News and views on stocker segment issues from BEEF magazine.
April 18, 2006 A Prism Business Media Publication
ISSUE CONTENTS
Deadline for Stocker Award Is April 30

Energy Prices Put More Acres In Soybeans

Government Predicts Rise In Fuel Prices

National Beef To Roll Out Natural Angus Product

After A Good Start, 2006 Softening For Feedlots


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Be sure to check out www.beefstockerusa.org for all your stocker cattle information and management needs.


News/Events
Deadline for Stocker Award Is April 30
You still have time to nominate your own or a peer's program for the first National Stocker Award (NSA), and the chance for the $10,000 cash prize. But time is growing short.

Competition is open to any stocker or backgrounding operation that derives the majority of its cattle income from stockering or backgrounding cattle. Operations can be nominated in one of three divisions:
  • Summer Stocker operation (forage-based)
  • Fall/Winter Stocker operation (forage-based)
  • Backgrounding/Dry lot Stocker (feed-based)
BEEF magazine developed the contest as a way to recognize the top stockers and backgrounders in the nation. Moreover, the notion is to share with others the strategies and practices of the winners so that other operations can also benefit. The cash prize and trip to the National Cattlemen's Beef Association annual convention for the winner, sponsored by Elanco Animal Health, is the icing on the cake.

You can find an application and detailed instructions at: www.beef-mag.com. If you have any questions, contact Steve May, publisher of BEEF magazine at 1-800-722-5334.

By way of clarification, if you are involved in all three enterprises, perhaps with the same group of cattle, nominate the group in the contest in the division where the cattle performed the strongest and returned the most to the bottom line. The judging committee, consisting of stocker experts from industry and university extension, will contact applicants if they have questions about whether a nomination fits a particular division or should be moved to another.

The deadline for applications is April 30.


News
Energy Prices Put More Acres In Soybeans
USDA's 2006 "Prospective Plantings" estimates projects U.S. farmers will plant record soybean acres and fewer corn acres this year. Soybeans are expected to claim 76.9 million acres in 2006, up 7% from 2005. Large increases are expected in the Corn Belt, including 600,000 more acres in Illinois, and 500,000 more acres in Indiana.

Meanwhile, corn plantings are expected on 78 million acres in 2006, down 5% from 2005. This would be the lowest corn acreage since 2001.

In addition, wheat is expected to total 57.1 million acres, down slightly from 2005. This will be the lowest wheat acreage since 1972.

USDA says farmers are switching from corn to less input-intensive crops due to high fertilizer and fuel costs.


Government Predicts Rise In Fuel Prices
The Energy Information Agency (EIA) short-term energy outlook for summer 2006 isn't sunny. The April 11 report projects diesel and gas prices to both average $2.62/gal. this summer. Diesel's 2005 summer average (April-September) was $2.59/gal.

EIA attributes the rise to the world's growing oil consumption, as well as new federal rules for both diesel and gasoline. The transition to ultra low-sulfur diesel is "possibly the most difficult fuel specification transition the refining industry has had to make so far," the report says, with the transition resulting in "increased production costs and distribution complexity."

Increased diesel demand from China and Europe is another contributor, as diesel fuel consumption is expected to increase about 3.2% over summer 2005.

Though hurricane season is still a couple of months away, oil prices this week resembled post-Katrina levels. Oil price eclipsed$70/barrel yesterday on the New York Mercantile Exchange before settling back down around the $60 mark. The all-time high for oil is the Hurricane Katrina-induced $70.85/barrel in early September 2005.


National Beef To Roll Out Natural Angus Product
National Beef® plans to introduce NatureSource Natural Angus Beef to its retail customers this month. The program complements the 2004 launch of the firm's Naturewell Natural Beef brand.

A company news release says the new program uses only "U.S.- born Angus cattle raised on 100% vegetarian diets. The program's cattle never receive antibiotics or added hormones at any time." The firm says its proprietary NatureSource Verification System ensures the program's corn-fed Midwest cattle meet strict quality standards and follow strict humanely raised and handled guidelines. National Beef Packing Company LLC (www.nationalbeef.com) is the nation's fourth largest beef processor, and the largest in the U.S. with beef producers holding majority ownership. Its sales exceed $4 billion annually and 12% market share.


Markets
After A Good Start, 2006 Softening For Feedlots
The years 2002-2005 were generally profitable for cattle feeders, says Dillon Feuz at www.lmic.info. The University of Nebraska economist says 2006 will likely be much different, with losses some weeks possibly exceeding $150/head.

How do these returns compare to historical returns? Feuz modeled weekly feedlot returns for Nebraska based on average Nebraska feeder cattle prices and Nebraska fed cattle prices. For the 2000-2002 period, Feuz estimates feedlots averaged a $40/head loss. During the 4th quarter of 2001 and the 1st quarter of 2002, losses averaged $115/ head, with one week seeing losses of more than $200/head. In contrast, he estimates average profits were $80/head sold from 2002-2005.

Feuz says feedlots found the first few weeks of 2006 profitable but returns have been negative since February. At current fed-cattle price levels, he estimates losses of about $90/head.

If cash prices follow the CME Live Cattle board and decline into the mid-to upper-$70s in the next couple of months, he says losses likely will average more than $125/head. Feeder prices have declined some in recent weeks, but Nebraska feedlots may not generate positive returns until the 4th quarter of 2006, he adds.



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