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Stocker News
Discounting Cutter-Bull
Prices
Between the increased health cost, death loss, reduced
performance and general hassle, everyone knows bull calves are worth
less than their castrated peers. How much less is a debate that usually
revolves around soft numbers and conjecture. Not so with Frank Brazle, a
long-time respected stocker specialist at Kansas State University (KSU)
who retired from that position. He didn’t retire from running lots of
stocker cattle, though, including purchased bull calves.
When he ran the numbers to present at this year’s KSU Beef Stocker
Field Day, based on research and his own numbers, Brazle calculates a
+$52.18 advantage to steers compared to bulls.
“This would calculate out to be about $1.72/cwt. for each 100 lbs. of
weight,” Brazle says. “I would estimate the difference (in value)
between steers and bulls to be somewhere between $1.50 and $2.00/cwt.
for each 100 lbs. of weight.”
In other words, a 500-lb. bull calf would be discounted $7.50/cwt. (5 x
$1.50) to $10/cwt. (5 x $2.00). A 600-lb. bull calf would be discounted
$9/cwt. (6 x $1.50) to $12/cwt. (6 x $2.00).
“As we get to 700- to 900-lb. bulls, this (discount) may be greater
without good data on grade effect. As economic conditions change in
terms of feed costs, etc., these differences could change as well.”
You can find Brazle’s complete discussion and calculations in the
proceedings from this year’s field day at www.ksubeef.org.
Economy – Fix And Prevent
“We are in the midst of experiencing the consequences
of the failure to take away the punchbowl,” says Richard Fisher,
president and CEO of the Federal Reserve Bank of Dallas. He explained to
participants at the recent Texas Cattle Feeders Association (TCFA)
annual convention that the punchbowl in question was the too easy credit
and policies that underpin the current financial fiasco.
Fisher says the Federal Reserve has been neither scanty nor slow in
using every tool available to them to lend money and help keep the
economy chugging. In addition to such measures as accepting new forms of
collateral and expanding access to securities dealers, Fisher explains
the Federal Reserve is also helping 14 federal banks from around the
world meet dollar-funding needs.
“This combination of measures, together with an effective Fed funds
rate of less than 1%, is unprecedented. We believe they are a necessary
antidote to what ails the economy and a needed impetus for the
restoration of confidence,” Fisher says. He adds that there are limits
to what the central bank can do, saying, “Our efforts must be
complemented by fiscal policy and by initiatives undertaken by other
regulators. And we also know that it will take time before confidence is
reestablished.
“We must never allow this to happen again. But first we must deal
with the situation at hand.”
Closer to home, credit for qualified stocker producers appears to remain
widely available and the rules for that credit the same as they were
prior to the meltdown in other lending sectors.
“The lenders are taking a hard look but the rules are the same as they
were, 30% margin (equity) on stocker cattle,” says John Hughes of
Hughes Cattle Company at Bartlesville, OK. Hughes and his son, Robert,
were the 2006 BEEF National Stocker Award winners.
Likewise, visiting with stocker operators and bankers in South Texas and
northeastern Colorado recently, credit for buying stocker cattle and the
rules for it remain the same as they were before the meltdown in other
areas of the national economy.
Keep in mind, in each of these instances we’re talking about local and
regional banks that didn’t get caught up in the paper-trading chaos of
the national and international ones that have been making headlines.
“There are some regional banks in this part of the world that are
underwater on some of their real-estate loans, but their ag loans are in
good shape,” Hughes says. “There’s certainly no shortage of credit
for experienced, qualified borrowers.”
See the December issue of BEEF magazine at www.beefmagazine.com for an
exclusive review of the credit situation in the cattle business.
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Stocker Management
Mycoplasma – Treat Early And Long
Enough
Though there are no easy answers for the vexing
pneumonia that stems from infection with Mycoplasma bovis, Dave
Sparks, DVM at Oklahoma State University (OSU), says early disease
detection and prolonged treatment are essential in managing it.
“If you don’t provide therapeutic levels continuously for 10-14
days, the disease will relapse in up to 70% of the cases,” Sparks says
in a recent issue of the OSU Cow-Corner newsletter. “It’s not
effective to attempt to treat the lameness. If you keep these calves
near feed and water and encourage them to get up to eat and drink
regularly, the swelling will subside and most will return to normal. It
usually takes several months, however, to get back to a positive gain
situation.”
According to Sparks, a typical M. bovis infection runs something
like this: “Two weeks after arrival, calves are pulled for treatment
of pneumonia but show no response even after treatment with multiple
antibiotics. Appetite often remains good, but calves show a depressed
attitude and a clear, serous nasal discharge. Three weeks after arrival,
calves are being pulled for arthritis, with affected calves exhibiting
swelling in the knee, elbow, or fetlock… A mycoplasma diagnosis is not
usually made until a postmortem is performed.”
Anyone who’s banged their head against the wall with M. bovis
knows the difficulty in treatment is that most antibiotics currently
available might treat secondary symptoms but do nothing to counter the
M. bovis infection itself.
Thus, prevention is crucial. Sparks explains that limiting mycoplasma
risk revolves around reducing stress on calves, everything from how
they’re handled to balanced nutrition and mineral supplement, to
sanitation with processing and equipment.
“Death losses (with mycoplasma) can easily run twice as high as in
other respiratory disease,” Sparks emphasizes. “If you think you may
be having respiratory disease complicated by M. bovis in newly
arrived stocker cattle, be sure to involve your local veterinarian.
Early detection and necropsy diagnosis might very well dictate the color
of ink you find yourself using this season.”
Look for Sparks’ complete article at beefextension.com/
Markets
Markets Continue Defying
Fundamentals
At least gamblers in Vegas know the rules of the game
and the odds. There was a time you could believe that about the stocker
cattle business, too.
Case in point is last week’s lightly tested market due to the holiday,
and a welcome respite from the seminal meltdown a week earlier when 5-
to 7-weight steers and heifers lost mostly $4-$10 compared to the
previous week. There were plenty of calves a tick shy of 12 o’clock
that gave up as much as $20.
The auction offering was heavy – the heaviest in several years at
almost 400,000 head, according to USDA’s Ag Marketing Service. But the
fundamentals are bullish – input costs continue south, packer margins
are in the black and cattle supplies are thin – more than some
analysts expected with the Nov. 21 “Cattle on Feed” report showing
placements down 11% compared to the same time in 2007 (on-feed numbers
are 7% below last year).
Cow slaughter continues at a liquidation pace, too. According to
Livestock Marketing Information Center (LMIC) analysts, as of early
November, federally Inspected (FI) cow slaughter was about 9% higher
than last year, on a weekly average basis, and nearly 15% more than the
2002-2006 average. FI beef cow slaughter averaged about 14% higher than
2007 from January through early November.
What’s more, beef-cow slaughter is running heavier in the second half
of the year. The LMIC folks say some of that’s seasonal but also
reflects increased culling rates in the U.S. and Canada due to economic
conditions as well as poor pasture and forage conditions in some regions
such as California. Imports of Canadian slaughter cows have accounted
for about 30% of 2008’s yearly increase in U.S. cow slaughter.
Yet, the market two weeks ago crumbled with cattle futures prices
following Wall Street on another of its too-frequent slides.
That’s why last week’s steady to $2 lower prices were viewed as a
relief by plenty of folks. Keep in mind virtually all the Southeast
markets closed for the entire week.
Also, keep in mind the prices paid last week were still sharply lower
than two weeks ago. For instance, 500- to 550-lb. steers in Texas were
13.5% lower than two weeks ago; 7-weight steers were 10.5% lower. Even
in Iowa – the heart of corn country – 5- and 7-weight steers sold
for 9% less than two weeks ago; 5-weight heifers there were down 11.2%.
“The coming weeks will be a true test of how much supply the current
demand can handle, with heavy receipts expected especially in the
Midwest and Northern Plains,” said AMS analysts Friday. “Last
week’s (two weeks ago) market crash was well publicized, which has
sellers braced for reality but also could stir some renewed buying
interest.”
By the end of last week, packers increased bids $3 (mostly $90)
compared to the previous week and found plenty of willing sellers. Both
the futures markets and Wall Street were on the rebound. Even before the
break in feeder prices, Randy Blach, Cattle-Fax CEO, noted at the recent
Texas Cattle Feeders Association annual meeting that cattle feeders
could buy break-evens in the mid $80s, the most favorable in what seems
like forever. Between tighter domestic supplies and strong international
demand, he reckons fed-cattle prices will average $96-$98 next year, the
highest in history.
Then again, as the last couple of weeks demonstrate, such fundamentals
currently seem to matter little in the marketplace.
The summary below reflects the week ended Nov. 28 for Medium and Large 1
– 500- to 550-lb., 600- to 650-lb. (calves), 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. |
| MO | 27,400 | $103.49 | $93.37 |
$93.92 | $87.13 | $84.60 | $87.39 |
| SD | 26,300 | $104.79 | $99.152 | $94.577 | $94.29 | $92.142 | $91.656 |
| TX | 17,500 | $91.10 | $83.23 |
$86.08 | $80.42 |
$75.84 | $77.74 |
| NE | 16,800
| $104.34 |
$97.714 | $95.19 | $93 | $86.76 |
$90.93 |
| OK | 13,000 | $104.44 | $95.96 |
$93.04 | $87.81 | $85.61 | $84.59 |
| IA | 10,500
| $97.57 |
$93.654 | $96.94 | $86.74 | $83.824 | $90.15 |
| MT | 8,400 |
$102.73 | $97.582 |
** |
$85.34 | $83.102 | ** |
| CO | 5,500 | $94-103.50 | $87.50-95.25 | $87-93 | $84-93.50 | $77.25-86 |
$78-79.256 |
| NM | 5,000
| $101.17 |
$88.99 | $82.85 | $87.14 | $83.58 |
$70.534 |
| WY | 4,500
| $103.58 |
$97.952 | $86.814 | $86.81 | $88.552
| **
|
| AR | 3,300 | $94.18
| $86.27 | $85.034 | $83.01 | $76.93 |
$75.404 |
| TN* | 2,100 | $82.06
| $78.52 | $76.27 | $71.17 | $68.22 |
$66.04 |
| Carolinas | 1,700 | $80-91 | $77-90 |
$77-82 | $67.50-85 |
$70-74 | $63-72.50 |
| VA | 900 |
$91.892 |
$83.80 | $78.27 | $74.722 | $69.33
| ** |
| WA* | 800 | $86.25
| ** |
** |
$76.552 | ** | ** |
* Plus 2
** None reported of the same quality at this weight or near
weight
(***) Steers and bulls
(?) As reported, but questionable
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.
Crops/Weather
Renewable Fuels Standard
Increases
Plenty of folks besides cattle producers are fed up with
the nation’s ill-conceived energy policy which mandates grain be used
for ethanol production, tying the cost of feed to energy along the way.
“We have spent 30 years and billions of taxpayer dollars subsidizing
the production of ethanol with little to show for it. Despite the
subsidies, ethanol is not competitive in the marketplace and the
industry only survives because politicians shovel our money into their
pockets. We must end the bailouts and subsidies for industries that are
unable or unwilling to stand on their own,” says Duane Parde, National
Taxpayers Union president.
"After 30 years of subsidies, ethanol is displacing only 3% of the
gasoline we use each year, is likely increasing rather than decreasing
greenhouse gas emissions, and is threatening our soil, water and
wildlife,” says Craig Cox, Midwest vice president of the Environmental
Working Group. “Yet ethanol gets $3 out of every $4 of tax credits the
federal government gives to all renewable alternatives, including wind,
solar and geothermal. It’s time we direct our tax dollars to renewable
alternatives, including biofuels, based on how well they protect our
climate, our environment and our energy security.”
Parde and Cox represented a coalition of diverse groups that called for
a repeal of ethanol subsidies Nov. 18.
In accordance with the Energy Independence Security Act of 2007, the
Environmental Protection Agency recently set the Renewable Fuel Standard
at 10.21% for 2009.
In less clinical terms that means approximately 11.1 billion gals. of
renewable fuels must be blended with gasoline next year. About 10.5
billion gals. of that are mandated to come from grain-based ethanol,
according to the Kansas Livestock Association. The mandate is for 36
billion gals. of renewable fuels by 2022, with 15 billion gals. of that
total being grain-based ethanol.
Displeasure with the policy has to do with more than economics. At the
same gathering, Jason Clay, senior vice president for market
transformation at the World Wildlife Fund (WWF), noted, “In its work
with local communities and habitats across the globe, WWF has seen the
negative impacts of the biofuel policy not only on the environment, but
on vulnerable populations throughout the world… Biofuels have a role
to play in our response to energy independence and climate change, but
the rush to produce them has been ill‐considered. The U.S. must set an
example to the rest of the world by pursuing sustainable agriculture and
energy practices that meet scientifically based environmental
performance standards.”
Organizations calling for the repeal also cited the results of a recent
survey conducted for the Food Before Fuel campaign. Ipsos Public Affairs
released the results of the national survey. Among the findings: 89% of
respondents are concerned about the rising cost of food. When provided
with info about USDA data showing corn-ethanol production is the cause
of 10% of food-price inflation, 49% are less likely to support policies
aimed at promoting the use of corn to produce ethanol. When asked if
they would support keeping or changing the existing Congressional
policies, 56% of respondents call for Congress to change these policies
by reducing or eliminating subsidies and mandates for the use of corn
ethanol.
For the week ending Nov. 23, according to the National Ag Statistics
Service:
Corn – 89% was harvested, 10% behind
last year and 8% in back of average. Harvest in Iowa, Missouri, Nebraska
and the Dakotas remained 10 or more points behind the usual harvest
pace. Major delays were evident in North Dakota and South Dakota, as
producers were reaping their crop 40 and 22 points behind the average,
respectively.
Winter wheat – 92% has emerged, 10%
behind last year, and 3% behind average. Emergence was complete in
Michigan, Nebraska, Ohio and South Dakota. 65% is
rated Good or Excellent, compared to 44% at the same time
last year.
Sorghum – 88% is harvested, 22% behind
last year, 12% behind average. Harvest was complete in the Delta and
nearly complete in New Mexico. Meanwhile, producers in Nebraska and
Oklahoma were harvesting 21 and 14 points behind the average pace,
respectively.
Events
Calendar
Dec. 5-6 – Missouri Livestock Symposium,
Kirksville Middle School, Kirksville; 660-665-9866 or missourilivestock.com.
Dec. 5-7 – Minnesota State Cattlemen’s Association
Convention, Craguns Resort, Brainerd; www.mnsca.org/.
Dec. 6-7 – International Livestock Emergency Response
Conference, Tucson, AZ; ag.arizona.edu/ans/alirt/INLERC2008.html.
Dec. 15-17 – Lectureship on Managerial Accounting for Ranchers,
King Ranch Institute of Management, Kingsville, TX; 361-593-5401 or krirm.tamuk.edu.
Dec. 16-17 – Kansas Income Tax Institute, 8 a.m. to 4:30 p.m.,
Pittsburg State University Overman Student Center, Pittsburg, KS; www.agmanager.info/events/Tax%20Institute/2008.asp.
Jan. 5-9 – Guy T. Canales Prescribed Burning Lectureship, King
Ranch Institute of Management, Kingsville, TX; 361-593-5401 or krirm.tamuk.edu.
Jan. 6 – South Dakota Grasslands Coalition Meeting, Cedar
Shores, Oacoma, SD; 605-280-0127 or kyle.schell@sdstate.edu.
Jan. 6-8 – BEEF 2020 Workshop, Brookings, SD; 605-688-5448 or
ars.sdstate.edu/extbeef/BEEF_2020.htm.
Jan. 13 – 2009 International Livestock Congress, Renaissance
Denver Hotel, Denver, CO; www.theisef.com/ilcusa1.aspx.
Jan. 25-27 – BVDV Symposium, Four Point Hotel by Sheraton
Phoenix North, Phoenix, AZ; www.ars.usda.gov/News/docs.htm?docid=10851.
Jan. 28-31 – Cattle Industry Annual Convention & Tradeshow,
Phoenix, AZ; www.beefusa.org.
Contact
Send Questions &
Comments 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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