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Monday, February 21,2005

‘Stayability’ EPD developed

by WLJ
A new EPD—Stayability—has been published in the American Simmental Association (ASA) Spring ’05 Sire Summary and will soon be available online. Calculated by Colorado State University’s Center for the Genetic Evaluation of Livestock, Stayability is defined as the probability that daughters entering the herd will stay in production through 6 years of age. “Stayability is a compound trait in that several factors may influence it,” said Dr. Wade Shafer, Director of Performance Programs at ASA. “From a Simmental Seedstock Producer’s prospective, traits such as fertility, soundness, productivity and temperament are candidates for influencing Stayability. To the degree that these traits influence commercial producers’ culling decisions, Stayability provides them with an estimate of how long a sire’s daughters will stay in the herd—in accountant terms, ‘the asset’s depreciable life’. Certainly, cows that stay in the herd longer tend to be more profitable; there is simply more time to spread out the substantial cost of getting her into production.” The age of a bull is one of the major issues with predicting Stayability, as most often bulls will be 10 years or older before having a daughter reach 6 years of age. Consequently, breeds using the trait (Red Angus, Gelbvieh and Limousin) have been relegated to pedigree estimates on bulls younger than 10. To enhance prediction on younger animals, the ASA incorporates information on 3-year-old daughters into its 6-year-old Stayability EPD. For more information about Stayability or ASA’s Spring 2005 Sire Summary, see www.simmental.org, or call Dr. Wade Shafer at 406/587-4531. — WLJ

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Monday, February 21,2005

Study looks at risk of global animal infections

by WLJ
A new study by an international task force, "Global Risks of Infectious Animal Diseases," discusses the severe economic, social and political impacts of disease outbreaks and outlines national and international monitoring, surveillance and response practices. The comprehensive study, issued by the Council for Agricultural Science and Technology, was written and evaluated by the task force of 13 authors and four reviewers from France, Switzerland, the United Kingdom, New Zealand, Canada and the United States. The paper brings together the expertise and experience of scientists and researchers on the front lines of this growing worldwide concern. It includes a historical review of the most prevalent of these diseases, an outline of the diverse ways they enter a country, an evaluation of contemporary practices that exacerbate disease spread and an overview of the significant impacts-now and in the future-that such diseases have on communities throughout the world. "Animal diseases will continue to affect food supplies, trade and commerce, and human health and well-being in every part of the world," said Colorado State University professor Mo Salman, co-chairman of the task force that released the study and director of Colorado State's Animal Population Health Institute. "Recent outbreaks of bovine spongiform encephalopathy, West Nile virus, foot-and-mouth disease in swine and avian influenza have made headlines and are of concern not only for significant economic costs but for the potential to 'cross-over' to humans." Specific topics addressed in the paper include: • Background of the global threat of infectious diseases. • Patterns for animal diseases and their control programs. • Factors affecting the emergence or spread of livestock diseases. • Impact of animal diseases on human health. • National and international economic impacts of animal diseases. • National and international impacts of animal diseases at the industry level. • National and international impacts of animal diseases on social and political issues. • National and international monitoring, surveillance and response. • Conclusions and recommendations. "The recent devastating outbreaks of foot-and-mouth disease, Newcastle disease and highly pathogenic avian influenza demonstrate the global risks of foreign animal and emerging diseases," said Jim Pearson, task force co-chair and international consultant. "These outbreaks have had severe economic, social and political impacts." Upon discovery of a disease outbreak, the social and political impacts can outgrow the technical and scientific considerations. Consequently, the need for effective risk communication to minimize unwarranted anxiety concerning animal disease crises becomes an important consideration. The threats of foreign animal disease, emerging diseases, new diseases transmitted naturally from animals to humans (zoonoses) and bioterrorism or agroterrorism have connected an uninformed public with the impact of animal diseases. The ability of animal agriculture to counter contemporary threats of animal diseases is more complex and challenging now than in the past, creating an even greater vulnerability for animal agriculture and requiring awareness of and fluency in current agricultural issues, including: • the shift from independence to interdependence; • the need for global awareness and actions; • the confluence of the worlds of animal and public health; • the demand for greater public participation in decision making; • the formation of new strategic partners and alliances; • interrelated impacts on the environment and ecosystems; • a need for a new sensitivity to respond to animal diseases and especially to the people involved and impacted in their control; and • the mandate to develop skills and competencies in politics, media interactions and community engagement. The full text of the paper, "Global Risks of Infectious Animal Diseases" (Issue Paper No. 28) may be accessed on the CAST Web site at www.cast-science.org, along with many of CAST's other scientific publications, and is available in hardcopy for $5, which includes shipping, by contacting the CAST office at 515-292-2125. CAST is an international consortium of 36 scientific and professional societies. It assembles, interprets and communicates credible science-based information regionally, nationally and internationally on food, fiber, agricultural, natural resource and related societal and environmental issues to its stakeholders-legislators, regulators, policymakers, the media, the private sector and the public. — WLJ

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Monday, February 21,2005

Tyson restarts shifts

by WLJ
Tyson will restart suspended operations at beef plants in the Upper Midwest and pacific Northwest, company officials announced Feb. 10. The affected plants will resume production on a staggered basis over the next two weeks. Market conditions prompted Tyson to suspend operations Jan. 10 in Denison, IA; Norfolk and West Point, NE; and Boise, ID. Second shift processing at Pasco, WA, was also temporarily discontinued. The company now plans to resume production based on the following schedule: Denison Wednesday, Feb. 16 Norfolk A-shift processing Monday, Feb. 21 West Point Tuesday, Feb. 22 Boise Tuesday, Feb. 22 Norfolk B-shift processing Wednesday, Feb. 23 Pasco B-shift processing Thursday, Feb. 24 Designated employees at the affected plants have been receiving the equivalent of 32 hours of pay each week since the second week of the suspension, Tyson said, and these workers will continue be paid the 32 hour guarantee while the plants remain idle. Once the plants resume operations, they will likely still operate at reduced levels of production until market conditions improve. “While cattle numbers remain tight, we believe supplies will improve in the months ahead, especially as the anticipated flow of Canadian cattle resumes,” said John Tyson, chairman and chief executive officer of Tyson Foods. “Beef demand has been weak, largely because of high beef prices and the attractive value of competing meats. We typically experience seasonal improvements in beef sales as we move into the spring and summer months. We’re hopeful cattle prices will moderate, so beef can be priced more competitively with other proteins.” Tyson also addressed recent progress in U.S. efforts to restart beef exports to Japan. “While the technical agreement reached between the two countries is a positive step, we believe the U.S. beef industry remains months away from any meaningful exports to the Far East,” he said. — WLJ

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Monday, February 14,2005

Beef Bits

by WLJ
Wendy's results turn favorable After a difficult autumn and early winter, Wendy's International saw its same-store sales edge up 0.5 percent in January at corporate locations, and 1.4 percent to 1.6 percent at franchised locations. Chairman Jack Schuessler said the turnaround, after months of declining same-store comparisons, was due to the performance of the Tim Hortons chain and the introduction in December of an option allowing customers to substitute a salad or baked potato, for the normal side order of fries. Aussie exports to Japan firm January saw Australian beef exports to Japan hold firm, with 21,053 metric tons shipped during the month, according to Meat and Livestock Australia. Although export volumes fell by 11 percent compared with January 2004 levels, beef exports in January 2005 were the second highest on record. Exports of grain-fed beef to Japan continue to be strong, as the Australian beef industry gears up to provide Japan with greater quantities of marbled beef. Grain-fed beef accounted for half of Australia’s beef exports to Japan in January, or 10,472 metric tons. In 2004, Australian exports of beef to Japan totaled 393,471 metric tons, with an additional 19,947 tons of processed beef exported to Japan. Exports of Australian unprocessed beef to Japan totaled $2.235 billion last year, a record for exports to this market. Bone darkening prevention unveiled Researchers at Kansas State University have found a way to keep the bones of packaged beef from darkening and becoming less appealing to grocery shoppers. The research, initiated by Kansas State University meat science specialist Michael Dikeman, tested three antioxidant treatments for their effectiveness at decreasing the discoloration of bones packaged in modified atmosphere packages. According to Dikeman, less discoloration of the bone occurred in packages manufactured with low oxygen and when a 2.5 percent ascorbic acid treatment was put on the bones. The study was funded by U.S. beef checkoff funds and Tyson Foods. Packaged meats firm expands Because of significantly increased customer demand for pre-sliced packaged foods, particularly roast beef and other meats, West Liberty Foods completed the expansion of its Mt. Pleasant, IA, slicing facility. The expansion doubled the capacity of the facility. The Mt. Pleasant facility is one of the most modern meat slicing facilities in the U.S. The facility was designed and is operated with total focus on food safety. West Liberty Foods is a producer-owned cooperative dedicated to co-manufacturing and private label production. Miami test market for McDonald’s Miami is getting a taste of what’s to come. The Oak Brook, IL-based company is using the Miami as a test market for its line of premium chicken sandwiches expected to be launched nationwide this fall, according to Boston-based restaurant analyst John Glass of CIBC World Markets. The sandwiches are available in several varieties: a classic with lettuce and tomato, club, spicy buffalo and bacon ranch. Served on toasted wheat buns, they are available with the choice of either fried or grilled chicken. Prices range from $2.99 to $3.79. Argentina’s 2004 exports up 26% Argentina exported 478,124 metric tons of beef in 2004, the animal- and food-inspection agency, Senasa, reported Feb. 7. That puts exports up 26 percent from 379,366 tons in 2003. Beef exports totaled $1.053 billion last year, up 51 percent from $694 million the previous year. Argentina exported these goods to more than 60 countries last year. The South American nation shipped 29.619 tons of beef—worth almost $210 million—to the European Union under the Hilton Import quota program. Non-Hilton-related chilled and frozen fresh beef shipments totaled 291,675 tons, or $602 million. Farmers Union opposes timing of Canadian Rule The reopening of the border to Canadian cattle could be devastating to Oklahoma producers. “March 7 paints a bulls-eye on Oklahoma stocker producers,” said Ray L. Wulf, Oklahoma Farmers Union (OFU) President/CEO, “because most cattle pasturing on wheat intended for harvest are moved off during the first two weeks of March. The bulk of our stocker producers’ income is realized at that time period,” he added. Texas chef instructors study beef Keeping up-to-date with the rapidly evolving beef product scene became a priority for 22 Texas Culinary Academy chef-instructors who attended a beef checkoff seminar in January at College Station. The seminar, co-hosted by the Texas Beef Council and Texas A&M University, taught the instructors about beef production from the pasture to product. The Texas Culinary Academy is headquartered in Austin.

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Monday, February 14,2005

Bison approved for brucellosis vaccination

by WLJ
Vaccination of Yellowstone bison calves and yearlings that enter Montana could begin this season, according to a recent decision by the Montana Department of Livestock. Brucella abortus strain RB51 vaccine will be used by hand injection. Calves (4-12 months of age) and yearlings (12-24 months of age) captured as a result of other management actions in the western boundary area that test negative for brucellosis are eligible for the vaccine, according to Montana State Veterinarian Dr. Tom Linfield. The Department of Livestock received 66 individual comments and 10 comments on behalf of organizations regarding the Environmental Assessment on vaccination of Bison in the Western Boundary Area. Public meetings were also held in December in Helena and Bozeman. The decision is consistent with the adaptive management steps as described in the Interagency Bison Management Plan that was approved through a mediated settlement agreement by state and federal agencies in 2000. Agencies implementing the IBMP include the National Park Service, Forest Service and USDA Animal and Plant Health Inspection Service, Montana Department of Livestock and Montana Fish, Wildlife and Parks. The IBMP was developed to preserve a wild, viable population of Yellowstone bison, reduce the risk of transmission of brucellosis from bison to cattle, maintain Montana’s brucellosis-free status and protect private property. The IBMP anticipated that vaccination of bison would be incorporated as a strategy to reduce the prevalence of brucellosis within the bison herd and to reduce the risk of transmission from bison to cattle. Within the adaptive management framework, the plan specified that vaccination would be implemented incrementally. Last season, the National Park Service vaccinated bison at Yellowstone National Park’s Stephens Creek facility on the northern boundary of the park. Capture operations will continue as defined by the IBMP. The Department of Livestock does not propose additional capture operations specifically to increase the number of bison vaccinations. During each of the last two seasons about 1,500 bison were moved back into Yellowstone National Park from the western boundary area. A total of 40 bison were captured from the western boundary area in the last two seasons with 24 testing positive and transported to slaughter facilities and 16 testing negative and released. So far this season, three bull bison have been captured on the western boundary and transported to slaughter facilities and 132 bison have been moved back into YNP. The Environmental Assessment, the Decision Notice and response to public comment are available on the department website at www.liv.state.mt.us. — WLJ

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Monday, February 14,2005

Beef Board elects new leadership

by WLJ
The Cattlemen’s Beef Board seated new board members and elected officers and representatives for its 2005 executive committee and beef promotion operating committee during its annual meeting in San Antonio, TX, Feb. 1-5, 2005. After being appointed by the U.S. Secretary of Agriculture in December, a total of 39 board members were seated for service on the CBB in 2005, including 14 reappointments of existing members to a second term and appointment of 25 new members. New members seated and the states they represent are Austin Brown, Texas; Virginia Coelho, California; Bob Combs, Virginia; O.D. Cope, Missouri; Jeff Dahl, North Dakota; Virginia Davis, Indiana; Terry Detrick, Oklahoma; Glenn Eberly, Pennsylvania; Robert Fountain, representing the Southeast unit; Dave Fugate, Tennessee; Glenda Fuller, Kansas; Ross Garwood, Nebraska; Donald Gray, New York; Dana Hauck, Kansas; Richard Hodge, Texas; Merrill Karlen, South Dakota; Neil Kayser, representing the Northwest unit; Louis Larson, Florida; Al Pedigo, Kentucky; Daniel Petersen, Iowa; Frank Phelps, Ohio; Doris Rush, Nebraska; Sharon Spenrath, Texas; Donald Stewart, an importer; and Al Wright, Arkansas. Reappointments and the states they represent are Dave Albers, California; Dave Bateman, Illinois; Peggy Biaggi, Oregon; Loretta Broderick, Missouri; Mike Brooks, Oklahoma; Bill Carroll, Iowa; Carl Crabtree, Idaho; Doug Dickmann, Minnesota; Bill Erhke, Wisconsin; Carol Mosher, Montana; Jay O’Brien, Texas; Dick Sherron, Texas; Wayne Thames, Alabama; and Mike Thoren, Colorado. New officer team At its annual meeting, the board also elected Al Svajgr, Cozad, NE, to serve as its chairman in 2005. In addition, board members elected Jay O’Brien, Amarillo, TX, to serve as its vice chairman for the coming year and Ken Stielow of Paradise, KS to serve as secretary/treasurer of the Beef Board for the year. Executive committee The 12-member CBB Executive Committee includes the board’s three officers and another eight members elected at large. In addition, the immediate past chair of the Beef Board, which is Nelson Curry of Kentucky, serves on the committee in an advisory-only capacity. Based on recommendations from the Joint Beef Industry Nominating Committee, CBB elected the following members to its 2005 Executive committee Carl Crabtree of Idaho; Richard Nielson of Utah; Dick Nock of California; Susie Sartwelle of Texas; Donald Stewart, an importer; Dave True of Wyoming; Lucinda Williams of Massachusetts; and Stan Zylstra of Iowa. The Executive Committee operates under the direction of, and within the policies established by the full board and is responsible for carrying out Beef Board policies and conducting business and making decisions necessary to administer the terms and provisions of the Act and Order between meetings of the full board. Operating committee The Beef Promotion Operating Committee was created by the Beef Promotion Research Act to help coordinate state and national Beef Checkoff Programs. The 20-person committee includes 10 members of CBB, among them the board’s three officers and seven others elected directly by Beef Board members. CBB members elected to the 2005 Beef Promotion Operating Committee during the annual meeting in San Antonio include Al Svajgr; Jay O’Brien; Ken Stielow; Dave Bateman, Illinois; Mike Brooks, Oklahoma; Michael Cline, Iowa; Jack Cowley, California; Jim Little, Idaho; Charles Miller, Kentucky; and Gary Sharp, South Dakota. The other 10 members of the committee are representatives of state beef councils, including the chair and vice chair of the Federation of State Beef Councils and eight other members elected by state beef councils. Those representatives include Federation Chairman Myron Williams, South Dakota; Federation Vice Chairman Mike Vache, Oklahoma; Larry Jones, Kansas; Ann Bruntz, Nebraska; Clifford Dance, Mississippi; David Dick, Missouri; Scott George, Wyoming; Sid Sumner, Florida; Leo Vermedahl, Texas; and Jim Wilson, Oregon.

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Monday, February 14,2005

Beef Board releases fiscal 2004 report

by WLJ
Beef producers invested checkoff dollars into promotion, education, research and information programs aimed at extending the upward trend in consumer demand for beef during the last year. These programs are outlined in the 2004 annual report of the Cattlemen’s Beef Board, released this week at the Cattle Industry Annual Convention in San Antonio. The annual report highlights some of the leading checkoff programs accomplished during the year and provides detailed, audited financial information for the 2004 fiscal year, which ran Oct. 1, 2003 through Sept. 30, 2004. The report includes state-by-state checkoff revenue listings and compares 2004 expenditures to those in 2003. “Amid some big challenges for the beef industry in 2004, we kept our focus on building consumer demand for beef through a variety of programs centered on beef safety, nutrition and promotion,” said Beef Board Chairman Nelson Curry, a cattleman from Kentucky. “The results of these programs were extremely positive and, as a producer, I’m pleased with the accomplishments of my checkoff dollars toward enhancing cattlemen’’s opportunities for profit,” Curry said. “When you stop and realize that demand for beef has increased more than 25 percent since it turned the corner in 1998, it’s hard to be anything but proud.” During the latest fiscal year, checkoff programs spanned the spectrum, from “Beef. It’s What’s for Dinner” television, radio and print advertising promoting beef and veal, to research efforts focused on maintaining the safety of the U.S. beef supply. In addition, checkoff dollars funded consumer information programs aimed at delivering accurate, science-based messages about beef to media, consumers, health professionals and educators, as well as foreign-marketing efforts to rebuild demand for U.S. beef abroad in the wake of a single case of BSE in the U.S. “One of the end results was increased consumer confidence in the safety of U.S. beef,” Curry said. “In fact, surveys indicated that 91 percent of U.S. consumers remained confident that their beef was safe from BSE in January 2004, just a month after the BSE case. And at the close of the fiscal year in September 2004, that confidence level was still above 90 percent and has been even higher since then.” — WLJ

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Monday, February 14,2005

Bullish fed market outlook turns sour

by WLJ
— Limited trade $1-2 softer. — Packers slow down further. Optimism for a $2-3 stronger fed cattle market early last week hadn’t come to fruition through mid-afternoon Thursday. In fact, the limited cash trade that had happened as of press time Thursday was mostly $1-2 lower than the week prior. After gaining more than $1.50 Monday through Wednesday, the first few listed live cattle futures contracts slid more than $1.50 Thursday, and that put the brakes on any significant desire from packers to come to the table with anything more than $90 per cwt live, $144 dressed. However, most cattle feeders weren’t ready to “cave in” either, and were still asking mostly $94-95 live, $145-147 dressed. As of close of business Thursday, less than 10,000 head of cattle traded in both Nebraska and Kansas at $143 dressed, $89 live, respectively. Market analysts expected trade to happen Friday, but most didn’t feel comfortable forecasting what prices would be paid. Packers appeared to slow their chain speeds down even further last week, and by last Thursday several sources said that slaughter-ready supplies were in place through the week ending Feb. 18. Between Monday and Thursday processors had slaughtered 459,000 head, 8,000 below the same period the previous week and 23,000 below a year ago. Total slaughter for the week was expected to be 580-585,000, still 15-20,000 more than is needed to meet current beef demand, according to market onlookers. “They may need a few cattle to fill some holes, but as slow as they are working packers can probably carry over at least one day’s worth of production week-to-week, if not a second day,” a Midwest market analyst told WLJ, on the condition of anonymity. “Looking at the narrowing Choice/Select boxed beef spread, I would guess that most packers are dipping into their own cattle supplies right now, particularly lighter-than-normal animals, and bypassing the cash market. That would make some sense particularly since processing margins are negative $40-plus per head. Independent cattle feeders usually aren’t as ready to ship cattle at a lighter weight, even though they may still grade (Choice). The less weight there is the less money that comes their way.” While both Choice and Select beef prices had gained $5-6 during the first half of the week, the Choice/Select spread narrowed to just over $3.03, the lowest, according to analysts, in almost a year. Choice had gotten up to $147.39 on Thursday, while Select was at $144.37. In addition, packers had paid mostly $91-91.50 on cattle that were processed last week, and most analysts said $152-plus Choice and $147-plus Select was needed for profits to be reported. Unlike two weeks ago that saw a couple of consecutive 500-plus-load days, cash boxed beef movement was very anemic last week, with the largest day being Wednesday at 413 loads. February live cattle futures got up just over $92 last Tuesday and Wednesday, however, as of close of business Thursday the contract had dropped to $89.75, and that took any gains in cash fed cattle out of the mix through the rest of day. April lost $1.40 on Thursday, closing at $86.72. Floor traders with the Chicago Mercantile Exchange (CME) said that Ag Secretary Mike Johanns announcement concerning Canadian live cattle trade wasn’t construed as positive news. “Instead, it kept intact the March 7 date for Canadian feeder and fed cattle, which means some cattle from north of the border will be added to the total cattle supply and packers won’t have to pay as much for what they need,” one floor trader said. “We’ve heard the reports from several trade teams that have traveled into Canada that no wall of cattle is there, however, even a few cattle right now will hurt prices.” Feeder, stockers gaining Despite fed cattle prices struggling last week, stocker and feeder cattle prices gained on very good demand. Prices on younger, lighter calves gained $2-3 last week and continue to be helped by the prospects for unusually good spring grazing seasons in not only normal hot beds of stocker grazing, but also in some areas that were hit by drought the past few years. Stocker operators from parts of Colorado, Nebraska, Wyoming, the West Coast and Northwest are adding competition to stockers from Missouri, Oklahoma, Texas, Kansas, and the Midwest. In addition, some higher quality heifers were bringing $3-5 more due to prospects for additional herd rebuilding in areas hit by drought the previous four or more years, auction managers said. Heavier feedlot-ready cattle were steady to mostly $1 higher as several feedlot managers reported slight profits on cattle that were marketed the week of Jan. 31-Feb. 5. In addition, news that even more corn was available nationwide helped spur another 5-10 cent downtrend in cash corn prices last week. According to USDA, beginning of year corn carryover totaled 2.01 billion bushels, 50 million bushels larger than the government’s previous estimate. Several reports had cash corn bringing $1.60-$1.75 per bushel FOB, $2.85-3.15 per cwt. In addition, weather has become very mild and mostly dry across major cattle feeding areas, and that has spurred some interest from cattle feeders because they think they can get cattle through the transition phase before inclement weather rears its ugly head again. The CME feeder steer index was at $104.31 last Wednesday, compared to $103.18 the previous Wednesday.

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Monday, February 14,2005

CBB: Survey shows checkoff support at 10-year high

by WLJ
Producer support for the $1-per-head beef checkoff program is at a 10-year high, with 73 percent of beef producers voicing approval of the Beef Checkoff Program in a January 2005 survey. That’s up from 70 percent in July 2004. Cattlemen’s Beef Board Chairman Nelson Curry told Cattle Industry Annual Convention participants that the new data shows a level of support for the beef checkoff that is unmatched since the early 90s, when approval levels were in the low 80-percent range. The new research further indicates that only 18 percent of cattlemen disapprove of the checkoff, while 9 percent are undecided or neutral. “The research results were positive on many levels,” said Curry, a Kentucky cattle producer. “Eighty percent of producers said they believe the beef checkoff had helped contribute to the positive trend in beef demand, 80 percent believe that the checkoff has value even when the cattle market is down, and 74 percent said they think the checkoff is a good value for the money invested. Conducted for the Cattlemen’s Beef Board by Aspen Media and Market Research, Boulder, CO, the telephone survey of a random sample of beef and dairy producers nationwide was completed between Dec. 19 and Jan. 8. It has a margin of error of plus or minus 2.8 percent. Aspen Media’s lead researcher Dan Hoffman said the increased support for the program could be attributed, at least in part, to its increased visibility in the news. Forty-one percent of producers had recently seen, read or heard something about the beef checkoff, up from 34 percent in the summer survey. “Many cattlemen are aware that the beef checkoff’s fate is in the hands of the U.S. Supreme Court,” said Hoffman. “That fact seems to have them paying more attention to their program.” Curry said he finds it “ironic that two negative issues have helped shine a beacon on the value of this program.” “First, BSE found in the U.S. and Canada has illustrated the need for a comprehensive public communications and crisis management effort,” Curry said. “And second, litigation challenging the Beef Checkoff Program is threatening to take away the crisis management program that we do have, as well as the promotional equity producers have in ‘Beef. It’s What’s For Dinner.’” Cattlemen also were asked to rank the importance of key Beef Checkoff Program areas. Listed were 10 strategic areas where checkoff dollars are focused to build demand for beef. Cattlemen ranked all of the strategies as important, but two were prioritized as particularly essential: maintaining consumer confidence in the safety of beef; and communicating beef’s nutritional value. Other important focus areas, as ranked by producer respondents, were: promoting beef’s enjoyment; promoting U.S. beef exports; new product development; working with retailers; working with restaurants; producer communications; product enhancement research; and consumer education and crisis response. On other fronts, the January data shows that producer optimism is at 78 percent, down slightly from July 2004 when 82 percent of respondents reported feeling optimistic about the direction of their industry. Results also indicate that 73 percent of producers consider themselves informed about the checkoff, up 5 percent from July 2004. The semi-annual survey of 1,225 producers is demographically representative of the various types of U.S. beef, veal and dairy operations in the United States, based on the 2002 Agricultural Census. “As a researcher,” Hoffman said, “I can say that these survey results provide a positive report card for the beef checkoff.” — WLJ

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Monday, February 14,2005

Common 1031 exchange questions answered

by WLJ
The past several years a growing portion of U.S. ranch transactions have been done utilizing Section 1031 language in the U.S. tax code. Several sources have indicated that nationally between 35-45 percent of ranch purchases have been done via Section 1031 Exchange rules, and several brokers and Realtors have indicated they think that trend could grow even more, perhaps above 50 percent over the next few years. In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date. Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of "like-kind," while deferring the payment of federal income taxes and some state taxes on the transaction. The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed. Therefore, it would be unfair to force the taxpayer to pay tax on a "paper" gain. The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property is ultimately sold, the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax. The following are answers to some commonly asked questions that WLJ presented to a couple of property acquisition specialists with the IRS. Q: What are the benefits of 1031 exchanges? A: A Section 1031 exchange is one of the few techniques available to postpone or potentially eliminate taxes due on the sale of qualifying properties. By deferring the tax, there is more money available to invest in another property. It’s like receiving an interest-free loan from the federal government, in the amount that would have paid in taxes. Any gain from depreciation recapture is postponed. Finally, properties can be acquired and disposed of to reallocate an investor’s portfolio without paying taxes on any gain. Q: What are the five types of exchanges allowed? A: They are: • Simultaneous Exchange: The exchange of the relinquished property for the replacement property occurs at the same time. • Delayed Exchange: This is the most common type of exchange. A delayed exchange is when there is a time gap between the transfer of the Relinquished Property and the acquisition of the Replacement Property. It is subject to strict time limits set by the U.S. Department of the Treasury. • Build-to-Suit Exchange: This technique allows the taxpayer to build on, or make improvements to, the replacement property, using the exchange proceeds. • Reverse Exchange: When the replacement property is acquired prior to transferring the relinquished property. The IRS has offered a safe harbor for reverse exchanges, which became effective Sept. 15, 2000. These transactions are sometimes referred to as "parking arrangements" and may also be structured in ways that are outside the safe harbor. • Personal Property Exchange: These are not limited to real property. Personal property can also be exchanged for other personal property of like-kind or like-class. Q: What makes up a valid exchange? A: First it must be said that certain types of property are specifically excluded from Section 1031. Among those exclusions are property held primarily for sale; inventories; stocks, bonds or notes; other securities or evidences of indebtedness; interests in a partnership; and certificates of trusts or beneficial interest. If property is not specifically excluded, it can qualify for tax-deferred treatment. Both relinquished and replacement property must be held for productive use in a trade or business or for investment. Taxpayers’ personal residences do not qualify. Replacement property acquired must be "like-kind" to the property being relinquished. In addition, relinquished property must be exchanged for other property, rather than sold for cash and using the proceeds to buy the replacement property. Q: How can all taxable gain be deferred? A: According to brokers, the value of the replacement property must be equal to or greater than the value of the relinquished property; equity in the replacement property must be equal to or greater than the equity in the relinquished property; debt on the replacement property must be equal to or greater than the debt on the relinquished property; and all of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property. Q: Can replacement property be converted to a primary residence or vacation home? A: Yes, but the holding requirements of Section 1031 must be met prior to changing the primary use of the property. There are no specific regulations on holding periods. However, it’s recommended that taxpayers hold replacement property for a proper use for a period of at least a year. Q: Are there time restrictions? A: A taxpayer has 45 days after the date relinquished property is transferred to identify possible replacement properties. The exchange must be completed by the date that is 180 days after the transfer of the relinquished property, or the due date of the taxpayer's federal tax return for the year in which the relinquished property was transferred, whichever is earlier. Q: What if replacement property isn’t identified within 45 days, or there is failure to close on replacement property before exchange deadline? A: If taxpayers do not meet time restrictions, the exchange will fail and taxes arising from the sale of relinquished property have to be paid. There are no extensions available! Q: What’s the limit on identified properties? A: There are three rules that limit the number of properties that can be identified. Taxpayers must meet the requirements of at least one of these rules. The three-property rule limits buyers to three potential replacement properties without regard to their value. The 200 percent rule allows an unlimited number of properties to be identified but their total value cannot exceed twice the value of relinquished property. The 95 percent rule allows people to identify as many properties as desired, but must also acquire replacement properties with an aggregate fair market value equal to at least 95 percent of all the identified properties. Q: Are 1031 exchanges limited to real estate? A: No. Any property that is held for productive use in a trade or business, or for investment, may qualify for tax-deferred treatment under Section 1031. In fact, many exchanges are "multi-asset" exchanges, involving both real property and personal property. — WLJ

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