Market Update:
5 Area Weighted Fed Cattle Price – The July 27, 2012 5-Area Weighted Fed Cattle live price was $114.20, a $1.36 increase from last week, with Dressed cattle slightly higher at $180-$181.
Wholesale beef prices dropped for the 6th week in a row with USDA Choice closing at $177.17, down $2.97 from the week prior. USDA Select closed at $170.32 down 0.41 from the week prior. The Choice-Select dropped to under $8.00.
Stocker and feeder cattle markets stabilized somewhat last week with feeders steady to $3 lower and stockers mostly steady.
Oklahoma City feeder cattle prices were steady to $3 lower this week with prices for medium and large frame #1 steers: 400-450# $159.00, 450-500# $147.50-$150, 500-550# $136-$157, 550-600# $131-$149.50, 600-650# $128.50-$147, 650-700# $123.50-$138, 700-750# $118-$137.25, 750-800# $129.75-$135.75, 800-900# $128-$136.25, and 900-1000# $118.50-129/cwt.
Cattle feeding margins improved slightly last week, but are still heavy in red ink. Feeders lost an average of $253.64 per head last week, which is a $16.67 improvement over the week prior. One year ago fed cattle sold for $108.29 with losses of $128.41 per head.
Average Packer margin for the week ending July 27, 2012 was -$12.99 per head, a $19.64 per head decrease from the week prior, putting packers back in the red after several weeks in the black.
Industry Updates:
Burke Teichert, former VP and General Manager of Deseret Ranches, stated that ranchers tend to be focused on productivity per cow, but that focus, coupled with selection for growth, hasn’t increased ranch profitability over the past 40 years. Teichert argues that profit per acre has actually decreased over the past few decades. He advocates that ranchers should change their thinking from profit per cow to profit per acre and think in terms of whole ranch revenue. This will certainly sound quite familiar to the “Herd Quitter†crowd, but Teichert states that when ranchers fail to account for all costs, things go downhill fast. He noted that when cows get BIGGER and produce more MILK, then ranchers are able to run fewer cows on the same acreage AND spend considerably more on feed and supplements. Teichert considers good fencing and water development as money well spent, having a good cost/benefit ratio. However, he cautioned that some cattle management techniques may not be as easy to cost justify. These include techniques that are commonly promoted in the industry, such as artificial insemination, estrus synchronization, individual animal ID and feed supplements. (I would certainly add equipment to that list.) Teichert insists that getting caught up in individual cow production or profit often results in fewer, bigger cows and poorer overall performance resulting in less profit per acre and larger supplement bills. He states that ranchers who focus on profit per acre will tend to gravitate towards the cow that is sized right for their environment. (I might add that if ranchers are seeking to maximize profit per acre rather than profit per cow, they might also want to consider additional complimentary enterprises such as adding small ruminants and/or poultry for a multi-species approach, grazing wooded areas, adding paid recreational opportunities or crop/livestock rotations.)
Recent Cattle Fax numbers show drought conditions now cover areas of the U.S. that comprise 70% of the U.S. cow herd. Those conditions range from moderate to exceptional drought, with 28% of the cow herd being impacted by exceptional drought. According to Cattle Fax, the ongoing drought has caused a $159 increase in the cost of finishing a steer, a price reduction of $168 per head for 550 lb calves, a $151 reduction for 750 lb calves, a drop of $107 for finished cattle, and a drop of $147 per head for cull cows. Meteorologists predict wetter conditions ahead for the southern third of the U.S., with slightly more moisture in the central and northern areas. The drought is already sending more yearlings than normal into the feedyards, but high grain prices have producers searching for alternatives. Small feedlot inventories are far behind 2011 inventories. In addition, feeders are keeping cattle longer, so the cattle are heavier when slaughtered. Cattle Fax anticipates corn prices to range from $6.50 to $8.00 in the foreseeable future.
The recently released USDA Agricultural Prices Report shows an increase in the overall farm price index since July 2011. The crop index advanced 9.4% while the livestock index decreased 0.7%. Corn prices are up $1.03 compared to July 2011, with hay up $14. The July average beef price is down $5.00 from June, but still $5.00 higher than July 2011. The index for prices paid for inputs is now 11 points higher than July 2011.
We may be witnessing what is akin to the Civil War in agriculture, as livestock organizations are pushing for the unwinding of the Renewable Fuels Standard thus putting livestock producers and finishers at odds with corn growers. These differences are starting to cause separation in farm organizations and challenging individuals to fight their own emotions. The EPA has mandated that 13.2 billion gallons of ethanol be produced for 2012, with 13.8 billion mandated for 2013. That amount of ethanol requires 4.7 to 4.8 billion bushels of corn. To date, 17 different livestock organizations, which include meat, poultry and dairy, have petitioned the EPA to waive those requirements until the corn supply improves, stating the wide-spread drought conditions and the subsequent rise in grain prices. These organizations state that producers will be forced to reduce the size of their herds and flocks, and that some will go out of business and jobs will be lost. They further state that these producer-level losses will have a ripple effect that will eventually cause severe harm to the economy of the country. The petition from the various groups states that the Renewable Fuels Standard EPA mandate creates an increase in corn prices of more than $0.80/bushel at a national yield of 156 bushels/acre, and an increase of $2.50 per bushel at a 135 bushel/acre average yield.
We all know that the industry has pushed “Black Hides†in beef cattle for more than two decades now, resulting in the vast majority of the U.S. cattle herd being black hided. What we may not realize is that a black hide is now a requirement for more than 80 branded beef programs certified by the USDA. This does, however, create supply issues for programs like Certified Angus Beef (CAB). According to Cattle Fax data, 63% of all cattle harvested are now black hided. Annual bull turnout now averages about 70% Angus bulls compared to bulls of all other breeds. In contrast, Canadian cattle are about 40% black and Mexican cattle are 20% black.
Crop conditions are similar to last week with only 24% of the corn crop rated as good to excellent and 48% rated as poor to very poor. Approximately 37% of the corn crop has advanced to the dough stage or beyond. In soybeans, 29% of the crop is rated as good to excellent with 37% rated as poor to very poor. Approximately 55% of the soybean crop has advanced to the pod-setting stage, indicating earlier than normal maturation. Analysts consider 2012 summer conditions to be the worst in 56 years. Additionally, 57% of U.S. pastures are now in poor to very poor condition compared to 36% in July 2011. Only 17% of U.S. pastures are in good or better condition.
Dr. Jude Capper presented a paper at the Cattle Industry Summer Conference, at a reception hosted by the Sustainable Beef Resource Center that stated that the industry’s ability to enhance performance and efficiency in beef production also provides environmental and economic benefits. Capper’s work involves using theoretical modeling to evaluate cattle production systems. Her two primary models are 1) cattle raised in a conventional production system which allows the use of four performance-enhancing technologies, such as implants, ionophores, MGA in heifers, and beta agonists, and 2) cattle raised conventionally, but not allowed the use of these four technologies. Her life-cycle analysis purports to include all inputs (land, feed, fertilizer, irrigation, drinking water, electricity, fuel, etc.). The research analyzed environmental and economic impacts and also measured global impacts of greenhouse gas production. Capper claims that without the use of performance-enhancing technologies, producing the same amount of beef in the U.S. would require an additional 10 million head, boosting annual slaughter rates by over 2.8 million head, 17 million additional acres, 81 million more tons of feed, 138 billion gallons more water, 8 billion more mega joules of energy, and 18.6 million more metric tons of greenhouse gas emissions. I am left pondering two things: 1) what would the model look like using grass fed beef as one of the modeling choices, and 2) do the two choices presented in Dr. Capper’s models encourage the production of bigger, higher milking cows that Burke Teichert states are the primary reason for reduction in ranch profit per acre?
The 2012 drought has many corn farmers pondering harvesting corn for silage as a way of salvaging something out of the damaged crop. This can certainly be a good strategy, but farmers must consider several factors. First, drought damaged corn typically yields less, even when chopped for silage, than normal corn. That means the economics of harvesting for silage vs. not harvesting must be considered. Drought damaged corn could have lower yields and lower nutrient value, although increased Crude protein and NDF digestibility have been noted in drought damaged corn. One of the most important potential issues though is the accumulation of nitrate-nitrogen in the corn plant. Corn silage with high nitrate levels can be deadly to livestock, causing asphyxiation and death. Additionally, corn silage with high nitrate levels can produce deadly nitrogen-based gases that are very dangerous to humans and livestock. When harvesting drought stressed corn for silage, always test the silage before feeding for nitrate levels and be extremely cautious around the silos, bunkers, etc. for at least three weeks after harvesting and ensiling.
Another potential problem is founder, especially in dairy cows, when livestock are fed drought-damaged corn silage high in nitrates. Founder, or laminitis, is a condition that adversely affects the cow’s feet causing lameness and off-feed problems. This condition may dramatically decreases milk production and result in the culling of affected cows.
Factors increasing the likelihood of nitrate accumulation: It is nearly impossible to predict the level of excess nitrates that drought-damaged corn silage may accumulate. However, here is a list of factors that contribute to increased nitrate accumulation:
- ·Nitrogen availability: The more nitrogen that is available to the crop increases the likelihood of excess nitrate accumulation. If the crop received application(s) of commercial fertilizer and/or manure, it is much more likely to have excess nitrate levels. However, the only way to be certain is to have samples of the silage tested to be certain of the exact levels of nitrate accumulation. Representative, fully ensiled samples of the suspect corn silage should be tested by a certified commercial laboratory to determine the level of nitrates before feeding to livestock. Corn silage samples may also be tested for nitrates at the Michigan State University Veterinary School’s Diagnostic Center for Population and Animal Health.
- ·Type of drought: Nitrate accumulation in corn plants tends to be higher when the drought is short and intense as compared with a longer and more sustained drought. Nitrate levels can also be high immediately after a drought-ending rain which results in rapid nitrate uptake if corn plants are still alive. In such cases, delaying harvest 3-4 days after the rain event allows enough time to pass for the living plant to convert excess nitrate into proteins.
- ·Cloudy weather: The enzyme that converts nitrate into proteins in the corn plant is less active in cloudy weather. Therefore, harvest should be delayed for several days following a period of cloudy weather.
- ·Nutrient deficiencies: If the corn plant is deficient in such nutrients as phosphorus, potassium and manganese the level of nitrate may be elevated. Such nutrient deficiencies result in higher levels of nitrate not because affected plants still take up nitrates but because of the nutrient(s) deficiency, growth and incorporation of nitrates into proteins is reduced.
- ·Plant age and plant part: The lower third of the stalk is the oldest portion of the plant and accumulates the most nitrates. Some experts recommend leaving 6-12 inches of stubble to reduce nitrate levels in the harvested corn silage. However, such a strategy lowers overall yield by 5-10 percent and is not necessary if management strategies are employed to dilute total ration nitrate level to < 1,000 ppm. Thus, Michigan State University does not recommend chopping corn at 12-16 inches above ground level.
- ·Frost damage: All corn, including drought-damaged corn, may have elevated levels of nitrate-nitrogen if harvested 2-6 days after a heavy frost. Such silage should be tested and treated with the same precautions as drought-damaged corn silage.
- ·Harvesting and utilization considerations: Here are some harvest and utilization guidelines producers should evaluate when considering harvesting and feeding drought-damaged corn as silage:
- ·Harvest moisture: Generally, in drought-damaged corn, moisture levels are much higher than they appear to be upon field inspection. Even though drought-damaged corn may appear “fired up†and quite dry, it still may contain over 70 percent moisture. Thus, as long as plants are growing allow them to continue to grow and accumulate biomass. Corn plants that do not have grain will generally still yield one ton of 30 percent dry matter per foot of plant height. Therefore, even if plants are devoid of grain and continue growing, delay harvest until the crop reaches the recommended harvest moisture level consistent with the type of storage structure. Proper moisture levels for harvest are: 68-70 percent for bunkers, 60-68 percent for upright silos (sealed and non-sealed), 60-68 percent for silage bags. Visual inspection and/or rules of thumb are very inaccurate in predicting whole plant moisture levels, therefore, the only way to accurately determine moisture level is to take a representative sample and use a microwave or Koster Tester to determine dry matter. Do not take samples from headlands as they usually are not representative of the entire field. Ensiling corn silage reduces nitrate levels 25-50 percent, but all silage should be specifically tested for nitrate levels. Once drought-stressed corn plants quit growing, dry down occurs very rapidly, especially if the weather is hot and dry with strong winds.
- ·Harvest considerations: Try to harvest on bright sunny days when nitrate conversion to protein is high. Do not harvest for at least 3-7 days after soaking rain that follows an extended period of dry weather since nitrate accumulation will tend to be higher and the crop needs time to convert these absorbed nitrates into protein.
- ·Ration formulation: Make sure the total ration does not exceed 1,000 ppm nitrate-nitrogen. Silages with nitrate-nitrogen levels up to 4,400 ppm can be fed if diluted to obtain the overall total ration nitrate-nitrogen of no more than 1,000 ppm nitrate-nitrogen. Testing for nitrates should not be performed until the silage has completed the fermentation process (~4 weeks). All laboratories do not express total nitrate-nitrogen in the same manner. Table 1 contains multiplication factors to convert various nitrogen compounds to nitrate-nitrogen.
In The News:
The movement towards the elimination of gestation crates in swine production continues to increase at a feverish pace. Over the past few weeks, we have seen a large number of retailers, food service giants, and further processors jump on the bandwagon. The pork industry is now trying to evaluate the cost of removing gestation crates from their system. Analysts believe that the long phase-out period that will take place over the next 10-15 years will allow producers to adjust and get most of the useful life out of current equipment. One the primary concerns facing pork producers is the need to keep sows separate after farrowing and while in early pregnancy to keep them from fighting. The fighting that usually happens in group housing can cause injury to the sows and death loss for the embryos. The challenge will be how to house the sows in a manner that discourages fighting and preserves pregnancy status.
Beef and Beer! The new combination now being promoted with Beef Checkoff dollars! In case you have not heard, the Beef Checkoff program has partnered with Corona to promote the combination of beef and beer during the summer. The new partnership will give consumers a mail-in rebate of up to $10 off a fresh beef purchase with the purchase of Corona Extra or Corona Light. This promotion will include in-store displays. This is bound to open a can of worms and encourage much debate among beef producers about how checkoff dollars are being spent. It will be interesting to see what transpires over the next few weeks.
Cattle feeders and ethanol manufacturers are not the only ones feeling the pain from the recent rise in crop prices. Integrated pork and poultry companies, as well as cereal manufacturers are also feeling a severe pinch. Each will have a hard time passing along all the cost increases to the consumer. Their only other alternative though would be to lower production. If production is lowered, then corn demand will be reduced as well.
Recently, there have been two outbreaks of Influenza A (H3N2) variant virus in humans in Ohio and Indiana. These outbreaks are supposedly traced back to contact with pigs at county fairs. Genetic testing confirms that several people who have become ill have strains of the virus that is identical to the virus found in swine at a county fair in LaPorte, IN. The H3N2 influenza variant is not any more virulent than the typical flu virus and not a life-threatening situation for healthy adults. However, each outbreak can potentially lead to mutated strains that are more virulent.
The Consumers Union has sent a letter to congressional leaders as a rebuttal to letters sent from the American Meat Institute, North American Meat Association and others who are challenging the Consumer Reports’ “Meat on Drugs†article. The Consumers Union states that their “Meat Without Drugs†campaign was initiated because antibiotic resistance has become a major issue in humans. The 8-page letter was sent to ranking members of both the House and the Senate Ag committees. See the following link for the entire letter:
http://www.consumersunion.org/pdf/CU_Rebuttal_to_Industry.pdf
