News Update

News Update
March 19, 2008

Pfizer Animal Health to Acquire Catapult Genetics and Bovigen

Pfizer Animal Health announced March 18 it will acquire two market-leading livestock genomics companies:

Catapult Genetics Pty., Ltd., focused on developing and commercializing innovative livestock DNA tests and gene markers to assist global food producers, processors and retailers in improving profitability and quality in the global food chain; and
Bovigen LLC, which markets DNA technology, including Catapult’s products in the U.S. and throughout Canada, Central America and South America.

Terms of the agreements were not disclosed. The acquisitions are expected to close by the end of this month. The two companies will continue to market products and services to their own customers as well as Pfizer Animal Health customers.

“This is a strategic initiative that places Pfizer at the forefront of livestock gene marker R&D (research and development) and enhances Pfizer’s ability to offer more complete solutions to global livestock producers,” said Juan Ramon Alaix, president, Pfizer Animal Health.

Current genetic tests are focused on productivity and carcass quality, while future genetic tests may one day allow producers to better predict disease in individual animals, thus helping veterinarians and producers target medicines to livestock that need it most, Alaix said.

“Catapult’s ongoing product R&D is based on core technology platforms developed in collaboration with research groups in Australia and New Zealand,” said Gerard Davis, Catapult Genetics chief executive officer (CEO). “Now with Pfizer’s added resources and capabilities, we expect livestock producers will begin to see an enhanced range of genetic tools. For sheep and beef cattle producers in Australia and New Zealand, there will be benefits from a continued focus on their needs as well as access to new and improved products,” Davis said.

Pfizer will continue to access and draw on the best R&D from Australia, New Zealand, the U.S., and Europe, according to a Pfizer release. As novel marker panels are discovered and developed, Pfizer plans to introduce new products and services to livestock producers.

“In the U.S., Pfizer also will be able to enhance the development and uptake of new genetic markers identified through Bovigen’s participation in The Carcass Merit Project with Texas A&M University and the National Cattlemen’s Beef Association (NCBA).

“Our move today expands Pfizer’s already strong commitment to promoting livestock health and safe, high-quality food around the world,” said Nigel Evans, senior director of business innovation for Pfizer Animal Health, who will lead the Catapult and Bovigen businesses for Pfizer.

For additional information on Pfizer’s portfolio of animal products, visit www.PfizerAH.com.

— Adapted from a release distributed by Pfizer Animal Health.

Higher Retail Beef Prices Caused by Rising Production, Transportation Costs

Rising feed and transportation costs continue to keep retail beef prices edging higher, a Texas AgriLife Extension Service economist said. “One of the big stories this year as we start 2008 is we’re seeing higher prices for consumer beef, whether it’s at the grocery store or restaurants,” said David Anderson, AgriLife Extension Service livestock marketing economist.

The annual average retail beef price for 2007 was $4.16 per pound (lb.), which was 5% higher than 2006 and exceeded the previous 2005 record of $4.09 per lb., according to U.S. Department of Agriculture-Economic Research Service (USDA-ERS) data. Factoring into the high beef prices is record-priced crude oil, which is increasing transportation costs for many beef suppliers, he said.

“There are higher costs of getting it to the store,” Anderson said. “When we talk about $100 per barrel oil, it ripples through the economy. Everything you get at a restaurant or grocery store, we have to get it from somewhere else.”

Another reason is a leveling of beef production across the U.S., Anderson said. With fewer cows and calves in national inventory, and increased export demand for U.S. beef, “that’s keeping pressure on beef prices,” he said. At the producer level, calf prices have been forced lowest by rising feed costs, which are tied to ethanol production. Lighter-weight calves are getting the most discounts because they require more feed to add weight before harvest, Anderson said.

Anderson described the current calf market as a “tug-of-war.” USDA inventory indicates 1% fewer beef cows, which will lead to a smaller calf crop, he said. “From a supply standpoint, that means fewer calves, and fewer calves usually means better prices for calves,” Anderson said. “I like to describe it as a tug-of-war going on in the calf market this year. You have feed on one side and high prices pressuring calf prices lower, then tight supply of calves on the other side pushing them higher. Still for 2008, we should see calf prices where they were in 2007, but a little bit lower due to the high feed costs. Given where we are in inventory, we should expect to see fewer cows in 2009, so tighter supplies keeping upward pressure on calf prices.”

Meanwhile, profit margins have also been tough for stocker producers. Recent USDA data indicated there were fewer calves on wheat pasture. “That (report) confirmed what we all knew,” Anderson said. “That’s down 30% or basically one-third fewer calves. What that means for stocker producers is typically they see the lowest prices for 700-lb. to 800-lb. steers in March. They come off wheat then and go to feedlots.

“There were not a lot of calves on wheat pasture this year, so what is a seasonal low may hold up, and we could see some moderation in the springtime that we usually don’t see. Consequently, we could see some heavier calf weight prices over the next couple of months simply because there’s not that much supply.”

— Release written by Blair Fannin, Texas AgriLife Extension Service, which provided the article.

Higher prices convince growers to return rotations towards normal pattern in 2008

After planting the most corn acres since World War II last year, U.S. farmers are ready to shift their crop rotations again in 2008, putting in more soybeans and spring wheat, according to the latest survey by Farm Futures magazine.

Farmers intend to plant 71.8 million acres of soybeans this spring, up from 63.6 million last year. Spring wheat acres will rise to 14.3 million, up 1 million from 2007, while corn sees a drop to 87.7 million from last year’s huge 93.6 million acres. Total wheat plantings should hit 63.9 million acres, compared to 60.4 million last year.

“Farmers once again showed they’re ready to respond to the market’s signals,” said Farm Futures Senior Editor Bryce Knorr, who directed the survey. “And the market is telling them to plant more soybeans due to very tight projected Sept. 1 supplies in the U.S.”

The magazine’s latest survey showed a shift toward more beans compared to a survey it released in December, when corn plantings were put at 88 million and beans came in at 69.5 million acres. Since then the ratio of soybean-to-corn prices increased from 2.35-to-1 to more than 2.50-to-1.

“Questions about acreage are only beginning,” Knorr says. “Farmers planted much more corn last year than their March intentions indicated, while soybean acreage dropped sharply. There’s also a big question this year about how much new ground — pasture and hay fields — will be converted to row crops.” He noted USDA’s recent forecast made at its February outlook conference, which showed a much bigger increase in acreage than many believe possible. And, even the big increase in soybean plantings found in the survey may not be enough, according to Farm Futures Market Analyst Arlan Suderman. “Many will look at the increased soybean acreage estimate as an opportunity to rest easy, that the market has done its job,” Suderman said. “However, a move to 71.8 million acres is barely enough to maintain soybean stocks at a tight level if the crop achieves trend yields this year. That will keep traders very nervous through the growing season, ready to quickly react to any perceived threat to the crop.

“On the other hand, the drop of nearly 6 million acres of corn is more than that market can allow to happen. A drop of that magnitude would require significant price rationing of demand to prevent the corn pipeline from running dry, even if trend yields are achieved,” he continued.

“The market truly has more work to do in the weeks ahead. Look for a long and volatile growing season in the commodity markets with wide price swings becoming the norm until supply and demand are brought into balance.”

Farm Futures surveyed 974 growers by e-mail from Feb. 28 to March 14. USDA releases results of its planting intentions survey March 31. Published nine times annually by Farm Progress Cos., Farm Futures provides business and management information to 205,000 large-scale, high-income U.S. farm operators.

19th Annual Pennsylvania Beef Expo Draws Near

Final preparations are being made for the 19th annual Pennsylvania Beef Expo. The Pennsylvania Beef Expo, which takes place March 27-30, is the largest exclusively beef cattle annual event in Pennsylvania.

The Beef Expo has something for anyone even marginally interested in agriculture, and specifically the beef industry.

Thursday afternoon at the Livestock Evaluation Center, there is a Beef Quality Assurance (BQA) re-certification at 1 p.m., followed by a BQA training session from 2 p.m. to 4 p.m. The Pennsylvania Cattlemen’s Association will host its annual meeting and Cattlemen’s Award Banquet Thursday evening at Celebration Hall, State College, beginning at 6 p.m.

Friday morning, the trade show opens at 9 a.m., at the Livestock Evaluation Center, and will remain open throughout the day.

Pennsylvania’s Secretary of Agriculture, Dennis Wolff, is scheduled to speak at noon, just prior to the start of Pennsylvania’s 35th annual Performance-Tested Bull Sale.

The junior quiz bowl competition will take place at 5 p.m. at the AG Arena on the campus of Penn State Friday.

Saturday and Sunday, all events are at the Snider AG Arena on campus. The junior Skill-A-Thon is scheduled to start at 8:30 a.m. This is a knowledge test for individuals about cattle, livestock equipment and supplies, feeds, and cuts of beef, just to mention a few of the stations.

The junior heifer show is scheduled to start at 1 p.m., followed by the showmanship clinic. The junior showmanship competition starts at 8 a.m. Sunday morning with the junior steer show immediately following. Placing of approximately 200-250 steers usually finishes up mid- to late afternoon Sunday. Video footage of the Bulls in the performance-tested bull sale can be viewed at www.das.psu.edu/das/beef/bull-sale.

For more information, call the Pennsylvania Beef Expo Office at 814-865-5857 or 814-238-2527, or e-mail geberly@state.pa.us.

— Release provided by the Pennsylvania Beef Expo.

Organic Valley Forms Grower Pool

In an effort to provide market stability to both crop growers and livestock producers, Organic Valley Family of Farms is opening its membership to organic crop growers with the introduction of its Grower Pool.

According to Organic Valley, the cooperative is the largest one of its kind, with more than 1,200 member farms.

Growers joining the pool will benefit from a guaranteed floor price for their crops on a long-term contract basis and will be able to enroll all or portions of their crop acreage in the pool. Organic Valley will offer contracts for feed-grade grains, beans, oilseeds and hay beginning with the 2008-2010 cycle.

Similar to Organic Valley’s current dairy, meat and produce pools, the Grower Pool’s prices will reflect differences in the co-op’s 15 grower regions. Members will form their own executive committee to develop policy and pricing guidelines. After one production year, any member can add a year to the contract at a newly set floor price, or can opt out of the pool.

“Our objective is to establish regional floor prices for crops that are clearly profitable for growers yet still affordable for our livestock producers,” said Lowell Rheinheimer, farm resources manager for Organic Valley.

Farmers interested in joining the Grower Pool may contact CROPP Cooperative at 1-888-809-9297.

— Release provided by Organic Valley.

— compiled by Crystal Albers, associate editor, Angus Productions Inc.