Market Update:

5 Area Weighted Fed Cattle Price – The October 19, 2012 5-Area Weighted Fed Cattle live price was $126.24, with Dressed cattle at $195 – $198.

Wholesale beef prices were up $5.35 compared to last week, with USDA Choice beef trading at $196.80. USDA Select traded up $2.90 at $180.37, putting the  Choice-Select spread at $16.43

Retail beef demand rose during August and was 1.5% greater than August 2011. However export demand for beef was down over 14% compared to August of last year. September beef retail prices in the grocery store averaged $4.94 per pound.

The latest USDA Cattle on Feed report shows September feedlot placements down almost 19% compared to last year at this time. September marketing’s were also down over 11%.

Feeder cattle traded even to $3 higher as numbers of feeders dwindle. Stockers were uneven once again, with calves trading anywhere from $3 lower to $5 higher across much of the U.S. Slaughter cows and bulls were unevenly steady from the week prior.

Cattle feeding margins saw feeders losing an average of $35.60/head last week, a slight improvement over the week prior. One year ago fed cattle sold for $120.47 resulting in losses of $8.86/head.

Average Packer margin improved $13 from the week prior with packers losing an average of $48.54 per head.

Industry Updates:

According to Dr. Chris Hurt, Extension Ag Economist at Purdue University, cattle prices will continue to rise in 2013. Dr. Hurt indicated that the 2012 drought will play a major role in keeping cattle prices at or near record highs for the next year. According to the U.S. Drought Monitor, drought conditions are still prevalent covering over 62% of the continental U.S. This is creating situations where producers are short on forage and hay, forcing many to take cows to town. Cow numbers are expected to be yet another 2-3% lower come January 2013. One thing that is sure to have an impact is the fact that feedlot cattle placements dropped sharply for September 2012. Hurt reports that this is the lowest placement number since 1996. As a result, fed cattle prices may reach the high $130’s in 2013 and are expected to average in the low $130’s for the year. Additionally, Hurt predicts a much larger U.S. corn and soybean crop for 2013. This may create significantly higher calf prices for the Fall of 2013.

The recent recall issues surrounding the Canadian XL Foods plant in Alberta has created an opportunity for JBS USA. JBS has struck a deal to first manage XL Foods four plants, feedlot, and farmland, then purchase for $100 million. For JBS this is a “no brainer” deal. The purchase price is so low that it virtually assures JBS of a no loss deal. The proposed purchase would give JBS 45% of the Canadian beef processing capacity. JBS has made a practice of acquiring distressed companies. They did the same a while back with the purchase of Pilgrim’s Pride Poultry company when Pilgrim’s Pride was in bankruptcy. Since JBS already has extensive US holdings, the Canadian acquisition would position JBS well for agility in the North American beef market.

North Dakota State University has completed recent research looking at various alternative livestock feeds. The study concentrated on the utilization of Field Peas, Hull-Less Barley, and Dried Distillers Grains (DDGs). The researchers concluded that feeding DDGs to cattle in backgrounding lots that were on a forage based diet (medium-quality hay) increased growth and dry matter intake and decreased the amount of time cattle spent consuming hay. Additionally, the scientists examined the effect of alternate day feeding of DDGs on cattle that were on a forage-based diet as a way to potentially reduce feed costs. They found that the alternate day feeding altered forage intake and rumen VFA concentrations, but did not impact digestibility. The studies did find that feeding field peas to cattle in a feedlot situation was an excellent choice and that field peas work well in a finishing diet. They also did beef palatability studies and found that field peas did not have any adverse effect on meat quality. However, they were expecting a slight increase in beef tenderness by feeding field peas, but the data indicated no impact on tenderness. Hull-less barley was found to be a viable small grain for finishing cattle in the feedlot. The research showed that substituting hull-less barley for corn at varying levels did decrease overall feed intake, but gains were not affected and feed efficiency was improved. The full study is available at http://www.ag.ndsu.edu/cattledocs/research-reports.

World beef production is expected to increase 0.6% to over 57 million metric tons in 2013. This increase will be fueled primarily by growth in India’s beef output. It is estimated that India now has more than 327 million cattle, which is by far the world’s largest cattle population. Brazil is number 2 at 204 million head, with the U.S. having just under 90 million head. India is now poised to be the 4^th largest beef producer and the largest beef exporter in the world. The U.S. will remain the world’s largest beef producer despite our lower inventory numbers.

The most recent USDA Cattle on Feed report was just released and the results show that feedlot placements are down a staggering 19% from this time last year. As a matter of fact, placements are at their lowest point since 1996. Cattle on feed were estimated at 11 million head, down 3% from a year ago. Additionally, fed cattle marketing’s were about 12% below September 2011 figures. This is the second lowest cattle marketing number since 1996.

In The News:

The Consumers Union, a division of Consumer Reports has announced its support for legislation that would help the FDA gain a greater understanding of how alleged overuse of feed grade antibiotics in livestock production is hampering the effectiveness of antibiotics in people. The legislation aims to increase funding for studies that will more reliably determine the amount and type of each antibiotic used in food animal production. The proposed bill is termed the “Delivering Antibiotic Transparency in Animals (DATA) Act” and intends to require drug companies to disclose to the FDA how their specific antibiotics are used in food animal production, require feed mills to report what types of antibiotics and in what amounts are used in their animals feeds and improve the timing and quality of data reported by the FDA. The bill would limit the reporting requirement to only food producing animals most frequently consumed in the U.S. and only for antibiotics that are important in human medicine.

On November 6, 2012 millions of Americans will head to the polls to elect our nation’s leaders. This election will have a significant impact on the future of agriculture in the U.S. and every decision made will either strengthen agriculture or weaken it. Beyond the huge issues such as the Farm Bill, there are also state and local initiatives that can impact the future of agriculture in the U.S. In North Dakota, two ballot measures are up for voter approval or disapproval. The first is termed Measure 5 or the North Dakota Prevention of Animal Cruelty Initiative 2012. This measure would make it a felony for an individual to “Maliciously” harm a cat, dog, or horse. This measure is heavily funded and supported by the HSUS. However, it is heavily opposed by the North Dakota Stockman’s Association. The other ballot measure is Measure 3 or the North Dakota Farming and Ranching Amendment 2012. This measure is sponsored by the North Dakota Farm Bureau and would require a constitutional amendment that would block any law that “abridges the right of farmers and ranchers to employ agricultural technology, modern livestock production and ranching practices”. The North Dakota Feeding Families organization supports the measure stating that it would keep food choices abundant, safe, and secure.

A French study that claims to have provided evidence that GM corn causes cancer in lab rats has been condemned by six French scientific academies for faulty reporting and statistics. The study supposedly found that rats fed NK603 Roundup Ready corn developed cancerous tumors. A joint statement released by the French Academies of Science for Agriculture, Medicine, Pharmacy, Science, Technology, and Veterinary Studies states that “the work does not allow any reliable conclusion to be drawn and spreads fear among the public”. The six academies have dismissed the study as a “scientific non-event”.

California’s Proposition 37, which would require labeling of foods containing GMO ingredients, is experiencing dwindling support. Opposition to the ballot initiative has raised millions of dollars to support advertising that encourages California voters to vote against the Prop 37. Early on, the measure appeared to have enough support to pass, but late opposition has been successful in convincing voters to vote “No”. Whole Foods and Dr. Oz, among others, have publically supported the measure, but food and beverage companies such as Kraft Foods, Unilever, Smithfield Foods, Pepsi, Coco-Cola, Campbell Soup, and General Mills have opposed the measure and have contributed major dollars to defeating the ballot initiative. In a “Vote No to Prop 37” campaign ad, there was a supposed statement by the FDA that said, “The US Food and Drug Administration says a labeling policy like Prop 37 would be inherently misleading”. The only problem is the FDA did not make this statement and is prohibited from taking a position.

The American Academy of Pediatrics released a report that addresses evidence on the benefits of organic foods. The report is designed to help pediatricians in advising families on eating habits that include organic foods. The report is titled, “Organic Foods: Health and Environmental Advantages and Disadvantages”. The report states that organic diets have been effective in reducing consumer exposure to pesticides and other chemicals used in conventional agriculture and that organic farming appears to have a lower environmental impact compared to conventional farming practices. However, it also states that there is no direct evidence that nutritional content of organic foods are greater than the nutritional content in conventional foods, nor does an organic diet necessarily confer better health benefits or disease protection. The report does admit that the studies to date may have been limited due to inadequate controls for many different potential confounders.

Tagged as: allen williams, feeder margins, grass fed beef, grass finished beef, grassfed, grassfed beef, packer margins

Market Update:

5 Area Weighted Fed Cattle Price – The October 12, 2012 5-Area Weighted Fed Cattle live price was $124.26, with Dressed cattle at $192 – $193.

Wholesale beef prices were up almost $2.00 with USDA Choice beef trading at $191.67. USDA Select traded down slightly at $177.04, putting the  Choice-Select spread at $14.63.

Feeders and stockers were uneven for a second week with markets anywhere from $8/cwt lower to $8/cwt higher depending on region. The closer to wheat country, the better the prices. Slaughter cows and bulls were mostly steady from the week prior.

Cattle feeding margins saw feeders losing an average of $38.10/head last week. One year ago fed cattle sold for $118.99 resulting in profits of $21.38/head.

Average Packer margin experienced another $9/head decline with losses averaging $61.45/head.

Industry Updates:

Tyson Foods has announced a new company-wide animal welfare auditing program that will monitor humane animal handling by their more than 12,000 livestock and poultry farmers. Tyson established the program in response to consumer calls asking for assurance that the food processed by Tyson is processed responsibly. The new program is named “FarmCheck” and is currently being tested on 3,000 hog farms. The program monitors things such as animal access to food and water, worker training, and human-animal interaction. Tyson states that the program will eventually involve independent 3^rd party auditors. They intend to expand the program to poultry and cattle farms in 2014. Tyson also announced that they will develop a Farm Animal Well-Being Research Program that will “lead to improvement in animal raising methods”. Dr. Temple Grandin is heavily involved in the development and implementation of this program and stated that “This program makes it very clear that mistreatment of farm animals will not be tolerated”. Walmart has stated that Tyson’s FarmCheck program is in line with their commitment to ethical food sourcing. However, the Humane Society of the United States (HSUS) stated that Tyson has not addressed the use of gestation crates in pork production – an issue that HSUS sees as the most pressing in the livestock sector.

Starting January 2013, Texas will require that all adult beef cattle in the state of Texas have some form of approved permanent identification whenever animals change ownership. This new ruling was approved by the Texas Animal Health Commission (TAHC). The rule states that any animal 18 months or older must have a TAHC approved ID prior to change of ownership. The rule is designed to allow for full traceability in the case of disease outbreak.

The massive beef recall that originated from Canada’s XL Foods has spurred renewed talk about food irradiation. Public health officials have cleared irradiation for many different types of foods, including meats, but public opinion is still the primary factor preventing irradiation from being implemented in most meat processing plants. Frankly, irradiation is quite controversial with consumers, adds costs to the end products, and creates logistical issues. This is an example of something that looks good in the lab but simply will not work in the marketplace. Consumers have spoken loud and clear and they are saying that they want nothing to do with irradiated meat. Simply the term “radiation” is something that consumers want nothing to do with.

Texas A&M announced that they have developed a new lab test called “In vitro True Digestibility Analysis” that will provide a “truer” picture of warm season forage digestibility in cattle. The test utilizes the animal’s rumen fluid to determine actual breakdown of the forage components. Proponents state that this test will provide ranchers with a better determination of when to supplement their cattle.

South Dakota and Nebraska officials are reporting incidents of large deer “die offs”. The reported cause is Epizootic hemorrhagic disease (EHD) which is described as an acute, infectious, often fatal, viral disease that impacts wild ruminants. The disease is spread by biting insects and is fatal to white-tailed deer. It can also be spread to domestic livestock. However, veterinarians state that the disease is rarely fatal in beef cattle and can be cleared up with appropriate antibiotic treatment. Once contracted by cattle, the disease causes sores in the mouth and some lameness. Cattle don’t want to eat and they have difficulty moving around. The incidence of the disease usually subsides after the first hard frost as the biting insects are killed off.   

In The News:

Will Harris and White Oak Pastures have been recognized as a “successful food hub” in a recent University of Georgia study. A food hub is defined as an “organization pulling together 5 or more small to mid-sized farmers and pooling product in order to fill large wholesale orders”. White Oak and their cooperating farmers supply Southeastern Whole Foods Markets and Publix supermarkets with grass fed beef. The study found that there is a strong demand for local foods and the formation of food hubs is a good way to aggregate and distribute local foods to the marketplace. The study identified 24 different food hub efforts in the Georgia area.

Elevation Burger, a Falls Church, VA-based company, now has 29 locations. The “better burger” concept chain serves only organic, grass fed beef at all its locations. The beef is ground fresh each day at all locations and the French fries are cut fresh each day and cooked in 100% olive oil. Elevation Burger currently has locations in 9 different states and in the Middle East.

For almost 20 years now, I have been talking about the validity of offering a number of different types of beef to the consumer and I have not been talking about USDA Choice vs USDA Select. Rather, I have been pointing out that the consumer prefers choice in their beef products. As an industry, we have seen antagonistic reactions to anything other than “generic” beef. Many within the industry have had the attitude that “beef is beef” and that we would somehow damage the industry if we offered various types of beef that featured attributes which appeal to various consumer segments. Their consistent argument has been that if we distinguish between one type of beef and another and that if claims are made stating that one is better for you than the other, then we would be confusing the consumer. When All Natural beef first appeared on the scene, the mainstream industry argued that it was just a fad, too expensive, the hormones and antibiotics were a must. Many predicted that All Natural beef would die a “natural” death. So where are we today? All Natural beef demand has grown exponentially and every packer/distributor that wants to capture decent market share offers an All Natural beef product. The grass fed beef sector has experienced the same pushback and I have heard many of the same comments that I heard 20-25 years ago concerning the All Natural sector.

What is my point? It looks like attitudes are starting to shift and that even those entrenched in the “traditional” beef industry are starting to recognize the power of multiple products that appeal to a broad spectrum of consumers. Virtually every other industry operates in this fashion. GM and Ford do not make a single model of vehicle with a single price point. They make everything from small, low cost cars to very expensive models. Their advertising clearly distinguishes the attributes or differences between the models. We must do the same within the beef industry if we are to capture additional market share.

This week, as I was doing my daily reading, I came across an article in Drovers Cattle Network, written by John Maday. The article was titled, “Beef: It’s All Good”. In the article, Mr. Maday points out that consumers have varying preferences and that the beef industry should accommodate those preferences. He states that consumers have different priorities for why they purchase food products, including beef. Some simply want beef items that are low cost, some want high quality in the form of a well-marbled product. Others are looking for beef that fits their value system. There have been many surveys over the past few years that have clearly delineated that consumers have many concerns and they vote with their food dollars in line with their concerns. These concerns may include food safety, environment, animal care & welfare, human health. So, in seeking beef products that fit their value system, some consumers prefer organic beef, all natural beef or grass fed beef. Maday points out that the diverse nature of the beef industry allows for the production of many different types of products that fit a wide range of consumer preferences.

At the recent Beef + Transparency = Trust Conference, beef produced in a number of ways was presented to the participants for a “taste testing”. Beef choices were prepared by chefs and all were prepared in a similar manner. All were seasoned with salt and pepper and cooked to medium rare degree of doneness. In addition, meat scientists even discussed the various production methods and talked about how those production methods may influence flavor and palatability. Samples included dry aged beef, CAB, Wagyu, USDA Prime and even grass finished beef from Uraguay. Maday’s opinion on the grass fed beef was that it was very tender with an intense beef flavor. He did state that the grass finished beef did not have any “grassy” or “gamey” flavor. He also pointed out that the grass finished beef was a product of British genetics selected for generations for performance on forage and that they were finished on very high quality grass and legume pastures. Maday’s conclusion was that each beef sample had its own good points and all would be appealing to certain consumer segments. His concluding statement was that “luxury of choice” allows the American consumer to be able to select the attributes they prefer in their beef products. My concluding statement is that this “luxury of choice” is a very good thing and will grow total beef market share.

Tagged as: allen williams, feeder margins, grass fed beef, grass finished beef, grassfed, grassfed beef, packer margins