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News
Snow And Ice Continue Altering
Market
It's been a while since Mom Nature threw a wrench like
this one into the infrastructure of the cattle business.
Starting with last month's first Colorado blizzard that tagged parts of
other states, cattle losses began to mount. According to firsthand
estimates, death loss in affected feedlots was running 1 to 4 head/1,000
head due to the storm. That was immediate; more losses are expected for
the next several weeks due to the extreme stress. This doesn't take into
account the cows and calves lost, nor factor in anticipated losses of
this year's expected calf crop.
Short-term that should mean fewer fed cattle ready for market than
anticipated when those feeders were placed. That's due to death loss and
stress-impaired performance. Longer term, it could also further slow
herd expansion.
"Boxed-beef prices have jumped sharply the last two weeks, mainly a
result of limited availability of fed cattle which has reduced
slaughter," Derrell Peel, Oklahoma State University livestock economist,
says in his market comments last week. "Packer margins have improved and
packers should be aggressively chasing available fed-cattle supplies in
the coming weeks. Market-ready supplies of fed cattle have been reduced
by death loss and poor feedlot performance. Many feedlot cattle lost
weight in the storms and are barely maintaining weight under cold, wet,
sometimes muddy, conditions that will continue for some time. Slaughter
and carcass weights will be lower for some weeks and January fed-cattle
marketings will certainly be less than previously expected."
Higher boxed-beef prices have yet to boost fed cattle though, as packers
have reduced slaughter levels (see Markets section).
Add to that the bearish impact of escalating corn prices (see
Crops/Weather) and the fact cattle feeders are coming off of their worst
year on record.
According to the Livestock Information Center (LMIC), "Average monthly
losses per steer sold in calendar year 2006 were about $75/head. For the
year, only three months had positive returns (January, August and
September) and five sale months had losses exceeding $100/steer."
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Stocker Nutrition
DDGs Stocker Supplementation Shows
Potential
"I'm very much enthused about using dry distiller's
grains (DDGs) to produce more beef on a fixed-land base. The caveat will
be to see what previous supplementation does to subsequent wheat grazing
gains. We'll have some data on that in the spring," says Jim MacDonald,
a Texas Ag Extension Service (TAES) beef nutritionist.
Though MacDonald expects the majority of DDGs produced via ethanol to be
used by feedlots and dairies, he believes the sheer volume of
availability will provide stocker opportunity, too. More specifically he
explains the most promising opportunity may be in the situation where
lightweight calves are held for a couple of months before they go onto
wheat.
With that in mind, MacDonald and TAES conducted a summer grazing study
using heifers averaging 600 lbs. which compared feeding 3 lbs. of
DDGs/head/day (about 0.5% of the animal's body weight) to no supplement.
Calves receiving the supplement gained 1/4lb./day
more than those not receiving it.
In a study where DDGs was used as supplement on fall dormant range,
steers weighing about 400 lbs. received 1lb., 2 lbs. or 3 lbs./head/ day
of DDGs. Compared to calves receiving no supplement, MacDonald says gain
improved from just over 1/2 lb./head/day at the
1-lb. supplement rate to 1¾ lbs./head/day at the highest level of
supplementation.
"However, the effect was quadratic in that the more you supplemented,
the incremental gain was lower," MacDonald explains. "In other words, at
the 1-lb. rate, the efficiency of gain was about 50%, where at the
highest rate, it was 40%."
During the summer trial, the efficiency was only about 10%, he says,
because both sets of animals were eating well on grass and the
supplementation did not make as big a difference.
Of course, MacDonald points out the economics of supplementing with DDGs
will depend on the cost relative to the value of gain. He paid $118/ton
for DDGs in the study, which equated to a $12.50/head investment for
$18.80/head in return over the 63 days the heifers were fed in the
summer trial.
With the increase in corn and DDGs prices, by the first part of January,
MacDonald explains the same scenario would have the producer paying
$175/ton, which would result in a $18.96/head investment for a
$16.20/head return.
The $175/ton DDGs rate in the fall study adds up to a $16.33/head
investment at the highest level of supplementation. That investment was
worth $68.25/head.
"Producers need to run the economics in their situation to see if it is
a good fit," MacDonald says.
MacDonald also cautions that producers feeding DDGs need to be cognizant
of all sulfur sources, including water. He explains feeding DDGs high in
sulfur to cattle that also have high sulfur in their water can lead to
trouble.
Find more info at agnews.tamu.edu/dailynews/stories/ANSC/Jan0307a.htm.
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Weather And Crops
USDA Lowers Final Corn
Estimate
Call corn oversold if you want, but fundamentals and
emotion continue to support record-breaking futures prices.
On the supply side, USDA's final 2006 crop estimates released about 10
days ago added more fuel to corn prices. In that report, estimated corn
production was lowered from 10.745 billion bu. to 10.535 billion bushels
based in reductions in estimated number of acres planted and harvested,
as well as a reduction in yield of 2.1 bu./acre. Carryover stocks were
also reduced by 183 million bu. to 752 million bu. Projected corn prices
for 2006-07 were raised another dime to $3-$3.40/bu.
Keep in mind, even with the reduced estimate, the crop in 2006 was the
third largest on record.
For price perspective, the University of Missouri's Ron Plain and Glenn
Grimes reported in their "Cattle Outlook" last week: "For the period of
1908-1942, corn prices averaged 78¢/bu., for 1942-1972 the average
corn price was $1.26/bu., and from 1973-2005 the average corn price was
$2.37/bu.
"The probabilities appear high for another step-up in prices for several
years. If corn prices increase in future years by the percentage of the
average of the two previous step-ups, we will have corn prices above
$4/bu. for the next period."
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© 2005 Merial Limited. Duluth. GA. All rights reserved.
Issues
Ethanol Phenomenon Is "Like a
Freight Train"
That's the analogy Barry Dunn gave about ethanol at this
week's Southwest Beef Symposium in Amarillo. But with a twist. "The
ethanol industry is a freight train going down the tracks. Hardly
anybody knows where it's going, they're laying the tracks as they go and
pulling them up behind because there's little chance we're going back."
Dunn, a Midwest native and executive director of the King Ranch
Institute for Ranch Management at Texas A&M University-Kingsville, said
while few people know the eventual outcome of the ethanol industry, its
effect on cow-calf producers is clearly evident.
Using a Cattle-Fax projection that fed cattle will average $84/cwt. in
2007, Dunn said corn prices at $3.50/bu. puts a 550-lb. feeder steer at
$99.25. Corn at $4 puts that steer at $87, and $5 corn puts him at
$62.71.
"We're not there yet," he said of feeder cattle prices, meaning the
market has some downside potential this year. Dunn called on ag to begin
an earnest debate about the full effect of ethanol not only on ag as a
whole, but on society as well. In many regions, ethanol is viewed as
apple pie and motherhood. "But its not. It's not apple pie and
motherhood to a rancher in West Texas."
-- Burt Rutherford
Events
OSU's Stocker Receiving Management
Conference
& The Mid-South Stocker Conference
Jan. 25 -- OSU Stocker Receiving Management
Conference, Enid, OK. Registration is $25. Speakers include Tom
Noffsinger, Dan Thomson, Mike Apley, Clint Krehbiel, DL Step. For more
info, contact, Greg Highfill at 580-237-7677, or greg.highfill@okstate.edu.
Feb. 13-14 -- Mid-South Stocker Conference, Cave City, KY,
presented by the University of Kentucky and the University of Tennessee.
For more info, visit www.midsouthstocker.org. You can also contact Jim
Neel at 865-974-7294 or jneel@utk.edu, John Bartee at
931-648-5725 or jbartee1@utk.edu, or John T.
Johns at 859-257-2853 or jtjohns@uky.edu.
Markets
Markets Weak In Light Test
Icy weather forced many auction markets to forego sales
last week, and that may have been a good thing. As it was, based heavily
on USDA's bearish corn report the previous week, as well as rocketing
corn futures, the stocker calves and feeders that did sell were $3-$7
off the preceding week.
Moreover, analysts with USDA's Ag Marketing Service (AMS) explain,
"Higher feed costs and weather expenses that feedlots are faced with
have not been offset with a higher fed cattle market as sales were
mostly $1 lower this week from $86.50-$87. Last year at this time, fed
cattle were selling at $96, cash corn was more than $2/bu. cheaper, and
the feeder cattle index was more than $17 higher."
As such, the AMS folks say, "Many feeder-cattle buyers and sellers were
more than willing to take a step back and watch cattle and corn markets
settle down."
The summary below reflects the week ended Jan. 19 for Medium and Large 1
-- 500- to 550-lb., 600- to 650-lb., and 700- to 750-lb. feeder heifers
and steers (unless otherwise noted). The list is arranged in descending
order by auction volume and represents sales reported in the weekly USDA
National Feeder and Stocker Cattle Summary:
| Summary Table |
| State | Volume | Steers | Heifers
|
| Calf Weight | 500-550 lbs. | 600-650 lbs. |
700-750 lbs. |
500-550 lbs.
| 600-650 lbs. |
700-750 lbs. |
| Dakotas | 30,900
South Dakota
North
Dakota |
$116.28
$115.13 |
$103.40
$106.10 |
$93.36
$96.69 |
$102.53
$103.15 |
$94.11
$94.47 |
$97.15
$91.10 |
| KY* | 16,600 | $94-104 |
$86-96 | $82-92.505 | $80-90 | $75-853 | $74-845 |
| IA | 16,200
| $112.02
| $107.832 | $96.98 | $98.83 | $94.622 | $88.497 |
| AL | 12,900 | $95-104 | $84-90
| $80-88 | $80-90 | $75-853 |
$72-82 |
| NE | 11,500 | $121.79 | $105.93 | $96.90 | $103.76 |
$94.89 | $90.88 |
| Carolinas* |
9,500 | $80-105 |
$72-93.503 | $69-845 | $70-87 | $64.50-833 | $60-775 |
| CO | 8,800
| $108.15
| $95.89 | $93.91 | $99.43 | $86.43 | $89.92 |
| MO | 8,300 | $110.91 | $100.81 | $93.62 | $94.81 | $92.34 | $86.39 |
| TN* | 7,200 | $93.93 | $85.73 | $80.99 | $83.99 | $79.32 | $79.10 |
| KS | 6,800 | $119.08 | $108.96 | $96.93 | $106.08 | $91.84 | $91.48 |
| TX | 6,600 | $98.11 | $94.232 |
$90.84 |
$90.95 |
$88.03 | $86.182 |
| OK | 6,300 | $110.50 | $97.73 | $96.01 | $93.69 | $90.55 | $87.46 |
| FL* | 5,200 | $82-101 | $76-92 | ** |
$74-91 |
$76-79 | ** |
| NM | 4,400
| $104.26
| $95.60 | $95.264 | $94.77 | $90.18 | $92.974 |
| AR | 4,200 | $102.98 | $96.12 | $89.584 |
$89.10 |
$85.06 | $84.104 |
| MS* | 3,900 | $85-951 | $75-853 | ** |
$77-851 | $70-773 | ** |
| WY | 3,800
| $122.09
| $109.872 | ** |
$96.50 |
$94.152 | ** |
| VA | 3,300
| $100.80
| $90.97 | $83.72 | $83.47 | $76.38 | $91.334 |
| GA*(***) |
2,000 | $87-102 |
$80-98 | $72-87 | $76-91 | $72-85 | $75.50-80.50 |
| MT | 1,900
| $111.11
| $110.752 | $98.564 |
$102.31 |
$97.05 | $87.45 |
| LA(ND) | 1,700 | $81-94 | ** |
** | $78-94 | ** |
** |
| WA* | 1,600 | ** | ** | ** |
$88.07 | ** | ** |
* Plus 2
** None reported at this weight or near weight
(***) Steers and bulls
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.
Contact
Questions & Comments
Please send questions to:
Wes Ishmael, Contributing Editor, BEEF Stocker Trends, at wesleysink@aol.com
Joe Roybal, Editor, BEEF magazine, at jroybal@beef-mag.com
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