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News and views on stocker segment issues from BEEF magazine.
October 10, 2006 A Prism Business Media Publication
ISSUE CONTENTS
Triple Heart Named Stocker Award Finalist

Winter Wheat Hopes Dwindling

Winter Wheat Needing Rain

Other Upcoming Events

Sign Up Now For BEEF Quality Summit, Nov. 14-15

Calf Prices Drop

Triple Heart Ranch Profile...conclusion

Questions & Comments


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News
Triple Heart Named Stocker Award Finalist
Narrowing margins are challenging enough when you own stocker cattle; they're a killer when folks are paying you to start theirs.

"The biggest challenge these days is overcoming increasing operating costs without being able to increase our fees to clients," explains Brock Karges of Wanette, OK, who owns and operates Triple Heart Ranch with his wife, Shelia.

"It's not just the fuel tank, it's everything tied to the fuel tank. Increasing costs and decreasing margins are a huge factor in a customer-driven business," continues Brock. "As margins get smaller and smaller, and customers can't pay you more for your service, you have to run more and more cattle." This is also true when you own the cattle, but it's magnified when you don't.

That's why the Kargeses decided they'd better start running some of their own cattle this year along with their customers. Not only was the decision a departure from Brock's fiscally conservative leanings, it represented a shift in philosophy about risk.

Evolving Necessity
When the Kargeses began their backgrounding/preconditioning operation in 1998 they decided to own the land, but let their customers stand the risk on the cattle side. Keep in mind, neither Brock nor Shelia come from stocker families back home. They learned the business by working for others for seven years before embarking on their own, from scratch. These days the Kargeses put about 20,000 head through their backgrounding/preconditioning system, besides grazing 7,000 to 9,000 head on summer grass each year.

In both cases, they explain, "Our primary goal is to generate as many dollars per head for our customers and us while the calves are under our control." Since so many things happen or don't happen to calves before arriving here, that's obviously easy to say but tough to do.

"Your problems come by the truckload," Brock says. "You have no control over what the cattle are, what the weather is when they're marketed and trucked here, and no control over what happened to them before they were marketed. Those are the three clouds looming over you, although you're accountable for the performance, death loss, chronics, sickness and health costs related to those things."

That's why Brock and Shelia created another business five years ago called Grass Roots Beef (GRB). Briefly, trained regional GRB reps provide the manpower, equipment, expertise and products to vaccinate calves before they leave the ranch. Whether GRB members or not -- membership is free -- deciding to wean and get another round of shots into the calves is their choice. But to receive Grass Roots services and benefits -- including reduced-cost feed, minerals, pharmaceuticals and pasture chemicals -- members must agree to let GRB put at least one round of vaccinations into them. These calves are then eligible to sell in approved GRB sales -- premium time slots at regular auction sales; GRB reps are on hand to explain the health and performance documentation on the calves, and the Kargeses have alerted a growing network of buyers GRB calves will be available at the sale.

"Our goal is to help put preconditioned calves into the marketplace so wherever they end up, they have an opportunity to make a profit on the market side because we're taking risk out of the health side," Brock says.

Read the conclusion at the end of this issue of BEEF Stocker Trends.


Winter Wheat Hopes Dwindling
September rains teased folks in big sections of winter-wheat country into hoping for some decent pasture this fall. The dry spigot since says that may not be the case, just like last year.

Derrell Peel, Oklahoma State University livestock economist, summed up the situation in his weekly market comments last week:

"As of Oct. 2, 51% of Oklahoma wheat has been planted, 10% below the five-year average for this date. More critically, only 22% of Oklahoma wheat has emerged, 11% less than the five-year average of 33% emerged on this date. The wheat that has emerged is extremely vulnerable to continued dry conditions.

"There are reports that some small wheat has blown out with recent winds and will have to be replanted. Emerged wheat needs moisture very soon to avoid losing the young stands. In other cases, dry-planted wheat is still waiting for moisture to germinate. In still other cases, the locally heavy September rains washed out some dry-planted wheat that has or will be replanted. All of this confirms that fall wheat forage production for grazing will be minimal (in Oklahoma)."

Further, Peel says there's some indication a growing number of the state's wheat producers who typically plant wheat for pasture, then harvest a grain crop, too, are raising the white flag on pasture.

"By not trying for fall-forage growth, producers are in less of a hurry to plant and will adjust seeding rates and fertilizer applications to wheat for grain-only enterprise. Especially under current dry conditions, it makes sense to reduce fall fertilization and wait to top dress in the spring if conditions improve to increase grain yield potential," Peel says.

Go to www.agecon.okstate.edu/livestock/comments.asp for Peel's complete comments.



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Weather And Crops
Winter Wheat Needing Rain
"The Plains' emerging wheat crop was in need of a soaking rain to ensure autumn establishment, in part due to lingering subsoil moisture deficits," National Ag Statistics Service (NASS) reporters said last week. "In addition, topsoil moisture shortages began to appear again in some areas, particularly across Oklahoma and Kansas."

Using those two states as an example, 47% of the topsoil moisture in Kansas is reported as adequate and only 34% of the subsoil moisture. In Oklahoma, only 21% of topsoil moisture was reported as adequate; just a measly 7% of subsoil moisture.

Harvest for some of this year's crops underscores the long-term challenges of 2005-2006. For example, NASS estimates the winter wheat crop down 13% from a year ago; oat production at a record low 93.8 million bu. (18% less than 2005), and barley 15% below last year at 150 million bu.

For the week ending Oct. 3, according to NASS:

  • Corn -- Maturation is at 88% or beyond, the same as last year, but 6% ahead of normal. Maturation was at or head of normal in all states except Indiana. 20% is harvested, which is 5% behind last year and 3% behind the five-year average. 61% is rated Good or better, compared to 55% last year.

  • Soybeans -- 87% of the acreage was at or beyond dropping leaves, 4% behind last year but 3% ahead of the average. Growers have harvested 19% of the crop, compared to 33% at this time last year and 26% for the average. 62% is rated Good or better; 56% was at the same time last year.

  • Winter wheat -- 54% of the crop is sown, 1% more than the same time last year but 2% less than average. Planting was 33% ahead of normal in Oregon, but at or behind par in most other states. 24% of the crop has emerged, the same as last year but 3% the normal pace. Emergence was most advanced in Colorado and Washington at 46% and 44%, respectively.

  • Sorghum -- 89% was at or beyond turning color, 4% behind last year and the normal pace. 60% is mature, compared to 65% last year and 67% for average. 38% has been harvested, compared to 36% last year and 40% for average. 32% is rated Good or better, compared to 49% last year.

  • Pasture -- 30% is rated Good or Excellent, compared to 29% last year. 22% is rated Poor and 18% is ranked Very Poor, compared to 23% and 15% respectively at the same time last year.
States with the worst pasture conditions -- at least 40% of the acreage rated poor or worse -- include: Alabama (58%); Arizona (50%); Arkansas (41%); California (80%); Kansas (45%); Mississippi (48%); Missouri (59%); Montana (42%); Nebraska (44%); Nevada (58%); North Dakota (52%); Oklahoma (63%); Oregon (51%); South Dakota (41%); Texas (67%); and Wyoming (65%).

States with the lushest pasture conditions -- at least 40% rated good or better -- include: Florida (55%); Illinois (56%); Indiana (67%); Iowa (61%); Kentucky (78%); Maine (85%); Maryland (49%); Michigan (53%); New Mexico (62%); New York (61%); North Carolina (62%); Ohio (72%); Pennsylvania (57%); South Carolina (47%); Tennessee (41%); Utah (48%); Virginia (46%); Washington (40%); West Virginia (60%); and Wisconsin (56%).



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Events
Other Upcoming Events
Oct. 11-13 -- Texas Cattle Feeders Association Annual Convention, Amarillo Civic Center, Amarillo, TX. For registration info, visit www.tcfa.org, e-mail info@tcfa.org, or call 806-358-3681.

Oct. 24-25 -- Western Hay Business Conference, Red Lion Hotel at the Park, Spokane, WA. Visit www.westernhayconference.com.

Feb. 13-14 -- Mid-South Stocker Conference, Cave City, KY, presented by the University of Kentucky and the University of Tennessee. For more info, visit www.midsouthstocker.org. You can also contact Jim Neel at 865-974-7294 or jneel@utk.edu; John Bartee at 931-648-5725 or jbartee1@utk.edu; or John T. Johns at 859-257-2853 or jtjohns@uky.edu.


Sign Up Now For BEEF Quality Summit, Nov. 14-15
Sign up now at www.beef-mag.com for BEEF magazine's 2006 BEEF Quality Summit. The Nov. 14-15 workshop in Oklahoma City's Clarion Hotel aims to provide attendees with the background, tools and the environment to make the connections for involvement, and the potential rewards offered, in the new beef-value chain.

The first day's program is devoted to outlining the opportunity available in the new beef-value chain, the second to how to link your production into that chain. Among the topics to be discussed are:
  • How U.S. beef consumers define quality.

  • Quality, profit and the cattle cycle.

  • International competition and opportunities for U.S. quality beef.

  • Current international beef trade opportunities.

  • Producers will discuss how they're paid for quality.

  • Selecting a marketing partner.

  • Evaluating costs, trade-offs and risks of various markets.

  • Linking up with a marketing partner -- an opportunity to meet with participating marketing channel reps.
For more detail, visit www.beef-mag.com and click on the "BEEF Quality Summit" box in the top right corner of the opening page.



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Markets
Calf Prices Drop
Lower futures prices last week followed downturns in both the calf and fed markets. In late trading Friday, fed cattle prices were $1-$2 lower in the Southern Plains ($90-$91) and were $0.50 to $1 lower in Nebraska ($90-$90.50). Dressed sales in the Western Corn Belt were steady to $1 higher, though, at $138-$140. Moreover, there is increasing speculation among some analysts that fed cattle prices may be positioned to gain strength. One indicator supporting the argument is the fact that cattle feeders were able to hold out for higher prices the previous couple of weeks and were able to hold the line in some areas this week. Those in the bullish camp suggest that front-end supplies may not be as bearish as some had envisioned.

That's fed cattle. Calf and feeder prices continued to decline last week, losing $1-$3/cwt. for the week according to the Ag Marketing Service (AMS). Reporters there note calf prices in some areas have dropped as much as $20/cwt. in the past month.

"In the Northern Plains, calf buyers are waiting for a hard frost and the completion of harvest. In the Southern Plains, backgrounders are waiting for a good wheat stand and enough moisture to ensure that pastures will at least hold their cattle until winter, which was not the case last year," say AMS analysts. "We're currently going through the typical October feeder-cattle cycle; yearling supplies have dwindled, unweaned bawling calves dominate offerings, and wide temperature swings make the preconditioning of these calves a challenge... As we move closer to November, more of the calves will be longtime weaned, cooler temperatures will put less stress on newly purchased cattle, farmer-feeders will have their crops in the bin, and the Hard Red Winter Wheat outlook will be better understood in terms of winter grazing."

Unless is gets real soggy real soon across much of wheat-pasture country, that market won't offer much support (see "Winter Wheat Hopes Dwindling" elsewhere in this issue).

The summary below reflects the week ended Oct. 6 for Medium and Large 1 -- 500- to 550-lb., 600- to 650-lb., 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.
TX 34,700 $115.71 $115.93 $111.43 $109.09 $106.27 $106.204
OK 34,600 $122.11 $117.59 $116.454 $111.93 $110.65 $110.87
MO 31,700 $127.61 $122.87 $117.41 $118.72 $114.27 $110.93
Dakotas 30,200
South Dakota
North Dakota

$132.76
$126.64

$132.762
$118.16

$119.406
$150.50?

$123.45
$124.34

$119.672
$113.26

$114.60
**
KY* 23,100 $110-120 $103-1163 $100-1105 $100-110 $95-1053 $88-985
NE 16,200 $113.71 $129.162 $117.52 $120.83 $118.28 $111.41
AL 15,400 $114-121 $108-113 $102-1094 $105-113 $97-103 $95-1024
CO 12,200 $128.16 $122.682 $112.39 $116.14 $113.832 $1106.964
AR 11,200 $117.12 $111.58 $107.70 $108.62 102.69 $97.314
GA*(***) 10,900 $102-117 $93-115 $90-104 $88-113.50 $85-109 $85-90
TN* 10,900 $115.23 $105.15 $99.56 $103.14 $95.91 $91.78
FL* 10,500 $100-118 $93-103 $91-95 $94-105 $88-101 $90-1044
WY 9,700 $127.22 $113.994 $114.82 $117.96 $118.312 $97.217
MS* 8,600 $105-1151 $100-1053 $95-1005 $100-1101 $90-100 $87-904
IA 7,800 $127.87 $126.934 $114.334 $119.38 $111.91 $108.384
Carolinas* 7,300 $90-118 $87.50-1013 $77.50-106.255 $81-102 $75-1013 $72-985
LAND 6,900 $108-115 $96-1073 ** $98-108 $95-1062 **
KS 5,400 $126.51 $119.18 $114.256 $115.87 $112.33 $110.88
NM(*steers) 4,700 $116.85 $108.22 $107.15 $113.01 $105.802 **
VA 4,400 $120.55 $111.83 $102.14 $104.84 $102.89 $97.30
WA* 3,100 ** $107.832 $97.01 ** ** **
MT 2,000 $126.81 $119.082 ** $120.60 ** $107.427

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


Continued
Triple Heart Ranch Profile...conclusion
Nutrition Equals Health
This focus on health is also behind the Kargeses' emphasis on calf nutrition and patience.

"We've learned through experience that good nutrition is the most important aspect of a preconditioning operation. Nutrition has a direct impact on the effectiveness of vaccines, reducing sickness, chronics and deads," Shelia says. "Getting a calf started on feed quickly is better than any antibiotic or vaccine. If the calf has a proper plane of nutrition, his system will respond to vaccines and antibiotics."

Brock emphasizes, "It may take two hours to gets new calves settled on the feed bunk that first day, but it's the most valuable time we spend."

Moreover, they say nutrition is all about the specifics. Though it ran counter to Brock's least-cost philosophy of feeding commodities, he and Shelia discovered several years ago they, and their customers, were money ahead by feeding a total mixed ration.

"It changed everything. Sickness and death loss is so much less and the performance is there," Brock says.

As for the patience part of the equation, none of the calves arriving at Triple Heart are touched for the first 12-24 hours, but have access to hay, mineral and water. After the calves are processed, Brock and Shelia won't jump the gun pulling and treating calves, either.

"It's proven to me over and over again that the calf just needs time. I'm adamant that as an industry we over-doctor cattle," Shelia says.

Rather than a belief based on conjecture, this notion, like everything else at Triple Heart, is backed by extensive recordkeeping and documentation, which was also born out of Brock and Shelia's frustration with trying to control the unknowns.

When they first started, Shelia explains they received some drought-stressed, flyweight calves that needed lots of doctoring, which they did. When all was said and done though, the calves' owner accused them of not administering all the antibiotics they charged for. So, the Kargeses started documenting everything.

Literally starting with Big Chief tablets, Shelia set about recording every aspect of the calf's time at Triple Heart. With the benefit of computer programs, these days new Triple Heart customers receive a weekly calf health report; existing customers receive a monthly report with their invoice.

"Customers can deal with information, good or bad; it's the surprises they can't handle," Brock says.

Incidentally, the report on any mortality includes the results of a necropsy Shelia performs herself. "It really opens your eyes and the eyes of your customers to what's going on," she says.

For all the evolution, the Triple Heart focus remains the same as when the program started: "We love seeing calves come here, get healthy and conditioned, then move on to the next phase of the business," Shelia says. "You just have to continue to evolve and look for ways to improve."

The National Stocker Award (NSA) competition was divided into three categories: Backgrounding/drylot stocker (feed-based); Fall/winter stockering (forage-based); and Summer stockering (forage-based). A single winner was chosen in each category, and the overall NSA winner was selected from these finalists.

Triple Heart of Wanette, OK, was named winner of the backgrounding/drylot category. Doug Rogers of Collins, MS was named winner of the fall/winter category. Each operation received a $2,500 cash prize from NSA sponsor, Elanco Animal Health. Overall NSA winner, Hughes Cattle Company of Bartlesville, OK (winner of the summer stockering category) received a $10,000 cash prize.

Profiles of each winner appear in the October issue of BEEF magazine, available online at www.beef-mag.com.


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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