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Monday, May 16,2005

Fed trends uncertain

by WLJ
— Boxed beef market cited. — Thursday bids, asks $5-6 apart. Packers and cattle sellers continued to stay $5-6 apart as WLJ went to press last Thursday. What made last week more interesting was the fact that nobody was sure where the market would end up at the end of the week. While some regional marketing sources said they thought steady money was in the cards for last week’s trade, other more national-based analysts were thinking $1 softer was more likely. Some northern trade was reported late last Wednesday, early Thursday at $142-143 dressed, which was $1 softer than the majority of northern trade the previous week. In addition, that price was paid on only 20-25,000 head of cattle. In southern markets packers were still bidding mostly $87 on Thursday, while producers were asking for at least $92, with most still wanting to get $93. There were some diverging opinions about what last week’s very heavy boxed beef movement meant to the cash market. Between last Tuesday and Thursday almost 1,800 loads of boxed beef moved on the spot cash market, which was considered the largest three-day total in several years, analysts said. On one hand, optimists said that packers had to be getting low on product and would need to get more active in the fed cattle market to meet increased production demands through the last half of May. However, more pessimistic analysts said that the heavy volume of boxed beef was the result of retailers holding out of the market the week prior and forcing packers to “fire sale” product because of overly large volumes starting to build. “The decline in boxed beef prices the last week will make up for a large portion of the spike in movement,” said Jim Robb, chief analyst with the Livestock Marketing Information Center. “If we would have seen a spike in the boxed beef composite value on Thursday, I could see some optimism on the fed market. However, no spike probably means that there is still plenty of product in storage and little need for extra beef production.” Choice boxed beef was at $155 per cwt last Thursday, compared to over $163.50 the previous week. Select was down to $139.25, compared to a high the previous week of $145.44. Last week’s slaughter volume was fairly consistent with the two previous weeks’ output and analysts said that could mean a continued buildup in beef supplies, particularly with most beef being produced now for retail sale after the Memorial Day holiday. “Most beef for Memorial Day has been booked,” said Reed Marquotte, M&Z Livestock Analytics. “There is some possibility that Choice steaks and other middle meats are demanded more, but booking other products for the holiday is probably done. Slaughter volumes right now are more than enough to meet current demand.” Through last Thursday 477,000 head of cattle were processed, according to USDA, compared to 481,000 head for the same period in the previous week. For the week ending May 7, 656,000 head of cattle were processed, 50-60,000 head more than the number of animals required to meet current demand, according to Marquotte. Last week’s slaughter volume was expected to be well over 600,000, which is considered mostly “in sync” with current beef demand levels. “I definitely see a buildup in beef until Memorial Day,” Marquotte said. While live cattle futures were still mostly steady for the entire week, compared to two weeks ago, it didn’t result in any major cash trends. May live cattle stayed between mostly $86-86.50 last week, still $5-6 below the previous week’s cash price. Most analysts said the normal seasonal basis, cash-futures, is $2-3. Feeders rally Feeder cattle markets were capitalizing on recent developments concerning Pacific Rim beef trade and the fact that cattle being offered were “greener” than the previous few weeks. In addition, overall volumes of calves and yearlings offered were called 75-80 percent of normal for this time of year. Feedlots were seen paying mostly $1-2 more on all classes of replacement cattle. Feeder cattle futures contracts helped lead to the upward trend in cash cattle prices, as the first few listed contracts all reached contract highs last Tuesday and Wednesday. May hit a contract high of $111.60 on Wednesday, while August got up to $111.50 the same day. The bullishness continued through most of the day Thursday with an extra dime being added to each contract’s high. Last week’s positive developments in the beef trade dispute with Japan and continued word of active consumer purchases of U.S. beef in Taiwan were said to help spur the jump in feeder cattle prices. In addition, USDA and industry lobbyists said that the trade dispute with Korea could be resolved over the next couple of months, adding to overall beef demand this fall. Most sources said it is possible that all three major Pacific Rim export markets could be receiving U.S. beef later this summer, possibly as soon as July. That means overall fall beef demand could be significantly larger than once expected and that more cattle will be needed to fulfill beef needs, particularly over the last quarter of the year. In addition, USDA auction market reporters across the board were calling cattle conditions “moderate” to “very green,” compared to previous weeks’ reports of cattle being in “high moderate” to “fleshy” condition. Heavier conditioned feeder cattle normally means poorer feed efficiencies and average daily gains. In addition, those cattle usually wind up hitting the market with a poorer yield grade, which means they need to be bought a little cheaper than “green” cattle. Cattle feeders were also justifying paying more for replacement cattle because of declining feed prices. Cash corn prices declined another five to seven cents last week, following a trend set by nearby corn futures contracts. As of last Thursday midday, May corn had dropped to $1.93 per bushel. Converted over, cash corn was hovering around $3.50 per cwt. Feedlots in close proximity to major corn producing and storage areas were reporting sub-$3.25 cash corn. The CME feeder cattle index, for 700- to 850-pound steers, was at almost $112 per cwt last Wednesday, compared to $111.15 the previous Wednesday. Calf prices ranged wildly last week, with auctions reporting trends anywhere from steady to $4 higher. The greatest gains last week were reported in Plains and northern tier states where stocker operators got into the market after a couple of weeks of field work occupying their time and dealing with muddy spring weather. Northern stocker interest has been helped by an unseasonable wet April and early May, which has resulted in the best pasture and range conditions since the late 1990s. In several northern Plains auction markets there were reports last week of 600-700 pound steers bringing upward of $125 per cwt; 500 pounders bringing $135-plus; and 350-400 pound cattle brought as much as $150-160. In the southern half of the country, auction reporters indicated that conditions are starting to dry out and stocker operator interest is waning as a result. In addition, an increase in feedlot demand for younger cattle has curtailed demand by backgrounders and calf graziers in those areas. In general, auction market owners said that weather is turning warmer on a more consistent basis and that there are fewer concerns about calves coming into a feedlot situation and creating more expense and labor due to health issues. The current corn market also was cited for allowing more interest in calves to be fed out as calf feds. — WLJ © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 16,2005

Beef Bits

by WLJ
McDonald’s posts growth in April McDonald’s Corp. posted a moderate rise in sales at its namesake fast-food restaurants last month, lifted by improved domestic business while European demand lagged. Same-store sales at worldwide McDonald’s locations open at least a year grew 2.8 percent in April, but slowed from an increase of 10.5 percent in the prior-year period. Total system wide sales were 6.7 percent higher. Monthly same-store sales jumped 4.7 percent at U.S. sites and 1.6 percent in Asia, the Middle East and Africa. A year ago, U.S. sales rose 13.5 percent and Asian, Middle Eastern and African sales were up 10.1 percent. Meanwhile, European same-store sales dropped 0.7 percent, compared with growth of 5 percent last year. Oman reopens to U.S. beef USDA announced last Monday that Oman has lifted its ban on all U.S. beef and beef product imports. In 2003, the U.S. exported more than $61,000 worth of beef and beef products to Oman. It is the second country in the Middle East region to reopen its market to U.S. beef. Egypt announced the reopening of its market to U.S. beef in March. Fast-food tax proposed The mayor of Detroit, MI, recently proposed a two percent tax on fast-food sales, which is an additional 10 cents on a $5 meal. The proposal is said to be an effort to curb a possible $300 million budget deficit facing the city. Mayor Kwame Kilpatrick said, “It's a small amount for the individual customer, but it adds up to a meaningful amount to preserve essential city service.” A vote on the budget initiative will take place before July 1, the start of the city's 2006 fiscal year. If approved, Detroit would become the first city in the United States to impose a tax on fast-food. Consumers already are charged an average nationwide restaurant tax of six percent on, according to the National Restaurant Association. Japan may have 18th BSE case A cow in northern Japan has tested positive for bovine spongiform encephalopathy (BSE) in a preliminary test, and its samples are being sent to university laboratories to try to confirm the infection, a state official said. If confirmed, it would be the nations 18th case of the fatal brain-wasting disease, said Toshinobu Tanabe, an official in Hokkaido prefecture in charge of dairy industry. Preliminary tests on the cow turned up positive May 10 at a slaughter house in Hokkaido, an island in Japan’s far north. But the animal’s age and other details weren’t immediately known. Samples taken from the cow were sent to two university laboratories in Hokkaido for more precise testing. Final results from the secondary tests are expected within several days. Buehler files bankruptcy Buehler Foods Inc., Jasper, Indiana, which owns and operates more than 60 grocery stores in five states—Indiana, Illinois, Kentucky, North Carolina, and Virginia—has filed for bankruptcy protection, citing delays in assuming control of 16 Winn-Dixie stores it purchased last year. The grocery chain owes $200 million to $400 million to 572 creditors. Under its Chapter 11 filing, Buehler will continue operating its stores as it tries to reorganize. Aussie slaughter up in March The Australian Bureau of Statistics recently revealed that Australian adult cattle slaughter during March was slightly higher than year ago levels, at 694,000 head. Slaughter rose six percent in Queensland, to 327,000 head, which was the second highest level for March on record. Slaughter levels also rose four percent in New South Wales, to 148,000 head, but fell by 14 percent in Victoria, to 124,000 head. The slight increase in March slaughter levels has taken adult cattle slaughter for the first quarter of 2005 to 1.8 million head, still down two percent compared to last year. Fewer ‘downers’ in 2004 USDA’s National Agricultural Statistics Service recently reported that the number of non-ambulatory cattle and calves totaled 450,000 head during 2004, 15,000 head fewer than the number reported during 2003. The number of non-ambulatory cattle 500 pounds or greater totaled 280,000 head in 2003, and 270,000 head in 2004. The number of calves under 500 pounds reported as non-ambulatory totaled 185,000 head in 2003, and 180,000 head in 2004. The number of operations that reported non-ambulatory cattle and calves was 103,000 in 2003, and 81,000 in 2004. In 2003, there were 66,800 beef cow operations reporting downer animals, compared to 49,700 in 2004. © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 16,2005

Letters

by WLJ
Distinguishing between fact and fiction Editor: In today's world, events you can count on seem to happen less and less, I however have found two. The ability and willingness of R-CALF to take facts and twist them around to suit their purpose, and that whatever they say is printed in newspapers, whether it is entirely factual or not. R-CALF's newest claim is that Canada has decreased BSE testing by 28 percent. They take the total number of cattle tested for BSE in Canada during December 2004 (7,088) and compare that to January, February, and March 2005's average test totals (5,285). R-CALF fails to mention that testing totals for BSE in Canada have increased over eight times in each of the first four months of 2005 compared to the same time in 2004. Does R-CALF honestly think Canada would decrease testing now and still expect to obtain their goal as a minimum risk country? The test totals are posted at www.inspection.gc.ca for anyone who would like to gain the real facts for themselves. Those newspapers that choose to print R-CALF's half-truths without presenting all the facts, mislead and provide a real disservice to the public who rely on them for accurate, factual news stories, just as R-CALF does. It seems every time they have a "news release," it is hard to discern what fact is and what fiction is. Kathy Falkenstine Bellevue, Idaho Observations regarding NCBA Dear Mr. Crow: I’ve been reading your editorials since the first BSE case with steam coming out my ears and can keep silent no longer. I’ve decided to get it off my chest and make some observations. Twenty years ago, many big corporations had their upper level personnel take training in people manipulation and conditioning. The process is called The Delphi Technique (also known in schools as peer pressure). Succinctly, it goes like this: Identify (the target), demonize, marginalize and neutralize. This is what you and your cohorts NCBA, USDA and much of the livestock media are employing in an effort to destroy that upstart R-CALF. My question is, at what point did all the ex-NCBA members, now with R-CALF, become so ignorant? I guess it’s when they left. Do they regain their intelligence if they return? It’s clear there’s a full-fledged attack being waged by some well trained facilitators. They say we are a fringe faction, isolationists, protectionists and short sighted: Not looking at the big picture, only short term price gains etc., ad nauseum. I’d say the first order of business is to stay in business and these higher prices are relative. Have you noticed ALL our inputs have gone up? Do you see any corporate packers announcing that in the interests of the big picture they’ll be foregoing some profit right now? You just don’t get it! Yes, NCBA does many good things, but on trade issues it isn’t representing the interests of mainstream independent family cattle producers or agriculture. You, and NCBA et al can’t hide a lock step bias toward corporate packer interests but still think you can! NCBA’s 11 points to reopening the border came after R-CALF sued and frankly, if fewer Montana and upper Midwest members hadn’t shown up at the convention and changed its direction, they’d still be lobbying in Washington while beef kept pouring in [from Canada] by an unpublicized agreement with USDA. NCBA wants unity, but only its way. I have a problem trusting an organization that at its core is dishonestly padding its membership representation. We haven’t been members since the seventies and yet, suddenly we are voting members. How did this happen? We fed cattle in Nebraska five years ago but have no record of dues paid. We’re not terribly important, so I doubt we alone were selected for this honor. How many others got “picked”? We received the ballot they sent out, and it, too, was deceptive. On the COOL issue, NCBA didn’t ask if we want it mandatory or voluntary. Instead they worded it so no matter how members vote, it’s in the context of a voluntary framework NCBA is all for CAFTA. Where is the big picture there? There’s been no benefit to anyone since NAFTA, GATT, WTO or any other trade agreement other than corporate interests and frankly, I’d forego those benefits if it means the rest of agriculture loses. I know! The government is saying it’s good for us and it’s never lied to us about anything and we should trust and believe what they say. Right! Even the Supreme Court knows better, having declared in at least six decisions that “when dealing with government employees, you should assume they are lying.” Our lack of protectionism has cost America jobs, compromised our infrastructure and forced us to purchase shoddy goods from China and Asia. Now our very foundation and security are threatened by trading away our food independence. Only FOOLS aren’t protective of their own countries’ best interests. You and your fellow travelers are the ones out of touch. Sincerely, Karen Meyer Solen, ND Support producers, but not blindly Dear Pete, I have enjoyed your paper for many years. I know Nelson Crow and Forrest Bassford, and I have enjoyed the friendship of Dick and Barbara on their trips. Let me state that I am for free markets. I support world trade. I believe the American Cattleman can compete. However, lax feed policies in Canada caused us to lose much of our Asian trade and we should be careful to not open our borders until this is cleared up. As a supporter of free markets, we must protect our cash markets. It’s OK to retain ownership of cattle and beef as far as you wish. It’s a free country. However, if it becomes an industry practice for most producers to retain ownership, we will lose our cash markets. The feeders, the packers, and the retailers are our friends, but if we allow them to shift all the risk and all the costs of inventory back to the producer, we are being stupid. They are just being good businessmen. No one is quite as interested in getting a fair price for the cow as the owner of the cow. We lost the cash market for juice oranges because of contractual participation plans. This is why we obtained the “Packers & Stockyard Act!” Our big advantage as cattlemen is when we sell an animal we get paid promptly. We want to keep it this way. I have been a member of the ANCA, the NCA, and the NCBA since 1949. I will continue to support any organization that supports the producers, but not blindly. I am optimistic about our industry and look forward to the next calf crop. Sincerely, Alto L. Adams, Jr. Fort Pierce, FL © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 9,2005

Feds off $2-4, but profits still noted

by WLJ
A struggling futures market and projections for less-than-stellar post Mother’s Day beef demand left cattle feeders settling for cash cattle prices $2-4 softer than the previous week. However, even with that decline, most cattle were bringing a $50-or-more profit to producers. Trade was mostly complete in the northern tier states last Wednesday afternoon, with cattle being moved for $144-146 dressed, mostly $91 live. Southern producers were still waiting for packers to come to the table with at least $92 per cwt. Packer bids finally got back up to $90 mid-morning Thursday, but trade was still nonexistent in Kansas and Texas. Trade the previous week was at mostly $93-94 live, $149-150 dressed. June took over as the “current” live cattle futures contract and that created some bearishness in the cash market since that contract stayed right around $85 last week; the cash premium using the previous week’s average price was almost $9. Market analysts said that was way too large of a spread for the season, and that narrowing of that spread was expected and it happened in the form of the cash market losing value. According to Jim Robb, chief analyst with the Livestock Marketing Information Center, beef demand for the week to ten days following Mother’s Day is expected to be lackluster and that was pressuring live cattle prices. He did say, however, that another upward spike in the cash market is possible but it won’t be until the next to last week of the month. “Memorial Day is usually a good beef demand holiday, and I expect a solid spike in cash cattle in reaction to filling up supply voids left by beef demand for that holiday,” Robb said. “However, until that product starts to move the last half of the month, cattle slaughter could be slowed down and that means fewer live cattle are needed by packers.” Robb was uncertain as to how high fed cattle prices would go leading into Memorial Day but said that the mid-$90s was a possibility. Southern cattle feeders were holding out a little longer last week given that packers were reporting $30-plus per head profits, and that slaughter volumes had picked up during the first half of the week. Through Thursday, packers had processed 485,000 head of cattle last week, about 15,000 head more than the previous week, but 20,000 head fewer than the same week last year. Analysts’ projections were that 600,000 head, or more, would be processed for all of last week. Additionally, analysts said that weekly slaughter volumes had surpassed weekly beef demand each of the four weeks in April, and that the amount of product in cold storage was adequate enough to get packers through the two weeks following Mother’s Day. Most sources said that 580-590,000 head of cattle would meet weekly beef demand. For the week ending April 29, 620,000 head of cattle were processed, with another 601,000 processed the previous week. For the month of April, average weekly slaughter volumes were 598,000 head. Robb said that Taiwan reopening its border to some U.S. beef would help increase total beef demand. However, he was also cautious about that help being significant due to bone-in product still being disallowed in that country. According to U.S. Meat Export Federation statistics, 35-40 percent of pre-BSE exports to Taiwan were bone-in short ribs, which means 7-8,000 metric tons of the total 20,000 metric tons shipped to Taiwan in 2003 was boneless short ribs. The boxed beef market started out stronger last week, but by Thursday was starting to weaken some. Choice hit a high last week of $163.89, before getting back down to $162.15 on Thursday. Select was at $144.74 Thursday, after rallying up to $147.59 during the previous week. The Choice/Select spread widened beyond $18 last Wednesday, giving some indication that higher quality Choice beef was in greater demand for the Mother’s Day holiday. Volumes of beef moved on the cash market was moderate last week, but only about 80 percent of the previous week’s volume. Feeders tailing off Auction barn reports from across the country indicated that cattle feeders weren’t willing to pay much more than steady money for cattle ready to go on full feed. In fact, a large portion of cattle feeders were buying cattle at prices $1-2 below the previous week. The two-week downtrend in fed cattle prices and projections for lackluster beef demand throughout most of the remainder of the spring had order buyers cautious about buying cattle at even steady money. In addition, northern and central Plains cattle were coming off pasture in fatter-than-normal condition and that hurt their value. Cattle that are in heavier condition when they enter a feedlot usually have decreased feed efficiencies and average daily gains, compared to “green” cattle that have a little more frame on them. Volumes of fed cattle offered in the southwest were called abnormally large for the first week of April due to wheat graze-out cattle having to be removed earlier than normal. “More wheat cattle were on the move this week as graze out wheat has matured early due to dry conditions,” said Robert Miles, USDA auction market reporter, Oklahoma City, OK. Feeder cattle offered for sale in Texas and Oklahoma were 125 percent of normal for the first half of the first week of April, and that softened the prices also. Last Wednesday’s Chicago Mercantile Exchange (CME) feeder cattle index was just over $111, down almost $1 from mid-week the previous week. Calves steady Weaned calves were bringing mostly steady money. However, there were reports that cattle 500 pounds or lighter were bringing $1-3 more than the previous week, particularly heifers. Lighter calves will be ready for market around the time fed prices are expected to strengthen this fall and winter and won’t be subjected to the normal summer lull in the fed market. In addition, it is likely that Korea, Japan or both will be reopened to U.S. beef by the time those cattle are ready for market, and some cattle feeders are buying them with that in mind. In addition, cash corn slid a little bit more in price last week, going back below the $2 per bushel mark, which is $3.50-3.60 per cwt prior to delivery. Analysts also said that the fact that most fed cattle are still making at least $50 per head has helped producers justify paying a little bit more for cattle that will hit the fed market after the summer lull. Most breakevens on northern cattle were called $83-85 per cwt, while southern cattle were probably breaking even at $84-87. Stocker demand was definitely softening in the Southwest as weather has turned dry and is starting to result in a slowdown in grass and forage production in that region. However, stocker demand in the upper two-thirds and western third of the country was starting to pick up as March and April moisture has resulted in better-than-normal pasture and rangeland conditions and production forecasts. Midwest demand for stocker cattle was somewhat depressed as a lot of producers have grain operations and were out in the fields doing their needed spring work. — WLJ © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 9,2005

Beef Bits

by WLJ
Tyson settles federal case Tyson Foods has paid a $1.5 million fine and its former senior chairman, Don Tyson, has paid $700,000 to settle Securities and Exchange Commission charges that the company had failed to disclose certain benefits paid to Tyson over the past several years. Don Tyson also repaid $1.516 million to the company. Tyson and Don Tyson neither admit nor deny wrongdoing. Wendy's sales up, profits decline First quarter sales at Wendy's International increased 7.1 percent to $894 million from $835 million a year ago, but inclement weather in parts of the country cut profits by 2.8 percent, from $52.8 million to $51.3 million. Unfounded claims by a Nevada woman that she found a human finger in her bowl of chili, caused a chain-wide same-store sales impact of about two percent in the last week of the quarter, according to the company. Despite the difficult quarter, Wendy's still beat analysts' expectations by five cents a share. Canadian packer shut down Provincial authorities in Ontario, Canada, have suspended a license of a meat processing plant. Authorities are holding all the meat products from Denview Meat Packers and warning the public not to eat any products they have bought. The warning is because of concerns that animals weren’t correctly inspected prior to slaughter to ensure that they are healthy. The provincial agriculture and health departments together with the Canadian Food Inspection Agency are investigating the problem to see if further action needs to be taken. Coleman unveils all-natural line Coleman Natural Foods announced it is introducing a line of all natural beef. The new Coleman Purely Natural line will be offered in dedicated natural meat sections within conventional grocery stores nationwide. “By offering various all-natural protein options at grocery stores, we are presenting consumers with a truly natural meat option, much like the choices they have in the produce and dairy areas of the store," said Jeff Tripician, Coleman vice president and chief marketing officer. Japan imports jump Beef imports into Japan during March were up 46 percent, compared to March 2004. The increase was largely a reflection of the strengthened Australian supply capacities since the ban on U.S. beef in late 2003. The value of beef imported during March just passed 20 million yen, with Australia holding 91 percent of the market. March is traditionally a strong month for beef imports in Japan, in the lead up to expected increased retail demand during the Golden Week holiday later this month. Simons receives Golden Parachute Swift & Co. has given former chief executive John Simons a severance package worth approximately $7.2 million, including $2.3 million in severance pay, $3.4 million for four million unused stock options and $1.2 million for about 1.2 million shares of Swift stock. He will also be paid approximately $225,000 for an upcoming six-month consulting period. The settlement was almost equal to the $7.25 million the company earned over the first three quarters of fiscal year 2005. Saskatchewan beef plant planned Organizers of Yellowhead Natural Beef are hoping to build a federally inspected facility that would supply Natural Valley's processing plant in Wolseley, Saskatchewan. Kathy Martin of Natural Valley said the relationship would be similar to the plant proposed for Neepawa, Manitoba, which intends to slaughter cattle and send the meat to Wolseley for processing. The organizers found they were looking at 52,000 head per year. Skjerven said the steering group has done feasibility studies, formed an interim board and is preparing to raise equity capital. The plant could be operating as soon as the spring of 2006 or as late as spring 2007. Packer wins workplace award Greater Omaha Packing Co., Omaha, NE, was one of the top award winners in the Omaha's Best Paces to Work competition. The contest, sponsored by the Greater Omaha Chamber of Commerce, honored five small companies and five larger ones, based on the results of over 10,000 completed surveys from area employees. Greater Omaha Packing, with about 750 employees, finished fourth in the large-company division, which was dominated by service companies. The company will also receive a significant workplace safety award later this month. The Omaha chapter of the National Safety Council will award Greater Omaha Packing its Platinum Award of Honor with Distinction for 12 consecutive years of outstanding worker health and safety accomplishment. © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 9,2005

Letters

by WLJ
An answer to a six-letter bad word Dear Editor: I read with some amusement and a certain amount of amazement Mr. Scheifelbein’s comments in the April 25 issue of your paper. Our society has long accepted that our capitalistic economy should seek and attain a number of goals; efficiency, consumer sovereignty, stable prices, sufficient competition and economic equity to name a few. Many times these goals conflict with one another. The reason the word packer is seen by some as undesirable is their behavior in the market place can and has violated the idea of economic fairness. Mr. Scheifelbein makes an effort to project packers as just “one of the boys” doing what all profit oriented businesses seek to do and therefore is just like an ordinary cattle producer is a questionable analogy. When "four" packers process 80 percent of all the fat cattle in the U.S. this places a tremendous amount of economic power in the hands of a few. Economics describe this market condition as an oligopoly, and businesses in oligopoly markets can and have behaved in a non-competitive manner. Packers are not inherently evil, its just an aspect of capitalism, economic power concentrated in too few hands, like political power, can have a corrupting influence. We have long accepted a role for government to modify those elements of capitalism that can produce harm to the greater number. Unfortunately, many in high places of business will loudly tout the strengths of our free economic system but will just as quickly engage in actions which has the effect of endangering it. Sincerely, Ken Martin Tuscumbia, MO Rights for vegetation? Since animal rights activists are on the rampage these days, I feel that it is my duty to start my own activist group. My group will stand for the rights of all known vegetation from grass, to weeds, to trees, etc. I feel that it is my god given right to protect all vegetation from lawnmowers, chemicals and from the picking of its fruits and vegetables. Our organization will rise up against the farming of crops, vegetables and fruit trees. We will also be against confinement issues. If hogs or cattle are not supposed to be confined, why are people confining plants, fruits and vegetables to pots, greenhouses, gardens and fields? They should be able to prosper freely throughout the world without our intervention. Our organization also has a problem with the way that people continually harm vegetation year after year. People run mowers over the grass slicing off their poor little leaves. People constantly trim hedges and trees of unwanted growth. People pull and pluck fruits and vegetables from its outstretched limbs and vines. People behead the cabbage and lettuce, spear the asparagus, uproot the carrots, beets, potatoes, radish, and disembowel the watermelon, cantaloupe and honeydew. After this is done, people maliciously slice them into smaller pieces without even knowing if they are deceased, or worse. . .people eat them alive! Then there is the warfare that is held annually on weeds. From fields to gardens to lawns, people constantly spray, hoe and pull these poor defenseless creatures. This has to disrupt the family of each weed that we kill so maliciously. Just think of how much tragedy that we bring to those families that worked so hard to raise their noxious little seeds. They just wanted a better life for their progeny and see them grow up and prosper in a beautiful pasture, field or lawn.. .not the shelterbelt, ditch or fenceline where they were raised. With all that being said I will unveil my NEW vegetation activist organization name. From now on we will be known as RIDICULOUS (Rich Individuals Demonstrating Incompetence and Commonly Utilizing Lawyers to Outrageously Undermine Stewards of the land). I feel that this is great name for our organization as this is what we are about. If you feel that you would like to contribute funds to our organization, please do so immediately as my chemical bill for spraying pasture is due by the 10th of the month. Corey Gall South Dakota A solution for everyone Packers (Tyson and Cargill) are losing money in the U.S. because of a low volume of high priced cattle. Really. I wonder how bad they are taking advantage of the Canadians—oh, I mean—how much profit are they making off the Canadians because of a large volume of low priced cattle? Japan says that the U.S. is curtailing the reopening of the border with Japan because we are not reopening the border with Canada. Really. Get this in writing. Let’s open the border, process all the Canadian beef at one plant, send all the meat to Japan, and label it North American (wouldn’t that be C.O.O.L.). That way the Canadians eliminate the surplus, packers are full and Japan is happy. Smile, saddle up, and let’s ride. Tony Cunha Jr. Laton, CA © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 2,2005

BeefTalk:

by WLJ
This is the time of year when carcass data starts to come in on last year's calf crop. The data also provides reflection material on the current bull battery. In the past, the conventional wisdom was that growth was the most important trait. Cow/calf producers, however, know many traits affect the bottom line. Data has shown growth alone, with no monitoring of the end package, simply produces an unpalatable product. In addition, even growth calves need to be alive after birth. Just this week a producer called concerning calving difficulty, which was becoming more apparent within the cowherd, especially with a labor shortage. In this particular case, the bulls were selected for a carcass program that favored growth and muscle. There was no selection emphasis placed on calving ease or birth weight. The result was predictable: The producer met the grid specs, the calves grew well, but the dead calf pile was simply getting too large. The pasture was becoming spotted with lonely mother cows. A balanced approach always has been the best formula for beef producers. Interestingly, even with balanced programs, the differences among calves are not always black and white. Data has shown that many bulls can turn a profit. The following is a tale of four Dickinson Research Extension Center calves, valued at just around $1,100 on the rail. They gained their value by different means. The calves represent four types of calves, two yield-grade 3 calves grading Choice or Select, and two yield-grade 2 calves grading Choice or Select. Yield-grade 3 calves have more fat on the carcass and slightly less rib eye (an indicator of red meat) in relation to their carcass weight. The yield-grade 2 calves are reflective of more rib eye per pound of carcass weight and have less fat trim. The palatability of the Choice-quality grade cattle would be greater than Select. The Select grade would have less evidence of intramuscular fat. Calf 4102 was a yield-grade 3 calf, with more trimable fat, less rib eye per pound of carcass weight and a rib eye with less evidence of intramuscular fat with a Select quality grade. Calf 4102 weighed 1,229 pounds out of the feed yard and had a 765-pound hot carcass weight. The rib eye area was 12.6 square inches, less than the 13 square inches needed based on the carcass weight. The calf sold on the rail at $1,098.54. Calf 4062 also was a yield-grade 3 calf and graded Choice, indicative of better palatability. Calf 4062 weighed 1,178 pounds out of the feed yard and had a 727-pound hot carcass weight. The rib eye area was 10.3 square inches, less than the 12.5 square inches needed based on the carcass weight. The calf sold on the rail for $1,083.88. Calves 4119 and 3242 were yield-grade 2, with a larger rib eye area in proportion to their carcass weight and had less external fat. Calf 4119 weighed 1,101 pounds out of the feed yard and had a 743-pound hot carcass weight. The rib eye area was 12.7 square inches, which is the amount needed based on the carcass weight. The calf was a quality-grade Select and sold on the rail for $1,096.67. In contrast, Calf 3242 had a higher quality grade. Calf 3242 weighed 1,176 pounds out of the feed yard and had a 752-pound hot carcass weight. The rib eye area was 13.7 square inches and the carcass, based on weight, needed 12.8 square inches. The calf sold on the rail at $1,119.35. Although the sale date significantly impacts price and the bottom line, there are many ways to make money in the beef business, just don't abandon all ranch common sense. May you find all your ear tags. — Kris Ringwall (Kris Ringwall is a North Dakota State University Extension beef specialist, director of the NDSU Dickinson Research Center and executive director of the North Dakota Beef Cattle Improvement Association. He can be contacted at 701/ 483-2045.) © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 2,2005

Beef Bits

by WLJ
McDonald’s reports a 42% profit McDonald’s Corp., the world’s largest fast-food chain, reported that better sales in Europe and continued momentum in the U.S. lifted first-quarter profits 42 percent. Net income for the January-through-March quarter was $727.9 million, or 56 cents per share, compared with $511.5 million, 40 cents per share, a year earlier. Results included a gain of $179 million, or 13 cents per share, due to a decreased tax rate and a charge of three cents per share because of a shift from share-based compensation to mostly cash-based. Revenues at the Oak Brook, IL-based company were $4.8 billion, up nine percent from $4.4 billion in the first quarter of 2004. Drop in Japan sales BSE related Sales at restaurants and coffee shops in Japan in fiscal 2004 through March 31 fell 2.4 percent from the previous year on a same-store basis, the Japan Food Service Association told Kyodo. The association attributed the fall to a sharp drop in the number of customers at Japanese fast-food restaurants serving “gyudon” beef-on-rice bowls, and “yakiniku” grilled beef restaurants that have been affected by Japans import ban on U.S. beef after the discovery of BSE in the U.S. But on an all-store basis, sales increased 1.6 percent with a rise in the amount spent per customer, more than offsetting a dip in the number of customers. Outback CFO quits; Q1 income up Bob Merritt, who joined Outback Steakhouse Inc. as chief financial officer in 1990, announced his retirement, effective May 27, citing recent accounting regulations that unduly burden corporate accounting and finance departments. On a more positive note, Outback reported first-quarter net income of $51 million, up from $47.8 million in the same period last year. The restaurant chain's total revenue for the first quarter jumped 12.8 percent to $895.1 million in the first quarter. Rancher’s Choice targets fall open The president of producer cooperative Rancher's Choice Beef said last week he hopes to have a packing facility up and running in Dauphin, Manitoba, by late fall. About 300 producers turned out at a Rancher's Choice annual meeting last Monday to find out when the plant will start slaughtering cattle. The group has raised close to the $16 million needed to build the slaughter facility, and about 20,000 cows have been committed to the plant, according to Rancher’s Choice president David Reykdal. Despite lobbying efforts, the Canadian government has not contributed any cash to the slaughter plant. However, a representative for the federal government at the meeting hinted some money could be on the way. Ruth’s Chris plans IPO Ruth's Chris Steak House Inc., based out of Metairie, LA, plans an initial public offering according to a filing with the U.S. Securities and Exchange Commission. At the end of December there were 86 Ruth's Chris restaurants, including 10 outside the United States. Thirty-nine restaurants were company-owned while 47 were franchisee-owned. For fiscal 2004, the restaurant chain brought in $192.2 million in revenue and had operating income of $23.3 million, compared with revenue of $167.8 million and operating income of $15.5 million in the previous year. The company said it does not intend to pay dividends on its common stock. Nebraska Beef to hold union elections The National Labor Relations Board has ordered Nebraska Beef, Omaha, NE, to hold a new election to decide if its workers want union representation. The United Food and Commercial Workers Union had challenged an election held in 2001, charging that management intimidated workers that voted down union representation by a wide margin. After a series of hearings, NLRB agreed with the union and ordered that new elections be held this spring. No specific date for the elections has been set. CKE Restaurants profitable According to CKE Restaurants Inc., which owns Carl’s Jr. and Hardees, company-wide fourth quarter net income rose to $7.1 million, a $58.8 million increase over the prior year’s net loss of $51.7 million. Hardees and Carl’s Jr. same-store sales increased 4.4 percent and 4.9 percent, respectively, for the fourth quarter. For the entire fiscal year 2004, net income grew to $18 million, an increase of $71.2 million over the prior year. Same-store sales increased 7.7 percent and 7.0 percent at company-operated Carl's Jr. and Hardee's restaurants, respectively, for the year. CKE has a total of 3,166 franchised or company-owned restaurants in 44 states and in 11 countries, including 1,014 Carl's Jr. restaurants and 2,034 Hardee's restaurants. © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 2,2005

Feds slump on futures turnaround

by WLJ
— Questions arise on marketings data. — Feeders, stockers still rallying. After showing signs of getting ready to eclipse $95 live, $152 dressed early in the week, last week’s cash fed cattle market wound up with only moderate trade happening through Thursday at prices barely steady to $1 softer, compared to the previous week. Approximately 50,000 head traded in Nebraska on Wednesday at mostly $149 dressed, $92.50, compared to mostly $149-150, $93 the previous week In southern feeding areas, trade was nonexistent with packers still bidding only $90-91, compared to producers’ asking prices of at least $96. Analysts with the Texas Cattle Feeders Association said they thought that $94 would probably get cattle traded for the week. Market analysts said last week’s cash market turnaround was indicative of how much influence the futures market has over the cash cattle market. After hitting a contract high of $94.05 on Monday, the April contract was back down to $92.45 at the close of business Wednesday. Thursday saw the April contract remain mostly steady with Wednesday’s settle price. Sources at the Chicago Mercantile Exchange (CME) told WLJ last Thursday that the turnaround in the April contract was almost solely related to packers not increasing their bids to levels at least steady with the majority of the previous week’s trade. Those same sources said packers ignored USDA’s April 1 Cattle-on-Feed Report, and that there might be more captive supply cattle ready for immediate processing. In addition, Andy Gottschalk, analyst with HedgersEdge.com, said he was very skeptical of how accurate USDA’s March marketings figure was, and there was probably more near-term slaughter-ready cattle available than the on-feed report indicated. “There is absolutely no correlation between USDA’s (marketing) numbers and the actual slaughter volume for March,” Gottschalk said. “Slaughter data is an actual known head count, as where marketings are derived from a survey. Those surveys could be less than entirely accurate.” Packer demand for live cattle might start to wane over the next week or two as slaughter volumes started to show a decline last week. Between last Monday and Thursday, 471,000 head of cattle were processed by packers, 5,000 head below the week prior and 36,000 fewer than the same week last year. For the week ending April 23, 600,000 head of cattle were processed, 14,000 head more than the week previous. In addition, market analysts said that was about 25,000 head more than the minimum number of cattle needed to meet current beef demand. Slaughter weights also continued to be much larger than a year ago, meaning fewer cattle are needed to produce a similar amount of product. For the week ending April 23, the average slaughter weight was 1,227 pounds, compared to 1,192 the same week last year. The average carcass weight was 748 pounds, compared to 726 in 2004. Other indicators appeared to be positive for the cash market. However, the futures movement on Wednesday trumped those other factors. Last week’s boxed beef market was very bullish, with both prices and volumes being called “very impressive” by market analysts. Through midday Thursday, Choice beef had gained $4.45 for the week, while Select had increased $4.56. Movement was called well above average with Monday being the only day during the first four days of last week where under 350 loads were moved. Retailers were starting to purchase beef supplies for the projected demand increase normally associated with Mother’s Day, which is May 8 this year. Eastern retailers are also still banking on unseasonably large spring beef demand due to consumers being “cooped up” at home for a longer- and “stormier-than-normal” winter weather season. Calves, yearlings stronger Despite most cattle feeders being disappointed in last week’s fed market developments, most sellers were still reporting $35-60 per head profits. That helped strengthen feeder markets another $1-2 last week. In addition, extremely wet weather permeated most central and northern cattle grazing regions and that spurred stocker operator interest in weaned calves, especially heifers. Seven-weight and lighter steers were up mostly $2-5 higher, compared to several weeks previous, while some $8-10 gains were reported on heifers. The one area that is still being reported as dry and in need of some moisture is the Southwest. Several auction barn reports from Texas and Oklahoma reported stocker cattle being mostly steady to $2 higher. In addition, volumes of cattle offered in those areas are being called 15-20 percent larger than a year ago. After starting out slightly stronger on Monday, last week’s nearby corn futures lost 10-12 cents over the next few days. May corn went below $2.04 Thursday. That news helped spur interest from cattle feeders in heavier calves, analysts said. In addition, while there was uncertainty surrounding USDA’s March feedlot marketings number, there was more credence put in the drop-in feedlot placements over the same month. “Placement figures for last month showed that feedlots may need to stock up on more cattle that will be ready for market come this fall, particularly starting in October,” said Reed Marquotte, M&Z Livestock Analytics. The CME feeder cattle index, for 700- to 850-pound steers, was at $111.78 last Wednesday, up approximately $1 from the previous Wednesday. — WLJ © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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Monday, May 2,2005

Forced sales of livestock have tax implications

by WLJ
Dry weather conditions in parts of the U.S. over the past several years and continuing this year have caused forced liquidation of breeding livestock and early sales of market livestock. Livestock producers who have been forced to sell livestock or are considering selling because of abnormally dry conditions may receive special consideration for federal income tax reporting purposes, says Tim Petry, North Dakota State University Extension Service livestock marketing economist. "Furthermore, a number of tax law changes important to livestock producers became effective through the American Jobs Creation Act (HR 4520) in October 2004," Petry says. Income tax reporting for forced sales of livestock because of drought or other weather-related conditions may be handled in two different ways, according to Internal Revenue Service guidelines. The first provision applies to all types of livestock and allows postponement for reporting income from forced sales for a year. "For example, the normal business practice for a cattle producer may be to background calves after fall weaning and market them the next February," Petry says. "If, due to drought conditions and lack of feed supplies, the calves are marketed at weaning in October, the income may be postponed until the next year. Only sales in excess of normal qualify for the deferral." The drought must have caused an area to be designated as eligible for assistance by the federal government. However, the livestock does not have to be raised or sold in the exact designated area, such as a particular county, but only in close proximity. The other IRS provision applies to the forced sale of draft, breeding and dairy animals, but excludes poultry. If these animals are sold due to a drought, the sale may be treated as an involuntary conversion. "Producers can choose to postpone reporting the capital gain from forced sales as long as similar animals are repurchased in the future," Petry says. "For example, a sheep producer normally markets 25 cull ewes a year, but in a drought year is forced to sell 50 head. Only the additional 25 head that will be replaced later are eligible for the involuntary conversion." Two important provisions were included in the 2004 revised tax law. First, the replacement period has been extended from two to four years and is retroactive back to the 2002 tax year. Second, if it is "not practical" for the producer to reinvest in the same class of livestock, other property (except real property) used for farming or ranching qualifies as replacement property. "The IRS tax code is complex, so livestock producers considering marketing livestock at abnormal times due to dry conditions should consult with their tax adviser," Petry says. "Other tax management tools such as income averaging also should be considered." — WLJ © Crow Publications - Any reprint of WLJ stories, except for personal use,  without permission, written consent and appropriate attribution is prohibited. ©1996-2005 Crow Publications. All rights reserved.

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© Crow Publications - Any reprint of WLJ stories, except for personal use, without permission, written consent and appropriate attribution is prohibited. 2008 Crow Publications. All rights reserved.