to only 2-3 percent of gasoline consumption, it has the potential to significantly displace petroleum demand,” the CRS report found. “However, the overall benefits in terms of energy consumption and greenhouse gases are limited, especially in the case of corn-based ethanol.” For the time being, it appears there will continue to be concerns about ethanol’s viability and acceptance as a solution to the nation’s energy needs even among the industry’s biggest supporters. — John Robinson, WLJ Editor  

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Monday, October 22,2007

Carcass ultrasound 101

by WLJ
—%IMF or Marbling Score….. Which is it? How can I tell? With all of the incentives to raise Choice and Prime cattle, it’s easy to see why so much selection pressure has been placed on marbling. However, the industry has done a poor job of explaining how producers can use ultrasound to select for quality grade, how ultrasound “measures” marbling, and why it’s done in such a confusing fashion. Percent Intramuscular Fat, or %IMF, is the common ultrasound term for marbling, but it needs further explanation to fully understand the concept. In short, %IMF is simply an indicator trait for marbling, much like Birth Weight EPD (expected progeny difference) is an indicator of calving ease. With high marbling EPDs and carcass quality genetics demanding top dollar in the sale ring, it is extremely important producers understand what they are buying. The major difference between %IMF and marbling is that %IMF is a numeric objective measure, whereas marbling is subjective to the eye of the grader. The correlation is usually around +.70 to +.80 between the two measures. In order to accurately predict USDA marbling score using ultrasound, the same grader would need to be used for every research trial. As a result, a chemical extraction procedure was adopted using the percentage of intramuscular fat in the ribeye muscle. The collection of %IMF comes from taking a thin slice of the ribeye in the cooler. External and seam fat are removed from the sample. The steak is then frozen, ground up, and ether extract analysis determines the fat percentage from a sub-sample of the ribeye. Thus, a live animal with an ultrasound estimate of 4.0 percent IMF should also produce a carcass with a ribeye steak that has 4.0 percent fat within it. This method captures saturated and unsaturated fat cells, both of which contribute to the eating experience of the consumer. USDA graders can only measure fat or marbling they can see when assessing quality grade. Typical chain speed in a harvest facility often does not give ample time for some fats to “bloom” or whiten before the carcass is stamped for quality. As a result, some animals are sent to a “re-grade” rail in the cooler to allow more time for fat cells to appear to the human eye. Some High Select carcasses will actually reach Low Choice if given this opportunity. Ultrasound machines show intramuscular fat by “hearing” a density change and portraying it on a screen as a grayscale (black& white) color change. Muscle tissue has a different density than fat, thus allowing us to estimate the amount of fat vs. muscle on a percentage basis. As a result, the prediction equations developed to estimate %IMF in seedstock do just that; they do not attempt to mirror any USDA grader. To classify and compare the actual IMF value is extremely difficult. A bull with a Birth Weight EPD of -1.5 is often termed a “Calving Ease Sire” with little to no argument. However, a bull with a high Marbling or %IMF EPD cannot necessarily be called a “Prime or High Choice Sire,” but merely a bull with good carcass quality genetics. The most confusing element of understanding ultrasound data is deciphering which unit of measure is actually under your nose, especially in the case of numeric marbling score vs. marbling score degrees vs. %IMF. As one can see in the table, the number scale for Percent Intramuscular Fat and Numeric Carcass Marbling Score is not one and the same. There is no written law or breed association rule that defines how %IMF or marbling is published in either sale catalogs or advertisements. When data is sent out from The CUP Lab to a breed association or breeder, it is in %IMF form, simply an average value taken from four to five images per animal. Complex computer models estimate the percent of intramuscular fat within a box placed by the interpreting technician in a consistent spot between the 12th and 13th ribs in the image, reported to the nearest hundredth. Some breeds express the EPD in %IMF fashion, but others convert the measure to Numeric Marbling Score units in order to prevent confusion. When purchasing bulls or heifers, keep in mind that sale catalogs may express marbling or %IMF in any of the columns presented in the table, not to mention additional data for EPDs and Ratios. Along with this, some breeders adjust bull ultrasound data to a “steer equivalent.” This attempts to give bull buyers information on how they can expect feedlot calves from a particular bull to grade, offsetting the testosterone effect known to be detrimental to a bull’s marbling. If all breeders used the same adjustment, data would be easier to compare. Unfortunately, a variety of unpublished math problems get used. Some use a base adjustment, for instance +2.0% IMF, which may overestimate the genetic ability of the poorest bulls to grade and undersell the top-end genetics. Others may multiply the actual %IMF or the age-adjusted values. If you are unclear if the data in front of you has been adjusted and to what extent, consult the breeder for clarification. Remember, the bull sale you attend first may differ from the one just down the road or the one you catch via satellite or video auction. The easiest way to ensure you make the right buying decision is to use EPDs first and foremost. Regardless of how they get published in the catalog, %IMF or Marbling EPDs are your best source of ranking animals based on their genetics for quality grade. Using actual or adjusted %IMF values is risky; here’s an example: You find a bull in a consignment sale catalog with a published %IMF of 6.25…pretty impressive. However, what was unpublished may scare you. The bull also scanned with 0.75in. backfat (unpublished) and came from a contemporary group that was fed hard and averaged 4.50%IMF. The bull was leaned up for the sale and looked really good that day. The chosen bull still looks pretty good for marbling until you figure in the +2.0%IMF adjustment put on every bull in the catalog. Using EPDs and Ratios would have told you the bull was below average in his contemporary group for marbling and should not be selected to help you increase quality grade in your calf crop. The amount of information that accompanies a registered animal has and will continue to increase. With feed costs and high quality beef demand on the rise, marbling will remain one of the most important selection criteria. Be sure you don’t let the numbers and stars get in the way of selecting the right animals for your program. — Patrick Wall, Director of Communications, The National CUP Lab  

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Monday, October 15,2007

More corn residue available for grazing

by WLJ
Grazing corn residues is one way to reduce the cost of wintering beef cows in the upper Midwest, a North Dakota State University (NDSU) cattle expert says. “With the increase in corn acres in North Dakota and the surrounding region this year, availability of corn residue also has increased, making this practice even more attractive,” says Greg Lardy, NDSU Extension beef cattle specialist. Corn residue left behind after harvest includes the stalk, leaf, husk and cob, as well as downed ears. The amount of downed ears varies with the corn variety, but it can be as much as three to five bushels of corn per acre. Generally, approximately 50 pounds of residue is left on the field per bushel of corn harvested. For example, if you harvest 120 bushels of corn, you can expect about 6,000 pounds of residue per acre (120 bushels x 50 pounds of residue per bushel). Obviously, the cow will not graze or use all of that material. At the most, a cow will be able to graze about 50 percent of that material (in this example, about 3,000 pounds per acre), Lardy says. One acre of corn residue should support a 1,000 pound cow for about 1.5 to two months. Strip-grazing the fields (dividing the field and limiting access using electric fencing) will improve utilization and allow you to increase the stocking rate. The residue portions with the greatest nutritive value include the husk and leaf. The cob is fairly high in digestibility, but very low in protein. The stalk is low in both protein and digestibility. The longer the cattle graze a particular corn field, the lower in nutrient content their diet will be. This is due to the cattle selecting the higher-quality material first and the loss of nutrients due to weathering. Longer-term grazing may require protein supplementation to meet the nutrient needs of grazing beef cows. Corn residue also is low in most minerals and vitamin A. Therefore, producers should follow a good-quality vitamin and mineral supplementation program when grazing corn residue, Lardy says. Corn residue can be grazed long into the winter feeding period, provided snow cover does not limit the cow’s selectivity and grazing ability. The length of time will vary from year to year. Once fields are snow-covered, the ability of the cow to select the higher-quality portions of the corn residue is limited. Two factors are the biggest limitations to grazing corn residue in this area of the country. First, many cornfields are not fenced and, second, many do not have adequate water for grazing livestock. “However, the amount of residue available for grazing and its cost effectiveness should cause beef cattle producers to at least consider this option as one means of lowering the cost of winter feeding,” Lardy says.

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Monday, October 1,2007

Pressure mounts on Mexican border issue

by WLJ
—Beef seedstock exports are an important target for producers in border states. USDA’s recent move toward trade rationalization is likely to be a step in the right direction toward opening live cattle trade with Mexico, the current largest importer of U.S. beef. USDA officials said last week the agency is pressuring Mexican officials to begin allowing beef from older animals and live seedstock and commercial beef animals to be shipped into the country. Despite the fact that Mexico has already imported more than 370,000 metric tons of beef from the U.S. from animals under 20 months of age, the border has remained closed to live animals since the first case of bovine spongiform encephalopathy was discovered in the U.S. in 2003. Now, U.S. officials say it is time for Mexico to accept the same standards for trade which are in the process of being established between the U.S. and Canada, a move that would benefit producers in the U.S. and Canada alike. To that end, two weeks ago, the director of the Arizona Department of Agriculture, Don Butler, and secretary of agriculture and livestock for Sonora, Mexico, Alejandro Elias Gutierrez, recently signed a joint letter addressed to U.S. Department of Agriculture Secretary Mike Johanns, prior to his resignation, requesting the reinstatement of beef cattle trade between the U.S. and Mexico. “As co-chairs of the Border Governor’s Conference Agriculture Work Table (AWT), we are writing to express the AWT’s support for reinstatement of beef cattle trade between the United States and Mexico,” wrote Butler and Gutierrez. “This topic has been thoroughly discussed during our AWT meeting with widespread support for restoring trade. We applaud USDA’s efforts in working with Mexico on the implementation of the Breeding Dairy Heifers Final Protocol in October 2006... It is now time to complete the opening of the border to other classes of cattle...We appreciate your prompt attention to this issue and urge you to work aggressively with Mexico to make the full reinstatement of cattle trade a high priority.” Cattlemen’s groups from U.S. border states have been working for years to restore trade between the two nations and applauded the assistance from governments on both sides of the border. “This joint effort will assist us greatly in re-opening the Mexican border to the export of live cattle from Arizona into Mexico,” stated Tom Chilton, president of the Arizona Cattle Growers’ Association (ACGA) from Tucson. Chilton went on to say, “The ACGA and its members have been frustrated for the last two years in trying to re-establish a normal trade relationship with Mexico. We raise and provide high quality animals to markets around the world and, hopefully, we will add Mexico to that list again.” Mexican producers have long had an interest in importing Canadian cattle, which would require trucking through the U.S. However, the U.S. ban on Canadian imports would have jeopardized the flow of Mexican feeder cattle into the southern U.S. The result has been continued stalling by Mexico to remove the blockade on breeding cattle from the U.S. until trade between the U.S. and Canada was normalized. One significant impact of seedstock trade ban often cited by U.S. producers is the likely decline in the quality of Mexican feeder cattle if producers south of the border are unable to purchase high quality U.S.-bred bulls. That decline in quality could lead to reductions in feed efficiency and quality grade in some southern Plains feeding areas where approximately 1 million head of Mexican cattle are fed annually. “We have worked jointly with our neighbors in Mexico and resolved many issues surrounding animal health and food safety over the last several years—it is now time to resolve this issue and once again open the Mexican border to our high quality production,” stated Scott Shill, president of the Arizona Cattle Feeders’ Association (ACA) from Yuma. The ACA has worked with Mexico officials and producers to normalize animal health standards and surveillance for a variety of animal diseases over the past 15 years. Shill went on to say, “Arizona’s beef producers were doing $1 million worth of business a week (beef and live cattle trade) prior to this barrier being placed; we look forward to recapturing this important segment of Arizona’s economy.” Since this Mexican trade barrier was raised, Arizona’s $2.8 billion beef and cattle economy has lost nearly $200 million of business with Mexico. “Hopefully, this effort is successful and it will end our frustration with a trade barrier that should have been removed two years ago,” said Chilton. — John Robinson, WLJ Editor  

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Monday, October 1,2007

On feed numbers support late 2007/early 2008 expectations

by WLJ
— Cattle on feed numbers total 10.3 million head, down 6 percent from 2006. — Placements drop 7.5 percent. — Marketings, even with last year, remain a blemish in an otherwise bullish report. The Sept. 1 cattle on feed report contained more good news for cattle feeders and cow/calf producers. On feed and placement numbers were inline with analyst’s pre-report expectations. As expected, it was the third consecutive month showing lighter placements and tighter fed cattle supplies ahead, paving the way for strong markets well into next year. The number of cattle on feed totaled 10.3 million head on Sept. 1, 2007. The inventory was 6 percent below the same date last year, but 3 percent above Sept. 1, 2005. “Looking inside the numbers, it’s clear inventories are down in nearly all the major cattle feeding states from a year ago,” American Farm Bureau Federation Livestock Economist Jim Sartwelle said. “We witnessed a none-too-subtle shift in feeder cattle placements from the south Plains to Nebraska, South Dakota and Iowa last fall and winter,” Sartwelle said. “This was in response to increased corn prices and the attraction of ample supplies of ethanol co-products in those key corn-growing states to the fed cattle sector.” As with each report this year, the trend in cattle feeding continues to show a shift toward the northern Plains, with on feed numbers in Iowa and South Dakota climbing 8 percent and 13 percent higher, respectively, than September 2006 counts. Meanwhile, on feed numbers in Texas dropped 7 percent and feedlot numbers in Kansas declined 10 percent, while Colorado on feed number were down 10 percent. In Idaho, on feed numbers dropped 13 percent, likely as a result of Tyson’s plant closure there last year which has meant cattle must be trucked farther for processing, reducing the incentive to feed in the region. However, despite the migration toward northern states, Sartwelle said there is reason to believe that trend may not hold up in the future. “As the year has worn on, some of the advantages in Nebraska, South Dakota and Iowa have fallen prey to cyclically reduced feeder cattle supplies,” he said. That’s because in August, only South Dakota and Arizona saw feeder cattle placements above 2006 levels, with numbers up 23 percent and 20 percent, respectively, Sartwelle said. “In addition, although cash corn prices decreased markedly through the summer, the stigma surrounding placing lighter weight cattle remains.” Placements in feedlots during August totaled 2.12 million, 7 percent below 2006 but 6 percent above 2005. Net placements were 2.07 million. During August, placements of cattle and calves weighing less than 600 pounds were 490,000, 600-699 pounds were 440,000, 700-799 pounds were 549,000, and 800 pounds and greater were 640,000. “During August 2007, placements of cattle that weighed between 600 pounds and 799 pounds actually increased relative to 2006, but the drop—by 190,000 head—in cattle weighing less than 600 pounds more than made up for those modest increases. We are unsure how much of this loss is due to projected costs of gain for 500-pound calves and how much is due to there just not being many 500-pound calves available during August,” Sartwelle said. HedgersEdge.com market analyst Andy Gottschalk agreed with Sartwelle’s comments on the stigma surrounding lightweight calves and went one step farther in his analysis, saying that the drop in calf value, as a result, has created a potential opportunity for profits. “Calf prices continue to weaken relative to the price of feeders and fed value. Versus feeders, calves are trading at their lowest level since September 2003,” Gottschalk said. “This condition creates an opportunity to swap from that which is ‘overpriced’ (feeders) to that which is ‘underpriced’ (calves),” he said. Gottschalk offered the following example: “If calves are placed in a grow yard, significant profits are available. Using a cost of gain of $60 per cwt., a 550 pound steer calf grown to 750 pounds would require a selling price of $134 or greater to allow only a breakeven, versus the January feeder futures currently trading at $114.50. Any price under $134 for 550 pound steer calves would capture additional profits to the producer, if those cattle were grown to 750 pounds,” he said.  “Under a similar scenario, a 450 pound steer calf grown to 700 pounds would benefit if the selling price received for the steer calf was less than $144 per cwt.” In terms of fed cattle marketings, many analysts attributed the lackluster number to multiple factors. Among the most commonly cited reasons was the significant premium offered by October cattle contracts over August on the Chicago Mercantile Exchange, giving cattle feeders reason to hold cattle over. However, the result was record carcass weights for this time of year. “Carcass weights continue to raise a caution flag, which should encourage more aggressive marketings of fed cattle,” said Gottschalk. “This industry must still market though May Placements, which were sharply above April and prior year levels.” He said the overall effect of slow marketings in August is likely to be offset by the tight supplies during the fourth quarter of 2007. However, Gottschalk cautioned that demand is going to be the primary driver of fed cattle prices, rather than supply. “We are convinced that our price forecast of a $97 fourth quarter high is likely to be exceeded. We would not rule out a run at $100 as fed cattle supplies tighten during the November- December time frame,” he said. — John Robinson, WLJ Editor  

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