News Update
March 26, 2009

Beef price recovery in 2010 depends on U.S. economy and exports

“I’ve got good news for beef producers,” Scott Brown, a University of Missouri (MU) livestock economist, said Monday night at the Polk County Soils and Crops Conference. “Good news, if you believe the economy will recover by 2010.”

In a show of hands, not all believed that the economy is in an upturn. However, many believed we are at or near the bottom and ready for a rebound. “What we need is some optimism in the market,” Brown said. “We’ve heard enough bad news.”

Brown, with the MU Food and Agricultural Policy Research Institute (FAPRI), based his beef outlook on a 10-year baseline presented to the U.S. Congress in early March.

His talk came on a day of news on buyouts of $1 trillion in toxic assets held by banks. Stock markets around the world surged and the Dow Jones average rose nearly 500 points. It was the most optimistic day on Wall Street since October.

“Maybe the stock market is like the cattle market,” Brown said. “A cattleman’s adage says the cure for low prices is low prices. After awhile, things have to turn around.”

An upturn in cattle prices won’t come quickly, Brown warned. “We have biology working against us. It takes time to raise and sell a calf crop.”

Projecting beef prices is no longer about estimating the supply alone. “For years, all we had to do was look at how many calves were coming into feedlots to estimate beef prices,” Brown said. “If you could tell me what the price of a barrel of oil will be, I could tell you the prices for corn and feeder calves.”

When oil prices surge, more corn is diverted into ethanol for fuel, raising the cost of corn for feed. In turn, higher feed costs lower feedlot demand for calves. That means less money for cow-calf producers.

The price of oil also affects the value of our currency and its foreign exchange rate. “When our dollar is cheap, beef demand abroad goes up. When the dollar is strong, demand drops,” Brown said.

“World market is very important to beef producers in Missouri. If we do not export product to Korea this year, we’ll have an extra billion pounds of meat to eat here at home. That will depress prices.” The U.S. sells about 8% of its beef abroad.

In the FAPRI baseline, fed-cattle prices run from 85¢ to $1 per pound for the coming year. “We used to think that was a good price,” Brown said. “But not with high feed costs.”

Beef price depends on the price of oil, price of corn, the exchange rate, and beef demand both foreign and domestic, among other factors.

Also, in a poor economy, fewer people eat at high-end restaurants. That affects the price of Choice beef. “If you want to help beef farmers, eat out more,” Brown said.

Beef producers surviving the economic downturn will be in position to profit in 2010 and beyond, Brown said. “Unfortunately, to keep meat supply down, it will require some producers exiting the business.”

“Beef supply is not that plentiful,” Brown added. “In a recovery, there won’t be enough beef to meet the demand.” That applies locally and around the world. Consumers in foreign countries want our beef. It just depends on whether their economies will support buying U.S. beef.

Brown used Korea as an example. After years of exclusion, trade negotiators convinced Korea to accept U.S. beef. Just when trade resumed, a stronger U.S. dollar weakened the buying power of the Korean yuan by 30%. “Our beef became too high-priced in their stores. Demand dropped.”

“Some producers don’t like NAFTA (North American Free Trade Agreement),” Brown said. “I remind you that buyers in Mexico and Canada have been very good for U.S. beef producers. If you don’t believe [in] the importance of world trade, ask your dairy farmer neighbors.”

World demand for U.S. milk products collapsed and the farm price for milk is at the lowest level in 30 years.

“Beef prices in 2009 will not be very good for you,” Brown said. “However, in a couple of years, we’ll be telling a much more positive story.”

The FAPRI baseline can be viewed at fapri.missouri.edu.

— Release provided by MU Cooperative Media Group.

USDA Highlights Preparations for Regions Affected by Flooding

Agriculture Secretary Vilsack today discussed how the U.S. Department of Agriculture (USDA) is preparing to assist regions affected by flooding. USDA is prepared to provide personnel and resources to help save lives and support recovery operations in areas devastated by flooding.

“Our thoughts and prayers go out to all who will be impacted by flooding in the Nation’s heartland,” Vilsack said. “We are working tirelessly to identify and send all of the resources we can offer to those who are in need and will expedite delivery of these services however we can.”

The USDA is mobilizing the following resources:

• Food Assistance: USDA’S Food and Nutrition Service assists disaster survivors by providing food and infant formula to shelters and mass feeding sites and issuing Disaster Supplemental Nutrition Assistance Program benefits (formerly food stamps). USDA is assessing food commodity inventories and will be ready to provide them to shelters if requested.
  
• Food Safety: USDA’s Food Safety and Inspection Service (FSIS) continues to provide information about how to keep food safe during power outages. A series of public service messages have been issued throughout the affected region and will continue through various available communications tools. Consumers can call the toll-free USDA Meat and Poultry Hotline 24 hours a day at 1-888-MPHotline (1-888-674-6854); for the hearing-impaired (TTY) 1-800-256-7072.
  
• Housing Assistance: USDA’s Rural Development is ready to help individuals needing payment assistance on their existing USDA Rural Development Single and Multi-family housing loans who are affected by the Red River flooding. They are encouraged to contact the Centralized Servicing Center at 800-414-1226.
  
• Community Assistance: USDA’s Natural Resources Conservation Service (NRCS) is immediately making available $500,000 for exigency needs through the Emergency Watershed Protection (EWP) Program. The purpose of the EWP Program is to provide emergency assistance to protect life and property through recovery measures such as debris removal from streams and stream bank stabilization.
  
• Farmer and Rancher Assistance: USDA’s Farm Service Agency (FSA) is anticipating an increase in prevented planting claims due to ground moisture. USDA has several disaster programs for qualified farm operators, including low-interest emergency loans, the Emergency Conservation Program and the Noninsured Crop Disaster Assistance Program. The North Dakota and Minnesota State and County Emergency Boards, chaired by the USDA Farm Service Agency, are on stand-by to assist with the response and quickly assess agricultural needs.
  
• Rescue Assistance: USDA’s Animal and Plant Health Inspection Service (APHIS) is monitoring pet evacuation and sheltering needs as well as assisting with zoo inspections.

The USDA Risk Management Agency is prepared to authorize emergency loss procedures that streamline, on a crop specific basis, certain loss determinations and payments.

Additional information and updates about USDA’s Red River flood relief efforts are posted on the web site at www.usda.gov/besafe.

— Release provided by USDA News

Agriculture Secretary Vilsack Extends Deadline for Floodplain Easement Assistance

Agriculture Secretary Tom Vilsack today announced that the USDA is extending the sign-up period — until April 10 — for floodplain easement assistance, a component of the department’s Emergency Watershed Protection (EWP). Up to $145 million has been made available to eligible landowners nationwide through the American Recovery and Reinvestment Act of 2009 and includes both technical and financial assistance. This funding will restore frequently flooded land to its natural state; create jobs in rural communities nationwide when landowners establish these floodplain easements; as well as restore and protect an estimated 60,000 acres of flood-prone lands nationwide.

“President Obama wants to make sure that landowners impacted by the recent flooding in states like North Dakota and Minnesota are given ample opportunity to apply for this assistance,” said Vilsack. “This extension is part of USDA’s plan to mitigate the impact of future flooding by restoring the landscape to its natural hydrology and native vegetation.”

Floodplains generate many public benefits, such as increased flood protection, enhanced fish and wildlife habitat, improved water quality and a reduced need for future public disaster assistance. Other benefits include reduced energy consumption when certain agricultural activities and practices are eliminated and increased carbon sequestration as permanent native vegetative cover is re-established.

All eligible landowners are encouraged to sign-up for the funding by visiting their local NRCS office. The sign-up, originally announced March 7, will close April 10, 2009. For eligibility requirements landowners should refer to the Emergency Watershed Protection — Floodplain Easement fact sheet.

— Release provided by USDA News.

— compiled by Mathew Elliott, assistant editor, Angus Productions Inc.