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March 24th: National Feeder & Stocker Cattle Weekly Summary

RECEIPTS:  Auctions   Direct  Video/Internet   Total
This Week     253,700    153,400         2,400        409,500 
Last Week     228,600     80,100        25,900        334,600 
Last Year       225,300     34,600          2,400        262,300  

Compared to last week, steers and heifers were steady to 7.00 higher, with the early week sales being steady to 4.00 higher and later week auctions 3.00 to 7.00 higher.  There were instances when trends this week were called up to 9.00 higher as the CME cattle complex was sharply higher mid week and didn't give up the ghost as the week moved on.  News of fed cattle trade on Wednesday spurred the markets higher when some cattle were reported on the FCE at 136.50 in Nebraska which would be 4.00 to 5.00 higher than last weeks sales.  Dressed sales were turned in on Thursday at 215.00, 5.00 higher than last week.  

Support flowed over to the Feeder Cattle contracts when they were from 3.00 to almost 4.50 higher for the week, with the most gain coming in the further out months.  With all the support around the circuit, spring has sprung and cattle buyers were bidding readily and aggressively for all offerings on hand at auctions nationwide.  On Wednesday in Kearney, NE at Huss-Platte Valley Livestock Auction a package of 707 lb steers with all the bells and whistles sold at 155.00 and a load of 542 lb thin fleshed steers rang the bell at 186.50.  Additionally on Wednesday in St Joseph, MO a load plus of 877 lb steers sold for 138.00 and a short load of 806 lb steers sold at 144.75.  On Thursday in Valentine, NE a load of 757 lb steers went for 152.00 and a string of 718 lb replacement heifers sold of $1335.00 per head which would equate to around 186.00/cwt.  

Feedyards are optimistic and are getting in a much better position as the bottom lines are much better now than they were at the first of the year.  Boxed beef has rallied since the beginning of February, the implied packer margins are back in the black and packers have been more than willing to pay up for live cattle.  Since February 10, Choice Boxed Beef has gained around $35.00 and this is going through the month of March, which is not known for its spectacular demand.  Some of the boxed beef sales may now be going the way of exports as a number of importing countries that utilize beef from Brazil announced that they are either suspending, curtailing or enhancing inspections of meat from that country.  Brazil has surpassed the US in exports and in recent years has become the largest global supplier of red meat and poultry products.  Analysts are looking at how many dollars of product that could be affected by suspension of those products and with approximately $5.5 B worth exported from Brazil in CY 2016, it could be a boon for other countries that step up production and fill the void.  

Wednesday's Cold Storage Report showed total red meat supplies in freezers were up 1 percent from the previous month but down 6 percent from last year. Total pounds of beef in freezers were down 7 percent from the previous month and down 1 percent from last year.  The outgoing pace of frozen beef supplies in February is supportive to the cattle industry and it appears that participants have been drawing on those freezer stocks that were purchased last fall at lower prices.  Cattle on Feed report released today came in within analyst expectations as the On Feed number is at 100 percent; placements at 99 percent and Marketings at 104 percent.  Auction volume this week included 58 percent weighing over 600 lbs and 43 percent heifers.

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March 24th: Cattle on Feed Report
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United States Cattle on Feed Up Slightly
  • Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.8 million head on March 1, 2017. The inventory was slightly above March 1, 2016.
  • Placements in feedlots during February totaled 1.69 million head, 1 percent below 2016. Net placements were 1.64 million head. During February, placements of cattle and calves weighing less than 600 pounds were 315,000 head, 600-699 pounds were 330,000 head, 700-799 pounds were 490,000 head, 800-899 pounds were 395,000, 900-999 pounds were 124,000, and 1,000 pounds and greater were 40,000 head.
  • Marketings of fed cattle during February totaled 1.65 million head, 4 percent above 2016.
    Other disappearance totaled 56,000 head during February, 3 percent below 2016.
Complete February Cattle On Feed Report
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Cattle on Feed Inventory in 1,000+ Capacity Feedlots as of Febuary 1st
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Number of Cattle Placed on Feed in 1,000+ Capacity Feedlots in Febuary
Millions of Head
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Number of Cattle Marketed from 1,000+ Capacity Feedlots in Febuary
Millions of Head
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Cattle on Feed by State as of March 1st
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March 24th: Shootin' the Bull Weekly Analysis
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In my opinion, the current market environment is as skewed as I've ever seen it.  Fats are cash led with futures remaining reluctant.  Feeders are futures led with cash reluctant.  Want to sell fats at the highest price? Sell them today.  Want to sell feeders at the highest price?  Sell them in April and out.  This environment is about as conclusive of evidence that the industry is in transition that I could imagine.  So, what is the goal?  Interestingly enough, when I ask that question no one has an answer.  So, here is what I think should be the answer.  Packing capacity is limited to approximately a 620K a week kill.  That would be if there were more cattle and greater employment at the packing plant.  However, there doesn't appear to be the ability to run at 100% at this time, or really much in the future.  So, we saw that numbers plus weight overwhelms the packers ability and prices fall.  Now that weights are down and numbers more manageable thanks to the demand uptick, the goal of the industry should be to not grow the herd to a size that once again burdens packing capacity.  As the vacuum is now being felt at the feeder cattle level, soon it will reach as high as the cow/calf operator.  It is then that the industry needs to convey the aspects of production versus ability to process.  Were work to be done to show the industry what packing capacity could be in the next several years, it may help producers make a more informed decision on expansion. 

Clearly price has impacted expansion as we have seen significant year over year increases in heifer and cow slaughter.  The flip side of this is that now prices are moving higher, there has to be some restraint on producers to keep from inventory growing too fast again.  This week has really stretched the brain power needed to keep up with the swiftness of change taking place.  The development out of Brazil is producing tremendous unknowns and speculation of what may or may not be of benefit to US beef.  Boxes began trading lower at mid week and the highest price for April fats was made on Friday from the contract low.  As I write this, the remainder of the cash trade has yet to take place and most will spend the weekend deciphering the on feed report.  Lastly, there remains the "wall" of cattle to be placed this spring.  Interestingly enough, this data is weeks away from having much of an impact.  It won't be until towards the end of April before we know what March placements are.  Then there will still be April and May placements to come before we know whether the $20.00 plus discount in the August thru October are justified. This is a great deal of information to process and then attempt to decipher as to whether bullish, bearish, or neutral.

Feeder cattle were the market of most interest this week.  For the first time in 2&1/2 years, producers were able to not only receive a higher price in the future, but as well, could lock in a minimum sale floor with an option at an even basis via the feeder cattle index.  I made the recommendation this week to use this newly developing pricing scheme to lock in a minimum sale floor.  For the two remaining spring months, I recommended a synthetic short futures and a bear put spread on the August and out months.  The bear put spread keeps the top side open.  ***These were sales solicitations.***   The wave count suggests the current rally from the March 3 low remains a primary wave 1 of a major wave 3.  The 5th wave of the primary wave 1 extended greatly upon the near limit move this week.  It remains undecided as to whether the primary wave 1 is complete or not. When complete, one should anticipate a 3 wave decline or potentially a sideways range to develop to mark time. 

Due to the current seasonal tendency to be weaker going into the 2nd week of April, I recommend anticipating the primary wave 2 to materialize.  Once it is complete, a primary wave 3 of major wave 3 will be anticipated.  Many ask how I remain friendly towards feeders with fat cattle futures reflecting a price that is not advantageous.  My answer is, few anticipate a 20% decline in cash.  Any break less than 20% continues to suggest a few more dollar could be bid for feeder cattle inventory.  Then, buy some strange miraculous event, cash remained above $115.00, quite a few more dollars could be put on feeder cattle. So, long story short, the discrepancies between fats and feeders, transitional environment, and the Brazilian ordeal is making for a volatile arena. 

The best description I've heard for the grain market this week was that traders were bloodletting the grains like Sweeny Todd with the last step placing on the leech's to finish the job.  This seems to tell the tale as well as anything. 

Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

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March 24th: Packer-Feeder Stand Off
Cassie Fish -- cassandrafish.com

For the first time in a while the packer is making a stand. Putting out lots of rhetoric that boxed beef values are topping, packers have not upped bids this week post-FCE Wednesday sale, instead coolly remaining patient. Even going as far as to say some will be “out of the market” next week entirely.

Packers have asked some cattle feeders for access to April contracts early and in at least a few cases, the cattle feeder has agreed. It will be one more week of course before the industry has full access to their 307k head of April forward contracted inventory. Supplies of fed cattle are also adequate in Texas and Kansas, so the $126 bid earlier in the week have not budged. Last week’s 5-Area average price was $128.56.

In the north, bids range from $208-212 with some packers offering stepped down bids by week out through April, once again an indication that the packer, as well as the futures market, are convinced cattle prices will be headed lower soon.

The full court press is on to stop, what has been an impressive rally in fed cattle prices thus far in 2017, and will stay on for a least a couple of weeks. Of course, packer margins are black currently and the pipeline of beef in the supply chain is still relatively clean. It is the anticipation that this week’s 602k kill will put more beef than the market can bear into the system at the current ‘high’ prices. For perspective, cutout values are back to year ago levels for spot sales.

The release of USDA’s official weight data yesterday showed steer carcass weights 15 pounds below a year ago, a not-too-subtle reminder, that months of aggressive slaughter have restored a great deal of currentness to the front-end.

What the market will really come down to will be demand from now into June. If demand continues to be robust and the big sold-ahead position is maintained, that will provide added incentive to grow kills which requires packers to avoid letting their cattle inventories slip. Packers are counting on the increase in market-ready fed cattle supplies in May, but there is no doubt cattle have been pulled forward and there are many April cattle that have already been sold. It will very informative as to how many May cattle die in April.
At the very least, the cattle market is in the best fundamental position in years heading into greater Q2 supplies and that fact ought to cushion the seasonal decline in cattle prices.

Futures have traded both sides but have been more resilient than anticipated today after yesterday’s sell-off. The spot Apr LC chart shows a flag forming. Obviously, taking out Wednesday’s high portends another leg up. The rest of the contract months will trade much more conservatively but Apr LC’s discount will make it tough to take it down much, unless cash prices collapse. Apr LC will not only likely close higher on the week but has a great chance to close the highest since 2016.

The big gains in open interest this week is being viewed as potentially bearish. Today’s likely neutral to bullish Cattle-on-Feed report is being ignored.

Regarding the fiasco in the Brazilian beef packing industry this week, the type of beef that country exports is not the type of beef that the U.S. exports. China and Hong Kong, Brazil’s two biggest customers, will likely seek beef from neighbors Australia and New Zealand, which does have the impact of tightening up the global supply of manufacturing-type boneless beef.

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March 23rd: Commodity Market Comments 
  • “Shootin’ The Bull” -- Christopher B. Swift.
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    Live Cattle: With all the additional price increase of cash and futures, the schematic of the fat cattle sector remains as out of line as it has been since the inception of this rally.  In transitioning, time is needed more than anything.  With the box price now appearing to have slowed its advance, I would imagine the packer will slow his bidding.  The FCE trade Wednesday may not produce a like or higher trade when the bulk is sold this week.  With the on feed report tomorrow and cash yet to be traded, Monday’s trade will more important than Fridays.  Nothing technically was completed or started today that I can see.  It is not that I anticipate a down turn, but more of a softening until we see how the weaker box price impacts packer’s decisions.

    Feeder Cattle: For the first time in a long, long time, you can hedge August feeders at a dead even basis.  The $136.00 put closed at $5.85 producing a minimum sale price of $130.15 with the index reading today at $130.02.  All the months prior for nearly 2&1/2 years, hedging was done at a discount and made more severe by the premium paid for the option.  I don’t have a clue how high traders will push this market.  What I do know is that you have seen a more friendly environment for which to manage risk than at present in a very long time.  Hence, use it.  There remains 3 more quarters to trade through and while the market is hot, use it to your advantage.  I’ve attempted to stave off hedging as long as possible as I’ve anticipated the change in the basis.  The change has materialized and I recommend using it.  How you use it will be as important as you using it.  First, if your inventory is to be marketed between now and May, you may consider a synthetic short futures position.  Due to limited time, even if the market remains strong, detriment would not be anticipated great due to the call strike still allowing for a predetermined amount of upside potential.  Recall that cattle being sold today, were most likely purchased at the lower end of the price range 3 to 4 months ago.  Next, if they are summer/fall cattle, then a bear put spread is recommended.  An at the money put would be complimented with an out of the money put with at least a $10.00 spread.  The achievement attempting to be spending a lesser amount on premium, with a predetermined downside factor, and the knowledge of having to make another decision if the $126.00 area is exceeded.  The belief is the $126.00 area won’t be exceeded.  If it is though, then you make another decision, but the compliment is that you don’t have to make it under duress as you already captured 2/3 of the initial decline to the $126.00 area.  The goal here is to minimize premium paid in order to write off less from your final sale bill.

    The price action remains a primary wave 1.  The 5th wave of primary wave 1 has extended.  There may still be some left to the upside, but today’s price action was such that I perceive a great deal of it was a “get me out” mentality from those who hedged too soon.  I’m not talking about just this week, I’m looking at those with hedges under $122.00.  This week still have a few crooks and turns with the majority of the cash trade looming, choice boxes lower today, and the on feed report Friday.  It doesn’t appear that the cold storage report will have much of an impact.

    Corn: Instead of planting grains, it appears traders are wanting to pound them into the ground.

    Crude: Crude rebounded after a new low in this decline was made.  The down ward trading is beginning to look more trendy than sell offish.  A trade back above $51.00 June will confuse me further, but would more likely begin to suggest traders are having a hard time pushing it under $50.00 and holding it there.

    Bonds: Anticipate bonds moving sideways, in a large range, for a very long time.

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    Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com

    An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

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    March 23rd: Closing Futures Summary
    AgriCharts/Brugler Marketing, LLC
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    Live cattle futures closed the day 67.5 cents to $1.05 lower. Feeder cattle futures lost 30 cents to $1.25. The CME feeder cattle index was at $131.58 for 3/22, a daily gain of $1.56. Wholesale beef prices in the afternoon report were lower, as choice boxes were down 72 cents and select was 3 cents lower. USDA weekly beef export sales were 14,607 MT, down 9.4% from last week, but 276.2% larger than the same week last year. DTN reported bids of $133 live and $212 to $215 dressed in NE and IA, with bids of $126 in KS. They also showed dressed sales of $215 in NE. Estimated FI cattle slaughter WTD is 463,000 head, up 6,000 from last week and 29,000 head more than the same time last year. The Cattle on Feed report is released tomorrow at 2:00 p.m. with estimates of March 1 COF at 100.1% of last year. Placed cattle in February are projected at 98.8% of last February, while marketed cattle are estimated at 3.5% larger. JBS in Brazil plans to cut beef production by 35% next week, amid sales and production issues tied to the bribery investigation. 
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  • Apr 17 Cattle settled at $121.775, down $0.675,
  • Jun 17 Cattle settled at $112.800, down $0.975,
  • Aug 17 Cattle settled at $107.900, down $1.050,
  • Mar 17 Feeder Cattle settled at $133.700, down $0.300
  • Apr 17 Feeder Cattle settled at $135.350, down $1.000
  • May 17 Feeder Cattle settled at $134.025, down $1.250
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    Corn futures ended Thursday mostly 2 cents lower, despite larger than expected export sales. May 17 closed at its lowest price for 2017. The USDA weekly exports sales report this morning had old crop corn sales at 1,347,016 MT, well over expectations, with new crop sales at 127,112 MT. Old crop sales were 4.7% larger than the previous week, and 67.7% higher than the same week a year ago. Export shipments were at 1,382,229 MT, down 12.5% from last week, but 38.57% above last year as this time. Argentine corn harvest is estimated at 8.1% complete by the Buenos Aires Grain Exchange. Chinese corn imports for February were 142,556 MT, according to Chinese customs data. Though they are trying to decrease stockpiles, that is 128% larger than the previous February. DDGS imports were 68,860 MT, down 61.9% from February 2016 due to steep tariffs implemented in 2016.
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    May 17 Corn settled at $3.56 3/4, down 2 cents,
    Jul 17 Corn settled at $3.64 1/2, down 2 cents,
    Sep 17 Corn settled at $3.72, down 2 cents
    Dec 17 Corn settled at $3.80, down 2 cents
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    Wheat futures finished the day mixed on the three exchanges. MPLS was 3 to 5 1/2 cents higher. CHI was mostly 1 1/4 to 2 1/2 cents lower, and KC was down 4 to 4 1/2 cents. Old crop export sales of 418,477 MT were reported by the USDA this morning, up 58.2% from last week and 113.4% of the same week the previous year. New crop sales were at 149,790 MT. Weekly shipments were 4.8% above last week and 82.3% larger than the same time last year. Japan purchased 117,689 MT of Aust ralian, Canadian, and US wheat in their weekly tender, with 57,100 MT from the US. SovEcon estimates Russia’s 2017 wheat crop at 62.5 MMT, which would be well below last season’s production of 73.3 MMT.
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  • May 17 CBOT Wheat settled at $4.21, down 1 1/4 cents,
  • May 17 KCBT Wheat settled at $4.28, down 4 1/2 cents,
  • May 17 MGEX Wheat settled at $5.40 3/4, up 3 cents
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    Lean hog futures came back to post gains of $1.20 to $1.85 today after showing losses earlier in the day. The CME Lean Hog Index for 3/21 was down 7 cents to $71.41. USDA’s average pork carcass value in the afternoon report was $77.49, down $1.55. The picnic and ham were slightly higher. National cash hog base prices were 44 cents lower with the weighted average at $65.06. In the weekly export sales report, pork showed 30,138 MT of 2017 sales, 133.1% above the previous week and 56.2% ahead of the same week from a year ago. Mexico was the largest buyer, purchasing 12,600 MT. WTD estimated FI slaughter for hogs was 1,767,000 head on Thursday, 8,000 more than last week and 92,000 head above the same week in 2016.
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  • Apr 17 Hogs settled at $69.350, up $1.200,
  • May 17 Hogs settled at $73.950, up $1.425
  • Jun 17 Hogs settled at $77.600, up $1.850
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    March 23rd: USDA Livestock Slaughter Report

    Commercial red meat production for the United States totaled 3.94 billion pounds in February, up 1 percent from the 3.90 billion pounds produced in February 2016.

    • Beef production, at 1.93 billion pounds, was 3 percent above the previous year. Cattle slaughter totaled 2.37 million head, up 3 percent from February 2016. The average live weight was down 12 pounds from the previous year, at1,360 pounds.
    • Veal production totaled 5.6 million pounds, 8 percent below February a year ago. Calf slaughter totaled 40,200 head, up 10 percent from February 2016. The average live weight was down 46 pounds from last year, at 241 pounds.
    • Pork production totaled 1.99 billion pounds, down 1 percent from the previous year. Hog slaughter totaled 9.37 million head, down 1 percent from February 2016. The average live weight was up 1 pound from the previous year, at 284 pounds.
    • Lamb and mutton production, at 11.2 million pounds, was down 11 percent from February 2016. Sheep slaughter totaled 159,400 head, 9 percent below last year. The average live weight was 140 pounds, down 2 pounds from February a year ago.
    January to February 2017 commercial red meat production was 8.2 billion pounds, up 3 percent from 2016.

    Accumulated beef production was up 6 percent from last year, veal was down 7 percent, pork was up 1 percent from last
    year, and lamb and mutton production was down 1 percent.

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    March 23rd: Analysis of Cold Storage Report
    Daily Livestock Report

    The latest USDA cold storage report did not present any major surprises but broadly speaking we thought it buttressed the bullish case for beef prices in the very near term.  The total supply of beef, pork, chicken and turkey at the end of February was 2.240 billion pounds, 1.6% less than a year ago but 2.9% higher than the previous month.   The pace of increase in inventory was in line with the five year average.   Normally we would expect cold storage inventories to pull back a bit in March before rising into the spring and early summer.  The seasonal increase in supplies coincides with higher meat production but also the need on part of end users to have more stock on hand as they prepare for an increase in sales. 

    Beef  inventory  in  cold  storage  at  the  end  of  February  was  estimated  at  502.4 million pounds, 0.8% less than a year ago but still about 6% higher than the five year  average.  The main reason we view the beef cold storage numbers as supportive is the pace of stock drawdown in February. Inventories declined by 35.5 million pounds from January levels or 6.6%.  This is far more than we normally see at this time of year.  And inventories declined even as beef supplies continued to increase.  Robust exports, a notable decline in imports and a favorable weather conditions likely all contributed to the larger than expected stock depletion. Inventories in the Middle Atlantic region have been quite large for some time, as end users took advantage of low prices last fall to bolster their freezer hedges.  However, those stocks are quickly being depleted and we expect an even sharper drawdown in March given very high prices for fat trimmings. 

    Total pork in cold storage at the end of the month was 572.0 million pounds, 9% less than a year ago and now 11.3% lower than the five year average.   While the overall supply of pork in cold storage remains below a year ago, the inventory build for the month was a bit higher than what we normally see at this time.  Inventories of pork products increased 9% from the previous month when the five year average increase is around 6%.  Much of this was due to more hams in cold storage in February relative to January levels.  Ham inventories at the end of February were 125.9 million pounds, 32% more than January and now 8.7% more than a year ago.  The five year average inventory build into February is 9%.   High ham prices in January and possibly a slower export pace may have contributed to the increase in ham cold storage stocks.  Current ham prices are notably lower than at the start of the year and we see the increase in ham inventories as somewhat negative for the pork market in the very near term.  Inventories of bellies in cold storage remain extremely low, down 74% from a year ago.  There was no appreciable increase in belly stocks during February, which is not a surprise since belly prices were near record highs.  We should see more bellies go into freezers in March and April, but maybe not enough to bring the stocks to normal levels. 

    Chicken inventories increased 1.5% in February when normally we see a drawdown in stocks during this month.  Breast meat inventories remain burdensome.  The inventory of leg quarters increased 3% from the previous month but remains 13% under the five year average.  Dark meat prices continue to perform well due to robust exports and improved domestic spring demand.

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    "Click Here to view a Slide Show of Drought Monitor maps for the last 12 weeks
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    March 23rd: Ground Beef Demand
    John Nalivka -- Sterling Marketing

    There has always been a great deal of conversation about ground beef. It is one of the most affordable and versatile beef products. But, in addition, Americans like hamburgers. If they didn't, the fast food industry wouldn't have grown at such a fast pace. I recently read an article presenting an infographic of the sales share for various beef items. Fresh ground beef accounted for 44 percent of beef sales in the U.S. in 2016.

    For 2016, I estimated that ground beef accounted for 56 percent of total beef consumed in the U.S. This figure includes grind from U.S. cows, imported beef grind, and trim and grind from fed cattle. Comparing back to 1980, ground beef consumption was 41 percent of the total beef consumed. In terms of per capita consumption, that's a fairly significant increase. However, in terms of the pounds of ground beef consumed, I have estimated that Americans consumed 31 lbs. of ground beef in 2016, the same as in 1980. Per capita consumption of all beef in 2016 was 55.6 lbs. while in 1980, U.S. consumers ate 76.4 lbs. of beef per person. So, while per capita beef consumption fell 21 lbs. over that 36 year period, ground beef consumption remained at 31 lbs. per person.

    In 1980, the beef industry harvested (I am becoming more politically correct) 34 million cattle and produced about 22 billion lbs. of beef. In 2106, the industry harvested 3 million fewer cattle and produced 3 billion more lbs. of beef. At the same time, there was 1 million fewer cull cows slaughtered in 2016 than in 1980. Cull cows are a major source of grinding beef.

    What is the bottom line of all these statistics? First, ground beef consumption as a percent of total beef consumption is increasing though the per capita pounds of ground beef remains the same as it was 36 years ago. While there is a growing demand for ground beef from the less traditional sources of fed cattle carcass (chuck, round, sirloin), there is a growing necessity to grind these items to meet the demand for ground beef. Perhaps, it's just as well that consumers are also eating fewer roasts from the chuck and rounds?

    If we consider supply in terms of using an increasingly larger share of fresh ground beef in fast food as opposed to frozen, the industry will have to grind an increasingly larger share of chucks, rounds, and sirloins from fed cattle carcasses. The trade-off in value will be interesting and demand will be the driver!

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    March 23rd: Key Countries Suspend Brazilian Meat Imports Due to Scandal
    CME Group

    The scandal that has affected the Brazilian meat packing and processing industry in recent weeks continued to play out, with a number of key importing countries announcing that they would suspend, curtail or enhance inspections of meat from that country, according to Steiner Consulting Group, DLR Division, Inc.

    According to a report in the Wall Street Journal on 17 March, “Brazilian authorities are investigating some of the world’s biggest meatpacking companies for allegedly bribing food?sanitation inspectors to approve sales to domestic and foreign buyers of meats that might otherwise have failed to pass muster.”

    The reason this is such a major issue is because it brings into question the integrity of the food safety inspection a key global producer. The most recent revelations are part of a widening corruption scandal in Brazil, a scandal that has involved some of the most powerful people and companies in Brazil.

    Remember that the Brazilian president was kicked out of office and the previous president has been charged with corruption. In recent years Brazil has emerged as the pre-eminent global supplier of red meat and poultry products, surpassing the United States.

    According to USDA data, exports of Brazilian chicken accounted for almost 40 per cent of the exports from the major supplying countries. China and Hong Kong accounted for 18 per cent of Brazilian chicken exports in 2016 according to USDA numbers.
    The top market by far was Saudi Arabia, followed by UAE, accounting for about a quarter of all Brazilian chicken exports. Similar to the US, Brazil also ships chicken to a number of smaller markets.

    As we noted, Chinese officials at this point have suspended imports of Brazilian red meat and poultry and likely are waiting for more information to become available before they take further steps.

    South Korea also suspended imports from Brazil but more recent reports now indicate that the suspension has been lifted. The challenge for smaller markets is that Brazil represents a critical supply source.  According to reports, about 80 per cent of South Korean chicken imports come from Brazil. For countries in the Middle East, Brazilian beef and chicken also represent a critical supply, which may be difficult to replace in the very near term.

    Some Brazilian product may be significantly less expensive than US product or importers in those countries have not developed the relationships that would allow them to easily replace the product.

    In the case of beef, Brazil is the top global supplier, having surpassed both the US and Australia to grab the top stop. Brazil beef exports in 2016 were 1.850 million MT on a carcass weight basis (they are less on a product weight basis as the chart shows).

    Brazil beef exports in 2016 were estimated to be up 9 per cent from the previous year in the latest USDA Post report. This is not an official statistic but matches up with the export data from Brazil.

    The following chart shows the key markets that currently are buying Brazilian beef. China and Hong Kong have emerged as the key destination, which is why the decision by China to suspend imports is critical.

    Brazil also is a key supplier of beef to the Middle East, with Egypt and Iran purchasing over 22 per cent of all Brazilian exports in 2016. The EU has announced it was suspending imports from four facilities, according to Reuters.

    If the scandal widens, we could see EU authorities act more forcefully but for now, officials want to be careful about disrupting trade. 

    Brazil ships relatively little meat to the US. It is our understanding that at this point FSIS has moved to inspect 100 per cent of all Brazilian product at the port of entry. Also Brazilian beef trimmings will be subjected to increased testing for E.coli O157:H7.

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    March 22nd: Americans Eating Less Beef
    FOX News

    Americans are eating less beef than they did a decade ago, but environmental groups and cattle producers can’t seem to agree on why.

    According to a study published by the Natural Resources Defense Council (NRDC) on Wednesday, Americans' beef consumption decreased by 19 percent between 2005 and 2014. During that time, people in the U.S. also stopped eating as much pork, chicken, shellfish and whole milk-- but not at nearly the same rate of decline as with beef.

    The NRDC also claims that, by eating less beef, Americans prevented the equivalent of 185 million metric tons of greenhouse gasses -- namely, those produced by cattle production -- from entering the atmosphere and contributing to global warming.

    “Whether we realize it or not, Americans have been fighting greenhouse gas emissions with their forks,” said Sujatha Bergen, a policy specialist for the NRDC, reports The New York Times.

    However, Bergen admitted that health concerns were probably the reason for the decline in beef consumption, as opposed to consumers’ concerns over the planet.

    The National Cattlemen’s Beef Association seems to disagree with Bergen’s assessment. While they don’t dispute the NRDC’s statistics concerning beef consumption -- the NRDC’s based their research on findings from the Agriculture Department -- they say the drop in beef consumption can be attributed to less beef in the American market.

    Between 2010 and 2013, the National Cattlemen’s Beef Association claims they exported more beef than was imported during that time. What’s more, the organization also argue that droughts, higher beef prices (caused by higher feed prices) and Americans’ preference for chicken or pork, is to blame.

    Meanwhile, the consumers themselves seem to agree with both the NRDC and the NCBA.

    In a survey conducted by Mintel in January 2017, over a third of consumers cited price as the reason they ate less beef; another 35 percent said they were eating other proteins; and more than a quarter cited health reasons.

    The NCBA also told The New York Times that the NRDC was “fallacious” to equate the decline in beef with greenhouse emissions.

    Sara Place, who studies sustainable beef production with the NCBA, argues that consumers who really want to reduce greenhouse emissions should start by producing less food waste.

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    March 22nd: USDA Cold Storage Report

    As of February 28, 2017:

    • Total red meat supplies in freezers were up 1 percent from the previous month but down 6 percent from last year. 
      • Total pounds of beef in freezers were down 7 percent from the previous month and down 1 percent from last year. 
      • Frozen pork supplies were up 9 percent from the previous month but down 9 percent from last year. 
      • Stocks of pork bellies were up 15 percent from last month but down 74 percent from last year.
    • Total frozen poultry supplies were up 5 percent from the previous month and up 2 percent from a year ago. 
      • Total stocks of chicken were up 2 percent from the previous month but down 2 percent from last year. 
      • Total pounds of turkey in freezers were up 12 percent from last month and up 11 percent from February 29, 2016.
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    March 22nd: Post-Wildfire Reality Sinks in for High Plains Ranchers
    Sherry Bunting -- Progressive Cattleman

    “The overwhelming reality of it all is sinking in,” said Greg Gardiner of Ashland, Kansas, in a phone interview 10 days after the Starbuck fire – which had consumed over 300,000 acres in Oklahoma and nearly 500,000 acres in southwest Kansas – claimed 43,000 of the 48,000 acres at Gardiner Angus Ranch.

    Officials are calling the Starbuck fire the largest single fire in Kansas state history. Additional wildfires on the same day brought the state total to 650,000 acres burned.

    All told, multiple windswept wildfires on March 6 burned close to 2 million acres of grasslands and left a deadly trail of crippling losses in four states.

    Preliminary livestock loss estimates for Kansas, Oklahoma, Texas and Colorado are approaching 7,000 to 9,000 adult cows and untold numbers of calves, horses and wildlife. These numbers are expected to increase in the weeks ahead as more cattle are located and those with less severe injuries are monitored and may not recover.

    Tragically, some of the affected ranching families suffered the ultimate loss of loved ones. Seven people lost their lives, at least five while trying to herd cattle to safety before becoming trapped in the rapidly moving fire when the high winds changed direction.

    It was the perfect storm when the red flag day dawned in the High Plains. The 60 to 70 mph winds drove multiple fast-moving fires that found abundant fuel in the grasslands that had previously benefited from two years of good moisture before turning tinder-dry over the past 60 days.

    In fact, the Starbuck fire was so fast and intense that even where fence appears to be standing, the wood at ground level is disintegrated. In Kansas, alone, an estimated 12,000 miles of fence will eventually need to be replaced. The priority is perimeter fencing, so materials and fencing crews are needed.

    With severe losses of grazing land and stockpiled hay, another immediate concern is feeding the estimated 25,000 to 30,000 surviving cattle in the affected areas of the four states for the next 30 to 60 days while ranchers deal with the recovery while finishing out the calving season before they can take stock of their positions and make decisions about their futures.

    The toll of survival

    While Gardiner Angus Ranch lost 500 adult cows – mainly donor cows for fall breeding and spring calving females on grass – the 1,500 cattle on wheat pasture and those gathered for their April 1 production sale were not affected. Gardiner estimates they have lost 300 calves. All of their stored hay is gone – 5,000 round bales and 3,000 bales of horse hay – despite scattered locations. Of the cattle in the line of the fire, 150 survivors are being monitored in corrals, and 30 of them have calved within days of the fire.

    “Those cows didn’t deserve this,” said Gardiner of the devastation. “We found many with their calves flat beside them – having just calved as the fire raced through. The fire happened so fast, but everything that day seemed to be happening in slow motion.”

    “Everywhere you looked, it was like the world was on fire with fire lines on every horizon,” Gardiner said, explaining how fast the fires were upon them and the complications of changes in wind direction, making it impossible to move cattle ahead of the fire.

    Even people evacuating their homes were back and forth on where to go as the shifting high winds fueled fires that jumped roads and turned in unpredictable ways throughout the day and night. Greg’s brother Garth had a few close calls, as the fire came first from the north and Garth’s family evacuated their home. Then it switched and the roads were blocked.

    Greg Gardiner described his own close encounter while following his brother Mark with a horse trailer. Mark and Eva were attempting to save three horses and two dogs with the fire closing in on their home. When a tree belt erupted in flames, the blackness descended and the heat of the fire reached Greg’s vehicle. He was forced to retreat with zero visibility, and was left wondering for what seemed like an eternity whether Mark and Eva had escaped before their home was engulfed.

    A firefighter emerged 30 minutes later to tell him they had made it out.

    “This thing is of biblical proportions. Everywhere you look, it is like an apocalyptic wasteland, but that seems like small potatoes right now: My family is alive,” said Gardiner.

    Waves of relief

    As the heart-wrenching stories and statistics emerge from the region, the focus is transitioning from cattle triage to organizing the significant short- and long-term needs of the ranchers. The agriculture community across the country is wasting no time organizing shipments of donated hay, milk replacer, fencing materials and other needs, while foundations are setting up methods to accept donated funds, and auctions are being organized to raise additional funds for these ranchers.

    “When the hay trucks rolled in, it was like the cavalry arrived,” said Gardiner, whose ranchlands were largely burned by the Starbuck fire, deemed the largest single fire in Kansas state history. All told, 22 counties in Kansas were affected by multiple wildfires.

    Truckers dispatched from drop points to ranches describe the evident relief in the faces of the ranchers they have met. While the early convoys of semis and flatbeds traveled under lifted highway restrictions, strangers along the way offered cash for fuel or for the ranchers. But the cost of fuel and the availability of trucking remain a bottleneck in getting some of the hay donations to their destinations.

    Hay has been delivered from mainly a 300-mile radius of the affected areas. Dr. Randall Spare of Ashland Veterinary Clinic said 800 bales are waiting in Waco, Texas, if they can find trucking. Convoys are also being assembled in South Dakota, Kentucky, Tennessee and Minnesota, with calls coming into the various state coordinators from as far away as Arizona, Wisconsin, Vermont and Canada.

    “By Friday we were just amazed at the amount of hay and calls we were getting, and it continues,” said Danny Nusser, Texas A&M Agrilife Extension regional director. “We put the message out Saturday morning that we will take all that we can handle.”

    By Monday, however, the 4,200-bale goal set for the three Panhandle supply points had been met, and Nusser reported they are taking names and numbers until they further assess the region’s needs. The goal was to gather a 30-day supply for the estimated 15,000 surviving cattle in the Panhandle.

    In Oklahoma, hundreds of large round bales were received over the weekend; one convoy was organized by ranchers in the southern part of the state.

    In Kansas, 3,000 large bales were received within a week of the wildfires, and according to Spare, they can use more. “We don’t want to turn down hay because some of our ranchers are just coming to grips with what their losses are and what their needs will be. Since Gardiner Ranch has the capacity to unload and accumulate hay where neighbors can come and get what they need, we are utilizing that.”

    Southwest Kansas has an estimated 15,000 surviving livestock on ranches that have lost most of their grazing and hay.

    Donations that lift spirits

    The challenge with the hay, said Spare, is that “some producers are saying they don’t need the hay or they feel embarrassed to take it, but the grass is all gone and we are 60 days from good grass [in unburned areas], and that’s if it rains, so we are still in the process of contacting ranchers, trying to help people understand as they make their plans that they will need to have something to feed.”

    As the immediate hustle to triage cattle and secure feed and care for survivors shifts to a longer-term coordination of ongoing recovery, those close to the situation are urging more distant donors to consider monetary donations to help with trucking of closer hay and materials and other needs instead of trying to send hay from 1,000 miles away.

    Spare has spent his time trying to connect the dots. And those dots include the growing number of orphaned calves.

    With fences to build and repair, feed to secure, cows still calving and long-term plans and decisions to make, there’s no time to bottle and bucket feed calves two and three times a day, particularly for those ranchers who have also lost their homes.

    Kansas county 4-H clubs put the word out early that youth members are taking in bucket calves to help the ranchers who have so many other things to do in the recovery. To follow their progress and donate milk replacer and other supplies, visit the Orphaned Calf Relief of SW Kansas on Facebook.

    Veterinarians are reaching out to colleagues in the hard-hit areas. Spare received a call late last week from Dr. Tera Barnhardt. She and Deerfield Feeders’ general manager, Cary Wimmer, came up with the idea of offering temporary homes and care in the calf ranch hutches for orphaned calves from Ashland.

    Many ag companies have donated milk replacer, feed, pharmaceuticals and other animal care products – and along with hay donations from other ranches, have come personal items for the families who have lost their homes and belongings.

    “Our hearts go out to the ranchers,” said Barnhardt. “I’m just glad we could help connect some dots and take something off their plate.”

    Moving forward

    With the fires mostly contained in the affected regions, conditions are still tricky in some spots, according to Nusser. He said it will be June or July, with sufficient rain, before the greenup slows the fire threat in the Panhandle.

    County FSA offices are asking ranchers to contact them with loss numbers so this information can be tied to emergency declarations from each state’s respective governors for grazing lands exceptions and assistance.

    The problem is that individual ranch losses will far exceed the individual $125,000 caps for USDA programs like the Livestock Indemnity Program and fencing cost shares.

    “Every individual rancher will weather these losses differently, depending on their financial position at the time of the fire,” said Dr. Steve Amosson, AgriLife Extension economist in Amarillo, Texas. His early estimate for the Panhandle, alone, is $21 million in losses, which he expects to see increase as more information is gathered. He said that for many ranchers, little insurance money will come into play.

    In Texas, the Perryton/Lipscomb fire is deemed the third largest in Texas state history.

    For the short term, the tangibles are necessary because it takes time for the various foundations to pool monetary donations and get resources to the ranchers. Over the next 30 to 60 days, the recovery will transition to a rebuilding effort.

    This will be a long recovery for ranchers who have lost 50 to 90 percent of their herds and multiple years of income and stockpiled forage, according to Spare.

    “We’re praying for rain,” he said, describing dirty skies as the wind lifts the gray dusty sand over charred soils.

    “I told CNN that we as ranchers are stewards of the grasslands, and that the only way we have something to sell for an income is to sell grass through the cows that are eating it. We are working to take care of that and start all over again,” said Spare, who had significant losses among his own cow herd and was relieved when his son showed up in the driveway Tuesday morning, taking time away from vet school before spring exams to take care of the home front while he worked with other ranchers and their cattle.

    As for the immediate fencing need, a short- and long-term approach is being pursued. While fencing certainly has its government specs to qualify for USDA cost-sharing, several ranchers interviewed for this report indicate that the amount of fencing they have to replace so greatly exceeds the cap on funds they will begin with what is donated to establish perimeters and do their cross fencing as they can over the next few years.

    While prayers are most coveted, those who want to help are urged to contact organizers in the affected states to see what the needs are as community leaders develop an ongoing relief plan.

    “There are no guarantees in agriculture. We know the risks and we appreciate this is life we have chosen to live,” said Gardiner. “This is an emotional deal, hitting us all every day. We’ll take it one step at a time. We’ll survive by keeping ourselves moving.”

    “There is so much appreciation in this community for the outpouring of love and compassion from the people who have come alongside us with prayers and help,” said Spare. “Many don’t know how they’ll get through this, but we know we will get through it.”  end mark

    The Starbuck fire consumed 43,000 of the 48,000 acres at Gardiner Angus Ranch. Over 12,000 miles of fencing in Kansas, alone, is estimated in need of replacement as the rapidly moving and intense fire disintegrated posts at the ground level. 


    Photo by Julie Tucker

    How you can help

    Wildfire relief organizers are indicating that the best way for distant donors to help is to provide monetary donations for transporting nearby hay and resources to the areas affected by the wildfires.

    In addition, auctions are being organized to benefit wildfire funds. For example, a heifer donated by Oklahoma West Livestock Market was auctioned 105 times on March 8 to garner $115,449 with proceeds going to the Oklahoma Cattlemen’s Foundation Fire Relief Fund. Similar ideas are creating a ripple response throughout the agriculture community and can be replicated anywhere.

    Trent Loos at Rural Route Radio is helping to organize this idea to fund the recovery and rebuilding efforts in the fire-ravaged areas of the High Plains through means of raising cash. For information about how to participate in this and to find a list of upcoming auctions, as well as how to set one up, contact Trent Loos at (515) 418-8185.

    To give supplies and trucking or to donate funds to foundations for direct wildfire relief, contact the state-by-state resources below.

    Kansas

    Monetary donations: Ashland Community Foundation/Wildfire Relief Fund at www.ashlandcf.com or P.O. Box 276, Ashland, KS 67831. The Kansas Livestock Association/Wildfire Relief Fund at 6031 SW 37th St., Topeka, KS 66614.

    Hay, trucking and fencing donations: Call Ashland Feed and Seed at (620) 635-2856. (Ashland Feed and Seed is also taking credit card orders over the phone for feed and milk replacer or other supplies for ranchers in the area.)

    Texas

    • Monetary donations: Texas Department of Agriculture STAR Fund.
    • Hay, trucking and fencing donations: Ample hay has been received for two to three weeks, so call to see if and when more is needed. Fencing supplies are needed, which can go to the Agrilife supply points. Contacts are J.R. Sprague at (806) 202-5288 for Lipscomb, Mike Jeffcoat at (580) 467-0753 for Pampa, and Andy Holloway at (806) 823-9114 for Canadian.
    • For questions about donations or relief efforts, contact Texas A&M Extension at (806) 677-5628.
    Colorado
    • Hay, trucking and fencing: Contact Kent Kokes (970) 580-8108, John Michal (970) 522-2330, or Justin Price (970) 580-6315.
    Oklahoma
    • Monetary donations: Oklahoma Cattlemen’s Foundation Fire Relief at P.O. Box 82395, Oklahoma City, OK 73148 or www.okcattlemen.org.
    • Hay, trucking and fencing donations: Contact Harper County Extension at (580) 735-2252 or Buffalo Feeders at (580) 727-5530.
    • Other states organizing deliveries
    Preliminary statistics
    • Texas: Four deaths and more than 480,000 acres burned and early livestock loss estimates of 2,500 adult cattle. Texas A&M Agrilife Extension estimates preliminary damage at over $21 million, not counting equipment losses. Gov. Greg Abbott declared a state of disaster in six counties in the Texas Panhandle.
    • Kansas: One death, 11 injuries, more than 40 homes destroyed and 702,000 total acres burned, 462,000 of which stem from the Starbuck fire deemed the largest single fire in Kansas state history. Kansas Gov. Sam Brownback signed a disaster declaration covering 20 counties. Early estimates of livestock losses are 3,000 to 6,000 adult cows and additional calves.
    • Oklahoma: One death, eight homes and 381,000 acres burned from the Starbuck fire. Three additional fires in the state have burned 120,000 additional acres. Gov. Mary Fallin declared a state of emergency for 22 counties. Early estimates of livestock losses are 3,000 cows and additional calves.
    • Colorado: Five homes were destroyed and more than 30,000 acres burned; early livestock loss estimates are 185 cow-calf pairs.
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    March 20th: Brazilian Government Closes 3 Meat Plants

    The Brazilian federal government decided to temporarily close three meat processing plants and remove 33 public employees from their jobs on Friday evening, after the Federal Police launched an investigation Friday morning to dismantle a bribery scheme involving sanitary licenses for adulterated products.

    Brazil's president Michel Temer held a meeting with diplomats from Brazil's meat importers yesterday to reassure quality of the country's products and sanitary procedures.

    The Federal Police said on Friday it was investigating federal sanitary inspectors and employees in the food industry for involvement in the scheme, which resulted in releasing meat unfit for consumption. Brazilian processors JBS and BRF are among food companies being investigated.

    Brazil's national beef industry association ABIEC said via press statement that none of the beef producing facilities of its 29 member-companies were cited in the Federal Police investigation.

    BRF's poultry unit located in Mineiros, Goias state, and two meat processing units of Peccin in Jaraguá do Sul (Santa Catarina) and Curitiba (Paraná) were closed, according to the Ministry of Agriculture.

    BRF said its unit in Mineiros produces less than 5 percent of the company's total chicken and turkey meat. “The plant is capable of exporting to the most demanding markets in the world, such as Canada, the European Union, Russia and Japan. This means that it follows the different standards stipulated by these countries,” the company said via press statement, adding that the facility has international certifications.

    BRF said the unit was temporarily closed until it can provide information that affirms the safety and quality of the products to the Ministry of Agriculture, “which should happen soon.”

    The government decided to establish a special audit procedure for 21 meat processing units cited in the investigation, according to a written press statement sent on Sunday night.

    Of these 21 processing units mentioned in the investigation, six exported meat in the past 60 days. Further details on countries that received the products, which products were sold and the companies selling have yet to be released, according to the government.

    Federal officials also said that all the exporting units remain open for inspections by importing countries, and that the Ministry of Agriculture will strengthen cooperation with the Federal Police to investigate eventual deviations in the agricultural defense system.

    “The federal government reiterates its confidence in the quality of the national product, which has conquered the consumer and obtained approval from the most demanding markets from the point of view of agricultural inspection and defense,” Temer said via press statement.

    Shares in Brazilian meatpackers tumbled anew after China, a key importer, joined countries placing restrictions on the South American country's $12bn meat exports, in the wake of a corruption scandal involving food safety inspectors.

    Shares in sector leader JBS touched R$9.64 in early deals in Sao Paulo, a drop of 10.0% on the day, and taking to 20% their losses since Brazilian police on Friday raided the company, and a number of rivals, in a probe into alleged bribery of officials charged with investigating meat processing facilities.

    Shares in rival Marfrig dropped 5.9% to R$5.72, taking their two-session losses to 7.9%, while stock in BRF dropped 11.8% to a four-year low of R$32.72, taking their two-session slump to 18.2%.

    Minerva shares touched an eight-month low of R$48.77, down 13.1% on the day, and by 14.9% since news of the scandal broke.

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    March Seasonal Drought Outlook
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    March 9th: USDA World Agricultural Supply & Demand Estimates

    LIVESTOCK & POULTRY: Total U.S. meat production for 2017 is increased from the previous month as higher forecast beef production more than offsets lower forecast pork and turkey production. 

    • First quarter beef production is raised on current slaughter data, and third-quarter production is raised as higher expected first quarter placements are marketed in the second half of the year. However, carcass weights for the year are forecast lower as feedlot operators are expected to remain current in their marketings.
    • The pork production forecast is slightly lower as a result of lighter carcass weights in the first half of the year. USDA will release the Quarterly Hogs and Pigs report March 30th,  WASDE-563-4 providing an indication of producer intentions for farrowings in the next 2 quarters. Small changes are made to 2016 poultry production estimates, reflecting recent data revisions.
    • The broiler production forecast is unchanged from the previous month. 
    • For 2017, the turkey production forecast is decreased on slower expected second-half production growth.
    The forecast for 2017 beef imports is unchanged, but the export forecast is raised on stronger-than-expected export shipments thus far in the quarter. Pork imports are lowered for 2017, reflecting larger domestic supplies and limited demand for foreign product. Forecast pork exports are raised on robust international demand and large domestic supplies of pork. No change is made to broiler and turkey trade forecasts.

    Cattle, hog, and broiler price forecasts for 2017 are raised from last month on continued demand strength. The 2017 turkey price forecast is lowered as the first-quarter price forecast is reduced.

    WHEAT: U.S. wheat imports for 2016/17 are reduced this month by 10 million bushels to 115 million. Ending stocks are projected lower by the same amount to 1,129 million bushels. The season-average farm price is unchanged with the midpoint of the range at $3.85 per bushel.

    Internationally, global production increased 2.8 million tons to 751.1 million, mainly due to larger crops in Argentina and Australia more than offsetting a slight reduction in the European Union. Australia’s 2016/17 wheat production is raised 2.0 million tons to a record-large 35.0 million. USDA model-based analysis of weather data estimates Australia’s yield in line with the latest Australia Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimate. Projected exports are increased for both
    Australia and Argentina on their larger supplies while Canada’s exports are reduced on a sluggish export pace. Global imports are raised this month led by India, which was raised 1.8 million tons to 5.5 million. This would be the largest wheat import total for India since 2006/07; India stocks have successively declined since 2012/13. Despite higher projected global use, driven by India, 2016/17 global ending stocks are increased by 1.3 million tons to 249.9 million.

    COARSE GRAINS: This month’s 2016/17 U.S. corn outlook is for increased corn used to produce ethanol and reduced feed and residual use. Corn used to produce ethanol is raised 50 million bushels to 5,400 million based on the most recent data from the Grain Crushings and Co-Products Production report and strong pace of weekly ethanol production during February as indicated by Energy Information Administration data. Offsetting is a 50 million bushel reduction in projected feed and residual use to 5,550 million bushels based on indicated use during 2015/16, increased corn used to produce ethanol, and higher expected sorghum feeding. Ending stocks are unchanged from last month. The projected range for the season-average corn price received by producers is unchanged at $3.20 to $3.60 per bushel.

    Corn for food, seed, and industrial use (FSI) is raised 11 million bushels for 2015/16 reflecting a 18-million-bushel increase in estimated corn used in ethanol production based on revisions to monthly data reported in the March 1 Grain Crushings and CoProducts Production 2016 Summary. Partially offsetting is a marginal reduction in nonethanol FSI. With stocks and trade known, a change is made to feed and residual use. Global coarse grain production for 2016/17 is forecast 12.7 million tons higher from last month to 1,341.7 million. 

    This month’s foreign coarse grain outlook is for increased production, consumption, trade, and stocks relative to last month. Brazil corn production is raised on increases to both projected area and yield. Reported first crop yields have been record high, while the rapid planting progress of second crop corn in the CenterWest boosts expected area and yield prospects, allowing for greater crop development prior to the normal end of the rainy season. South Africa corn production is higher as above normal rainfall and benign temperatures during grain fill support an increased yield forecast. India corn production is raised based on the latest government statistics. Argentina corn production is increased based on higher-than-expected yield results for early-planted corn and indications of larger planted area. Barley production for Australia is projected sharply higher based on the latest information from ABARES. 

    Major global trade changes for 2016/17 this month include higher projected corn exports for Brazil, Argentina, and South Africa. Corn imports are raised for Iran, while barley imports are raised for Saudi Arabia and China. Foreign corn ending stocks are raised from last month, mostly reflecting increases for Brazil, Argentina, Iran and South Africa. 

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    February 15th: Comprehending the Immensity of the National Debt

    This does not directly pertain to the cattle market, but we recently came across the map of the United States found below that shows the proportion of Federally owned land in each state. This prompted the question, "How much of the nearly $20 trillion National Debt could be paid if vast amounts of this land, much of which costs more to administer than it generates in lease payments, were sold and the sale proceeds applied to the debt?" -- National Debt Clock

    What was found in the New Estimates of Value of Land of the United States - Bureau of Economic Analysis - April 3, 2015, is astounding and may be the most compelling and understandable way to comprehend the immensity of the National debt...

    In the conclusion of this report, it is stated... "This paper presents new estimates of the value of land in the lower 48 United States from 2000 to 2009. In 2009, the value of land was approximately $23 trillion, $1.8 billion of which is owned by the federal government.  According to the National Land Cover Database, 6% of the lower 48 states is developed, and according to the estimates in this paper, this land consists of 50% of the overall land value. Land values rose until 2006 and then fell until the end of the sample in 2009."

    "The estimation methodology consists of dividing the U.S. into a mosaic of parcels at the census tract level and below, assigning ownership and prices to each parcel, and tabulating.  Whereas past estimates have omitted large areas of land or have based valuation on potentially implausible estimates of structure values, this attempt instead misses no land area and uses hedonic estimates of land values."

    The Bottom Line... Selling all Federally owned land and applying the sale proceeds to the National Debt would only be "a drop in the bucket" and nearly all of the land in the lower 48 states would have to be sold to pay the debt.

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    All Cattle & Calves Inventory: January 1, 2017 vs. 2016
    Compiled from USDA National Agricultural Statistical Service Data
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    Beef Cows Inventory: January 1, 2017 vs. 2016
    Compiled from USDA National Agricultural Statistical Service Data
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    Replacement Heifers Inventory: January 1, 2017 vs. 2016
    Compiled from USDA National Agricultural Statistical Service Data
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    January 31st: January 1 Cattle Inventory Up 3 Percent
    USDA - National Agricultural Statistics Service (NASS)
     
    • All cattle and calves in the United States, as of January 1, 2017, totaled 93.6 million head. This is 2 percent above the 91.9 million head on January 1, 2016. 
    • All cows and heifers that have calved, at 40.6 million head, are 3 percent above the 39.5 million head on January 1, 2016. 
      • Beef cows, at 31.2 million head, are up 3 percent from a year ago. 
      • Milk cows, at 9.35 million head, are up slightly from the previous year. 
    • All heifers 500 pounds and over, as of January 1, 2017, totaled 20.1 million head. This is 1 percent above the 19.9 million head on January 1, 2016. 
      • Beef replacement heifers, at 6.42 million head, are up 1 percent from a year ago. 
      • Milk replacement heifers, at 4.75 million head, are down 1 percent from the previous year. 
      • Other heifers, at 8.88 million head, are 1 percent above a year earlier. 
    • Calves under 500 pounds in the United States, as of January 1, 2017, totaled 14.4 million head. This is 2 percent above the 14.1 million head on January 1, 2016. 
      • Steers weighing 500 pounds and over totaled 16.4 million head, up slightly from one year ago. 
      • Bulls weighing 500 pounds and over totaled 2.23 million head, up 4 percent from the previous year. 
    • The 2016 calf crop in the United States was estimated at 35.1 million head, up 3 percent from last year's calf crop. 
      • Calves born during the first half of 2016 were estimated at 25.6 million head. This is up 4 percent from the first half of 2015. 
      • Calves born during the second half of 2016 were estimated at 9.53 million head, 27 percent of the total 2016 calf crop. 
    • Cattle and calves on feed for the slaughter market in the United States for all feedlots totaled 13.1 million head on January 1, 2017. The inventory is down 1 percentfrom the January 1, 2016 total of 13.2 million head. 
      • Cattle on feed, in feedlots with capacity of 1,000 or more head, accounted for 81.2 percent of the total cattle on feed on January 1, 2017. This is up 1 percent from the previous year. 
      • The combined total of calves under 500 pounds and other heifers and steers over 500 pounds (outside of feedlots) is 26.6 million head. This is 2 percent above one year ago. 
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    November 16th: What Did it Cost to Produce a Calf This Year?
    Aaron Berger -- University of Nebraska Extension 

    Weaning of spring-born calves has occurred for many cow calf producers. Right after weaning is a good time to analyze the business and see what it cost to produce a pound of weaned calf.

    Cow costs and thus the cost to produce a weaned calf have shot up over the last 15 years. From 1987 to 2001, the Livestock Market Information Center reports that annual cow costs increased from $300 to $400 per cow. From 2002 to 2015, cow costs more than doubled from $400 to $875 per cow.

    These annual cow costs figures are from National Ag Statistics Surveys. Cow costs in much of Nebraska would be equal to or higher than the national average due to the cost of pasture. Obviously not every cow weans a calf, so the actual cost per calf produced is much higher than $875!

    This information prompts the question: What did it cost you to produce a pound of weaned calf this year? What do you project it will cost in 2017?

    Unit cost of production (UCOP) is a value based on a relationship in production between costs and units of product made or produced.

    Unit Cost of Production = Costs / Units Produced

    The relationship between the numerator (Costs) and the denominator (Units Produced) is what drives the UCOP value. The power of the UCOP ratio for cow-calf producers is that everything involved in the production of a pound of calf is represented in the numerator or denominator of the equation. For example, if a producer wants to buy a pickup that will be used in the production of calves, he can estimate how the purchase of that pickup will affect his UCOP in terms of cost per pound of calf produced. The same thing goes for the purchase of a bull. Evaluating the purchase of a bull in light of how many estimated pounds of calf that bull will produce in relation to his cost can give insight into what a producer might be willing to spend.

    What did it cost to produce a pound of weaned calf this year? What is it projected to cost next year? The old adage "you can't effectively manage what you don't measure" is true in relation to managing the cow-calf enterprise. The first step in calculating UCOP is to have accurate production and financial records. These records do not have to be complicated, but they need to be accurate and thorough. If current management and information systems don't provide the data to run this type of analysis, consider making changes that will provide the records needed.

    Unit Cost of Production takes into account both product produced and input costs. Knowing UCOP allows a manager to look forward utilizing both present and projected input costs with production numbers to make informed decisions. You can’t change last year’s cost of production numbers, but with good information, you can make management changes that will impact the upcoming year. Cow-calf producers who know UCOP numbers and understand the interaction between costs and production can implement strategies to effectively manage resources to meet business and personal goals. 

    As with most things in life, the first few times you do something, you make mistakes and through the process learn how to get better. The first time someone learns to drive, there is going to be gears grinding, lurching and jerking, and some killed engines. There also is likely going to be some parent or adult with more gray hair (or perhaps less hair) in the process! Passing the driver’s test and being able to drive is well worth the hassle and effort!

    Learning how to calculate UCOP is a similar process for cow-calf producers who have never done it before. The first few times through the mental gears will be grinding and there will be frustration along the way. However once someone does it and gets comfortable, the value of knowing this information and being able to confidently make decisions that improve profitability is extremely satisfying! 

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