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April 21th: Closing Futures Summary

The cattle market apparently found chart support. Cattle futures opened firmly despite Monday’s big breakdown and overnight news of a ‘bird flu’ outbreak on an Iowa broiler farm. Big futures discounts and doubts about the cattle/beef complex’s vulnerability to potential broiler losses seemingly supported. June cattle futures advanced 0.85 cents to 146.72 cents/pound at Tuesday’s CME settlement, while August cattle surged 1.22 to 145.45. Meanwhile, May feeder cattle futures ran up 1.82 cents to 206.97 and August vaulted 2.15 to 208.62 cents/pound.

Late Monday news seems to depress the crop markets. Corn futures continued their Monday decline today, with traders seemingly responding to the latest USDA Crop Progress report indicating U.S. corn plantings accelerated last week. Predicted Midwest dryness also suggests a fast pace this week. Moreover, news that a huge Iowa broiler farm had been hit by bird flu raised concerns about domestic feed demand. May corn futures settled 5.0 cents lower at $3.73/bushel Tuesday afternoon, while December lost 3.75 to $3.975.

The soy complex traded mixed through Tuesday’s session. Talk of increased Chinese demand and potential South American production problems seemed to boost the soy complex Monday. Persistent palm oil strength and rebounding crude oil supported soyoil quotes today, but beans and meal traded weakly all day. Talk of good planting weather and accelerated farmer activity reportedly weighed on beans, with news of spot meal weakness undercutting CBOT quotes as well. May soybean futures ended Tuesday having fallen 2.25 cents to $9.74/bushel, while May soyoil rallied 0.23 cents to 31.82 cents/pound, and May meal slid $2.7 to $315.8/ton.

Wheat futures turned higher Tuesday morning. The wheat markets moved generally lower overnight, which probably reflected the stunningly fast pace at which farmers planted spring wheat last week. The midmorning reversal may have reflected disappointing winter wheat ratings in the wake of last week’s rains. On the other hand, the fact that the Minneapolis market led the way higher suggests hopes for improved demand sparked the rebound. May CBOT wheat futures bounced 2.0 cents to $5.0075/bushel in late Tuesday trading, while May KC wheat gained 1.25 cents to $5.1375/bushel, and May MWE wheat climbed 6.25 to $5.4525.

Technical buying seemed to exaggerate Tuesday’s hog surge. As expected, the bird flu news weighed on CME hogs on today’s opening, but bears couldn’t sustain the pressure. The simple fact that the news didn’t greatly change the current wholesale situation may have encouraged bulls, especially after midday pork quotes posted sizeable advances. The subsequent bounce was apparently exaggerated when prices topped short-term chart resistance. June hog futures leapt 2.07 cents to 77.60 cents/pound in closing Tuesday action, while December jumped 0.90 to 68.37.

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April 20th: Beef Exports Good Signal For US Cattle

Latest weekly beef export data is "quite positive" for the cattle market, according to leading analysts.

Shipments of muscle cuts in the last four weeks have averaged 12,224 MT, compared to 12,238 MT during the same four week period a year ago.

Len Steiner and Stever Meyer in their daily livestock report for the CME write that, despite the very strong dollar, US exports to Japan during this four week period were 20 per cent higher than a year ago and exports to S. Korea were up 18 per cent.

Mexico demand has suffered and this is the biggest drag for US beef shipments, down 38 per cent compared to last year. As with pork, we have shown the ratio of weekly vs. monthly exports, which in the last four months has averaged about 83 per cent.

If the ratio holds, we could see March beef exports at around 65,000 MT, 4 per cent higher than last year. An early projection for beef currently pegs shipments at over 65,000 MT, +one per cent vs. Apr 2014.

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April 17th - National Feeder & Stocker Cattle Summary
USDA-MO Dept of Ag Market News

RECEIPTS:  Auctions   Direct   Video/Internet    Total
This Week     221,700     44,800        41,100        307,600 
Last Week     186,900     53,100        21,300        261,300 
Last Year       171,800     82,500         6,900        261,200

Compared to last week, feeder cattle and calves sold steady to mostly 5.00 lower to start the week, after cattle futures last Friday declined sharply with near limit losses on the feeder cattle contracts.  Market watchers were also disappointed by limited cash trade and lower prices paid on fed cattle as weekly slaughter was very light at 502,000 head.  Momentum redeveloped across the live and feeder cattle futures to start the week and gained ground until this Friday’s collapse.  From mid-week on feeder cattle and calves also strengthened with many auctions reporting steady to instances 3.00-5.00 higher.  In the Southeastern regions feeder calves were mostly 2.00-6.00 lower.  In addition to market pressure on feeder calves, lightweight offerings are now overwhelmingly made up of new crop fall born calves which are not always highly demanded by stocker buyers as many are unweaned and fleshy. 

With higher futures and strengthening boxed-beef prices the feedlot managers this week will have no reason to back down from higher asking prices.  Unpredictable attitudes are dictating market direction as of late, resembling a poker game where every player is either all-in or folded on every hand.  Volatility is the only rule that cattle markets abide by lately with the debate of how high is high enough.  These are the results of an industry yearning for profits as packers have been operating with negative margins for some time, but have been successful in moving boxed beef higher at light movement and can he keep enticing the retailer into the market at higher money.  All participants in the cattle industry are leery but no one wants to be caught with empty pens or pastures when profit opportunities appear. 

Auction receipts were again fairly heavy this week especially in the Northern Plains where in Ogallala, NE on Thursday sold 155 fancy steers weighing 615 lbs at 291.00, with 60 head of their smaller brothers weighing 528 lbs sold at 315.50.  In Mitchell, S.D. on Thursday sold 224 head of value added NHTC steers averaging 815 lbs sold with a weighted average price of 243.98.  Corn planting is getting well underway with USDA reporting 2 percent planted on Monday.  A slower than expected pace but not a problem at this time especially with today’s planting capabilities to cover acres in a very short time.  Auction volume included 55 percent over 600 lbs and 43 percent heifers.

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April 17th: Canadian Weekly Cattle Report

Fed cattle rally

  • The fed steer average price last week almost hit $200 per hundredweight.
  • In Canada, packers eventually bought most of the week’s modest cash offering at an average steer price of $199.86, up 75 cents from the previous week.
  • American packers bought a few Canadian cattle at US$270 dressed, steady with the previous week.
  • Alberta dressed sales rose C$1-$4 with most trade from $335-$338 per cwt. delivered.
  • Alberta packers were pulling in cattle from Saskatchewan and Manitoba.
  • The April Chicago live cattle contract fell 4.225 cents over the week, three cents on Friday alone, but the Canadian cash market held up well.
  • Weekly Alberta cash-to-futures basis strengthened to -$3.07 from -$5.42.
  • Reduced slaughter rates prompted packers to pressure cash cattle in the U.S. Plains last week to US$163-$165.50 per cwt. live, down from $167-$169 the previous week, Reuters reported.
  • Weekly western Canadian slaughter to April 4 fell 17 percent because of the Good Friday holiday to 26,075 head.
  • Weekly fed exports to March 28 rose 10 percent to 7,084 head.
  • April show lists should moderate, and cash trade will be limited.
  • U.S. interest should continue to enhance competition.
  • A few fed calves traded last week, and excellent feeding conditions could increase that number. However, profitable feeding margins might encourage feedlots to keep early calves on feed as long as possible.
Cow price up
  • Western Canadian weekly cow slaughter has been 4,000-4,300 head in recent weeks, the lowest seen this year.
  • Accumulated Canadian cow slaughter this year is down 18,600 head, while accumulated exports are down more than 25,000 head from 2014.
  • D1, D2 cows ranged $140-$155 to average $148.17, up $2.50. D3 cows ranged $120-$140 to average $129.25.
  • Rail grade cows ranged $279-$284 per cwt.
  • The butcher bull average was $167.90, up $10 over two weeks.
  • Higher yielding bulls are now trading in the mid-$180s.
  • Western Canadian D1, D2 cows are trading at a $5-$7 premium over U.S. utility cow prices.
  • There is a chance northern U.S. cows will come into Canada if this premium continues to grow.
Feeders hit record
  • The western Canadian calf and feeder index climbed $9.16 to $226.03 per cwt., a new record, because demand for all classes of feeders was strong.
  • The 850 pound steer-heifer price spread has been wide this year, but it narrowed over the past couple of weeks to $11 per cwt.: $248.33 steers versus heifers at $237.25.
  • Export interest and breeding premium are contributing to the narrowing spread.
  • Interest for yearling forward contracting has started to pick up. Steers 875 lb. in Saskatchewan traded at $253 for September delivery.
  • Exports rose to 17,987 head, up six percent from the same time last year.
  • Many of the feeders going south are contract cattle.
  • Cattle lighter than 500 lb. are rallying as much as heavier stockers, likely because they are too light to go on grass. Also, quality has been mixed.
  • Lethbridge cash barley prices have jumped $20-$30 higher, the strongest prices in nearly a year.
  • Feed barley should remain firm over the next couple of months because of tight supplies and brisk export movement.
Beef stronger
  • Spring grilling demand and reduced North American beef production pushed boxed beef prices higher.
  • U.S. Choice was up US$7.72 at $258.39 in the week ending April 9, and Select was up $5.49 at $252.45 per cwt.
  • The cutout was $30-$35 per cwt., or 13-16 percent above year ago levels.
  • Cattle slaughter usually increases this month, but beef supplies are expected to remain tight because year-to-date cattle slaughter is down seven percent.
  • The U.S. port backlog of meat is now mostly cleaned up, but American exports are challenged by the strong buck and strong competition from cheaper pork.
  • Canadian cutouts for the week ending March 28 were unavailable.
This cattle market information is selected from the weekly report from CanFax, a division of the Canadian Cattlemen’s Association.
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April 17th - Lawsuit to Stop NCBA as a Checkoff Contractor

A lawsuit to be filed in federal court Friday is seeking a permanent injunction against the use of beef checkoff funds by the National Cattlemen’s Beef Association as a contractor. The suit will be filed on behalf of Mike Callicrate, plaintiff, vs the United States Department of Agriculture (USDA), USDA’s Agricultural Marketing Service, the Cattlemen’s Beef Board (CBB), and CBB’s operating committee.

The lawsuit was announced at a press conference in Kansas City, MO, prior to the Organization for Competitive Market’s (OCM) annual meeting by OCM president Fred Stokes. The lawsuit seeks an “injunction against the use of beef checkoff funds flowing to NCBA who we deem have misused those funds,” Stokes said. He described the legal action as an effort to “stop the abuses occurring to the beef checkoff.”

Callicrate is the owner of Ranch Foods Direct, a Colorado Springs-based “meat packing facility and local farmer's retail market delivering healthful, high quality, naturally tender meats and foods to consumers direct from the ranch,” according to the firm’s website. He is also an “independent cattle producer, entrepreneur, inventor and political activist.”

Specifically, Callicrate, who serves as vice president of OCM, and Stokes claim a large majority of checkoff funded projects are directed to NCBA acting as a contractor to the Cattlemen’s Beef Board. The suit alleges that the contracts are awarded to NCBA by the CBB operating committee in which “10 of the 20 seats” are occupied by NBCA members.

Additionally, Stokes believes that many of the projects funded by checkoff dollars are aimed at helping large cattle operations and large corporations rather than smaller, family cattle operations and farmers. He called the actions of the defendants named in the lawsuit “blatant abuses we think are offensive.”

The lawsuit will not seek a temporary injunction, which is often a common request as the legal process unfolds. Rather, the Callicrate lawsuit would mean “business as usual” for both the CBB and NCBA until the court renders a verdict, which Callicrate and OCM hope will be a “permanent injunction.”

Drovers Network

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April 17th: Shootin' the Bull Weekly Analysis
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In my opinion, traders pushed, shoved, and grappled their way to recovering the losses from the prior week.  The discount of the June and August contracts makes them appear about as unattractive as I've seen in a while.  Producers do not appear to have any intent on being short futures at such a discount.  Yet, purveyor's aren't chomping at the bit to own the discount.  Open interest and volume have stagnated, helping to confirm the reluctance to trade the June or August.   This leads me to be overly cautious about doing anything. 

Feeders are perceived different.  With the basis fairly tight, neither producers or purveyor's have much of an upper hand.  This year is significantly different than last year.  The near $16.00 negative basis last year allowed for profits to be locked in, regardless of how much may have been left on the table.  This year, it is perceived profit margins are thin to non-existent coming into the spring.  With no significant basis, neither side appears to have much of an advantage.  To accentuate that, the growing pains of vertical integration is anticipated to keep the current marketing environment at hand for several more months to come.

Vertical integration takes inventory out of the open market and places it in a pipeline that won't be quick to offer details on how it got there and at what price.  The perception of an increase in vertical integration, with the decline of inventory, is anticipated to have reduced the number of animals available to the open market.  There is perceived still more capacity utilization intact than animals and hence the fight for inventory continues, even with the perception of slim to negative profit margins anticipated. This leads me to want to be significantly more aggressive at marketing late summer and early fall inventory.

The futures nor options on futures will help to overcome the thin profit margins.  They can be significantly beneficial in helping to reduce adverse exposure to downside price action if it materializes. With the price having been paid for replacement inventory this spring, the hurdles to be faced, and extent of working capital at risk, I continue with my recommendations from last week to own the $212.00 August puts and/or the $210.00 October puts.  ***This is a sales solicitation.*** 

Corn continues to confound.  I perceive a change in direction of the US dollar would go a long way in helping to relieve some of the selling pressure off corn.  I continue to be friendly towards corn and perceive that if corn were to move up 5% to 10%, feeder cattle prices would suffer greatly. 

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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April 16th - Global Beef Exports & Cattle Numbers

Global 2015 beef exports will reach a record 10.2 million tons, according to the latest Livestock and Poultry World Markets and Trade report from USDA. That estimate is up 3 percent from that in the last report issued in October 2014.

According to the report, larger shipments from India and to a lesser extent the EU and Paraguay more than offset declines by Brazil, Uruguay, and the United States. Imports by a number of oil-reliant countries such as Russia, however, are expected to decline due to declining oil revenues and weaker currencies.

The report projects U.S. beef production up 2 percent from the October report to 11.1 million tons, primarily based on heavier cattle weights. U.S. beef exports are revised 5 percent lower to 1.1 million tons due to a stronger dollar.

In breaking out exports by country, the report shows India increasing its lead over Brazil as the world’s largest exporter of beef. Much of India’s beef production and exports come from Buffalo, rather than cattle. Australia is the third-largest beef exporter, followed by the United States.

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April 16th - Drought, Input Costs May Hinder Cattle Herd Expansion Required to Meet Demand

North American cattle prices are likely to stay high until at least 2019, say market experts, but the future beyond that is riding on cow herd expansion.

John Paterson, a consultant with the National Cattlemen’s Beef Association, said the North American cow herd numbers 28 million head, and markets look good until it expands to 32 million.

“No matter where you go in the United States, everybody says, ‘we’re going to retain animals.’ That’s what they say. Are they really going to do it?” Paterson asked those at a March 31 feedlot meeting.

Recent figures indicate herd expansion has begun in the United States, likely because of good supply and demand fundamentals, high international demand, lower cost feed in most areas and less volatility in input costs.

However, working against expansion are drought in some regions, environmental restrictions, input costs, industry consolidation and limits on available credit. Without expansion, producers run the risk of missing opportunities to capitalize on consumer tastes for quality beef. 

Paterson quoted Randy Blach of Cattlefax, who said the herd must expand within the next one to four years.  If it doesn’t, there will be a smaller industry and beef will move from the centre of the plate to a specialty item, such as steak salad.

“None of us want to see that happen,” said Paterson.

He listed five factors that will influence herd rebuilding in North America:

  • Financing
  • Forage availability
  • Options for replacements
  • Value of replacements
  • Generational turnover
The last factor refers to recent statistics that show producers aged 35 to 54 are the ones most frequently leaving the cattle business.
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April 16th - The Other Side of the 'Beef is Bad' Story
U.S. News & World Report -- By Keri Gans, MS, RDN, CDN, a registered dietitian/nutritionist.

After 20 years as a vegetarian, a nutritionist sees a brighter side of red meat. 

Last week, I had the amazing opportunity to eat dinner with the governor of Nebraska, Pete Ricketts, and a room full of Nebraskan ranchers at the Empire Steak House in New York City. Much to my surprise, I was seated exactly next to the governor and across from Greg Ibach, the director of Nebraska’s Department of Agriculture.

Funny thing is, had I received this invitation more than two years ago, I would have passed on it. For 20 years, I took a hiatus from meat. Yep, that's right: I was a fish-eating vegetarian – no poultry or beef – until March 2013, to be exact. (But who's counting?)

I can't really tell you why I switched back to eating meat, but I do know when I did. I was at the Palm in East Hampton eyeing my husband's steak and decided to take a bite. One bite became many bites, and before I knew it, the next time we ate there, I ordered my own. Now I’m hooked.

With my family history of high cholesterol and heart disease, I have worried that my new carnivore lifestyle could be risky. However, I am happy to report that over the last two years, my blood cholesterol has not changed. So far, so good.

Needless to say, during my dinner with the Nebraskans, I had a ton of questions. For example, how often to you eat red meat? Daily. Do you name your cattle? No. (Yes, I actually did ask that.) What do you think of someone who orders their beef well-done? Let's put it this way: It's a good thing I like mine medium-rare.

After that night, I realized there is a lot of confusion surrounding consumption of red meat. To help me sort through it all, I interviewed meat scientist Chris Calkins, a professor of animal science at the University of Nebraska-Lincoln. Here’s what he had to say about some common beliefs about red meat:

1. Grass-fed beef is more nutritious than grain-fed beef, right?

Not necessarily. The majority of research concludes that there are really no significant nutritional differences between grass-fed and grain-fed beef. Even though grain-fed beef has a little more fat, when you look at the actual percentage of omega-3 fatty acids against total fat content, the number only appears higher in grass-fed beef because the amount of total fat is lower.

2. What about organic beef versus conventional beef?

Same story. There are no measurable differences in the nutrition of organic versus conventional beef. The best reason to choose organic is because you want to support a particular type of farming practice. The specifics of different practices are so vast that I honestly don’t think I could explain them unless I took a trip to a cattle ranch. (Note to self: Visit Nebraska.)

3. Isn’t beef loaded with antibiotics?

No. This is one of those points that is really misunderstood. Yes, sick cattle are given antibiotics; otherwise, they may suffer. But the beef we eat has absolutely no harmful residue from these antibiotics, Calkins told me. The Food and Drug Administration mandates such rigorous testing of the cattle before being harvested (also known as “slaughtered,” but “harvested” sounds nicer)that the consumer should not be concerned. What I found interesting is that even organic farms give their cattle antibiotics when sick; otherwise, it could be considered inhumane. But after their treatment, they are asked to leave the ranch (which reminds me of “The Biggest Loser”).

4. Is beef packed with nutrients?

Yes. Beef is an excellent source of protein a 3-ounce serving provides nearly half of our daily needs. It also is a good source of zinc, selenium, vitamins B12 and B6, niacin, phosphorous, choline, iron and riboflavin. I dare to say that a steak (or burger) is not an inevitable health disaster; what can make it so is the serving size and what a person chooses to eat with it. For example, a 3-ounce serving of a lean beef averages 150 calories and 2 grams of saturated fat. But if you eat a serving closer to 8 ounces, pile the plate with fries or mashed potatoes, sautéed onions and creamed spinach, those numbers are going to change rather quickly.

5. Doesn’t beef have more saturated fat than chicken and poultry?

Not necessarily. It really depends which cut of beef and poultry you choose. There are actually 29 cuts of lean beef which have a total fat content somewhere between a skinless chicken breast and a skinless chicken thigh. And, if you eat the chicken skin, it stands to reason that even more cuts of beef would be lower in saturated fat. When buying beef, key words to look for include “loin” and “round” – those are typically the leaner cuts of beef. Also, current research supports that the saturated fat found in beef is rich in stearic acid, a type of fat that has been found to have a neutral effect on our blood LDL (the "bad" cholesterol) and total cholesterol.

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 February 29th Seasonal Drought Outlook
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"Click Here" to view a Slide Show of Drought Monitor maps for the last 12 weeks
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April 15th - McDonald's Sirloin Third Pound Burgers

McDonald's has announced a new line of premium burgers: the Sirloin Third Pound burgers. The burgers will be hitting McDonald's menus later this April. Like it's spiritual predecessor The Angus Third Pound burgers, the sandwiches will this time feature sirloin meat rather than Angus.

McDonald's three new burgers will be the Steakhouse, Bacon & Cheese and Lettuce & Tomato. The Steakhouse will feature sautéed mushrooms, white cheddar cheese, grilled onions and a creamy peppercorn sauce. The Bacon & Cheese boasts bacon, red onion, white cheddar, pickles, mustard and ketchup. Finally, the Lettuce & Tomato is made up of red onion, lettuce, tomato, white cheddar, mayo and mustard.

All of the burgers will sport a 1/3 pound 100% sirloin patty. The biggest burger offering McDonald's has since they discontinued the Angus line.

Unlike the fairly expensive Angus burgers, the new line of Sirloin Third Pound burgers will cost about $5 each (prices may vary depending on the franchise). This is due to the many complaints McDonald's customers had about how pricy the Angus burgers became back in 2013.

The Sirloin Third Pounders will be at participating McDonald's locations for a limited time only.

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April 15th - Waning Beef Demand and a Weekly Slaughter of 502,000 Cattle

It is counterintuitive to consider less available cattle translates into lower prices. Packers have waited for spring demand for beef to improve to allow them to raise slaughter levels and restore lost margins to the business of processing beef. Tough trading cattle owners have resisted lower bids from packers knowing the numbers of available cattle are tight.

This tug of war between stubborn sellers and money losing packers was destined to end badly and it has. No one doubts the ability of cattle owners to refuse lower bids and require higher prices. If all sellers require higher prices, packers must pay higher prices regardless of their margins unless they choose to shut down. The rational and perfectly normal reaction of packers is to lower slaughter numbers to the point that cattle numbers start backing up in the feedyard and the relative bargaining strength of the parties changes. Improved margins can only come from lower live cattle cost or higher box prices.

The disappointment of this spring has been a failure of beef demand. In spite of smaller slaughter numbers, retailers have not responded. Retail interest has been focused elsewhere. Wholesale pork prices are running half of the cutout prices a year ago yet retailers have held store prices for pork close to the same pricing level. The result has been windfall margins in pork for processors and retailers and features all across the country have push pork cuts.

USDA was forecasting 5% more cattle to slaughter in 2015. That number appears to be far off the mark. Private sources were calling for a slightly larger fed cattle slaughter this spring than last year. The reality is vastly different. This past week the slaughter will include 60,000 fewer fed cattle than last year. This is a big number only partly offset by higher slaughter weights. The miss on the part of the forecasters is partly because of the increases in dairy calves placed on feed that reduce turnover and require a year to finish. There also might be some double counting of dairy cattle placed in the southwest but moved to the southern plains when the Brawley beef plant closed.

The west coast dock strike combined with a out of control dollar value on the currency markets has caused beef exports to suffer and encouraged beef imports. The result has been much more of the beef production dedicated to our domestic market. The loss of exports has a large impact on beef demand because prices are made or lost at the outside margins of the demand curve. Additionally, the attractiveness of alternative meat choices and prices have cut into beef demand.

Cattle supplies will remain short this year both in fed cattle and stocker and feeders. Unfortunately, smaller supplies will be forced to deal with lower prices. The destruction of beef demand will compel a major realignment in the price structure across all segments of the industry. Consumers won't forsake beef and beef will remain a preferred choice but context will force a new reality to pricing.

Ag Center Cattle Report

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April 13th - North American Cattle Situation: Mexico

The Mexican cattle and beef industry is always dynamic and continues to evolve.  The industry has faced challenges in recent years with declining cattle inventories while attempting to maintain domestic production and cattle exports; all while beef exports have increased sharply.

The Mexican beef cattle industry experienced the same drought conditions that affected the U.S. in 2011-2013 leading to forced herd liquidation.  Moisture conditions improved significantly in 2014 and so far in 2015.  Herd expansion has been slow to begin in Mexico but may be beginning at the current time.  Cows and heifers have played a large role in maintaining domestic Mexican beef production and cattle exports in recent years and increased female slaughter contributed to herd liquidation.

Record U.S. cattle prices and a weakening Peso contributed to a 12.8 percent year over year increase in Mexican cattle exports to the U.S. in 2014 despite extremely tight cattle supplies in Mexico. Increased Mexican cattle exports in 2014 included more steers and spayed heifers compared to the previous year.  U.S. imports of Mexican cattle are up less than one percent for the first two months of 2015 compared to last year.  Year to date U.S. imports of Mexican steers are up 4.5 percent while heifer imports are down nearly 15 percent.

U.S. imports of Mexican beef are up 40 percent for the first two months of 2015 compared to the same period last year.  Reduced U.S. beef production and record high U.S. beef prices, abetted by the strong dollar, provide a strong incentive for more beef exports from Mexico to the U.S. which, in 2014, resulted in a 23 percent year over year increase.  Mexico has rapidly increased beef exports since 2009.  Total Mexican beef exports increased 17 percent in 2014 compared to one year earlier.  The 2014 export total is only slightly lower than the 2012 record despite the loss of the Russian market after 2012.  Increased Mexican beef exports are the result of rapid growth in feedlot production, increased carcass weights (partially offsetting lower cattle slaughter), and widespread adoption of boxed beef technology in recent years. The U.S. is the largest destination for Mexican beef exports, accounting for 84 percent of the 2014 total.  Mexico has been the fourth largest source of U.S. beef imports since 2010.  Other major Mexican beef export markets include Japan and, in 2014, Hong Kong.

Mexico has been one of the top four U.S. beef export destinations for 20 years.  Mexico imported 8 percent more U.S. beef in 2014 compared to the prior year despite record high U.S. beef prices and a poor exchange rate which makes U.S. beef even more expensive in Mexico.  However, U.S. beef exports to Mexico are down 13.5 percent year over year so far in 2015. 

Mexico, like the U.S. and Canada, is faced with the need for herd rebuilding which can only occur by squeezing current production to allow for increased heifer retention and reduced cow slaughter.  It will be difficult for Mexico to maintain the current level of domestic beef production, cattle exports and beef exports as herd expansion begins.  Continued strong U.S. prices for cattle and beef will continue to favor cattle and beef exports to the U.S. along with decreased imports of U.S. beef.  Current exchange rates add to these incentives.  However, limited cattle inventories and increased heifer retention in Mexico may moderate either cattle exports or beef exports or some combination of both.  Early trade flows in 2015 may indicate that domestic Mexican cattle demand may be strengthening enough to retain more feeder cattle in the country.  U.S. beef exports to Mexico will continue to face the disadvantage of high U.S. prices aggravated even more by a weak Mexican Peso.  However, to the extent that Mexico continues to grow beef exports, imported beef will be needed to maintain domestic beef supplies.  The increasingly bilateral nature of U.S.-Mexican beef trade emphasizes that beef trade is less about an imbalance in beef quantities in the two countries and more about the value enhancement from improved quality distribution and product mix in the two countries.

Derrell S. Peel, Oklahoma State University

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April 6th: North American Cattle Situation: Canada

The North American cattle and beef market is a complex set of cattle and beef flows among Canada, Mexico and the U.S.  These trade flows played a role in the unprecedented production and prices that occurred in 2014 and will play a role in 2015 and beyond.  Trade impacts among the NAFTA countries were generally as expected in 2014.  Beef imports from Canada increased while beef exports to Canada decreased compared to 2013.  Cattle imports from Canada and Mexico also increased year over year along with beef imports from Mexico.  Canada and Mexico accounted for a combined 31.1 percent of U.S. beef exports and 30.9 percent of U.S. beef imports in 2014. The impact of Canada and Mexico on the U.S. cattle and beef market may be different in 2015. More detail on the Canadian situation follows.

U.S. imports of Canadian beef increased 11.9 percent in 2014 compared to one year earlier. Canadian cattle slaughter and beef production increased year over year in 2014 as cattle inventories continued to decline.  However, cattle slaughter and beef production are expected to decline in 2015.  Canadian beef exports are expected to close to 2014 levels in 2015 due to tight supplies.  Nevertheless, U.S. imports of Canadian beef are up nearly 14 percent in the first two months of 2015.  U.S. beef exports to Canada have continued to fall in 2015 with January and February combined beef exports to Canada down 20.9 percent.

Canadian feedlots have struggled with competitive disadvantages to the U.S. and limited cattle supplies.  Feedlot placements in Canada dropped sharply in the second half of 2014.  Feedlot placements in Alberta and Saskatchewan were down 16.9 percent year over year in the four months from last November through February.  March 1 cattle on feed inventories in Alberta and Saskatchewan were down 11.7 percent from one year ago.  Feedlot marketings in these two major Canadian cattle feeding provinces were down 14.6 percent in January and February compared to the same two months last year.  Fewer feedlot marketings in Canada impacts Canadian beef production and slaughter cattle exports.  Combined January and February U.S. imports of Canadian slaughter cattle were down 34.6 percent year over year, including a 55.1 percent decrease in slaughter steer imports; a 40.8 percent decrease in slaughter heifer imports; and 21.4 percent fewer cull cows imported for slaughter.

Record high U.S. feeder prices and a strong dollar favor Canadian exports of feeder cattle to the U.S.  U.S. imports of Canadian feeder cattle increased 37.8 percent in 2014 over the previous year.  This increase consisted of a 60 percent year over year increase in feeder heifers exported to the U.S. along with a 7 percent increase in feeder steers exported to the U.S.  In the first two months of 2015, total U.S. imports of Canadian feeder cattle are up a more modest 7 percent; the result of a 51.2 percent increase in feeder steer imports combined with a 12.6 percent decrease in feeder heifer exports. 

January 1, 2015 Canadian cattle inventories confirmed that cattle herd liquidation continued in 2014 with a beef cow herd of 4.78 million cows, down two percent from the previous year.  Beef replacement inventories were down one percent as well, indicating that herd expansion has not yet started in Canada.  This is consistent with slaughter and export data indicating that heifer slaughter in Canada was up 9 percent in 2014; 24 percent more slaughter heifers were exported to the U.S. and 60 percent more feeder heifers were exported in 2014 compared to 2013.  Decreased feeder and slaughter heifer exports so far in 2015 may indicate that heifer retention is beginning in Canada.

Decreased beef production in Canada in 2015 will hold beef exports close to 2014 levels despite favorable exchange rates.  U.S. imports of Canadian beef may moderate in the coming months from the strong year over year increases posted in January and February, though the U.S. may be picking up a larger share of total Canadian beef exports.  Slaughter cattle imports from Canada are already down year over year and will likely remain lower due to decreased Canadian feedlot production. Herd rebuilding may result in fewer cull cows exported to the U.S. for slaughter in 2015.  U.S. imports of Canadian feeder cattle may also moderate in coming months as a result of tight Canadian cattle supplies and increased heifer retention in Canada.  Compared to 2014, Canada is likely to contribute relatively less to U.S. beef supplies, slaughter cattle supplies, and feeder cattle supplies in 2015.

Derrell S. Peel, Oklahoma State University

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April 2nd: Tight Global Beef Supplies in Command of Marketplace

From Australia to the United States and everywhere between, tight supplies of beef will be a common theme in 2015, according to the latest Rabobank Beef Quarterly report.

“Global beef supply continues to remain tight in Q1 2015, although Australian exports remain high as drought continues,” says Rabobank Animal Protein Analyst Angus Gidley-Baird.  “Continued liquidation of the cattle herd and possible improved seasons will lead to a reduction in Australia’s beef production through 2015.”

According to the report, the rate of liquidation in the Australian herd, due to drought in much of Australia’s major beef-producing regions, cannot continue at the rates in 2013 and 2014 (slaughtered 9.2 million head in 2014). High slaughter and export volumes have offset some of the tight global cattle and beef supplies, however. Despite this fact, without any global beef expansion forecast in the shorterm, Rabobank’s report says global supplies will remain tight.

In the United States, says the volatility in the first quarter of 2015 was due to a number of factors, including pressure in live cattle futures, due in part to an exit of investors and managed money in the marketplace, concern that cattle and beef prices peaked in 2014, concern that increased pork and poultry production will drive down prices for those competitive meats, thus potentially resulting in consumers picking pork and poultry at the meatcase, a disruption in consumer spending and eating out due to severe winter weather across the heavily-populated East Cost, labor disputes in West Coast ports, and more.

Rabobank projects that fed cattle prices will push into the upper $160s to $170 per hundredweight in the normal seasonal rally leading up to grilling season and then decline to a summer low of about $150. Additionally, Rabobank projects demand for replacement females to remain strong.

Throughout the report, Rabobank pointed to the strength of the U.S. dollar as a challenge for U.S. exports but as a potential opportunity for other nations to export more beef and cattle to the United States.

The report provided a snapshot of supply, demand and production in major beef producing nations around the world:

  • Brazil:  The devaluation of the Brazilian real is projected to continue, thus boosting Brazil’s export competitiveness. However, Russia, the second largest market for Brazilian beef, reduced its import quota in the first quarter of 2015. Rabobank says this development will be key for Brazilian meat exports this year.
  • Canada:  Prices for all classes of Canadian cattle have had a strong start in 2015, driven by “aggressive shipments” of feeder cattle and calves. In 2014, shipments of Canadian cattle to the U.S. were up 42 percent, and year-to-date, they are up an additional 14 percent compared to 2014 levels, according to Rabobank. Prices are projected to remain strong for Canadian cattle this year.
  • China:  Retail prices have been stable in early 2015, which Rabobank says reflects weakening demand as prices are generally higher early in the year due to the country’s spring festival. Additionally, the central government has been cracking down on the grey market for meat shipment. The report says more time is needed to review the impacts of shipments through Hong Kong before making any conclusions on the impact.
  • Mexico:  Cattle exports are projected to be strong in 2015, due most, according to Rabobank, by the strong U.S. dollar and demand for cattle from the United States. Rabobank says beef demand will be challenged in 2015 due to relatively high prices, especially compared to lower pork prices. 
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March 31st - USDA Grain Stocks Report

Corn Stocks Up 11 Percent from March 2014
Soybean Stocks Up 34 Percent
All Wheat Stocks Up 6 Percent

  • Corn stocks in all positions on March 1, 2015 totaled 7.74 billion bushels, up 11 percent from March 1, 2014. Of the total stocks, 4.38 billion bushels were stored on farms, up 13 percent from a year earlier. Off-farm stocks, at 3.36 billion bushels, are up 7 percent from a year ago. The December 2014 - February 2015 indicated disappearance is 3.47 billion bushels, compared with 3.44 billion bushels during the same period last year.
  • Soybeans stored in all positions on March 1, 2015 totaled 1.33 billion bushels, up 34 percent from March 1, 2014. Soybean stocks stored on farms are estimated at 609 million bushels, up 60 percent from a year ago. Off-farm stocks, at 725 million bushels, are up 18 percent from last March. Indicated disappearance for the December 2014 - February 2015 quarter totaled 1.19 billion bushels, up 3 percent from the same period a year earlier.
  • All wheat stored in all positions on March 1, 2015 totaled 1.12 billion bushels, up 6 percent from a year ago. On-farm stocks are estimated at 279 million bushels, up 17 percent from last March. Off-farm stocks, at 846 million bushels, are up 3 percent from a year ago. The December 2014 - February 2015 indicated disappearance is 405 million bushels, down 3 percent from the same period a year earlier.
  • Durum wheat stocks in all positions on March 1, 2015 totaled 37.6 million bushels, down 1 percent from a year ago. On-farm stocks, at 16.2 million bushels, are down 22 percent from March 1, 2014. Off-farm stocks totaled 21.4 million bushels, up 23 percent from a year ago. The December 2014 - February 2015 indicated disappearance of 6.43 million bushels is down 59 percent from the same period a year earlier.
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March 31st - ADT Clarification: Selling at a Livestock Auction Market

The Animal Disease Traceability (ADT) rule went into effect on March 11, 2013. However, after a 2-year grace period, the final component of the rule went into effect this month. Many producers have been asking questions recently to ensure they are complying with the rule. In some cases, there has been a misconception that the rule prohibits producers from traveling to a market across state lines to sell cattle. This is not true. In fact, in most cases, when selling at market producers do not need to do anything different because they have the auction market owners can help ensure the rules are followed. 

It is important to note that state rules still apply and are not consistent across the United States. Any questions about shipping to another state can be answered by the State Veterinarian's office in the receiving state. 

THE 2015 PHASE IN

As of March 11, 2015, ear tags applied to cattle on or after this date must have an animal identification number beginning with the 840 or other prefix representing a U.S. territory in order to be recognized as official identification. The tag must also bear an official ear tag shield.

This does not change what animals require official identification or when official identification is required. Rather, USDA simply allowed a two-year phase in period to ensure ear tags being used as official identification would meet the standards listed above.

THE ADT RULE
The ADT rule only applies to cattle moving from one state to another and not those staying in state. For cattle, the following animals must be identified with official ID if traveling in interstate commerce:

  • All sexually intact cattle and bison over 18 months of age,
  • All female dairy cattle of any age,
  • All dairy males (intact or castrated) born after March 11, 2013, and
  • Cattle and bison of any age used for rodeo, shows, exhibition, and recreational events. 
  • Cattle requiring official identification must have an Interstate Certificate of Veterinary Inspection (ICVI), commonly called a health certificate, or alternate documentation agreed on by the state to move across state lines. 
Shipping to Market or Slaughter

There is some flexibility built into the rule. Cattle requiring official ID may move across state lines directly to an approved livestock facility, including many livestock markets, without a health certificate if moved on an owner-shipper statement. Information required to be included on an owner-shipper statement, such as the location from which the animals are moved interstate and the destination of the animals, is spelled out in the ADT rule. In some cases, and existing document such as a tag in slip at livestock markets have been used as an owner-shipper statements.

Additionally, cattle can move to an approved tagging site, including many livestock markets, prior to being identified as they will be identified at the approved tagging site.

In another exception, cattle moved direct-to-slaughter can move with approved backtags instead of official identification, even if moving between states.

State Veterinarian Decisions

State Veterinarians also have the ability to make some key decisions under the rule. While official eartags always qualify as official identification, State Veterinarians may accept the use of brands or tattoos accompanied by breed registration documents as official identification when agreed to by both the shipping and receiving states. State Veterinarians may also accept movement documentation other than an ICVI, as long as both the shipping and receiving state agree on the alternative document.

OTHER RULES STILL APPLY

The ADT requirements are in addition to state requirements for livestock identification, documentation, and disease testing for cattle movement in their states. Veterinarians shipping to a state where they are unsure of import requirements should contact the State Veterinarian’s office in the receiving state for specific requirements. 

ENFORCEMENT

For the first year under ADT, USDA focused its efforts on education about the rule. On March 4, 2014 USDA Animal and Plant Health Inspection Service (APHIS) administrator Kevin Shea sent out a bulletin about the next phase ADT implementation. While USDA will continue to work with people not in compliance to educate them about the requirements, USDA will also pursue penalties in situations where an individual repeatedly fails to comply with the regulatory requirements. USDA stated its priorities are:

1. Official Identification of Cattle
2. Proper Administration of Interstate Certificates of Veterinary Inspection (ICVI)
3. Collection of ID at Slaughter 
Livestock Marketing Association
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March 30th - Beef herd rebuilding: What’s next?

It seems likely that the industry will be rebuilding or trying to rebuild for the remainder of the decade.

The long-awaited end to beef cow herd liquidation happened in 2014 as the industry abruptly switched to expansion.  The 2.1 percent increase in beef cow numbers in 2014 was more than generally expected but not a big surprise as the conditions were right for such a turnaround. Modest growth in heifer inventories has occurred since 2012.  It wasn’t until 2014 that beef cow culling decreased enough to combine with heifer retention and result in herd growth.  This leads to a number of questions including how much additional herd growth is needed; how fast can it happen; and where will it take place.  The answers to these questions are not completely apparent at this time and will depend on a number of factors yet to be determined in the coming years.  However there are some indications already in place.

After a brief attempt at expansion in 2004 and 2005, the industry has experienced unplanned herd liquidation.  I mean unplanned in the sense that it was not typical cyclical factors that caused the liquidation.  It was not, for the most part, low cattle prices but rather cost shocks that caused low returns and liquidation between 2006 and 2010.  Widespread drought forced additional liquidation between 2011 and 2013.  The question of how much growth is needed will depend on domestic and international market conditions over the next few years as herd growth occurs. It will depend also on things such as carcass weights that will determine total beef production relative to slaughter rates.  At this point I see little reason why the cow herd should not rebuild to at least the level of the truncated expansion in 2007-2008…roughly 32.5 million head.  That would suggest another 2.8 million head beyond the January, 2015 level. This implies total herd growth of nearly 9.5 percent in the next few years.  Time and market conditions will, however, determine exactly what the size potential is for the industry.

How long will it take?  At the 2014 rate of 2.1 percent per year, it would take until 2019 to surpass the 32 million head level.  In the last complete cyclical expansion from 1990-1995, the average annual herd growth rate was 1.4 percent.  Leaving out the slow first year and tapering off the last year, the principal four years of expansion during this period averaged 2 percent per year.  In the current expansion, a single year of faster growth is very possible but it is unlikely that an annual growth rate much above 2 percent could be maintained for two or three years consecutively. There are however, a number of regional factors that could slow down expansion. An average herd growth rate of 1.5 percent would take until 2021 to exceed 32 million head of beef cows. The question of how long is related to the question of where herd growth will take place.

In five Midwestern states from Missouri to Ohio, the beef cow herd in 2015 was 8.4 percent smaller than in 2008.  In the Appalachian states of Kentucky, Tennessee and West Virginia, the 2015 beef cow inventory was down 15 percent compared to 2008.  In both of these regions, the decrease in beef cows is largely the result of decreased forage acreage due to expanded crop production.  Lost pasture and hay production in these regions is not likely to return quickly, if ever.  The beef cow herd in these regions will grow but is unlikely to rebuild to previous levels.  The Northern Plains states of Nebraska and the Dakotas experienced a modest 2.9 percent decrease in the beef cow herd between 2008 and 2015.  Similarly, the 2008-2015 beef cow herd decrease in the Northern Rocky Mountain region of Montana and Wyoming was only 1.2 percent.  These regions will likely experience herd rebuilding but the two regions together are currently only 155 thousand head below the 2008 level.   The beef cow herd in other regions is down as well including the South (down 3.8 percent; the Great lakes region (down 4.7 percent); the Gulf region (down 8.1 percent); the Southern Rocky Mountain region (down 2.8 percent) and the Southwest (down 9.4 percent).  These five regions combined are down just over 500 thousand head from 2008 and will likely rebuild but drought will limit or slow the rate of growth in Southwest and Southern Rocky mountain regions.

The 2015 beef cow inventory of the Southern Plains region (Kansas, Oklahoma and Texas) was down 13.2 percent from 2008, a decrease of over 1.1 million head.  This represents 42 percent of the total beef cow herd decline between 2008 and 2015.  This region will clearly play a central role in U.S. beef cow herd expansion in the coming years.  Parts of the region are still experiencing severe to exceptional drought conditions.  The 6.2 percent herd expansion in 2014 in the Southern Plains may be difficult to maintain if drought conditions do not improve significantly.  Moreover, herd expansion could be halted or reversed if drought conditions redevelop in the region. 

While the final beef cow herd total for this expansion is unknown, it seems likely that the industry will be rebuilding or trying to rebuild for the remainder of the decade.  Much of the herd growth will be in the Southern Plains with proportionately more growth likely in the western half of the country compared to the eastern half.

-- Glenn Selk, Oklahoma State University

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March 28th - Animal Disease Traceability Update

The federal Animal Disease Traceability (ADT) program is up and running, but challenges including inconsistencies in state requirements and mixed messages regarding program goals continue to slow progress toward true traceability. Those points were clear during the recent National Institute for Animal Agriculture (NIAA) conference in Indianapolis where the NIAA Animal Identification and Information Systems Council received an update from USDA officials and others.

Neil Hammerschmidt, ADT program manager for the USDA’s Animal and Plant Health Inspection Service (APHIS) provided a program overview and update. The ADT rule was published in January 2013 and the rule became effective on March 11, 2013. Today the program continues to build on the original program guidelines, Hammerschmidt says.

The ADT rule specifies that several classes of cattle travelling in interstate commerce must be identified with official ID and accompanied by traceability documents acceptable to the shipping and receiving states. These include all sexually intact cattle and bison over 18 months of age, all female dairy cattle of any age, all dairy males (intact or castrated) born after March 11, 2013 and cattle and bison of any age used for rodeo, shows, exhibition and recreational events. Feeder cattle under 18 months of age, by far the most common class of cattle traveling across state lines, are currently exempt from the ADT rule.

March 11, 2015 marked the end of a 24-month phase-out period during which producers could continue to use various identification tags, such as those using a “900” numeric prefix, as official identification. As of that date, only tags beginning with the 840 prefix and using the program’s official Animal Identification Number (AIN) system and the U.S. shield will be in compliance with the program for non-exempt cattle moving across state lines. Others such as 900 tags remain acceptable only if the animal was tagged prior to March 11.

Currently, APHIS is engaged in assessing the effectiveness of the ADT system in tracing cattle in the case of an animal-disease outbreak. These assessments include several performance measures such as determining the ability and time it takes to determine the state and premises of origin for an animal based on its ID and shipping documentation

Early in the program, APHIS conducted 255 trace exercises on cattle shipped interstate to establish baseline performance data. In determining the premises of origin, the success rate was 77 percent, but at an average time of 264 hours – far longer than the program’s goal of 24-hour traceback.

APHIS now is running a news series of trace exercises using updated standards and a new software system. By this August, the agency plans to have new assessment data to compare with the baseline performance numbers.

As for enforcement of ADT requirements, APHIS initially focused on educating producers and markets when animals were out of compliance, and began phasing in enforcement procedures in March 2014. Enforcement focused on repeat offenders, and so far, APHIS has issued 1,015 letters of information and initiated 33 cases with its Investigative and Enforcement Services (IES).

Hammerschmidt also outlined a number of ongoing challenges including inconsistencies between states in terms of required documents for importing animals and lack of producer awareness of program requirements, such as that they need to obtain an official premises identification number (PIN) to purchase official program ID tags.

Jack Shere, DVM, associate deputy administrator for APHIS Veterinary Services also addressed some of the program’s challenges.  He indicated USDA administrators and Congress want to see faster progress in the program at the state level, and said USDA currently is implementing a review of the ADT program. A high percentage of states, he says, have fallen behind in updating their ADT plans or “road maps,’ which serve as the basis for cooperative agreements with APHIS.

Shere also pointed out that APHIS is under pressure from other government agencies and industry over the lack of a comprehensive farm-to-fork traceability system and its impact on trade. Most of our competitors for international meat exports have such a system, and use it as leverage against the United States in trade negotiations. Some critical import markets, including China, cite our lack of traceability in refusing imports of U.S. beef.

International trade falls outside the official goals of the ADT program, which was designed to help minimize and contain potential disease outbreaks. Many in the industry however, believe we need a more comprehensive traceability program to help ensure future competitiveness in international markets.

Bovine Veterinarian

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March 27th - House Ag Subcommittee Discusses Termination of COOL as Final WTO Decision Nears

The House Agriculture Committee’s Livestock and Foreign Agriculture Subcommittee held a public hearing Wednesday to examine the implications of potential retaliatory measures against the United States in response to its country-of-origin labeling (COOL) requirements for beef and pork.

The World Trade Organization (WTO) is expected to make a decision on the COOL rule by May 18 in response to a U.S. appeal following a WTO compliance panel’s decision declaring that Canada and Mexico were facing unnecessary burdens imposed by COOL regulations in labeling beef and pork muscle cuts for export to the U.S.

California cattleman Mike Smith testified before the subcommittee pointing out that his ranch’s experience has mirrored the findings of the Kansas State University Study showing that COOL is a mandatory marketing program that consumers pay little attention to and has had no impact on beef demand. “The K-State study actually measured how Americans vote,” said Smith. “Americans vote with their pocketbook by purchasing beef, and the vast majority don’t consider COOL in their purchasing decision. Why then would we incur the costs of a program that the consumer is not demanding?”

In his opening statement at the hearing, subcommittee ranking member Rep. Jim Costa (D-Calif.) said, “Mandatory (COOL) was destined not to work for a number of factors. While the supporters have argued the opposite, I think that we have to look at the facts. I think that we’ve seen an increase in production costs, we’ve seen impacts in costs to consumers that are factoring in meat purchasing.”

Should COOL not be fully repealed, retaliatory efforts from both Mexico and Canada are likely on the horizon. According to Canadian Agriculture Minister Gerry Ritz, Canada doesn’t “want to go the retaliatory route, but we certainly will should it be forced on us.” He also noted that those retaliations could come in many different forms “from California wine to Minnesota mattresses.”

U.S. Agriculture Secretary Tom Vilsack says that the USDA has done everything possible with all involved to make the current COOL statute work. Though there are still U.S. parties on both sides of the issue, a full repeal of the rule is the most likely outcome. 

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March 27th - Meat Export Expectations for 2015

Exports are an important component of demand for all three of the major meat species.  According to the most recent data, exports of beef, pork, and chicken amounted to 21 percent, 19 percent, and 11 percent of production, respectively, in 2014.  All of these figures are high by historic standards, but none is a record for the share of production exported.  Figure 1 shows exports as a share of total production for beef, pork, and chicken from 1984 through 2015 (forecast). 
 


Percent of Beef, Pork, and Chicken Production Exported: Annual, 1984 through 2015F. 
Data Source: USDA Foreign Agricultural Service.

Clearly, exports have become an important part of the market for all of these products.  For chicken, exports became a really significant factor in the market with the fall of the Iron Curtain, which resulted in improved market access in eastern Europe and Russia.  For pork, exports really took off in the early 2000s, with a major boost from China as purchasing power in that country began to grow.  And, of course, beef exports grew more-or-less steadily through the 1990s before being severely set back at the end of 2003 with the discovery of the first U.S. case of BSE.

But what is as noticeable as the periods of growth in exports is the fact that exports (again, as a share of production) have not grown for the last few years.  In fact, for 2015, USDA’s most recent forecast has exports declining for beef, pork, and chicken as a share of production as well as in total pounds.  In fact, if that forecast holds, it will be the second straight year in which exports of beef, pork, and chicken have all declined together.  That has really never happened – at least not since exports became a meaningful component of these markets. 

Combined, beef, pork, and chicken exports in 2015 are currently forecast to decline by 485 million pounds (beef down 173 million pounds, pork down 108 million pounds, and chicken down 204 million pounds).  There have been larger annual declines in combined exports before.  In 2004, beef exports alone declined by over 2 billion pounds.  In 2009, following the Olympic-fueled boom in pork exports to China in 2008, pork exports fell by 572 million pounds.  In 2002, chicken exports fell by 748 million pounds due to Russia’s first really serious export ban.  But it is unusual to see all three species decline together, and the combined 485 million pound drop in red meat/chicken exports will be, if realized, among the bigger year-over-year declines in the last twenty years. 

Why the weakness in exports this year?  There are several factors at work.  For one thing, beef, pork, and poultry are historically quite expensive.  Relatively tight production, particularly when considered on a per capita basis, and strong domestic demand have helped push prices to record levels.  This alone would tend to reduce exports (ceteris paribus, of course).  Adding to the impact of higher prices for foreign consumers is a very strong dollar.  While it doesn’t seem to be attracting as much attention this time around, the dollar is actually stronger on a trade-weighted basis that it was during the financial crisis in 2009.  This makes U.S. meat (and, in fact, all U.S. products) more expensive for foreign consumers in terms of their home currency.  Finally, the West Coast port disruptions got exports off to a very slow start this year.  Some of that ground may be made up as the year progresses, but it will not necessarily be easy to do.

John D. Anderson, Deputy Chief Economist -- American Farm Bureau Federation

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March 23rd - Cold Storage Report
  • Total red meat supplies in freezers were up 8 percent from the previous month and up 12 percent from last year. 
    • Total pounds of beef in freezers were up slightly from the previous month and up 20 percent from last year. 
    • Frozen pork supplies were up 15 percent from the previous month and up 5 percent from last year. 
    • Stocks of pork bellies were up 27 percent from last month but down 23 percent from last year
  • Total frozen poultry supplies on February 28, 2015 were up 4 percent from the previous month and up 6 percent from a year ago. 
    • Total stocks of chicken were up slightly from the previous month and up 8 percent from last year. 
    • Total poundsof turkey in freezers were up 15 percent from last month and up 4 percent from February 28, 2014.
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March 20th - March Cattle on Feed Report

United States Cattle on Feed Down 1 Percent

  • Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10.7 million head on March 1, 2015. The inventory was 1 percent below March 1, 2014.
  • Placements in feedlots during February totaled 1.52 million, 8 percent below 2014. Net placements were 1.46 million head. During February, placements of cattle and calves weighing less than 600 pounds were 330,000, 600-699 pounds were 270,000, 700-799 pounds were 388,000, and 800 pounds and greater were 535,000.
  • Marketings of fed cattle during February totaled 1.52 million, 2 percent below 2014. February marketings are the lowest since the series began in 1996.
  • Other disappearance totaled 62,000 during February, 13 percent below 2014.

Cattle on Feed Inventory in 1,000+ Capacity Feedlots as of March 1st
Millions of Head
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Number of Cattle Placed on Feed in 1,000+ Capacity Feedlots in February
Millions of Head
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Number of Cattle Marketed from 1,000+ Capacity Feedlots in February
Millions of Head
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Cattle on Feed by State as of March 1st
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March 17th - Annual Sales Data for Cattle Farms & Ranches

The USDA’s National Agricultural Statistics Service has compiled data from the 2012 Census of Agriculture Farm Typology report profiling family farms/ranches in the United States.  For farms/ranches raising cattle or calves, the report lists a total of 740,978 operations...

  • Of those, 202,047 are listed as retirement farms, where the operators report they are retired, although they continue to farm on a small scale. 
  • On 266,250 cattle operations, NASS reports the operator has an off-farm occupation. 
  • Of the cattle farms where the operator’s primary occupation is farming, 
    • 130,774 are listed as having annual sales less than $150,000
    • 47,648 have sales of $150,000 to $349,999
    • 51,301 have sales from $350,000 to $999,999
    • 20,142 have sales from $1 million to $4,999,999
    • 2,609 have sales of more than $5 million
  • Non-family farms account for the remaining 20,207 cattle operations.
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March 13th - U.S. Beef Trade: 2014 Value of Exports & Imports Up

On a dollar value basis, the U.S. beef industry is a net exporter; that is exports exceed imports. Although 2014 was no exception, the net value between cattle and beef exports and imports slipped on an annual basis. In 2012 and 2013 the net export value was around $2 billion dollars, but in 2014 it shrunk to about $1 billion. The value of exports set a new high, but imported beef and cattle also jumped up.

The U.S. exports live cattle, beef and veal, hides and skins, variety meats, and tallow and grease. The total dollar value of all U.S. cattle and beef 2014 exports reached $9.2 billion, a 10% increase year-over-year. Within the export categories, beef and veal made up 68% of total export value and was also the category that experienced the largest year-over-year gain in value, up 16%. Variety meats came in second, with a 15% increase in value, and accounted for 9% of total export value.

On the import side, the same categories are traded. The total dollar value of all U.S. cattle and beef imports in 2014 grew by 47% year-over-year to sit at $8.2 billion. The largest growth was seen in beef and veal at 52%, and live cattle at up 40%. These categories account for 65% and 30% of total import value, respectively.

The large increase in cattle and beef imports shrunk the annual U.S. net export value to $990 million, the smallest net since 2009. 
 

Livestock Marketing Information Center

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February 27th - Comparison by State of Heifers Retained for Replacements
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January 1, 2015 Inventory vs. 2014 Inventory... Compiled from USDA National Agricultural Statistical Service Data
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Rank
State
2015
2014
% Change
2015 as
% of Total
.      
 
1
Texas
710,000
660,000
7.58%
12.29%
2
Montana
425,000
430,000
-1.16%
7.36%
3
Oklahoma
405,000
325,000
24.62%
7.01%
4
Nebraska
390,000
400,000
-2.50%
6.75%
5
South Dakota
380,000
340,000
11.76%
6.58%
6
Missouri
310,000
305,000
1.64%
5.37%
7
Kansas
260,000
240,000
8.33%
4.50%
8
Wyoming
183,000
175,000
4.57%
3.17%
9
Iowa
170,000
160,000
6.25%
2.94%
10
North Dakota
164,000
170,000
-3.53%
2.84%
11
Colorado
160,000
150,000
6.67%
2.77%
12
Arkansas
141,000
137,000
2.92%
2.44%
13/14
Kentucky
135,000
150,000
-10.00%
2.34%
13/14
Tennessee
135,000
130,000
3.85%
2.34%
15
Florida
125,000
115,000
8.70%
2.16%
16
California
120,000
110,000
9.09%
2.08%
17/18
Idaho
110,000
110,000
0.00%
1.90%
17/18
Oregon
110,000
105,000
4.76%
1.90%
19
Alabama
110,000
110,000
0.00%
1.90%
20
Virginia
105,000
115,000
-8.70%
1.82%
21
Mississippi
95,000
91,000
4.40%
1.64%
22
Minnesota
85,000
80,000
6.25%
1.47%
23
Georgia
83,000
82,000
1.22%
1.44%
24
New Mexico
80,000
70,000
14.29%
1.38%
25
Utah
 78,000
70,000
11.43%
 1.35%
26
Wisconsin
75,000
70,000
7.14%
1.30%
27
Louisiana
73,000
84,000
-13.10%
1.26%
28
North Carolina
69,000
72,000
-4.17%
1.19%
29
Illinois
64,000
63,000
1.59%
1.11%
30
Washington
51,000
50,000
2.00%
0.88%
31/32
Ohio
50,000
55,000
-9.09%
0.87%
31/32
Pennsylvania
50,000
50,000
0.00%
0.87%
33
Indiana
45,000
39,000
15.38%
0.78%
34
New York
40,000
45,000
-11.11%
0.69%
35
Nevada
37,000
36,000
2.78%
0.64%
36
Arizona
34,000
30,000
13.33%
0.59%
37
West Virginia
32,000
35,000
-8.57%
0.55%
38
South Carolina
30,000
30,000
0.00%
0.52%
39
Michigan
23,000
29,000
-20.69%
0.40%
40
Hawaii
11,000
9,000
22.22%
0.19%
41
Maryland
8,000
9,500
-15.79%
0.14%
42/43
Vermont
4,000
4,500
-11.11%
0.07%
42/43
Maine
4,000
3,000
33.33%
0.07%
44/45
Connecticut
2,000
1,500
33.33%
0.03%
44/45
Massachusetts
2,000
2,000
0.00%
0.03%
46
New Jersey
1,300
1,000
30.00%
0.02%
47
New Hampshire
1,000
1,000
0.00%
0.02%
48
Alaska
900
800
12.50%
0.02%
49
Delaware
700
500
40.00%
0.01%
50
Rhode Island
500
500
0.00%
0.01%






-
Total
5,777,400
5,551,300
+4.07%
 100.00%
.

February 27th - Beef Cows: State Rankings & Change
.
.January 1, 2015 Inventory vs. 2014 Inventory... Compiled from USDA National Agricultural Statistical Service Data
.
. Rank
. State
2015
2014
. % Change
2015 as
% of Total
 
 
 
 
1
Texas
4,180,000
3,910,000
6.91%
14.08%
2
Oklahoma
1,900,000
1,795,000
5.85%
6.40%
3
Missouri
1,881,000
1,820,000
3.35%
6.33%
4
Nebraska
1,786,000
1,807,000
-1.16%
6.01%
5
South Dakota
1,632,000
1,635,000
-0.18%
5.50%
6
Montana
1,506,000
1,476,000
2.03%
5.07%
7
Kansas
1,477,000
1,414,000
4.46%
4.97%
8
Kentucky
1,007,000
992,000
1.51%
3.39%
9
Iowa
920,000
895,000
2.79%
3.10%
10
Florida
916,000
907,000
0.99%
3.08%
11
North Dakota
904,000
923,000
-2.06%
3.04%
12
Tennessee
883,000
864,000
2.20%
2.97%
13
Arkansas
863,000
862,000
0.12%
2.91%
14
Colorado
745,000
710,000
4.93%
2.51%
15
Wyoming
694,000
694,000
0.00%
2.34%
16
Alabama
672,000
681,000
-1.32%
2.26%
17
Virginia
637,000
637,000
0.00%
2.15%
18
California
600,000
600,000
0.00%
2.02%
19
Oregon
525,000
516,000
1.74%
1.77%
20
Georgia
489,000
500,000
-2.20%
1.65%
21
Idaho
481,000
465,000
3.44%
1.62%
22
Mississippi
468,000
477,000
-1.89%
1.58%
23
Louisiana
466,000
450,000
3.56%
1.57%
24
New Mexico
407,000
407,000
0.00%
1.37%
25
Illinois
376,000
355,000
5.92%
1.27%
26
North Carolina
363,000
355,000
2.25%
1.22%
27
Minnesota
350,000
340,000
2.94%
1.18%
28
Utah
324,000
340,000
-4.71%
1.09%
29
Ohio
282,000
293,000
-3.75%
0.95%
30
Wisconsin
275,000
250,000
10.00%
 0.93%
31
Nevada
217,000
231,000
-6.06%
 0.73%
32
Indiana
199,000
187,000
6.42%
 0.67%
33
Washington
198,000
214,000
-7.48%
 0.67%
34
West Virginia
185,000
191,000
-3.14%
 0.62%
35
Arizona
175,000
178,000
-1.69%
 0.59%
36
South Carolina
170,000
169,000
0.59%
 0.57%
37
Pennsylvania
150,000
160,000
-6.25%
 0.51%
38
New York
115,000
105,000
9.52%
0.39%
39
Michigan
112,000
119,000
-5.88%
 0.38%
40
Hawaii
69,800
71,800
-2.79%
0.24%
41
Maryland
41,000
38,000
7.89%
 0.14%
42
Vermont
12,000
12,000
0.00%
 0.040%
43
Maine
11,000
11,000
0.00%
0.037%
44
New Jersey
7,500
7,000
7.14%
0.025%
45
Massachusetts
5,500
6,000
-8.33%
0.019%
46
Connecticut
5,000
4,000
25.00%
0.017%
47
Alaska
4,300
4,300
0.00%
0.014%
48
New Hampshire
3,000
3,000
0.00%
 0.010%
49
Delaware
2,500
2,800
-10.71%
 0.008%
50
Rhode Island
1,500
1,500
0.00%
0.005%






-
Total
29,693,100
29,085,400
+2.09%
100.00%
.

February 27th - All Cattle & Calves: State Rankings & Change
..
January 1, 2015 Inventory vs. 2014 Inventory... Compiled from USDA National Agricultural Statistical Service Data
.
Rank
State
2015
2014
% Change
2015 as
% of Total
.      
 
1
Texas
11,800,000
11,100,000
6.31%
13.14%
2
Nebraska
6,300,000
6,250,000
0.80%
7.02%
3
Kansas
6,000,000
5,800,000
3.45%
6.68%
4
California
5,150,000
5,250,000
-1.90%
-5.73%
5
Oklahoma
4,600,000
4,300,000
6.98%
5.12%
6
Missouri
4,000,000
3,850,000
3.90%
4.45%
7
Iowa
3,900,000
3,800,000
2.63%
4.34%
8
South Dakota
3,700,000
3,700,000
0.00%
4.12%
9
Wisconsin
3,500,000
3,400,000
2.94%
3.90%
10
Colorado
2,600,000
2,550,000
1.96%
2.90%
11
Montana
2,500,000
2,550,000
-1.96%
2.78%
12
Minnesota
2,330,000
2,300,000
1.30%
2.59%
13
Idaho
2,300,000
2,240,000
2.68%
2.56%
14
Kentucky
2,060,000
2,110,000
-2.37%
2.29%
15
Tennessee
1,730,000
1,760,000
-1.70%
1.93%
16
Florida
1,700,000
1,670,000
1.80%
1.89%
17
North Dakota
1,650,000
1,750,000
-5.71%
1.84%
18
Arkansas
1,640,000
1,650,000
-0.61%
1.83%
19
Pennsylvania
1,530,000
1,610,000
-4.97%
1.70%
20
Virginia
1,470,000
1,510,000
-2.65%
1.64%
21
New York
1,450,000
1,450,000
0.00%
1.61%
22
New Mexico
1,340,000
1,310,000
2.29%
1.49%
23
Oregon
1,300,000
1,280,000
1.56%
1.45%
24
Wyoming
1,300,000
1,270,000
2.36%
1.45%
25
Ohio
 1,250,000
1,250,000
0.00%
 1.39%
26
Alabama
1,220,000
1,270,000
-3.94%
1.36%
27
Washington
1,150,000
1,110,000
3.60%
1.28%
28/29
Illinois
1,140,000
1,130,000
0.88%
1.27%
28/29
Michigan
1,140,000
1,130,000
0.88%
1.27%
30
Georgia
1,040,000
1,040,000
0.00%
1.16%
31
Mississippi
910,000
930,000
-2.15%
1.01%
32
Arizona
880,000
920,000
-4.35%
0.98%
33
Indiana
870,000
860,000
1.16%
0.97%
34
North Carolina
800,000
810,000
-1.23%
0.89%
35
Louisiana
790,000
790,000
0.00%
0.88%
36
Utah
780,000
810,000
-3.70%
0.87%
37
Nevada
435,000
460,000
-5.43%
0.48%
38
West Virginia
370,000
385,000
-3.90%
0.41%
39
South Carolina
335,000
335,000
0.00%
0.37%
40
Vermont
260,000
260,000
0.00%
0.29%
41
Maryland
185,000
182,000
1.65%
0.21%
42
Hawaii
135,000
133,000
1.50%
0.15%
43
Maine
85,000
85,000
0.00%
0.095%
44
Connecticut
47,000
47,000
0.00%
0.052%
45
Massachusetts
38,000
39,000
-2.56%
0.042%
46
New Hampshire
30,000
32,000
-6.25%
0.033%
47
New Jersey
28,000
27,000
3.70%
0.031%
48
Delaware
17,000
16,000
6.25%
0.019%
49
Alaska
10,000
10,000
0.00%
0.011%
50
Rhode Island
5,000
5,000
0.00%
0.006%






-
Total
89,800,000
88,526,000
+1.44%
 100.00%
.

January 19th - Mixed Cattle Outlook for 2015

Tight margins and lower grain prices are encouraging cattle feeders to feed to heavier weights, helping offset lower numbers of cattle available for feeding and slaughter, according to the latest Livestock, Dairy and Poultry Outlook report from the USDA. At the same time, improved forage conditions appear to be encouraging ranchers to retain more heifers for breeding, which could further reduce supplies of feeder cattle in the near term.

Milk prices, meanwhile, are dropping, which could result in a pickup in culling of dairy cows. The average all-milk price for 2014 was a record high of $23.97 per hundredweight, up 19.6 percent from the 2013 price of $20.05 per hundredweight. But for 2015, USDA now projects an average all-milk price of  $17.75 to $18.55 per hundredweight, down from last month's forecast of $18.45 to $19.25.

Pork will become more competitively priced as the U.S. industry rebounds from the effects of Porcine Epidemic Diarrhea. USDA reports producers have increased breeding inventory increases express strong farrowing intentions, suggesting higher pork production and lower hog prices in 2015. Hog prices are expected to average $60 to $65 per hundredweight this year, almost 18 percent below prices in 2014.

Other key points in the report include:

  • Drought continues in the Southern Plains and Southwestern United States, although its intensity has abated somewhat. The U.S. Drought Monitor, released December 30, 2014, showed an improved situation for cattle country compared with last month.
  • Despite continuing drought, the limited precipitation has allowed wheat pasture to remain in relatively good condition, providing some opportunity for weight gains in feeder cattle being pastured on Southern Plains wheat.
  • Placements in 1,000-plus-head feedlots during November dropped 4 percent below 2013. November placements were the lowest and marketings were the second lowest for the month since the series began in 1996.
  • Any significant retention of heifers for rebuilding the cow herd would offset increases in beef production due to heavier slaughter weights. However, cow-calf operators face significant incentives to sell heifers as feeder cattle sooner rather than waiting for income from their calves at least two years later.
  • Commercial red meat production for the United States in November 2014 was down 9 percent compared with November 2013. Further, Livestock Slaughter showed a 10-percent drop in commercial beef production through the month of November 2014 compared with this time last year.
  • Average live weights of commercial cattle continue higher than last November, up by 24 pounds. Since September 2014, 5-Area Fed Steer live weights have consistently exceeded 1,420 pounds.
  • November 2014’s All-fresh beef retail value was $5.98 per pound, up nearly a dollar from a year earlier. Estimated average monthly Choice retail beef prices for January 2014 through November 2014 were $5.97 per pound, 13 percent above the same-period average of $5.28 for 2013.
  • For 2015, average annual retail beef prices are expected to be slightly higher than they were in 2014. Recent drops in gas prices have given some indication of additional spending power at the grocery store. Larger supplies of pork and poultry may limit beef price increases this year.
.

May 21st - As Fundamental Change Moves an Industry

It doesn't feel any different as you walk around but beneath the surface some large and monumental plates are shifting and the foundations of an industry are undergoing change. The day to day business continues and we wake every morning to new bids and offers, new grain prices, the drought, and other continuing influences but there are some big picture developments that are occurring while we move day to day.

  • Climate: There are major changes occurring in the climate. Extreme weather patterns are more severe and long lasting. Drought in some areas continues. Flooding in other regions is causing its own problems. We can debate whether it is man made or not, but large and serious weather patterns are at work and no one impacted more than agriculture.
  • Geography: Nebraska took over Texas's spot as top feeding state. The image below clearly demonstrates the loss of feeding capacities in Texas and increases else where. Processing plants follow the feeding locations for cattle and the southern plains has lost processing capacity to the northern plains -- but both have suffered plant closings and slow downs as the herd grows smaller.
  • Basis: Cattle and grain are moving towards cash markets trading basis the futures. Cattle cash trading has ceased to be reported in Texas and lightly reported elsewhere. Poor grain basis pricing, south of Amarillo, is pressuring south plains feedyards in competitiveness.
  • Sustainability: This is a term used by everyone and understood by no one. Beef retailers are being pressured to act on assuring the industry is observing best management practices to deliver a sustainable agriculture.
  • Mandatory ID: Whether it is a trading scandal involving phantom cattle or a disease threat that can't be traced, animal ID won't go away. International trade and exports will demand it or penalize our products without it.
Downsizing is no fun and lots of money has been lost in processing and feedings. Downsizing is always painful but it also can build a better and stronger industry through change.


The Cattle Report

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April 2

14.

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