News Update
Aug. 1, 2008

AMI, FMI to Host COOL Workshop

The American Meat Institute (AMI), in partnership with the Food Marketing Institute (FMI) and the United Fresh Produce Association, announced that it will present a series of workshops in August explaining how to comply with new country-of-origin labeling (COOL) laws.

Attendees at the workshop will hear directly from the U.S. Department of Agriculture (USDA) experts who wrote the regulations that will go into effect Sept. 30. They will get direct answers to questions and will have the opportunity to talk with industry legal and business experts about compliance with the law and supply chain efficiency.

The workshops will take place Aug. 12 at the Four Points Sheraton in Baltimore, Md., Aug. 13 at the Hyatt Regency O’Hare in Chicago, Ill., and Aug. 14 at the Wyndam Hotel in San Jose, Calif. Registration is $195, and space is limited.

— Article provided by Meatingplace.com.

K-State Economist Sees Beef Output Cuts If Production Costs Remain High

Soaring grain, oilseed and land prices helped bolster some rural Americans’ incomes during the past year, but livestock producers have not reaped such gains.

“Feed is the largest single cost item for livestock and poultry production — accounting for 60 to 70 percent of the total cost in most years,” said Kansas State University (K-State) agricultural economist James Mintert. “Although energy, labor and other inputs have increased over the last two years, feed costs have jumped 40 to 60 percent, depending on whether a producer is feeding swine, cattle or poultry.”

Mintert, who is a livestock marketing economist for K-State Research and Extension, said corn prices at Omaha, Neb., for example, averaged $5.44 a bushel (bu.) for the January-June 2008 period — a $3.44 or 173% increase over the $1.99 per bu. average set in January-June 2006. Plus, peak cash corn prices topped $7 a bu. this year in late June and early July.

“The rising costs of production have largely been absorbed by livestock producers so far, but that cannot continue indefinitely,” he said. “Ultimately, higher prices throughout the marketing chain will be required to offset the large increase in production costs.”

The beef industry is feeling the pinch just like all livestock sectors. A monthly survey of feedlots conducted by K-State’s Department of Animal Sciences and Industry indicated that the cost of feeding cattle in commercial feedlots averaged 74¢ per pound in 2007, up from 54¢ in 2006. Preliminary estimates indicate cattle feedlots’ costs of gain could average near 85¢ a pound in 2008 — an increase of 58% in two years. Cattle feeding returns estimated at Iowa State University show that cattle feeders experienced the largest loss on record — $167 per head during February — that producers have had since modern records started being kept in the 1960s.

Similarly, production costs for cow-calf producers have jumped, mostly due to feed costs. According to the Kansas Farm Management Association (KFMA), its cow-calf producer members’ feed costs rose to $346 in 2007, up 21% from $287 in 2006.

“Recent feed grain and protein supplement prices, along with a sharp increase in forage production costs, indicate that total feed costs will rise again in 2008, likely exceeding $400 per cow,” Mintert said. “That would be an increase of 40% or more in just two years.”

The KFMA data indicate that returns for Kansas beef cow-calf operations still exceeded production costs in 2007 by about $50 per cow. But, the overall anticipated rise in feed costs during 2008 “will almost certainly push returns below variable production costs,” Mintert said. That, he said, will spark herd reductions and encourage some producers to exit the industry.

“It’s important to note that the losses experienced in the cattle sector were not associated with large cattle price declines,” Mintert said. “In fact, prices for market-ready cattle in Kansas were record-high in 2007, averaging $93 per hundredweight (cwt.) or 8 percent higher than in 2006. So, the reduced profitability was directly attributable to rising costs, especially feed costs.”

Higher beef prices from stronger U.S. demand seem unlikely over the next few years. Beef demand has been weakening somewhat since 2004, Mintert said.

“Consumers’ disposable income is a major determinant of their demand for beef. Slow or even negative growth in the U.S. economy during 2008 and 2009 will mean little likelihood in the short run for an increase in domestic beef demand,” he said.

A bright spot in the beef outlook is that export demand has improved since plummeting in 2004, following the report of the first U.S. case of bovine spongiform encephalopathy (BSE). During January-May 2008, for example, U.S. beef exports to all destinations were 32% larger than during the same five-month span in 2007. 

Even so, exports still are not close to where they were prior to the BSE discovery, Mintert said. He cited data showing that U.S. beef exports during the first five months of 2008 were 34% below the exports for that same period in 2003. “Based on the trend established early this year, U.S. beef exports in 2008 could total 6 percent to 7 percent of beef production — which effectively reduces the supply of beef available in the domestic market and hence supports beef and cattle prices,” he said.

Added to current exchange rates, that will continue to boost U.S. beef exports and discourage imports, but it’s unlikely to be enough to offset the dramatic rise in production costs. “If beef demand — especially export demand — does not increase enough to boost beef and cattle prices high enough to offset the rise in production costs, the industry will shrink in size to the point that fewer pounds of beef are marketed to U.S. and international consumers,” the K-State economist said. “The magnitude of the supply shift will depend on how rapidly beef exports recover and on whether feed grain prices continue to increase or they stabilize at current levels.”

Mintert noted that some U.S. beef herd reduction was already under way in 2007, with the beef cow herd down about 1%. Harvest data through early July 2008 also suggests that liquidation is under way and, in fact, may have accelerated since January.

“Looking ahead, the U.S. beef industry could be facing several more years of herd reduction before prices rise sufficiently to offset the new production cost regime,” he said.

— Release provided by K-State Research and Extension

Export Markets Improve, Opportunities Abound

As U.S. beef exports continue to recover from market disruptions resulting from BSE, cattle producers are focusing on the opportunities for growth in beef demand through growth in exports. During the 2008 Cattle Industry Summer Conference in Denver, producers approved a Cattlemen’s Beef Board Fiscal Year 2009 budget that increases investment in foreign marketing efforts by 11.2% year-on-year, even though the total Cattlemen’s Beef Board (CBB) budget is down 6.6%.

According to the U.S. Meat Export Federation (USMEF), year-to-date U.S. exports of beef and beef variety meats through the first five months of 2008 — at 355,982 metric tons — are 29% above the same period in 2007 by volume, and up 39% in value.

Export volume during the first five months of the year represented 70% of the level during the first five months of 2003, while value of exports during that five-month period in 2008 are at 87% of 2003 levels. Individual bright spots so far this year include: Japan up 58% to 24,193 metric tons; EU up 118% to 7,480 metric tons; Canada up 52% to 63,189 metric tons; Russia up 333% to 7,895 metric tons; Taiwan up 36% to 10,975 metric tons; and Vietnam up 679% to 14,772 metric tons. For more information about beef exports, go to www.usmef.org.

— Information provided by CBB.

Research Provides Direction For Beef Checkoff Efforts

Checkoff funding has initiated 15 beef safety research projects in Fiscal Year 2008, with a total budget of $1.1 million. In addition, multiple white papers and project summaries are being developed to disseminate research results. In recent weeks, three new one-page overviews of vital product enhancement research topics were posted on the checkoff’s beef research web site.

Overview topics include tenderness, aging, and muscle profiling. In addition, the site provides references to more in-depth publications printed with checkoff funding. To read these overviews and the full publications they reference, go to www.beefboard.org.

— Information provided by CBB.

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