Allen’s Update: May 3, 2013

Market Update:

5 Area Weighted Fed Cattle Price – Last week’s 5-Area Weighted Fed Cattle live price was $128.07, with Dressed cattle at $202 to $204. 

Wholesale (Boxed Beef) prices closed on April 26 higher than the week prior with USDA Choice beef trading at $192.89 and USDA Select beef traded at $184.43.  The Choice/Select spread was $8.46.  However, by the week of April 29, boxed beef had set a new all-time high at $201.68 for USDA Choice beef.  The old record high was $201.18 set on October 2003.  This new high was set amid a late start to grilling season coupled with supermarkets stocking up for the Memorial Day weekend.  About $370 million in beef is expected to be sold at retail for Memorial Day weekend. 

Retail beef prices also hit a new record high in March 2013 at $5.30/lb.  This smashes the record set just a few months back, in November 2012, of $5.15/lb. 

Feeder and Stocker cattle traded sharply higher last week, continuing the up and down ride that the industry has experienced over the past several weeks.  Calves and Stockers traded $5 to $10 higher with Feeders trading mostly $2 to $6 higher.  However, calves in the Southeast traded anywhere from $3 higher to $3 lower.  The trend in rising prices should stay strong to steady with warmer temperatures and rapid grass growth.  Slaughter cows were $2 lower with bulls steady.   

Cattle feeding margins improved last week with average feedyard losses were $49.25 per head.    A year ago, fed cattle sold for $118.63 with losses of $107.33 per head. 

Average Packer margin improved as well increasing nearly $6 per head.  Average packer losses for the week were $52.34 per head.      

Industry Updates:

Tallgrass Beef Company and Buedel Fine Meats, a Chicago processor, have signed a deal to market a frozen burger for retail sale.  The frozen burgers are being distributed by Delhaize to Food Loin, Hannaford, and Sweetbay supermarkets at a suggested retail price of $9.99 for a box of four patties.  Frozen hamburger patties have been a staple for years at retail grocers, but this market has only been lightly penetrated by grass fed beef.  Bill Kurtis, Founder and Chairman of Tallgrass Beef Company, stated that, “This new product line provides Delhaize customers with the ability to show support for animals raised naturally and devoid of hormones and antibiotics.  The appetite for local and sustainable foods is exploding”.  Buedel has been in business since 1907 and supplies grass fed, dry aged, naturally raised meats for foodservice.  In related news, Hearst Ranch, a long time grass fed beef producer located in California, has signed a new deal with Whole Foods Markets to supply grass fed beef to Whole Foods stores in the western region of the U.S. 

A recent study just released by Charleston-Orwig, and advertising agency and Datassential, a research firm, asked consumers and food operators about locally sourced foods.  The survey posed questions to2741 consumers and 320 food operators.  Findings show that definitions of the term “Local” vary quite a bit.  The survey showed that 58% of consumers believe local ingredients must be used for a national brand to be considered locally sourced, while 17% state that a national brand could never be considered local.  Almost 27% said that a national brand could be considered local if sales helped the local economy.  The survey also revealed an age gap in defining “local”.  Younger respondents believed local means food products sourced less than 15-20 miles from their home, while older respondents were not very concerned about distance the food traveled, but preferred that the foods supported the local economy and were produced on small farms.  In the restaurant, 82% surveyed stated they were more likely to select an item on the menu if it was identified as being “locally sourced”.  However, a full 58% of all food operators (distributors) still do not offer any locally sourced or farm identified items.  However, consumers still favor food safety, price, and quality as top priorities for making food purchases.  Both the consumers and the food operators placed food safety at the top of their list and consider this attribute more important than where the food is sourced. 

There has been a considerable gap in opinion about beef cattle grazing grasslands between ranchers and environmentalists and conservationists.  Many environmentalists and conservationists believe cattle are the enemy and should be banned from the range.  For example, the Center for Biological Diversity, based in Arizona, states that “The ecological costs of livestock grazing exceeds that of any other western land use.  By destroying vegetation, damaging wildlife habitats and disrupting natural processes, livestock grazing wreaks ecological havoc on riparian areas, rivers, deserts, grasslands and forests alike – causing significant harm to species and the ecosystems on which they depend”.  Representatives at the center also say that cattle “reduce once-lush streams and riparian forests to flat, dry wastelands; once rich topsoil to dust and cause wholesale elimination of some aquatic habitats”.  Many environmentalists feel that the fees that ranchers pay for access to public lands grazing are too low and amount to a subsidy for ranchers.  However, Pima County Arizona has been developing a comprehensive Multi-Species Conservation Plan (MSCP) that addresses a number of contentious issues, including cattle grazing on public lands.  Pima County is largely publically owned and includes several Native American reservations and National Forests.  The MSCP is a coalition of real estate and mining representatives, ranchers, environmentalists, Native Americans, and other community groups.  The coalition aims to reach a reasonable balance between cattle grazing and habitat protection for more than 44 threatened species of plants and animals.  The plan calls for land previously planned for development to be set aside as open space, and ecological monitoring of the condition of vegetation, water resources, and wildlife populations.  Because it takes large tracts of land to raise cattle in Arizona, public lands grazing is a necessity for ranching to survive.  The MSCP is taking the viewpoint that cattle are not a blight on the rangeland, but rather potentially its salvation.  Allan Savory’s 2012 article titled, “The U.S. Drought – A Manmade Natural Disaster”, states that “If you sample the land from the best conventionally managed ranches, no matter how good the grassland might superficially appear, anywhere from 50% to over 90% of the soil is bare between grass plants.  This guarantees ever-increasing frequency and severity of droughts”.  Allan Savory if one of the world’s greatest proponents of using large ruminants to restore damaged grasslands.  Savory goes on to explain that with too few large livestock on the land showing unnatural behavior with no predator pressure leads to over-resting the land while overgrazing the grass.  He states that “resting” rangeland is the worst conservation strategy that can be employed for areas with low rainfall and long dry seasons.  However, The Center for Biological Diversity insists this is the only valid prescription for healing rangeland.  Savory states that without the livestock impact, much of the rainfall that does occur tends to simply run off, failing to penetrate the soil and nourish the grass.  He calls this a “pastoral drought”, meaning that it is not always the lack of rainfall that causes drought, but the lack of water infiltration into the soil.  Savory strongly believes that the remedy is to manage rangeland by adding more cattle and grazing those cattle intensively, allowing access to areas where their strategic grazing can promote thriving local vegetation.