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News and views on stocker segment issues from BEEF magazine.
March 6, 2007 A Prism Business Media Publication
ISSUE CONTENTS
January Placements Way Down

National Stocker Award Competition Begins

Health Management Barometers

Higher Costs Pushing Grazing Rates

Pasture Lease Rates Continue Climb

Fed-Cattle Prices Jump

Questions & Comments


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News
January Placements Way Down
"The stage is clearly set for historically strong fed-cattle prices in 2007. In fact, for calendar year 2007, fed-cattle prices could easily exceed the record set in 2005," say the folks at the Livestock Marketing Information Center (LMIC).

That observation is in response to USDA's National Agricultural Statistics Service monthly Cattle on Feed report Feb. 24, which indicates the first year-to-year decline since October 2005 (down 3% from Feb. 1 last year).

According to LMIC, harsh winter weather in the High Plains cattle-feeding region in January and surging corn costs limited placements of cattle into feedlots; January placements were 23% lower than a year earlier. Year-to-year declines in feedlot placements have now been posted for five consecutive months. The largest percentage declines in placements during January were reported in New Mexico, Texas and Kansas.

"Reported feedlot marketings for January were even lower than expected, at 2% above a year ago, given U.S. steer and heifer slaughter for January was nearly 5% above a year ago," explain LMIC analysts. "With one less slaughter day in January 2007 vs. 2006, and after adjusting for U.S. imports of Canadian steers and heifers, most market watchers expected daily average marketings to be about 1% below a year ago. But that number came in at 3% below 2006. Some of that difference may have been due to sales of cattle by unreported feedlots (under 1,000-head capacity), which are mostly in the Midwest states as harsh winter weather hammered High Plains feedlots."

Meanwhile, Derrell Peel, Oklahoma State University Extension livestock marketing specialist, says placements will remain limited due to tight feeder supplies, especially limited supplies of the heavy feeder cattle that feedlots prefer right now, and high feed costs.

"Demand for grazing cattle will be strong this spring unless severe drought conditions develop over the next couple of months," Peel says. "Feeder prices will likely stay strong through the first half of the year but are subject to shocks due to drought potential and corn market volatility."


National Stocker Award Competition Begins
Mark April 1 on your calendar. That's the deadline for submitting an application for this year's National Stocker Award (NSA) competition.

If you're unfamiliar with the NSA, it's sponsored by BEEF magazine and open to any stocker or backgrounding operation that derives the majority of its cattle-based income from the stocker and backgrounding businesses. You can nominate yourself, or someone else.

The overall winner wins $10,000 in cash, and two other divisional winners receive $2,500 in cash. For more info or an application, go to www.nationalstockeraward.com. For a hard-copy application, contact Marilyn Anderson at 800-722-5334, ext. 14710.



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Stocker Health
Health Management Barometers
"Any good animal health program is in constant evolution, with improvement based on the cycle of implementation, evaluation and change," says Brad White of Kansas State University's (KSU) College of Veterinary Medicine. "Evaluation is based on good records including diagnosis evaluations, treatment response rates, disease rates and necropsy findings."

At the KSU Stocker Conference last fall, White explained that keeping accurate and complete stocker-health records is the requisite foundation for gauging how well or how poorly the stocker-health program is working. Some measures he shared:
  • Evaluation of number of animals pulled from the pen is an important tool for continual improvement of diagnosis techniques. Rectal temperature can provide a quick, general guide for assessment of pulling patterns. A good rule of thumb is 5-10% of the pulls with a rectal temperature of 104º F. or less.

    If more than 10% has a lower temperature, there may have been too many animals pulled or the diagnosis may not be infectious respiratory disease. If all the pulls have a rectal temperature of 105º F. or higher, then it's likely there are more animals in the pen that need to be segregated and treated. If only a handful of the animals pulled for treatment have a fever, we may have misdiagnosed illness in some of the animals and pulled too many.


  • Pen morbidity and mortality rates are good gauges for level of illness within the group of calves. These rates can be benchmarked against other groups of similar type animals on the farm and through the industry to evaluate health performance.


  • First-treatment response rate is an important number when evaluating efficacy of the initial treatment regime. This number is calculated by dividing the number of animals retreated by the number of first pulls. This reveals the retreatment rate; conversely first-treatment response rate is 1 minus the re-treatment rate. Ideally, the first-treatment response rate should be greater than 80%. The rate may be below the target due to: ineffective treatment selection, misdiagnosis of the disease condition, or delayed intervention (failed to notice until too late).


  • Treatment interval is the time between the first and second treatment (although it may be calculated using any two successive treatments). The average treatment interval is influenced by the drug selected at the first treatment and the presence or absence of a post-treatment moratorium. Excessively long treatment intervals on a pen basis may indicate disease clearance and re-infection. Long treatment intervals on individuals may indicate a calf that never fully recovered from the initial insult and wasn't retreated until disease had progressed.


  • Case fatality rate (CFR) is also a good method to evaluate both disease identification and treatment regime. CFR is calculated by dividing the mortality number by the number of animals treated. Ideally, the CFR is in the 6-8% range depending on the type and risk level of the animals. A higher CFR could indicate poor treatment selection, misdiagnosis of disease, or delayed identification of sick animals. A low CFR could mean that too many calves were pulled and treated and the health program is economically inefficient.
For more of White's insights visit www.beefstockerusa.org and look for the "2006 KSU Beef Stocker Proceedings."



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Weather And Crops
Higher Costs Pushing Grazing Rates
In Texas, rising maintenance costs have prompted landowners to take advantage of healthy cattle prices and push grazing rates up more than 6%. Higher steel prices have nearly doubled fencing costs over the last 18 months, says Richard Conner, a Texas A&M University economist in College Station.

Heading north into Oklahoma, grazing rates are flat to nominally higher. Cattlemen are paying an average of 34¢/lb. of gain for young lightweight stocker cattle on winter wheat pasture during the mid-November to March season, says Roger Sahs, an Oklahoma State University economist in Stillwater.

Graze-out wheat pasture, in which cattle remain on fields into May, is especially scarce. Strong wheat prices are prompting landowners to pull cattle off wheat fields before the first hollow-stem growth stage to harvest their wheat for grain. This has helped push graze-out rates up 4¢ to an average of 37¢/lb. of gain.

Leases for native grass in Oklahoma are essentially unchanged at $9.80/acre. Bermuda grass pasture -- located mostly south of Interstate 40 -- is averaging $15/acre, up $2.

Lease rates are also flat in Missouri. Pasture leases range from $10-25/acre, depending on forage quality, reports Richard Sullivan, a Farm Credit Services appraiser in Springfield. Better-quality land suitable for hay is renting for $35-40/acre.

Mark Harmon, who runs 160 cows on leased pasture east of Joplin, MO, says fescue pasture is renting for $35-40/acre, also unchanged from a year ago.

The Bureau of Land Management (BLM) and the Forest Service are cutting the federal grazing fee for Western pasturelands 13.5% this year to $1.35/AUM from $1.56/AUM last year. The new fee, which took effect March 1, is the lowest rate allowed under the current formula. BLM says rising production costs, especially higher fuel prices, outweighed strong cattle prices and higher private lease rates. The fee applies to more than 26,000 grazing permits and leases on public land administered by the two agencies.

At the state level, grazing fees on state-owned trust lands are flat to modestly higher. In Oregon, 2007 lease rates are up 3.6% to $5.80/AUM for the 638,000 acres of arid to semi-arid state rangeland in central and eastern Oregon. Typical privately-owned irrigated pasture in Klamath County, OR, rents for $22.50/AUM. County Assessor Reg LeQuieu expects 2007 rates will rise to about $24/AUM.

In Colorado, state grazing leases are up 5.5% and range from $7.64/AUM to $10.22/AUM.

In neighboring Nebraska, grazing rates on state-owned land are generally flat, despite USDA's reported 6.7% average increase for private leases. State leases for sandy soil pasture range from an average $21/AUM in the western Sand Hills, to $28/AUM in the eastern Sand Hills.

The extended drought has prompted continued cuts in stocking rates, reports Ron Vance, field supervisor with the Nebraska Board of Educational Lands and Funds.

Heavy herd liquidations over the last 6-9 months in the south-central and southern Plains have left some uncertainty in private lease rates. In mid-February, local observers expected private rates to hold steady at $18-24/AUM in eastern Wyoming and the western Nebraska Sand Hills, and $22-30/AUM in the eastern Nebraska Sand Hills.

Still, private rates could soften because fewer cows are competing for grass, notes Lex Madden, manager of Torrington Livestock Markets in Torrington, WY. Western Nebraska, western South Dakota and most of Wyoming remain in a moderate to severe drought.
-- Mike Fritz, Mercator Research LLC, Monona, WI


Issues
Pasture Lease Rates Continue Climb
Say this for the widespread nature of the lingering drought; it likely lowered the ceiling on escalating grazing rates.

As it is, a dearth of forage and historically high cattle prices pushed private grazing rates up 4.5% this year to $13.80/animal unit month (AUM) across the Western U.S., according to the latest USDA January Cattle Survey. That follows a modest 0.8% gain last year.

According to Michael Fritz of Mercator Research LLC in Monona, WI, last year's dry weather, high corn prices and high energy costs stalled the rebuilding of the beef herd, which remains 6.3% under the 1996 cyclical peak of 103.5 million head. The number of beef cows in Texas, Missouri and Oklahoma, which represent nearly 29% of the U.S. beef cow herd, was down 4% in January compared to a year ago. Beef cow replacements in these three states contracted 7%. The result: 216,000 fewer beef cows and replacement heifers are competing for pasture than a year ago.

Fritz is also editor and publisher of Farmland Investor Letter, a monthly newsletter providing farmland market insight for farmland investors and managers (www.farmlandinvestorletter.com).

USDA's survey reflects state averages. Local rental rates vary widely based on such factors as forage quality, proximity to roads, availability of stock water, size of the acreage, lease term and landowner services. Charges for counting, checking health and water, providing salt and minerals, and maintaining fences vary with each situation.

With that said, pasture rates climbed the most in South Dakota, California and Nebraska, where rates are up an average 10.3%, 7.1% and 6.7%, respectively, over last year.

Conversely, the January survey says grazing rates declined in Oregon and Washington. However, interviews with market participants in Oregon indicate grazing leases are steady to up 3.5%.

The protracted drought across the Southwest, Plains, Wyoming and southwest Missouri continued to counter landowner efforts to seek higher pasture rents, says Fritz. Lease rates were mostly unchanged in these states.
South Dakota is the exception. Here the strong cattle market and a tight grass supply due to insufficient rainfall provided much of the momentum behind a more than 10% increase to $20.30/AUM.

The run-up in corn prices is also believed to be indirectly pushing up grazing rates in eastern South Dakota. Cattlemen are feeling pressured to pay up for grass pasture since grass serves as a substitute for high-priced corn, asserts Matt Diersen, a South Dakota State University economist in Brookings.

These cost pressures continue to narrow the lease rate gap with Nebraska, which leads the western states at $24/AUM.



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Events
April 1 -- Applications due for BEEF magazine's 2007 National Stocker Award -- for more details and an application, see www.nationalstockeraward.com; for a hard copy of the application, contact Marilyn Anderson at BEEF, 800-722-5334.

Markets
Fed-Cattle Prices Jump
"The high price of grain is virtually the only element holding cattle markets from making huge strides," say analysts with the Agricultural Marketing Service (AMS). "Last summer's drought, followed by a harsh fall and winter, has put U.S. cattle numbers at a low point that hasn't yet been fully realized. But most cattlemen can't help but think that we'll be short of cattle at every level. We've culled too many cows and lost too many calves not to make an impact; plus, all of these cattle are at lighter weights than normal."

Certainly, the markets are starting to reflect this notion. Feeder and stocker cattle sold firm to $3 higher last week. If they follow the late-week rally in fed-cattle prices, they'll move higher again this week. Direct-fed cattle jumped $3-4 to $93-94 with a few in the Southern Plains bringing $95. Dressed sales in the North were $5 higher at mostly $150.

Plus, AMS reporters explain, "Packers are reportedly operating at a good margin and the onset of spring normally sees an improvement in consumer beef demand as warmer weather promotes grilling. This year could be especially good for beef as Daylight Savings Time has been moved up three weeks, giving folks an extra hour in the evening to cook a steak or go out for one before dark."

The summary below reflects the week ended March 2 for Medium and Large 1 -- 500- to 550-lb., 600- to 650-lb. (calves), and 700- to 750-lb. feeder heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:
Summary Table
State Volume Steers Heifers
Calf Weight 500-550 lbs. 600-650 lbs. 700-750 lbs. 500-550 lbs. 600-650 lbs. 700-750 lbs.
OK 43,700 $120.80 $111.02 $101.77 $107.09 $98.54 $93.97
MO 42,800 $124.13 $110.48 $100.29 $107.33 $97.11 $91.95
KY* 28,700 $103-113 $93-103 $86-945 $86-96 $81-913 $76-865
TX 24,200 $117.03 $106.15 $101.34 $105.06 $97.41 $94.02
Dakotas 18,000 $121.72
$119.182
$110.53
$107.40
$100.72
$99.10
$110.07
$111.84
$102.76
$96.25
$93.45
$93.43
NE 14,400 $127.62 $111.47 $103.14 $108.97 $99.76 $94.49
AL 13,300 $111-119 $98-106 $96-1024 $100-110 $87-95 $83-88
TN* 11,800 $111.00 $96.45 $90.57 $95.24 $86.03 $83.35
KS 11,400 $125.71 $117.19 $103.61 $105.59 $99.36 $94.99
GA*(***) 8,700 $96-117 $85-104 $78-95 $86-109.50 $80-94.50 $78-85
AR 8,500 $117.22 $107.24 $98.02 $101.49 $92.32 $90.29
Carolinas* 8,400 $92-114 $82-101 $75-90 $80-104 $78-88 $74-83
IA 6,300 $119.37 $112.842 $92.907 $105.13 $100.452 **
NM 6,100 $121.05 $103.95 97.494 $99.962 $94.50 **
CO 5,700 $125.27 $118.082 $99.69 $107.41 $98.78 $91.48
FL* 5,700 $92-114 $82-100 $82-864 $85-100 $78-86 $80-824
WY 4,500 $133.08 $114.02 $104.33 $110.30 $102.92 $96.79
MS* 4,500 $105-115 $90-1003 $80-905 $90-1001 $80-903 **
MT 4,200 $125.42 $111.91 $96.57 $102.82 $95.84 $91.91
LA(ND) 3,200 $105-119 $100-1152 ** $95-112 $90-1092 **
VA 1,500 $111.612 $98.334 $90.99 $91.612 ** **
WA* 1,300 ** ** ** $104.27 ** **

* Plus 2
** None reported at this weight or near weight
(***) Steers and bulls
(?) As reported, but questionable
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.



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Contact
Questions & Comments
Please send questions to:

Wes Ishmael, Contributing Editor, BEEF Stocker Trends, at wesleysink@aol.com

Joe Roybal, Editor, BEEF magazine, at jroybal@beef-mag.com



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