Allen’s Cattle Industry Update 3-16-2012

 

Market Update:

5 Area Weighted Fed Cattle Price – The March 6, 2012 5 Area Weighted Fed Cattle live price was $126.75, with Dressed cattle at $201 – $202.

Cattle feeding margins declined approximately $38 last week as fed cattle prices dropped $3.00. One year ago fed cattle sold for $117.98 with feeders margins approaching $268 per head.

Average feeder margins for the week ending March 3, 2012 were $75.27 per head, providing feeders with a continued profit margin increase.

Average Packer losses for the week ending March 3, 2012 were $45.56 per head continuing their week after week posted losses. However, this was a significant improvement on previous week’s losses.

Industry Updates:

The USDA World Agricultural Supply and Demand Estimates (WASDE) state that US Beef supply will shrink even more than expected in 2012. The WASDE report expects beef imports to increase in 2012 but not enough to offset lower production and export demand. The March 2012 report estimates U.S. beef production for the month at 25.14 million pounds compared to 26.31 million pounds for March 2011. Per capita beef supplies are projected to be 54.9 pounds for 2012 compared to 57.3 pounds in 2011 and 59.6 pounds for 2010.

Kansas State has unveiled plans for a new Sheep & Meat Goat Center. The almost $2 million center will be used as a teaching unit and for extension based producer education programs.

The drought that has severely impacted the Southern Plains of the U.S. has also impacted Northern and Central Mexico. Conditions there are grave and significant herd liquidation is taking place. Approximately 1.42 million head of Mexican cattle were imported into the U.S. in 2011 as a result of drought conditions in Mexico. This is the largest annual importation of Mexican cattle into the U.S. since 1995. At question is what the import numbers will be for 2012 as a result of ongoing drought and what will future import numbers look like as the cattle population continues to decline in Mexico. If their cattle numbers drop significantly will U.S. beef exports to Mexico rise accordingly (currently exporting 488 million lbs annually)?  

In The News:

Tyson has announced that it is increasing the company’s supply of Local Beef through their existing Open Prairie Natural Angus beef brand. Tyson is harvesting cattle that are “locally raised” (within 60 miles of the processing plant) at both their Pasco, WA and Lexington, NE plants. Tyson’s Open Prairie Natural Angus brand is a “no hormone”, “no antibiotic” product. Tyson stated that they are “pleased to produce beef so close to where it is sourced”. They indicated that “local” production reduces transportation, minimizes animal stress, and helps with high quality beef production. The questions are: 1) are the cattle really raised “locally” from birth or are they simply finished within 60 miles of the processing plants, and 2) how “local” will Tyson keep the beef market?

The USDA stated that sales of “Local Foods” totaled $7 billion in 2011. This is up from $4.8 billion in 2008.

A corn grower near Charles City, VA is the new corn yield champ having produced 429 bu/ac irrigated corn. David Hula won the 2011 National Corn Growers Yield contest using intensive no-till management. David and his family have practiced continuous No-Till since the 1980’s. They make extensive use of cover crops and crop rotations which help minimize insect and disease pressures and improve soil health.

Sales of Fair Trade certified products rose significantly in 2011. According to Fair Trade USA sales jumped more than 75% between the first quarter of 2011 and the fourth quarter of 2011.

The “Pink Slime” controversy is really heating up. For those who are not familiar with this issue, Pink Slime as defined by the American Meat Institute (AMI) is “Boneless lean beef trimmings (BLBT, also known as Lean, Finely Textured Beef (LFTB)) is a safe, wholesome and nutritious form of beef that is made by separating lean beef from fat. To make the product, beef companies use beef trimmings, the small cuts of beef that remain when larger cuts are trimmed down. These trimmings are USDA-inspected, wholesome cuts of beef that contain both fat and lean and are nearly impossible to separate using a knife. When these trimmings are processed, the process separates the fat away and the end result is nutritious, lean beef. It’s a process similar to separating cream from milk. One process uses food grade ammonium hydroxide gas, something commonly used in the production of many foods, to destroy bacteria. Whatever process is used, it is all done under the watchful eye of USDA inspectors and according to strict federal rules. Lean finely textured beef is blended into foods like ground beef. Producing BLBT ensures that lean, nutritious, safe beef is not wasted in a world where red meat protein supplies are decreasing while global demand is increasing as population and income increases.”

This issue has been around for some time, but as consumers have learned more about it, it has become a “hot button” issue. The fact is that this product has been a staple of hamburger used in school food programs and was being used extensively in the fast food industry (QSR) until most pulled it because of negative customer reaction. One of the primary issues is that most of this product has also been treated with ammonium hydroxide to reduce incidence of pathogens. My take on this matter is that the consumer will make the choic; they just want to be informed of what is in their products especially as it impacts their children.

Harvard School of Public Health has released a study that states that consumption of Red Meat and processed meat products is associated with an increased risk of mortality from cardiovascular disease and cancer. The study supposedly observed over 37,000 men for 22 years and over 80,000 women for 28 years. In the study, dietary habits were assessed every 4 years via a survey of the participant’s eating habits. The study purports that one 3 oz. serving of unprocessed red meat increases risk by 13% and one daily serving of processed red meat increases by 20%. At question is whether an “association” means direct “cause and effect”. The Harvard study can only look at potential associations and not discern “cause and effect”. The fact is that the study is simply not designed to determine direct cause and effect. What the study fails to account for are all the other items in a person’s diet and how their proportion has changed over the 20-28 years of the study. How has the proportion of processed breads (read refined carbs), condiments, sauces, chips, fries, soda, etc. increased or decreased? Most fast food companies still ask if you would like to “upsize” your order with additional fries, chips, or a larger soda.

McDonalds has recently praised many of their suppliers for their accomplishments in Sustainability. McDonalds has published 51 stories about ways supply chain partners are “addressing challenges to help improve food sources, the environment, communities, and employee wellness…”. Specific companies singled out for recognition include Tyson Foods, Cargill, JBS USA, OSI Food Solutions, and Kraft Foods.