News Update
May 14, 2009

CME Livestock Report

It appears that the latest round of dairy herd reductions will remove about 103,000 head during the summer months. That is the news released today by Cooperatives Working Together (CWT), a cooperative effort of a number of dairy cooperatives to reduce U.S. milk supplies by encouraging exports and paying producers to remove cows from production. CWT had conducted six previous dairy herd reductions with the first being in 2003 and the most recent two in 2008. Previous reductions removed from 24,000 to 64,000 head from production. The current one, like those before, is funded by a 10¢-per-hundredweight (cwt.) of milk checkoff paid by dairy producers.

The funds are pooled and producers interested in reducing their cow numbers place bids to be considered for reduction, with the lowest bids being chosen. CWT, in its news release (which can be found at www.cwt.coop/index.html) says that herds ranging from 50 head to 5,000 head are included in this buyout. The buyout is for only one year, though some firms may be exiting the industry for good. Chosen producers receive the CWT payment for the milk production being removed plus the value of the cow when sold for harvest.

Businesses cooperating with one another to reduce supplies and drive up prices are usually viewed quite dimly by the Federal Trade Commission (FTC) and Department of Justice. Such collusion and manipulation are why we have anti-trust laws. But specific agricultural cooperatives are exempt from those laws under the Capper-Volstead Act of 1922 so long as they do not “significantly” affect prices. CWT is such a coop and can thus work together to reduce cow numbers and, consequently, milk supplies.

More cows coming to harvest will increase the supply of grinding beef and potentially drive the grinding complex, which has been a major source of strength for beef prices in 2009, lower. Cattlemen realize this and have raised questions about previous buyout plans — especially in light of the government-funded buyout in the mid-1980s that severely damaged beef markets for several years. Beef interests have not strongly opposed the CWT programs since they involve no government funds.

CWT will have auditors on farms next week to verify producers’ cow and milk production figures. Cows will begin to move to harvest as soon as audits are completed, perhaps by late May. Audits are to be completed by early July, so harvest will probably wrap up late that month or early in August. That provides about 10 weeks to move 103,000 cows — roughly 10,000 per week.

As can be seen in the tracking charts, U.S. beef cow slaughter has been from 4,800 to 8,450 head lower than year ago levels in recent weeks. With U.S. range and pasture conditions generally good and calf prices back above $1.25 per pound (lb.), these levels should remain near 60,000 per week. It is also obvious that dairy producers have been holding cows in anticipation of the CWT program as dairy cow harvest has been lower than last year in 3 of the past 4 weeks in spite of continued heavy losses on milk production. Adding 10,000 per week to harvest totals will obviously not be good for beef prices, but lower beef cow harvest numbers, ample harvest capacity and the expected measured pace of shipments should prevent any big reduction in grinding beef values.

— Adapted from release provided by Chicago Mercantile Exchange.

Ag Secretary Vilsack Names Vasquez Deputy Undersecretary For Rural Development

Agriculture Secretary Tom Vilsack continued naming top staff today and appointed Victor Vasquez to serve as deputy undersecretary for Rural Development at the U.S. Department of Agriculture (USDA) in Washington, D.C. The Rural Development agency helps rural areas to develop and grow by offering Federal assistance that improves the local quality of life — targeting communities in need and then empowering them with financial and technical resources.

Vasquez has had more than two decades of experience in government and private sector in community and economic development at the local, state, federal and international levels. His special interest is local decision-making and leadership development.

— Adapted from release provided by USDA.

New ‘Grass-fed’ Certification Program for Cattle, Sheep and Goats

The nonprofit Food Alliance announced today that two California ranches have been certified under the organization’s newly published national certification standard for grass-fed cattle, sheep and goats. The standard requires that animals be raised on pasture or range, where they can browse on an exclusive diet of grass and forage plants. Animals may not be fed grain or grain byproducts, or receive hormone or antibiotic treatments of any kind. In addition, producers must also meet the organization’s signature standards for humane animal care, safe and fair working conditions, soil and water conservation, and protection of wildlife habitat.

The two newly certified beef operations are Hearst Ranch Beef, a 150,000-acre ranching operation on California’s central coast, and the TomKat Ranch, a smaller, direct-market beef producer in Pescadero, Calif.

“Consumer interest in grass-fed meats will only continue to grow,” says Food Alliance executive director, Scott Exo. “Food Alliance grass-fed certification offers a practical solution for farmers and ranchers at all scales who want to access that market. Buyers of grass-fed products want to know that animals have been treated humanely, that they have grazed freely on grass and forage plants, and that range and pasture have been managed to produce the best possible environmental outcome.”
In addition to the two California ranches, Food Alliance is processing applications for grass-fed certification from farms in New York, Pennsylvania and other states. “We’re seeing rapidly growing interest in developing certified grass-fed products,” Exo says.

Food Alliance’s new grass-fed certification standards and related audit protocols have been reviewed by the USDA’s Food Safety and Inspection Service (FSIS), and were found to meet or exceed USDA requirements for labeling of grass-fed meat.

— Adapted from Food Alliance release.

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