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Monday, February 28,2005

Aussie meat exports to China to expand

by WLJ
— Nineteen more Aussie plants certified. Australian beef, sheep, and goat meat exports to China are set to increase following the Chinese government's approval of another 19 Australia meat processing plants for export. This brings the total number of plants approved so far to 35. Australian Trade Minister Mark Vaile said: “This is great news for Australian exporters. China is a significant market for our agriculture exports, and imported around A$50 million worth of high-quality Australian meat in 2004.” Agriculture, Fisheries, and Forestry Minister Warren Truss said the approval from China means the Australian Quarantine and Inspection Service can now recommend the registration of Australian meat processing plants that meet China's specific requirements. Truss said: “Quarantine and inspection authorities from both countries are working closely together to finalize registration of Australian meat processing establishments wanting to export to China. AQIS is assessing a number of further plants, and will be submitting recommendations to China for approval in the near future.” China will be issuing meat import permits under four existing exemption categories until the end of June, after which product can only be supplied by plants approved by China. The current exemption categories are: • Products cooked and processed before they enter the retail market; • Products processed in China for re-export; • Products intended for deluxe hotels; and • Products intended for the personal use of diplomats. “In light of the deadline for the exemptions, AQIS is working with a number of other meat industry groups to ensure they can supply this important market from July, and will also be submitting a protocol to China for approval covering Australian pig meat and processed products,” Truss added. Vaile said that China is Australia's third-largest trading partner, and second-largest market for merchandise exports. The two-way trade in goods was worth more than A$25 billion in 2003-2004. — WLJ

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Monday, February 28,2005

Beef Bits

by WLJ
Outback growth flattens Outback Steakhouse Inc., which missed fourth-quarter earnings expectations, forecast relatively modest guest count gains this year at its flagship steakhouse brand. The company said traffic should be “flat to up a little bit” given “tough” competition and selective menu price increases, in part to offset higher beef and minimum wage rates. Beef costs will be up about 3 percent from last year. Outback plans to raise menu prices in Florida, its home state, in May to offset an increased minimum wage there. Shares of Outback were changing hands recently at 45. 62, down 1.9 percent or 90 cents, on the New York Stock Exchange. Food chain doubts March 7 Jack In The Box expressed doubts last Wednesday that the U.S.-Canadian border will reopen for beef imports as scheduled early next month. "Our intelligence indicates the March 7 has slipped," Chief Executive Robert Nugent said on a conference call. "That's what we're expecting," he added. Asked its expectation for prices, Jerry Rebel, chief financial officer of Jack In The Box, a regional hamburger chain, said, "Our general outlook for beef is that it will remain high through our second quarter.... We believe the border will open later this year." Argentina's exports up 50% Argentina exported 43,852 metric tons of beef in January, the animal- and food-inspection agency, Senasa, reported. That puts exports up 50 percent compared to the same month a year ago. January sales totaled $91.6 million, up 53 percent from a year earlier. The South American nation shipped 1,607 tons of beef—worth almost $11.233 million—to the European Union under the Hilton Import quota program. Non-Hilton-related chilled and frozen fresh beef shipments totaled 28,881 tons, or $62 million. Last year, Argentina's beef exports totaled 478,124 tons, or $1.053 billion. Argentina is the world's third largest beef exporter, behind Australia and Brazil. ConAgra Q3 earnings waning ConAgra Foods said it expects third-quarter earnings, ending Feb. 27, to lag by some $50 million, or about 25 percent of projected earnings, because of food production problems, weak sales in refrigerated meats and technology problems. The company said, “Continued weak results from refrigerated branded operations” reflect a spike in higher raw material prices that cannot be offset by raising prices. However, its recently introduced Banquet Crock-Pot Classics product line has been a hit and will account for about $100 million in sales during its first full year of production. Supermarket files for Chapter 11 Winn-Dixie Stores, Jacksonville, FL, filed for bankruptcy reorganization under Chapter 11 bankruptcy rules last week. Winn-Dixie stores are prominent in eight southern U.S. states and the Bahamas. The company reported that during its most recent quarter, it lost $399.7 million, compared with a loss of $79.5 million during the same quarter last year. It also said its 920 stores will remain open. However, the company is seeking court permission to terminate leases of two warehouses and about 150 stores that were closed previously, for an annual cash savings of approximately $60 million, and plans to sell all its remaining manufacturing operations to cut expenses. Yoshinoya expects smaller loss Restaurant chain operator Yoshinoya D&C Co. said it expects to see a smaller-than-expected group net loss for fiscal 2004 as better-than-expected sales are likely to help alleviate losses stemming from Japan’s continued ban on American beef imports, reports Kyodo. The company said it now expects to see a group net loss of 1.10 billion yen for the year ending Feb. 28, less than the earlier projected loss of 2.54 billion yen. Yoshinoya said it expects to post a group pretax loss of 1.40 billion yen, an improvement from the earlier expected 2.12 billion yen loss. The company attributed the earnings revision to its cost-cutting efforts. Sonic ad creates controversy A television ad campaign for Sonic Drive-In has created controversy after the Kansas City Star reported the campaign won a series of awards for outstanding advertising. The ads in question feature two male comedians, identified as Pete and P. J., who discuss their love of Sonic burgers. In one spot, one says that he loves a Sonic burger "more than going to the video arcade" but less than "when a lady opens a beer bottle with her belt buckle." The Star received a flood of e-mails and phone calls, all from men who disliked the spots. Some thought they were annoying, while others said they promoted homosexuality. Greg Haflich, Sonic’s vice president of marketing and brand development, noted the ads have resulted a greater than 10 percent jump in same-store sales.

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Monday, February 28,2005

Canadian cattle at record

by WLJ
Canadian farmers held a record number of cattle on their farms Jan. 1, while hog numbers were only slightly above year-earlier levels on the back of good exports, Statistics Canada reported last week. The national cattle herd has been building steadily since May 2003, when Canadian officials identified the first native-born case of bovine spongiform encephalopathy in an animal in Alberta. "Canada's national cattle herd continued to swell last year, reaching a record 15.1 million head as of Jan. 1, 2005, a little more than a year-and-a-half after the worldwide ban on Canadian cattle," the government reporting agency said. However, changes in herd size vary across the country, with Atlantic Canada, Quebec, Ontario and British Columbia showing the same or smaller cattle numbers this January than a year earlier. The growth in cattle numbers comes only in the three Prairie provinces of Manitoba, Saskatchewan and Alberta. The North American cattle and beef industries will closely watch the Statistics Canada report. The U.S. Department of Agriculture is supposed to lift its ban on imports of Canadian cattle younger than 30 months of age on March 7. The American cattle industry is worried that lifting the ban will hit cattle prices in the U.S., prompting industry groups to offer conditional support, at best, for the U.S. government action. "Canadian farmers had 430,000 more cattle on their farms this year than they did on Jan. 1, 2004," Statistics Canada reported. "This was the equivalent of a 2.9% increase." Elizabeth Whiting, press secretary to Canada's Agriculture Minister Andy Mitchell, said the numbers were "not unexpected. There is an issue with managing older animals in the herd, which we hoped would have been dealt with in the U.S. rule."

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Monday, February 28,2005

Court to hear labor dispute

by WLJ
— Pay for getting dressed requested. The U.S. Supreme Court last week said it will hear arguments on whether meat-processing plants must pay workers for the time to change into protective clothing and to walk to their work stations. The nine justices will review two opposite lower court rulings examining workers' rights under federal labor law. One ordered IBP Inc.—prior to its purchase by Tyson Fresh Meats Inc.—to pay $3.1 million to 815 workers in Pasco, WA, for the time to put on and remove protective clothing. A separate federal court ruling said 44 Barber Foods employees in Portland, ME, were not entitled to compensation. The Supreme Court’s ruling could have ramifications for a wide swath of occupations from nuclear plants to law enforcement whose employees might spend extra time to perform duties related to their principal line of work. At the IBP plant, workers were required to gather protective gear, put it on in the plant's locker room, and then prepare work-related tools before entering the slaughter floor. The gear typically consists of a sanitary outer garment, boots, a hard hat, goggles, and gloves. However, under company policy, workers were not considered “on the job” until they showed up, fully equipped. They also were not paid for the time spent changing out of the heavy gear for a 30-minute lunch break or at the end of the shift. Under the Fair Labor Standards Act, employers aren't required to pay workers for time spent changing clothes. However, the 9th U.S. Circuit Court of Appeals in San Francisco rule that donning protective gear in a hazardous profession is different from changing clothes because the protection is “integral and indispensable” to the job. In ruling against the Barber Foods employees, 1st U.S. Circuit Court of Appeals said that time spent changing gear and walking to work stations shouldn't be compensated, in part because donning the equipment only takes a few minutes. — WLJ

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Monday, February 28,2005

Consumers Union: cow needs retest for BSE

by WLJ
Consumers Union last Thursday asked USDA to retest a cow that was determined in November 2004 to be negative for bovine spongiform encephalopathy (BSE) using a test called the “Western blot.” The Western blot test is used by authorities in Japan and Europe when making a final determination as to whether a cow has the brain-wasting disease, Consumers Union said. “Given the potential consequences to both public health and the cattle industry if this brain- wasting disease become established here, it is extremely important that every scientifically justifiable step be taken to prevent it," said Michael Hansen, a biologist with Consumers Union, and Jean Halloran, director of the group’s Consumer Policy Institute, in a letter Thursday to USDA Secretary Mike Johanns. Representatives of the Consumers Union met with USDA officials earlier in February and urged the agency to revise its testing methods. The Consumers Union is asking the USDA to not only retest the cow from November 2004, but also to send samples from the cow to the UK for independent testing. USDA in November 2004 confirmed that the suspect cow was negative for BSE using the immunohistochemistry (IHC) test, which the agency describes as the "gold standard." However, the agency didn't perform the Western blot test, even though it had previously used both the IHC and Western blot in confirming the first case of BSE in the U.S. USDA also sent samples from that cow to the UK for further review. Scientists in Japan and Belgium have reported that suspect cows may be negative on the IHC and still test positive on the Western blot. Such cows are universally regarded as infected, Consumers Union said. In addition, the IHC is a more subjective test, relying on the judgments of a skilled scientist. The Western blot is more objective and its results can be read by any technician, according to Consumers Union. — WLJ

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Monday, February 28,2005

Judge permits arguments for older Canadian cattle

by WLJ
A U.S. District Court judge denied last Wednesday the U.S. government's request to strike two arguments made by the American Meat Institute in an effort to force the U.S. to lift its ban on Canadian cattle of all ages. The American Meat Institute, which represents U.S. beef processors, told Judge John Garrett Penn that USDA isn't justified in using a 30-month age threshold to distinguish cattle as less or more safe. AMI also asked Penn to impose a 120-day deadline on USDA to make a decision on older cattle in the event the judge doesn't grant a preliminary injunction that would allow in Canadian cattle of all ages. Penn denied USDA's arguments to strike those two requests by AMI, but gave USDA until March 1 to file a response to the judge's denial. USDA General Counsel Nancy Bryson said last Wednesday that the judge's denial of the motion wasn't significant in the overall question of whether the preliminary injunction would be granted. Bryson said it was strictly a "procedural" issue. USDA officials have said it can't lift the ban on Canadian cattle 30 months or older because no risk assessment has been performed. Penn asked USDA twice about when the agency could reach a decision on the older Canadian cattle. Tamara Ulrich, a lawyer representing USDA, twice said she had no answer, but stressed it was a "priority" for the department. Jonathan Abram, an attorney representing AMI, said the only reason USDA officials haven't performed a risk analysis on older Canadian cattle is because "they haven't gotten around to it." Penn didn't say when he would decide on AMI's request for a preliminary injunction to lift the ban on Canadian cattle of all ages. The USDA banned all Canadian cattle and beef in May 2003 after Canada reported a case of BSE. A few months later, in August, the USDA lifted the ban only on Canadian beef, so long as it was boneless and from cattle 30 months old or younger. In December 2004, USDA unveiled its plan to further open up trade with Canada by lifting its ban on live cattle younger than 30 months and beef from older animals by March 7. However, on Feb. 9, USDA Secretary Mike Johanns decided to postpone letting in beef from animals older than 30 months. Johanns has indicated it may take six month to a year for the U.S. to reopen its border to Canadian cattle that are 30 months of age or older and beef from those animals. — WLJ

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Monday, February 28,2005

Group sets requirements for Canadian cattle

by WLJ
The Livestock Marketing Association has called for the U.S. border to remain closed to Canadian cattle and beef until USDA meets three requirements. According to a resolution passed by LMA’s Board of Directors, at its recent annual meeting in Austin, TX, the border should remain closed unless and until: • There is full implementation of mandatory country-of-origin labeling (COOL); • there is resumption of U.S. cattle/beef trade with Japan, Mexico and South Korea; and • Canadian cattle imports can be accepted in an “orderly marketing method.” The board of directors noted that LMA provides marketing services “to tens of thousands of cattle producers,” and that those producers, livestock auction markets and others involved in the industry could suffer “serious economic harm” if additional cases of BSE are confirmed in Canada. LMA also said there are looming questions about the enforcement of Canada’s ruminant feed ban, and that the border reopening date of March 7 is premature. “These factors could also further erode consumer confidence in U.S. beef and harm all those in the industry,” the group said in a statement. The directors also said LMA supports the recent action taken by USDA to keep Canadian boxed beef from animals 30 months or older, from entering the U.S. Under LMA by-laws, the resolution will be presented to LMA’s full membership. For the resolution to be overturned, a majority of at least 30 percent of the total membership must vote no. If less than 30 percent of the membership votes, the resolution will stand. — WLJ

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Monday, February 28,2005

Japan reports positive BSE in preliminary test

by WLJ
A cow in northern Japan tested positive for bovine spongiform encephalopathy (BSE) in a preliminary examination last Thursday, a Japanese official said. If confirmed, it would be the country's 15th case of the brain-wasting malady. Preliminary tests on the Holstein cow—already dead when it was brought in from a ranch in Hokkaido prefecture—turned up positive at a dairy health center in Obihiro, said Hokkadio government official Osamu Terada. Other specifics, including the cow's age, were not disclosed. Results from more precise testing at a state-run research center north of Tokyo were likely to be released during the first week of March, officials said. On Feb. 4, Japan confirmed its first human case of BSE following the death of a man with symptoms of the illness. Japanese health authorities have said it was likely the man contracted the disease while living for a month in Britain, where the disease first surfaced in 1989. Earlier this month, a Japanese government panel took a step toward partially lifting a ban on U.S. beef imports, but the decision still has to be approved by the government. Tokyo has checked every slaughtered cow before it enters the food supply since 2001, after its first discovery of BSE. Japan imposed a ban on U.S. beef after the first case of BSE was confirmed in Washington state during December 2003. — WLJ

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Monday, February 28,2005

Europe approves BSE tests

by WLJ
The European Commission approves new BSE tests, opening up competition in the field. The European Commission has approved seven new rapid BSE tests: • CediTect BSE test • Enfer TSE Kit version 2.0 • IDEXX HerdChek BSE Antigen Test Kit (EIA) • Institut Pourquier Speed'it BSE • Prionics Check PrioSTRIP • Roboscreen Beta Prion BSE EIA Test Kit • Roche Applied Science PrionScreen. The approval means that now 12 tests can be used to monitor BSE. Following a laboratory evaluation by the Commission and subsequent field trials by the test producers under the supervision of the Joint Research Center, the European Food Safety Authority recommended that the seven new tests should be approved for use. The tests are designed to detect BSE in brain material collected from animals at the slaughterhouse or which have died on the farm. Until now, tests designed to detect BSE in live animals have not been evaluated. In the European Union, all healthy bovine cattle slaughtered at an age above 30 months and all fallen stock above 24 months have to be tested for BSE, with some derogations for some countries. The five previously approved tests can also be used to check for TSE in sheep and goats. Formal evaluations of additional tests for this purpose are ongoing. — WLJ

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Monday, February 28,2005

Feds stall on packer losses, beef demand

by WLJ
— Moisture still helping calf market. — Feeder cattle losing ground. A Thursday rally in the live cattle futures market kept last week’s fed cattle trade at a stalemate as prospective sellers had more impetus to hold on for at least steady money, compared to the previous week. However, analysts weren’t sure packers would ante up that much, as processing margins continued to go deeper into the red last week. As of press time last Thursday, the only trade for the week was an anemic 13,000 head in Nebraska at mostly $137-137.50 dressed. Other northern cattle feeders were waiting for packers to bid $139 and prospective sellers in more southern feeding areas were asking mostly $89. Packer bids in the south were hovering around $85 live. Packer margins continued to be on the negative side of the ledger last week. In fact, several days last week showed packers losing up to $60 per head, and prospects weren’t looking to improve anytime soon. Boxed beef markets continued to struggle last week. As of midday Thursday, Choice beef was leaving processors’ warehouses at $139.28, while Select was selling for $136.21 per cwt. Choice lost about $2.50 off the previous week’s high, while Select lost a little over $3 in value over the same period of time. Boxed beef movement was called moderate at best for the previous two weeks, with only one day showing over 600 total loads moved via the cash market. Several market analysts said consumers in the eastern half of the country are still trying to get through the winter doldrums, and that it could be another couple of weeks before they start to kick into grilling mode and start demanding beef, especially higher-quality middle meats. Packer demand for live cattle was also said to be waning due to slaughter volumes exceeding weekly beef demand. For the week ending Feb. 19, USDA reported 576,000 cattle processed, 10-15,000 head more than what analysts said needed to be processed to meet current weekly beef demand. Most analysts said 560-565,000 head of cattle would meet current weekly demand rates. Through last Thursday, 451,000 head of cattle were processed, according to USDA, putting packers on pace to process around 550,000 head of cattle. “They just don’t need many cattle right now,” said Reed Marquotte, analyst with M&Z Livestock Analytics. “Demand is anemic, beef movement is very slow and weather still remains very wintery across the country. One or more of those things have to change before packer demand for cattle picks up.” The only glimmer of optimism for cattle feeders last week was Thursday’s 10-30 point rally in live cattle futures. However, analysts even said that wouldn’t be enough to probably rally the cash market because most packer buyers based procurement decisions on the April contract. “February is basically an expired contract, and packers will try to convince feedlots that they need to base their marketing tactics on April, which is currently under $87,” Marquotte said. “The other indicators aren’t there to justify holding out for much more than that, unfortunately.” Stocker cattle gain ground The most positive U.S. cattle market news was coming out of stocker cattle and calf circles last week as spring grazing forecasts continue to improve and alternative feed resources remain much cheaper than normal. Calf prices nationwide ranged between mostly steady to $3 higher last week, with most auction barns reporting strong demand and very active bidding. Rain and snow continues to inundate southern and Far West grazing areas and that continues to improve pasture and rangeland conditions and extend the outlook for the length of the 2005 grazing season. In addition, old crop corn continues to be available to a majority of areas at around $3 per cwt, making it possible for stocker operators to purchase cattle a little earlier than normal and putting them on a little hotter feed ration before being turned out to grass or other pastures. Other feedgrains, specifically milo, barley and feed wheat, are also very cheap and some operators are utilizing them in tandem with cheaper hay. There were several auction barns, particularly in the Southwest and southern Plains, last week reporting some instances of four-weight steers getting back into the $145-150 per cwt range. In addition, higher quality heifers, specifically those called “more replacement heifer quality,” were bringing a $5-8 premium to their “commodity quality” counterparts, auction sources said. Feeders hurt by fed trend Yearlings and heavier replacement-ready calves were struggling last week as cattle feeding profits are still non-existent and there is still some possible pressure coming from Canadian feeder cattle entering the U.S. beginning in March. Feedlot order buyers were seen paying $2-3 less than the previous few weeks. In addition to cattle feeders reporting losses on most cattle marketed during the past few weeks, pen conditions continue to be muddy, which is lessening the desire to bring in cattle to put on full feed. The CME feeder index, for 700- to 850-pound steers, was at $101.61 last Wednesday, compared to $103.89 the previous Wednesday.

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