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October 30th - Closing Futures Summary

Cattle futures staged an impressive Thursday afternoon rally. Cattle futures staggered around early this week as traders worried about seasonal weakness. Midday beef slippage didn’t help. Nevertheless, futures closed very strongly, which probably reflected optimism about late-week cash trading. December live cattle futures ended Thursday’s pit session having rallied 0.57 cents to 167.32 cents/pound, while April futures climbed 0.62 to 166.17. Meanwhile, November feeder cattle futures leapt 1.17 cents to 234.22 cents/pound, and January feeders gained 0.52 cents to 228.47.

Thursday’s corn export data was rather disappointing. Corn futures rose slightly Thursday morning despite the soy setback from Wednesday’s late highs. Yellow grain prices later followed beans lower, due in part to likely trader disappointment with the results of the weekly USDA Export Sales report. December corn futures sagged 1.25 cents to $3.74/bushel at their Thursday settlement; May also lost 1.25 to $3.9575.

Soy market bulls reportedly took profits Thursday. The tight supply situation for soybeans and meal apparently continued supporting those markets Wednesday night. But futures turned decidedly lower this morning despite an unsurprising result on the weekly Export Sales report and daily news of a sizeable sale to China. It was rather clear that bulls were taking profits after the overnight loss of upward momentum. November soybean futures dove 18.75 cents to $10.2425/bushel as the CBOT pit session ended, but December soyoil sustained a 0.13-cents rise to 34.31 cents/pound, while December soymeal tumbled $17.2 to $380.0/ton.

The wheat markets were also dragged lower. Concerns about the production potential of Australian and the Black Sea wheat probably offered continued support for wheat futures Thursday. However, today’s soy weakness apparently undercut golden grain prices despite a strong result on the Export Sales report. December CBOT wheat slid 2.25 cents to $5.36/bushel in late Thursday trading, while December KC wheat stumbled 4.5 to $6.02/bushel, and December MWE wheat sank 4.75 to $5.7775.

Fresh spot market losses again depressed hog futures. Pork prices bounced Wednesday, thereby encouraging bullish hog traders. Unfortunately for bulls and producers, today’s early cash and wholesale quotes proved quite weak once again, which apparently sparked fresh Chicago selling. December hog futures plunged 1.40 cents to 87.20 cents/pound late Thursday afternoon, while April hogs dropped 1.05 to 88.05.

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October 30th - Animal Welfare Institute Disputes NCBA’s Welfare Standards

The Animal Welfare Institute (AWI) announced this that it has sent a written appeal to the National Cattlemen’s Beef Association (NCBA), criticizing and requesting revision of the trade association’s guidelines for the care and handling of cattle raised for beef in the United States.

“Cattle raised for food in the United States have no federal legal protections against inhumane treatment on the farm or at feedlots,” said Dena Jones, AWI’s farm animal program manager. “Because there are no legal standards, it is essential that NCBA provide animal care guidelines that ensure good animal welfare. We urge NCBA to revise its standards to provide these animals a better quality of life.”

AWI recently reviewed the animal care guidelines of NCBA’s Beef Quality Assurance program and determined that US beef industry guidelines are not in compliance with the international animal welfare code of the World Organization for Animal Health (known by its French acronym “OIE”), the intergovernmental organization dedicated to improving animal health worldwide. AWI discovered that, unlike Canada’s beef cattle industry, NCBA has not revised its animal care standards since OIE adopted a welfare code for beef cattle production in 2012. While NCBA has been participating in an international process to help countries implement OIE animal welfare standards, it has not taken action to implement those standards within the United States. AWI also found that, in some cases, the NCBA standards are inconsistent with the animal welfare policies of the American Veterinary Medical Association (AVMA).

As a result of its review, AWI concluded that the NCBA guidelines fail to provide an acceptable level of animal welfare. Specific deficiencies of the NCBA guidelines, addressed by AWI in its letter to NCBA, include:

  • Not acknowledging that pain and distress are associated with hot-iron branding, and not encouraging alternative methods of identification, as recommended by both the OIE and AVMA.
  • Allowing the practice of routine tail docking of cattle, and the practice of housing cattle indoors at high densities on slatted floors.
  • Not recommending that producers seek guidance from veterinarians on pain control for castration, which is known to induce pain and physiologic stress in cattle.
  • Not recommending that a veterinarian be consulted for providing pain management for the procedure of dehorning, which is also known to cause significant pain and distress to animals.
  • Not providing guidance on protecting cattle from the stress of extreme cold.
The lack of adequate animal care standards for fundamental animal care practices reinforces the public’s concern about the treatment of cattle on farms. A recently released study conducted by researchers at Kansas State University found that only 39 percent of the public believed that U.S. farms and ranches provide appropriate overall care to their cattle.
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October 30th - Dec LC Carve Out a Trading Range, Bears in the Weeds

Most active Dec LC is rallying this morning but it’s really been going nowhere fast. Instead for 2 weeks it’s wearing out the pavement between $165 and $170 just ahead of the roll. Dec has been supported, especially psychologically by the historical bull performance of Oct LC. But bears have a list of reasons why Oct is the end of the bull run and Dec is no good. Aspects of the bear thought process are valid and worth considering, since Dec futures expire December 31, a timeframe when both beef demand and fed cattle demand both will be limited.

Last year when packer margins were under pressure, slaughter Christmas and New Year’s holiday weeks was historically small at 432,100 and 524,800 head respectively and this year is expected to be as small or smaller. In fact last week’s kill of 576,000 head was likely the largest for the remainder of 2014 as each week until the first full kill week of January, will fall sometimes dramatically below a year ago.

Bearish Because...

Bears believe the kill cuts will be so severe for such an extended time frame that even though fed cattle numbers are low, that currentness will be chipped away week by week. With incentive to feed cattle to heavier weights pushing tonnage ever higher coupled with what the long-range weather forecast indicating a warmer and drier November than normal, bears think by the time early January is reached, the cattle feeder will have lost some significant bargaining advantage.

Of course these are just ideas and words, and Dec will probably be buffeted about between the reality of solid cash prices and expectations $170+ won’t last through the first half of November. All the while, traders will be enticed to bear spread Dec, piling on for the roll out of Dec and into Feb by funds.

Or Bullish?

There’s a couple of bullish fundamentals that may come into play that could make being short Dec uncomfortable at times. The rib primal finally broke out above $360 yesterday indicating the seasonal rally there is in force and it’s not inconceivable ribs could gain $30 more. Another is packers still have to supply kills and some plants are short bought for next week in spite of multiple tactics to avoid being so. Inquiry this week is still quite subdued, though a $168 bid or two has surfaced and a fully steady to higher cash trade is expected.

A Pause Perhaps

The cattle trade over the next couple of months may offer something for everyone. A push over $170 followed by a break to $165 or $162 doesn’t seem out of the question. This action would translate only to another correction in a long term bull market, not a major top in a long term historical bull, unless you believe a market like this one will never experience a blow off. The Jan/Feb 2014 blistering rally was led by demand for grinding material and created by pipelines left empty by tiny holiday kills. Sound familiar? One doesn’t have to be an active grain and oilseeds traders to be aware of what an empty pipeline can do, aka, the soymeal rally of October 2014.

Dec LC may not be a standout in the Bull of 2014, but the Bull of 2015 may dim that memory very quickly.

The Beef

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"Click Here" to view a Slide Show of Drought Monitor maps for the last 12 weeks
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46% of Corn Crop Harvested

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October 29th - Australian Drought Puts Pressure on Cattle Market

Forced sales due to the expanding drought have kept numbers to slaughter high. If the current kill rate of 170,000 head a week continues Australia will eclipse last year’s slaughter total of 8.3 million head.

Those who have been in a fortunate position to retain cattle, such as Jonathan Hassall, whose manager Marcus Lyons looks after his properties at Braidwood and Holbrook, have become increasingly scarce. Many have watched as the ducks line up, including a lower dollar, a small US herd, high global prices and booming live exports. But we still need rain. Perhaps the most lasting impact will be the number of breeders which have been lost from the system.

Meat and Livestock Australia’s (MLA’s) beef market analyst Ben Thomas said female cattle made up more than half the 6.1m head slaughtered to August this year. “In our projections we estimated it would be level with last year’s kill rate, going off average seasonal conditions, but because the drought has continued for so long it’s kept the kill rate at high levels,” Mr Thomas said.

This huge sell-off of female cattle in the past two years has become a cause for concern for MLA’s new boss Richard Norton, who says it will take some time for the herd to recover. “For the past two years the annual adult cattle slaughter has been above 8m head and on top of that live exports have also been at record levels,” the managing director told agents at the Australian Livestock and Property Agents Association annual general meeting in Sydney.

This will not only have a flow-on effect in the market with fewer available sale cattle, it will also mean a reduction in the cash flow for MLA, so Mr Norton said the company was planning ahead for this reduction in funds.

But it could also mean beef prices cop some upward price pressure even before a break in the season arrives, simply due to tightening supply. Mr Thomas said increasingly strong competition would emerge between processors and live exporters to supply exports, which could also have a knock-on effect to cattle headed for the supermarket shelf, prices for which had already begun to rise with MLA reporting a 5.1pc increase year on year.

So far this year the big slaughter of cows has been driven not just by the dry, but good prices for better conditioned stock. “That’s up 20 per cent on 2013 and 1m head or 47pc on 2012 for the same period,” Mr Thomas said.

This high slaughter rate has quickly brought the herd back from its peak in June 2013 of more than 29m head, which was the highest level since the 1970s.

“The 2014 estimate is 26.5m and we’re forecasting that to continue to decline into next year and be about 26m head, providing we have a normal season,” Mr Thomas said.

And it’s looking like the decline is set to continue.

Southern abattoirs have also reported higher slaughter rates.

“There are still some drought-affected cattle from the north being killed and there are fairly large yardings at Dubbo and further north at Roma, Queensland, but the southern processors have also been flat out,” Mr Thomas said.

What had been mainly a concern of northern NSW and Queensland beef producers has now spread into the State’s south as producers in the western Riverina and around Wagga Wagga move from selling surplus stock on to breeding stock.

Stock and station agent Ian Macleod, Hay, said most people in his area were destocking, be it in the store or prime market.

He said all surplus stock were sold and now it was down to the breeders. “The country is bare and everybody is getting worried and destocking at a rapid rate,” Mr Macleod said.

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October 28th - Record Cattle Prices, Again and Again

The words, "Another new record for cattle prices" has kind of lost its punch this year because there have been so many new records established. Finished cattle prices began the year at about $135 per hundredweight which were record highs. By March they reached $150, a new record high. In July prices ascended to $160, for the first time ever. Now, finished cattle have touched $170, for the first time ever-a new record high.

What is going on? Will cattle prices just keep setting new records? For how long?

The U.S. cattle cycle is well documented back into the mid-1800s. That is a cycle of rising and falling production over 10 to 12 years with a price cycle that is inverse to the production cycle. Studies of those cycles suggest that prices tend to reach their cyclical peak in the early phase of cow expansion as the industry begins to rebuild the herd. There are two reasons for this: first, the number of market ready animals is already small due to the contraction that has been going on; and second, the retention of heifers and cows further reduces slaughter animal numbers even more thus pulling down beef supplies.

The current cattle production cycle is at the end of an 8 year downward slide in numbers that began in 2006 when beef cow numbers were at 32.7 million head. By the start of 2014, those numbers had dropped to 29 million head, a decline of 11 percent. This means there is already a small pool of calves for our beef supply. The second key is reduced female slaughter as producers begin to re-build the beef cow herd. That appears to have started in earnest, especially in the last-half of this year.

There are two ways in which cattle producers rebuild the herd. The first is by holding on to older cows for another year rather than sending them to market. The current evidence for this behavior is demonstrated by an 18 percent reduction in beef cow slaughter so far this year. Further evidence that this trend is increasing is a 23 percent reduction in beef cow slaughter during the most recent quarter--July through September. In addition, the dairy industry is contributing to reduced beef supplies as milk cow slaughter is down 11 percent year-to-date. The milk industry has also likely begun an expansion phase.

Holding on to older cows for another year is a short-term form of expansion that cannot be maintained for multiple years due to the aging of the herd. So, the second way the herd expands is through heifer retention. There is clear evidence that this behavior is also being practiced by both the beef and the dairy industries. Heifer slaughter so far this year is down nine percent and was down 11 percent in the third quarter of 2014.

Chris Hurt, Purdue University Extension

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October 27th - Trouble at the Beef Plants

Week before last, fed cattle prices reached $164. This slightly exceeded the all time high in some regions, but more importantly, the last time prices were this high, the box prices were $10 cwt. higher. Add to this fact a $6 rise in the live prices this past week and, as if to add insult to injury, a $2 drop in box prices on Friday. Put them all together and you have big time trouble at the beef plants. Current losses are estimated between $100-150 a head.

As anyone who has owned cattle knows, no one is entitled to a profit. Passing along information to buyers about the breakeven and the prices necessary for a profit, will fall on deaf ears. The best you are entitled to is a bid if the buyer happens to be interested. While sometimes losing money is part and parcel of the business in which we find ourselves, losses also can be a reflection of larger problems, and solutions not readily available.

Some of the problems at the beef plants are of their own making.  Cattle are in short supply and arranging supply to fill slaughter needs from mostly committed sources, ignores one critical factor. The last remaining few cattle in the open markets must be acquired to complete the needs, and if those few cattle are in strong hands then the price can be extremely volatile. Those few cattle then price all the committed cattle.

In an open market with no committed cattle, bids would have started at $164 then worked higher during the week with a few cattle purchased at each incremental dollar increase in price.  Pricing cattle, basis the cattle futures market, also would result in a more diversified price structure probably averaging around $167.

The coming year is likely to be the toughest for processing and cattle feeding. Processors will be faced with short supplies of cattle and an abundance of pork and chicken. This will make it tough to ratchet up box prices in the face of large supplies of competing meats. Cattle feeders will be faced with record breaking feeder cattle prices and a consumer who has a lid on prices they will pay for beef.

As they say, it will all work out in the end, but in the interim some pain will be felt by processors and feeders. As the herd expands, relief will be felt in all segments of the beef pipeline. The year end cattle inventory will likely show a larger herd than last year. Next month's cattle on feed report will likely show more cattle on feed than a year ago. And finally this time next year, the consumer will likely be paying less for beef than this year.

Ag Center Cattle Report

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October 27th - New Trading Hours for CME Cattle Futures

New trading hours will be in effect today at the CME for all livestock futures. The contracts will open for trading at 9:05 AM CDT today and then 8:00 AM CDT for the remainder  of the week   Trading closes at 4:00 PM each day except Friday when trading closes at 2:00 PM CDT.

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October 24th - National Feeder & Stocker Cattle Summary
USDA-MO Dept of Ag Market News

RECEIPTS:    Auctions     Direct    Video/Internet     Total
This Week     315,200       58,000         3,900             377,100 
Last Week     247,800       23,800        20,000            291,600 
Last Year      320,400        59,200         3,400            383,000

Compared to last week, feeder cattle and calves sold very uneven as prices on yearlings traded unevenly steady; early in the week mostly steady to 5.00 lower then firming up mid-week trading steady 5.00 higher. The calf market remains very uneven and volatile with the month of October showing some pressure this week on new arrivals of new crop bawlers which is typical of autumn as  market pressure was noted this week on those unweaned calves in which supplies always outweighs demand at this time of year.  There were instances on lightweight calves under 450 lbs that sold 10.00-15.00 lower as prices for these lightweight calves have been very lofty.  Calves weighing 450-650 lbs all traded with very wide price ranges and trends across the trading areas from unevenly steady to 5.00 higher to 5.00 lower. 

Also of note at several auctions, a lighter presence of farmer feeders due to harvest getting back into full swing this week.  USDA reported slower harvest pace than normal with 31 percentof the corn harvested with the 5 year average of 53 percent.   Soybeans are also behind with 53 percent harvested with the 5 year average at 66 percent. 

Unweaned bawlers will continue to be scrutinized with additional discounts forbeing fleshy or having a snotty nose as health issues will always be a concern. Most cattle growers would love to fill their orders with calves weaned at least 45 days and an extensive precondition program, but many calves are coming tothe auction right off the cow and in many cases with little use of knives or needles. 

Wheat pasture prospects look very bright across much of the Hard RedWinter Wheat regions as demand for stockers remain very good with Corn Belt cattlemen having lots of silage, hay and corn.  In Bassett, NE on Wednesday the replacement heifer offering was in very good shape as a near pot load of fancy replacement heifers weighing 555 lbs sold at 372.00 or 2064.00 per head.  In Philip, SD on Tuesday over 1200 head of 500-550 lb steers averaging 531 lbs sold with a weighted average price of 309.68.  Last week’s fully steady fat cattle trade was a big positive with the meltdown that occurred in the Stock Market and swept through many of the commodity markets as economic situations have calmed down in the short term. 

On Thursday afternoon fat cattle trade busted loose in a big way as live prices again hit record highs in the Southern Plains and Nebraska with live prices 5.00-6.00 higher at 170.00.  Packers needed inventory to secure needs proving that Supply and Demand still has a valid presence. 

The next question is where do boxed beef prices go from here, leaving plenty of questions for traders to ponder as live and feeder cattle futures on Friday closed with triple digit losses.  Traders seemed more concerned with Friday’s afternoon Cattle on Feed Report that ended up being right in line with industry guesses.  The report would be viewed as neutral as October 1 inventory was reported at 99.5 percent of a year ago; placementsat 101.0 percent of a year ago; marketings at 99.5 percent of a year ago.  This week’s auction volume included 37 percent over 600 lbs and 37 percent heifers.

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October 24th - October 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 10.1 million head on October 1, 2014. The inventory was 1 percent below October 1, 2013. The inventory included 6.46 million steers and steer calves, up 1 percent from the previous year. This group accounted for 64 percent of the total inventory. Heifers and heifer calves accounted for 3.55 million head, down 3 percent from 2013. 
  • Placements in feedlots during September totaled 2.01 million, 1 percent above 2013. Net placements were 1.94 million head. During September, placements of cattle and calves weighing less than 600 pounds were 460,000, 600-699 pounds were 340,000, 700-799 pounds were 437,000, and 800 pounds and greater were 770,000. For the month of September, placements are the second lowest since the series began in 1996.
  • Marketings of fed cattle during September totaled 1.68 million, 1 percent below 2013. 
  • Other disappearance totaled 65,000 during September, 5 percent above 2013.
Analysts regarded the report as neutral. September placements were slightly higher than forecast but so too were marketings. One extra slaughter day versus last year meant marketings were 5% below last year. The Oct 1 COF total was 0.2% below analysts’ average forecast. 

The trend of feeding more cattle up north continued. Iowa, Minnesota, Nebraska and South Dakota each had COF totals above a year ago, as each placed more cattle in July than a year ago. Washington had 15% more cattle on feed after placing 24% more cattle versus last year. Texas had the most cattle on feed (2.470M head). Nebraska was second with 2.240M head and Kansas was third with 2.010M head. 

The weight breakdown showed an 8.0% or 57,000 head year-on-year increase in cattle 800 lbs and over but an 8.0% or 38,000 head decline in placements 700-799 lbs. Arizona, Colorado, Iowa, Minnesota, Nebraska, South Dakota and Washington all marketed more cattle in September than a year earlier. All other featured states marketed fewer cattle, with Kansas and Texas marketings down 8% and 5%, respectively.
 
 

Cattle on Feed Inventory in 1,000+ Capacity Feedlots as of October 1st
Millions of Head
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Number of Cattle Placed on Feed in 1,000+ Capacity Feedlots in September
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Number of Cattle Marketed from 1,000+ Capacity Feedlots in September
Millions of Head
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Cattle on Feed by State as of October 1st
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October 24th - Canadian Weekly Cattle Report

Cash trade dries up

  • Most Alberta feedlots are contracting cattle for better returns, and the cash trade was too small to establish a trend.
  • Few local bids suggested the Alberta-Nebraska cash-to-cash basis remains seasonally weak.
  • American buyers showed interest in the market during the week, but local packer interest was lacklustre.
  • Weekly western Canadian fed slaughter to Oct. 11 rose two percent to 36,338 head.
  • Weekly Canadian exports to Oct. 4 fell eight percent to 7,953 head.
  • Trucking to the United States is a challenge because of the fall calf run now underway.
  • North American market-ready fed supplies are expected to tighten, and slaughter cow and bull supply is only moderate, meaning the market is fundamentally well supported.
  • U.S. packers will need to buy this week, and interest in Canadian cattle could improve.
  • To generate cash trade, cash prices must rise to align with fall contract bids.
Cows strong
  • D1, D2 cows ranged $115-$135 to average $125.70 per cwt. D3 ranged $105-$120 to average $111.67.
  • Rail grade cows were $237-$242.
  • Average D1, D2 cows have traded in a tight range of $122.25 to $126.50 per hundredweight over the past 10 weeks.
  • Cow and bull supply is rising seasonally, but numbers are manageable.
  • It is rare for non-fed markets to set annual highs during the fourth quarter.
  • However, there is a chance to set new highs if volumes remain manageable and the loonie continues to trade below US90 cents.
  • Market direction will depend on non-fed supplies and export demand.
  • Weekly exports to Oct. 4 totalled 6,787 head. That was up two percent from the same time last year.
Feeders volatile
  • The calves that are now trading are priced against the June Chicago live cattle contract, which was highly volatile last week.
  • Every 100 point swing on the live cattle futures equates to roughly a $2-$3 per cwt. fluctuation on calf prices, assuming a constant basis and Canadian dollar.
  • Ontario buyers are buying Alberta and Saskatchewan feeder cattle, but truck supply is becoming an issue.
  • Anyone selling feeders through electronic sales or private treaty might consider deferring delivery two weeks or offering a one week delivery window so that trucks can be scheduled.
  • Steers on average are trading $116 higher than last year, while heifers are up $109. The spread between steers and heifers continues to widen, especially on calves and light stockers.
  • All provinces saw auction volumes increase compared to the previous week.
  • Weekly feeder exports to Oct. 4 totalled 14,093 head.
  • Barley prices have risen, which will weigh on the feeder market.
Bred cows traded at $1,700-$2,375.

Cattle on feed

  • Canfax’s Oct. 1 Alberta-Saskatchewan Cattle on Feed report showed the on-feed number is not increasing as fast as a year ago.
  • Cattle on feed were nine percent higher than a year ago this summer, but as of Oct. 1 the number was three percent below last year.
  • Marketings in September were up six percent from last year but down four percent from the five-year average.
  • September placements were down only three percent from last year and four percent from the five-year average.
  • Yearling placements appear down, but feedlots were aggressively placing smaller calves.
  • Market-ready supplies are expected to tighten toward the end of the year, and the large number of forward sold calves and the early placement of light calves means market volumes for the fall calf run likely won’t increase as much as expected.
This cattle market information is selected from the weekly report from CanFax, a division of the Canadian Cattlemen’s Association.
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October 23rd - Beef Production Down Slightly from Last Year
  • Commercial red meat production for the United States totaled 3.96 billion pounds in September, up 1 percent from the 3.94 billion pounds produced in September 2013.
    • Beef production, at 2.07 billion pounds, was slightly below the previous year. Cattle slaughter totaled 2.53 million head, down 3 percent from September 2013. The average live weight was up 31 pounds from the previous year, at 1,344 pounds.
    • Veal production totaled 7.2 million pounds, 16 percent below September a year ago. Calf slaughter totaled 42,300 head, down 33 percent from September 2013. The average live weight was up 57 pounds from last year, at 291 pounds.
    • Pork production totaled 1.87 billion pounds, up 2 percent from the previous year. Hog slaughter totaled 8.83 million head, down 2 percent from September 2013. The average live weight was up 10 pounds from the previous year, at 283 pounds.
USDA
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October 22nd - Cold Storage Report
  • Total red meat supplies in freezers were up 3 percent from the previous month but down 8 percent from last year. 
    • Total pounds of beef in freezers were up 8 percent from the previous month but down 16 percent from last year. 
    • Frozen pork supplies were up slightly from the previous month but down 4 percent from last year. 
    • Stocks of pork bellies were down 26 percent from last month but up 44 percent from last year.
  • Total frozen poultry supplies on September 30, 2014 were down 2 percent from the previous month and down 10 percent from a year ago. 
    • Total stocks of chicken were down 2 percent from the previous month and down 9 percent from last year. 
    • Total pounds of turkey in freezers were down 2 percent from last month and down 10 percent from September 30, 2013.
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October 17th - Shootin' the Bull Weekly Analysis
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In my opinion, the volatility has reached a hyper stage. The price swings up and down, at the speed and range they have been trading, creates an environment for significant error. Best laid plans one day are foiled the next. Option sellers have reduced position size and increased spreads between bid/offer. The market has stopped going up for all anyone knows and the volatility has created significant indecision. My objective has been and will be, regardless of past experience, is to capture what is currently available that may or may not be available in the future. 

Feed yards lost significant premium on the February and April contracts this week. It is these two contract months that I perceive to be most susceptible to a decline in price as inventory purchased to be sold in this time frame was purchased at the tip top of the price range of feeder cattle. Back grounders are not perceived in much better condition due to their replacement inventory of stockers to have been at a historically high level as well. The basis for fats remains fairly consistent at this time. However the basis on feeders is exceptionally positive and that is perceived a detriment towards spring sales. 

Further developments this week has created significant volume and volatility in the equities, interest rate and energy markets. These are key components to our economy and prices for these derivatives are flying all over the place. Bonds this week shot up 5 full points on Wednesday. This is a phenomenal move as the bond market is one of the largest, most liquid markets we have. Of those 5 points, 3 of them came within a 6 minute time frame. That is perceived to have left several entities out to dry. In my opinion, this was an instance of some one wanting out, not in as it is was viewed as a move of desperation. I perceive that the centrifuge of the markets has obtained a wobble. This wobble is anticipated to slosh a tremendous amount of money around. What no one knows is how much and how damaging the effects can be to other markets. I anticipate this weeks market movement to bleed into next week and urge all to take every precaution necessary to minimize risk remove capital from risk. 

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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 October 16th Seasonal Drought Outlook

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October 22nd - Cold Storage Report
  • Total red meat supplies in freezers were up 3 percent from the previous month but down 8 percent from last year. 
    • Total pounds of beef in freezers were up 8 percent from the previous month but down 16 percent from last year. 
    • Frozen pork supplies were up slightly from the previous month but down 4 percent from last year. 
    • Stocks of pork bellies were down 26 percent from last month but up 44 percent from last year.
  • Total frozen poultry supplies on September 30, 2014 were down 2 percent from the previous month and down 10 percent from a year ago. 
    • Total stocks of chicken were down 2 percent from the previous month and down 9 percent from last year. 
    • Total pounds of turkey in freezers were down 2 percent from last month and down 10 percent from September 30, 2013.
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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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May 5th - 2012 Census of Agriculture Reveals Trends

There are now 3.2 million farmers operating 2.1 million farms on 914.5 million acres of farmland across the United States, according to the 2012 Census of Agriculture, released today by the U.S. Department of Agriculture. The agriculture census presents more than 6 million pieces of information, which provide a detailed look at the U.S. farm sector at the national, state and county levels.

"Once every five years, farmers, ranchers and growers have the unique opportunity to let the world know how U.S. agriculture is changing, what is staying the same, what's working and what we can do differently," said Dr. Cynthia Clark, the retiring head of USDA's National Agricultural Statistics Service, which administered the survey. "Today, we can start to delve into the details." 

Census data provide valuable insight into the U.S. farmer demographics, economics and production practices. Some of the key findings include:
 

  • Both sales and production expenses reached record highs in 2012. U.S. producers sold $394.6 billion worth of agricultural products, but it cost them $328.9 billion to produce these products. 
  • Three quarters of all farms had sales of less than $50,000, producing only 3 percent of the total value of farm products sold while those with sales of more than $1 million - 4 percent of all farms - produced 66 percent. 
  • Much of the increased farm income was concentrated geographically or by farm categories. 
  • California led the nation with 9 of the 10 top counties for value of sales. Fresno County was number one in the United States with nearly $5 billion in sales in 2012, which is greater than that of 23 states. Weld County, Colorado ranked 9th in the top 10 U.S. counties. 
    • The top 5 states for agricultural sales were California ($42.6 billion); Iowa ($30.8 billion); Texas ($25.4 billion); Nebraska ($23.1 billion); and Minnesota ($21.3 billion). 
  • Eighty-seven percent of all U.S. farms are operated by families or individuals. 
  • Principal operators were on average 58.3 years old and were predominantly male; second operators were slightly younger and most likely to be female; and third operators were younger still. 
  • Young, beginning principal operators who reported their primary occupation as farming increased 11.3 percent from 36,396 to 40,499 between 2007 and 2012. 
  • All categories of minority-operated farms increased between 2007 and 2012; the Hispanic-operated farms had a significant 21 percent increase. 
  • 144,530 farm operators reported selling products directly to consumers. In 2012, these sales totaled more than $1.3 billion (up 8.1 percent from 2007). 
  • Organic sales were growing, but accounted for just 0.8 percent of the total value of U.S. agricultural production. Organic farmers reported $3.12 billion in sales in 2012, up from $1.7 billion in 2007. 
  • Farms with Internet access rose from 56.5 percent in 2007 to 69.6 percent in 2012. 
  • 57,299 farms produced on-farm renewable energy, more than double the 23,451 in 2007. 
  • 474,028 farms covering 173.1 million acres were farmed with conservation tillage or no-till practices. 
  • Corn and soybean acres topped 50 percent of all harvested acres for the first time. 
  • The largest category of operations was beef cattle with 619,172 or 29 percent of all farms and ranches in 2012 specializing in cattle. 
Conducted since 1840, the Census of Agriculture accounts for all U.S. farms and ranches and the people who operate them. The Census tells a story of how American agriculture is changing and lays the groundwork for new programs and policies that will invest in rural America; promote innovation and productivity; build the rural economy; and support our next generation of farmers and ranchers.
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February 14th - USDA Long-Term Projections

Despite lower prices for many agricultural products in the near future, USDA is projecting U.S. farm income to remain historically high through 2023. Analysis for the report was conducted prior to completion of the Agricultural Act of 2014, and was based on the assumption of continuation of policies in the 2008 Farm Bill. Projections range from long-term economic growth, global production and consumption trends, global trade trends, commodity prices, farm income and more.

USDA projects global economic growth to average 3.2 percent annually over the next decade, with stronger growth projected in developing countries, including China, India, and countries in Africa and Latin America. The U.S. economic growth is projected to average 2.6 percent over the next decade. “Steady global economic growth supports longer term gains in world food demand, global agricultural trade, and U.S. agricultural exports,” according to the report.

While prices for many of the major crops are projected to decline in the next few years, long-term growth in global demand, a low-valued U.S. dollar, and demand for biofuel, will hold prices for corn, oilseeds and other major crops above pre-2007 levels, according to the report.

As a result of recovering from high feed prices in recent years and drought, USDA is projecting livestock production and per capital red meat consumption to increase through 2023.
While beef production is projected to decline through 2016 as producers retain heifers to grow the overall herd, production is expected to begin increasing in 2016. USDA is projecting that beef cow numbers will increase from 29 million today to more than 33 million in 2022-2023. The total cattle inventory is projected to expand to approximately 96 million in 2023, and increasing slaughter weights add to increased beef production projections. USDA is projecting beef cattle prices to increase through 2017, then fall but increase again through 2023.

With regard to global beef trade, USDA is projecting world meat consumption to increase by about 1.9 percent annually from 2014-2023 and world meat trade to increase by 22 percent during that same period. Stagnate beef export projections from Australia resulted in the top four beef exporting nations, according to USDA, to be Brazil, India, the United States and Australia. On the import side, China and Hong Kong are projected to increase beef imports by 55 percent in the next decade as China’s middle class grows from 300 million today to an expected 640 million by 2020.

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February 13th - USDA Projects Net Farm Income to Fall in 2014

While USDA’s latest farm income projections indicate an overall decline in net farm income of around 26.6 percent in 2014, there are some positive projections in the report, especially for livestock producers.

“Livestock receipts are up marginally,” said USDA Chief Economist Joe Glauber. “They’re up at $183.4 billion. It’s the first time in a long while that we’ve seen livestock and crop receipts at around roughly the same magnitude.”

Crop receipts are projected at $189.4 billion in 2014, down more than 12 percent and back to pre-2011 levels. According to the report, declines in cash receipts are expected for almost all major crop categories, including food grain, feed, oil, fruits/tree nuts, and vegetables/melons. Large anticipated declines in the 2014 price for corn are impacting farmers’ decisions regarding other major crops. According to the report, use of corn for ethanol is expected to rise in 2014. Additionally, USDA is projecting declines in hay, wheat and soybeans receipts as well.

USDA is projecting a 0.7 percent increase in livestock receipts in 2014. For cattle and calves, steady receipts are projected due to lower production levels. Additionally, USDA is forecasting a decline in beef and veal export quantities in 2014.

Overall, net farm income, earnings only from current year production, is forecast to be $95.8 billion in 2014, down 26.6 percent from 2013 and projected to be the lowest since 2010. Net cash income, which includes income from carryover stocks from 2013, is forecast at $101.9 billion, down 22 percent from 2013.

For just the second time in the last 10 years and the first time since 2009, USDA is projecting a decline in production expenses, with an expected $3.9 billion decrease in 2014.

“Expenses are down,” Glauber said. “We’re forecasting them at $310 billion. That’s down almost $5 billion from last year, and that’s largely lower feed costs.”

Feed expenses are expected to decline by $6.6 billion, 11.3 percent, but livestock and poultry purchases are projected to increase, driven by an expected double-digit increase in the price of feeder steers due to tight supplies and strong beef demand. The overall expenses for the two major livestock-related expenses, however, are projected to fall by 6.1 percent, or $5.1 billion.

Other farm expense projections include a 4.7 percent decline for the three major crop-related expenses – seed, fertilizer and pesticides; a 9.6 percent decline in net rent to non-operators; a 4.6 percent increase in total labor; and a 3.2 percent increase for miscellaneous expenses, including things like animal health and breeding expenses, contract production fees, irrigation water, and general production and management decisions.

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All Cattle & Calves... State Rankings & Change
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January 1, 2014 Inventory vs. 2013 Inventory... Compiled from USDA National Agricultural Statistical Service Data
Rank
State
2014
2013
% Change
2014 as
% of Total
 
1
Texas
10,900,000
11,300,000
-3.54%
12.42%
2
Nebraska
6,150,000
6,300,000
-2.38%
7.01%
3
Kansas
5,800,000
5,850,000
-0.85%
6.61%
4
California
5,250,000
5,300,000
-0.94%
5.98%
5
Oklahoma
4,300,000
4,200,000
+2.38%
4.90%
6
Missouri
3,800,000
3,650,000
+4.11%
4.33%
7
Iowa
3,700,000
3,850,000
-3.90%
4.22%
8
South Dakota
3,650,000
3,850,000
-5.19%
4.16%
9
Wisconsin
3,350,000
3,450,000
-2.90%
3.82%
10
Montana
2,550,000
2,600,000
-1.92%
2.91%
11
Colorado
2,480,000
2,600,000
-4.62%
2.83%
12
Minnesota
2,280,000
2,390,000
-4.60%
2.60%
13
Idaho
2,190,000
2,370,000
-7.59%
2.50%
14
Kentucky
2,090,000
2,240,000
-6.70%
2.38%
15
North Dakota
1,770,000
1,790,000
-1.12%
2.02%
16
Tennessee
1,760,000
1,830,000
-3.83%
2.01%
17
Arkansas
1,660,000
1,600,000
+3.75%
1.89%
18/19
Florida
1,620,000
1,660,000
-2.41%
1.85%
18/19
Pennsylvania
1,620,000
1,610,000
+0.62%
1.85%
20
Virginia
1,530,000
1,610,000
-4.97%
1.74%
21
New York
1,450,000
1,400,000
+3.57%
1.65%
22
New Mexico
1,290,000
1,340,000
-3.73%
1.47%
23
Oregon
1,280,000
1,280,000
+0.00%
1.46%
24
Wyoming
1,270,000
1,290,000
-1.55%
1.45%
25
Ohio
1,250,000
1,230,000
+1.63%
1.42%
26
Alabama
1,240,000
1,220,000
+1.64%
1.41%
27
Illinois
1,130,000
1,120,000
+0.89%
1.29%
28
Michigan
1,120,000
1,120,000
+0.00%
1.28%
29
Washington
1,100,000
1,150,000
-4.35%
1.25%
30
Georgia
1,000,000
1,020,000
-1.96%
1.14%
31
Mississippi
930,000
910,000
+2.20%
1.06%
32
Arizona
920,000
900,000
+2.22%
1.05%
33
Indiana
870,000
810,000
+7.41%
0.99%
34
North Carolina
810,000
820,000
-1.22%
0.92%
35
Utah
800,000
770,000
+3.90%
0.91%
36
Louisiana
790,000
780,000
+1.28%
0.90%
37
Nevada
455,000
460,000
-1.09%
0.52%
38
West Virginia
380,000
410,000
-7.32%
0.43%
39
South Carolina
360,000
355,000
+1.41%
0.41%
40
Vermont
260,000
270,000
-3.70%
0.30%
41
Maryland
182,000
192,000
-5.21%
0.21%
42
Hawaii
130,000
132,000
-1.52%
0.15%
43
Maine
85,000
85,000
+0.00%
0.097%
44
Connecticut
47,000
48,000
-2.08%
0.054%
45
Massachusetts
39,000
39,000
+0.00%
0.044%
46
New Hampshire
32,000
33,000
-3.03%
0.036%
47
New Jersey
29,000
31,000
-6.45%
0.033%
48
Delaware
16,000
18,000
-11.11%
0.018%
49
Alaska
10,000
12,000
-16.67%
0.011%
50
Rhode Island
5,000
4,600
+8.70%
0.006%






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Total
87,730,000
89,299,600
-1.76%
 100.00%
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Beef Cows... State Rankings & Change
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January 1, 2014 Inventory vs. 2013 Inventory... Compiled from USDA National Agricultural Statistical Service Data
. Rank
. State
2014
2013
. % Change
2014 as
% of Total
 
 
 
 
1
Texas
3,910,000
4,015,000
-2.62%
13.46%
2
Missouri
1,820,000
1,757,000
+3.59%
6.27%
3
Oklahoma
1,805,000
1,754,000
+2.91%
6.22%
4
Nebraska
1,797,000
1,805,000
-0.44%
6.19%
5
South Dakota
1,635,000
1,688,000
-3.14%
5.63%
6
Montana
1,476,000
1,506,000
-1.99%
5.08%
7
Kansas
1,414,000
1,328,000
+6.48%
4.87%
8
Kentucky
1,012,000
1,028,000
-1.56%
3.48%
9
North Dakota
943,000
922,000
+2.28%
3.25%
10
Iowa
885,000
925,000
-4.32%
3.05%
11
Arkansas
882,000
851,000
+3.64%
3.04%
12
Florida
877,000
908,000
-3.41%
3.02%
13
Tennessee
864,000
912,000
-5.26%
2.97%
14
Colorado
700,000
715,000
-2.10%
2.41%
15
Wyoming
694,000
694,000
+0.00%
2.39%
16
Alabama
671,000
651,000
+3.07%
2.31%
17
Virginia
657,000
686,000
-4.23%
2.26%
18
California
600,000
610,000
-1.64%
2.07%
19
Oregon
516,000
527,000
-2.09%
1.78%
20
Georgia
480,000
490,000
-2.04%
1.65%
21
Mississippi
477,000
486,000
-1.85%
1.64%
22
Louisiana
450,000
454,000
-0.88%
1.55%
23
Idaho
445,000
510,000
-12.75%
1.53%
24
New Mexico
387,000
390,000
-0.77%
1.33%
25
North Carolina
360,000
364,000
-1.10%
1.24%
26
Illinois
359,000
360,000
-0.28%
1.24%
27
Minnesota
350,000
375,000
-6.67%
1.21%
28
Utah
325,000
315,000
+3.17%
1.12%
29
Ohio
293,000
290,000
+1.03%
1.01%
30
Wisconsin
240,000
260,000
-7.69%
 0.83%
31
Nevada
226,000
231,000
-2.16%
 0.78%
32
Washington
209,000
221,000
-5.43%
 0.72%
33
Indiana
192,000
191,000
+0.52%
 0.66%
34
West Virginia
191,000
200,000
-4.50%
 0.66%
35
Arizona
178,000
175,000
+1.71%
 0.61%
36
South Carolina
174,000
174,000
+0.00%
 0.60%
37
Pennsylvania
170,000
155,000
+9.68%
 0.59%
38
Michigan
114,000
113,000
+0.88%
0.39%
39
New York
105,000
90,000
+16.67%
 0.36%
40
Hawaii
68,800
69,900
-1.57%
0.24%
41
Maryland
38,000
41,000
-7.32%
 0.13%
42
Vermont
12,000
12,000
+0.00%
 0.041%
43
Maine
11,000
11,000
+0.00%
0.038%
44
New Jersey
8,000
9,000
-11.11%
0.028%
45
Massachusetts
6,000
6,500
-7.69%
0.021%
46
Alaska
4,300
4,900
-12.24%
0.015%
47
Connecticut
4,000
6,000
-33.33%
0.014%
48
New Hampshire
3,000
3,500
-14.29%
 0.010%
49
Delaware
2,800
4,000
-30.00%
 0.010%
50
Rhode Island
1,500
1,500
+0.00%
0.005%






-
Total
29,042,400
29,295,300
-0.86%
100.00%
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February 4th - Rabobank Report: Structural Changes Needed to Keep U.S. Beef Industry Competitive

Consumption shift requires better cost control as U.S. becomes a “Ground Beef Nation”

Rabobank has published a new report on the U.S. cattle industry, calling for changes in the way beef is produced in order for the industry to remain competitive. In the new report, “Ground Beef Nation,”, Rabobank says that changing consumer preferences and a production model tailored to production of top-shelf steaks has put the U.S. cattle industry in a position of losing market share to competitive proteins.

“Under the existing business model, the U.S. cattle industry manages all fed beef as if it were destined for the center of the plate at a white table cloth restaurant,” notes Rabobank cattle economist Don Close. “The industry is, essentially, producing an extraordinarily high-grade product for consumers who desire to purchase a commodity. More than 60% of U.S. beef consumption is ground product. If the U.S. cattle industry continues to produce ground beef in a structure better suited to high-end cuts, the result will be continued erosion of market share.”

The report goes on to explore the trend of changing consumer preferences and the role pricing plays in the notable decline in beef consumption. The industries that produce competitive proteins such as pork and chicken have grown and become more efficient, making the products more readily available at competitive prices.

“The industry must change to a production model that determines the best end use of an animal as early as possible, in order to compete in a ‘ground beef nation’,” notes Close. “A new system for end-use categorization that influences calf selection, cattle management, production costs, and feeding regimen throughout the life of the animal is vital to keeping beef competitive with other choices at the meat counter.”

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USDA Cattle Inventory Report... January 1 Cattle Inventory Down 2 Percent

All cattle and calves in the United States as of January 1, 2014 totaled 87.7 million head, 2 percent below the 89.3 million on January 1, 2013. This is the lowest January 1 inventory of all cattle and calves since the 82.1 million on hand in 1951.

All cows and heifers that have calved, at 38.3 million, were down 1 percent from the 38.5 million on January 1, 2013. This is the lowest January 1 inventory of all cows and heifers that have calved since the 36.8 million head in 1941.

  • Beef cows, at 29.0 million, were down 1 percent from January 1, 2013. 
  • Milk cows, at 9.2 million, unchanged from January 1, 2013. 
Other class estimates on January 1, 2014 and the change from January 1, 2013, are as follows:
  • All heifers 500 pounds and over, 18.8 million, down 2 percent. 
  • Beef replacement heifers, 5.5 million, up 2 percent. 
  • Milk replacement heifers, 4.5 million, unchanged. 
  • Other heifers, 8.7 million, down 5 percent. 
  • Steers weighing 500 pounds and over, 15.4 million, down 3 percent.
  • Bulls weighing 500 pounds and over, 2.0 million, down 1 percent. 
  • Calves under 500 pounds, 13.3 million, down 4 percent. 
  • Cattle and calves on feed for slaughter in all feedlots, 12.7 million, down 5 percent. 
  • The combined total of calves under 500 pounds, and other heifers and steers over 500 pounds outside of feedlots was 24.7 million, down 3 percent. 
 Calf Crop Down 1 Percent

The 2013 calf crop was estimated at 33.9 million head, down 1 percent from 2012. This is the smallest calf crop since the 33.7 million born during 1949. Calves born during the first half of 2013 are estimated at 24.7 million, down 1 percent from 2012.


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October 30th - 

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