News Update
November 16, 2011
Daily Livestock Report
Faced with escalating cattle prices and the need to force wholesale beef prices higher, U.S. beef packers have significantly reduced cattle slaughter in recent days. For the seven days ending Nov. 15, U.S. steer and heifer slaughter was an estimated 457,000 head, 9.9% lower than the comparable period a year ago. Slaughter was particularly light last week, with just 66,000 head going to market on Friday, compared to the normal 95,000-100,000, and just 5,000 head slaughtered on Saturday.
The immediate result of the cutbacks is visible in the price of the overall cutout, particularly for specific items such as trimmings.
The Choice beef cutout closed Tuesday at $194.30 per hundredweight (cwt.), $36.2 per cwt., or 23% higher, than a year ago. The Select cutout was quoted at $176.1 per cwt., $26 per cwt., or 17% higher, than a year ago. The Choice/Select spread at $18 per cwt. is about double what it was a year ago and well above the five-year average.
Normally the Choice/Select spread increases in the fourth quarter as demand for high-quality beef improves going into the year-end holidays, while slaughter levels decline from summer highs. The recent increase in the spread, however, reflects improving demand at retail, as well as the significant premiums packers are paying for better-grading cattle in Northern states.
It appears that, for the moment, packers have been successful in pushing through higher prices. End users have faced significantly higher beef prices for much of the year, and either due to fear, or by design, some end users are caught with short positions coming into the holidays. And we are not talking about a short position in the futures market. Rather, it means end users have limited their out-front coverage of the supply they need to purchase, opting to fill more of their needs in the spot market. The decision to stay short-bought makes sense given the ongoing uncertainty in global markets and constant chatter about another financial crisis brewing in Europe.
The problem with being short-bought, however, is that when packers suddenly cut slaughter, it dramatically reduces the supply of product in the spot market since standing orders get priority. In that situation, end users have no choice but to pay up to fill their needs. A good example is the price of 50CL beef trim, fat beef trimmings that are mixed into hamburger and ground beef. Prices for 50CL are now at all-time record highs, surpassing the highs established back in April ahead of Memorial Day. The last time this happened was in the fall of 2003. Back then prices collapsed due to the BSE outbreak. Today, however, we are looking at fewer cattle out front and expanding export markets.
Ranchers Warn U.S. Forest Policies Threaten Livestock Grazing
On behalf of the Public Lands Council (PLC) and the American Sheep Industry Association (ASI), Margaret Soulen Hinson told lawmakers during a hearing of the House Subcommittee on National Parks, Forests and Public Lands if the USDA Forest Service (FS) proposed forest planning rule goes into effect, thousands of ranching families could be forced off the land. While Soulen Hinson, an Idaho cattle and sheep producer and president of ASI, discussed multiple concerns PLC and ASI have with the proposed planning rule, which could be finalized this winter, she spent the bulk of her testimony detailing the negative effect a provision calling for management for “species viability” would have on federal lands ranching.
“By 2013, my family and I will be forced to remove 60% of our sheep from our allotments on the Payette National Forest, which may well mark the end of our family’s 80-year-old sheep operation altogether,” Soulen Hinson said. “This has come to pass because of a very specific wildlife provision of the current planning rule, which calls for management for ‘species viability.’ The term ‘viability’ is a vague, ill-defined term, which appears nowhere in statute and has been the source of endless litigation and economic destruction over the years. We recommend the Forest Service remove entirely the term ‘viability’ and leave wildlife management to the states, as required by statute.”
According to Soulen Hinson, while the FS claims the viability provision in the proposed rule is an improvement because it only applies to populations of “species of conservation concern,” there is no science-based definition for “species of conservation concern,” which could result in a limitless list of species to manage. Notably, she said, the viability provision goes beyond the current vertebrate standard and applies to all types of species, even moss and fungus. She said the most important fact for lawmakers to realize is that under the National Forest Management Act and the Multiple-Use Sustained Yield Act, the FS does not have statutory authority to manage for species viability.
Subcommittee Chairman Rob Bishop (R-Utah) agrees that the proposed planning rule could have devastating effects on the federal lands grazing industry.
“I remain concerned that the U.S. Forest Service’s proposed planning rule will have a devastating impact on access within our nation’s 155 national forests and 20 grasslands, especially for ranchers who utilize these areas for grazing. Secondly, I am very interested in addressing rising concerns that the Forest Service is attempting to leverage access to public lands in exchange for privately held water rights,” Bishop added, addressing another topic raised in the hearing regarding the Forest Service’s policy on water rights and permitted activities. “It is my hope that these concerns can be brought to light and put to rest with final resolution. Privately held water rights should not be a factor associated with the permitting process.”
Citing growing demands by the FS to amass water rights in the west in return for permitted activities such as range improvement maintenance, Demar Dahl, a Nevada cattle rancher and member of the National Cattlemen’s Beef Association (NCBA) and PLC, testified on the policy’s potential effect on the ranching industry. He said the policy threatens the continuation of activities such as grazing that have existed on national forests for more than a century — predating the agency’s existence.
“The Forest Service’s demand flies in the face of federalism and the prior appropriation doctrine for water rights which exists in much of the west,” Dahl said. “For the benefit of the resource, which ranchers are striving every day to improve, and which the Forest Service is mandated to care for, the current Forest Service policy of delaying maintenance and establishment of stockwater resources [in return for water rights] needs to be reevaluated and discarded.”
Collect DNA Samples Now
As spring sale season quickly approaches, producers utilizing DNA technology should begin the sample collection process as soon as it’s practical, says Kent Andersen, associate director global technical services, Pfizer Animal Genetics.
“If producers want to present DNA information on sale cattle, it’s imperative they plan ahead for two reasons,” he says. “First, there needs to be enough time for samples to be processed and results returned to the breeder. And, second, both sellers and buyers need time to evaluate the information prior to sale day.”
Andersen recommends breeders collect and submit DNA samples 60 days prior to when sale book materials are due and, if possible, collect two samples — especially for important animals.
“While it should not take the full 60 days to process the samples and return results, it’s best to allow a little extra time to ensure all information will be ready at press time,” he says. “There may be a few samples in each batch that cannot be processed. Therefore, having a spare sample on hand will save that animal another trip through the chute and the breeder the time of collecting another sample.”
Andersen also recommends breeders check with their Pfizer Animal Genetics representative when preparing to collect samples, as the submission process has changed for some breeds.
“Pfizer Animal Genetics is pleased to partner with several breed associations to help streamline the DNA-testing process,” he says. “However, this also means there have been a few changes since the beginning of this year that breeders need to keep in mind.”
DNA sample collection can easily be worked into normal processing routines, which is why Andersen says producers should plan ahead to gain information about genetic defects as well as results for multiple traits of economic importance with GeneSTAR® or genomic-enhanced expected progeny differences (GE-EPDs) powered by High-Density 50K (HD 50K) for Angus available from Angus Genetics Inc., a subsidiary of the American Angus Association.
“Given that DNA testing has become a mainstream seedstock production practice, incorporating sample collection from all animals into routine cattle processing, such as pregnancy checking, breeding soundness exams, etc., ensures that stored samples are available for convenient submission whenever they are needed,” Andersen says.
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