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News and views on stocker segment issues from BEEF magazine.
November 28, 2006 A Prism Business Media Publication
National ID Is Dead

Market Demands Some ID Today

Corn Prices Lose Some Momentum

Ethanol Corn Crunch Both Good And Bad

Southwest Beef Symposium & The Mid-South Stocker Conference

Cattle Prices Strengthen

Questions & Comments

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National ID Is Dead
USDA effectively and quietly knocked the National Animal Identification System (NAIS) in the head last Wednesday. It did so with the unheralded publication of the "NAIS User Guide," which replaces all former NAIS draft documents. This document, for the first time, emphasizes NAIS as a voluntary program rather than as a steppingstone to a mandatory one.

In fact, at the very beginning, the guide explains, "USDA is not requiring participation in the program. NAIS can help producers protect the health and marketability of their animals -- but the choice to participate is theirs."

Late last month at a community outreach event in Kansas City, Chuck Conner, USDA Deputy Secretary, and Bruce Knight, USDA Under Secretary for Marketing and Regulatory Programs, paved the way for the agency's back-pedaling.

"Since we've had some confusion on this, we need to be as clear as we can be. This is 'voluntary' with a capital V. Not a currently voluntary, then maybe a mandatory system. This is a permanently voluntary system at the federal level," Conner said.

"We're making it crystal clear that NAIS is voluntary -- no ifs, ands or buts," explained Knight. "Farmers can choose to register their premises. They can choose to participate in individual animal or group identification. And they can opt to be part of tracking. Or not."

The guide goes on to explain, "Participation in NAIS is voluntary at the federal level. Under our current authorities, USDA could make the NAIS mandatory, but we are choosing not to do so -- again, participation in every component of NAIS is voluntary at the federal level. The NAIS does not need to be mandatory to be effective; we believe the goals of the system can be achieved with a voluntary program. As producers become increasingly aware of the benefits of the NAIS and the level of voluntary participation grows, there will only be less need to make the program mandatory."

Absent from the "NAIS User Guide" are the suggested timelines and benchmarks for achieving an effective level of producer participation. Instead, USDA emphasizes its belief that market demands will provide the necessary incentive for participation.

That's possible, though it hasn't been the case, thus far. It's hard to imagine, too, the need commerce will see for a system cohesive and coordinated enough to provide the industry-wide, 48-hour trace-back NAIS was designed to provide. Consequently, the only real incentive for animal ID remains to be the value individual producers see in it for management purposes.

So, it seems NAIS is over, at least for the tenure of the current administration.

You can find the complete "NAIS User Guide" at


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Stocker Management
Market Demands Some ID Today
Though NAIS has apparently become road-kill on history's highway, there's no question the market is paying for verification of certain practices and product attributes that must be substantiated via individual animal ID.

For example, it seems everyone is chattering about source and age verification, and more recently Non-Hormone Treated Cattle (NHTC) for the European Union.

Premiums for age -- specifically for cattle 20 months of age and younger and eligible for export to Japan -- have been running $3-$4/cwt. on feeders and $2-$3/cwt. on fed cattle, according to Bill Mies, eMerge Interactive vice president of national accounts.

That's when premiums are available, though. According to Mark Spire, Schering-Plough Animal Health bovine technical services manager, sources for age premiums are dwindling. He explains packers are typically able to meet still-paltry Japanese demand by pulling from their regular purchases.

Both of the gentlemen visited with BEEF recently about the differences and similarities between Quality Systems Assessment programs (QSAs) and Process Verified Programs (PVPs). Both are USDA programs used to verify source, age and other cattle attributes.

"The biggest misunderstanding in the country, and I think one that has slowed adoption of source and age verification, is some mistakenly think these are steps in a national animal ID program," explains Mies. "They're amazed to discover these (QSAs and PVPs) are private-industry programs aimed at getting them more money for their cattle."

Spire emphasizes there are lots of folks, including government officials, who continue to wrap NAIS -- and its purpose for national animal disease surveillance and animal health monitoring -- with animal ID needed for market-driven programs such as QSA and PVP. "This confusion has delayed the widespread adoption of both types of USDA programs," he says.

You can explore QSA's and PVPs in more detail in the upcoming December issue of BEEF. The next issue of BEEF Stocker Trends will also provide more info about these programs.

Weather And Crops
Corn Prices Lose Some Momentum
Though the cost of corn remains high, at least it seems to have found a practical top for the time being.

"The recent run-up in corn prices appears to be over, at least for now," says Derrell Peel, Oklahoma State University ag economist. "Much of the price increase was based on expectations about new ethanol demand but the fact is most of that increase isn't a reality yet. Corn futures also indicate corn markets have topped for now. It's possible corn prices could actually retreat somewhat depending on how feed use, exports and other market segments adjust to the higher prices over the winter, although prices are likely to remain well above year-ago levels. At any rate, corn prices aren't expected to continue increasing anywhere near the rate seen recently, if at all."

For the week ending Nov. 19, according to the National Ag Statistics Service.
  • Corn -- 94% is harvested, which is 4% behind last year and 1% behind the five-year average.
  • Soybeans -- Growers have harvested 96% of the crop, compared to 99% at this time last year and 97% for the average. Harvest lagged behind normal in the eastern Corn Belt and Ohio River Valley. Kentucky growers are 15 points behind the normal pace with just 77% of their acreage harvested.
  • Winter Wheat -- 92% of the crop has emerged, 1% ahead of last year and the five-year average. 57% is rated good or excellent, compared to 55% at the same time last year; condition has declined slightly in the past two weeks.
  • Sorghum -- 89% has been harvested, compared to 91% last year and 88% for average.

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Ethanol Corn Crunch Both Good And Bad
Reducing American dependence on oil and petroleum products via increased domestic ethanol production is doable, and could benefit ag on a net basis, though livestock sectors may pay the price.

That's the aggregate view of two recent studies, one conducted by Iowa State University's Center for Ag and Rural Development (CARD), and the other commissioned by the 25 X '25 Working Group. The 25 X '25 program seeks to have America producing 25% of its energy needs by Year 2025.

"Much of the debate surrounding the current incentives to the ethanol sector suggests these incentives are driven in large part by a desire to reduce U.S. dependence on imported oil. By stimulating the production of ethanol to as much as 20% of total fuel use, these incentive structures appear to be well on their way to meeting this goal," explains the CARD report. "Other beneficiaries include landowners, who will benefit from a dramatic increase in corn prices and associated increases in land rents.

"U.S. crop growers will benefit until the higher profits are captured by higher land values and land rents. Dairy and beef producers who are near ethanol plants will benefit from having access to DDGs (dry distillers grains). Owners of ethanol plants will benefit until corn prices rise to eliminate the current arbitrage in ethanol production.

"Specialized pork and poultry producers who don't own shares in ethanol plants will lose, as higher corn prices, and eventually reduced international competitiveness, cause a reduction in production levels. The transition to these lower production levels will be painful for most of these producers. Ethanol construction will stimulate rural economies, as will the flow of profits from ethanol facilities. However, there will be a reduction in livestock in these same areas and this will eventually work to offset this advantage," the report says.

Meanwhile, the 25 X '25 study conducted by researchers at the University of Tennessee concludes:
  • The 25 X '25 goal is achievable. Continued yield increases in major crops, strong contributions from the forestry sector, utilization of food-processing wastes, as well as the use of over 100 million acres of dedicated energy crops, like switch grass, will all contribute toward meeting this goal. A combination of all these new and existing sources can provide sufficient feedstock for the additional 15.45 quads of renewable energy needed (a quad is 1 quadrillion BTUs).
  • The 25 X '25 goal can be met while allowing the ag sector to reliably produce food, feed and fiber at reasonable prices.
  • Reaching the goal would have an extremely favorable impact on rural America and the nation as a whole. Including multiplier effects through the economy, the projected annual impact on the nation from producing and converting feed stocks into energy would be in excess of $700 billion in economic activity and 5.1 million jobs in 2025, most of that in rural areas.
  • By reaching the 25 X '25 energy goal, the total addition to net farm income could reach $180 billion, as the market rewards growers for producing alternative energy and enhancing our national security. In 2025 alone, net farm income would increase by $37 billion compared with USDA baseline projections.
  • Reaching the goal would also have significant positive price impacts on crops. In the year 2025, when compared with USDA baseline projections, national average per bushel crop prices are projected to be 71¢ higher for corn, 48¢ higher for wheat, and $2.04 higher for soybeans.
  • With higher market prices, an estimated cumulative savings in government payments of $15 billion could occur. This doesn't include potential savings in fixed/direct or Conservation Reserve Program (CRP) payments.
  • In the near term, corn acres are projected to increase. As cellulosic ethanol becomes commercially viable after 2012, the analysis predicts major increases in acreage for a dedicated energy crop like switch grass.
  • The higher crop prices don't result in a one-to-one increase in feed expenses for the livestock industry. Increases in ethanol and biodiesel production result in more distillers dried grains (DDGs) and soybean meal, which partially compensate for increased corn prices. Moreover, the integrated nature of the industry allows for the adjustment of animal inventories as a way to adjust to the environment and increase net returns. In addition, the production of energy from manure and tallow could provide additional value for the industry.
  • Contributions from America's fields, farms and forests could result in the production of 86 billion gals. of ethanol and 1.2 billion gals. of biodiesel, which has the potential to decrease gasoline consumption by 59 billion gals. in 2025. The production of 12.83 quads of energy from biomass and wind sources could replace the growing demand for natural gas and coal-generated electricity. These renewable energy resources could significantly decrease the nation's reliance on foreign oil and fossil fuels, and enhance the national security of all Americans.
You can find the complete CARD study at and the 25 X '25 report at

Southwest Beef Symposium & The Mid-South Stocker Conference
Jan. 16-17 -- Southwest Beef Symposium, at the Fifth Season Inn in Amarillo, TX, presented by New Mexico Cooperative Extension Service and Texas Cooperative Extension Service. To learn more, visit

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 You can also contact Jim Neel at 865-974-7294 or; John Bartee at 931-648-5725 or; or John T. Johns at 859-257-2853 or

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Cattle Prices Strengthen
Auction volume last week was only about a third of the prior week (100,100 head) due to the holiday, but feeder and calf prices seemed to maintain the strength found the previous week when the market finally seemed to find at least a short-term bottom.

In fact, while there were too few head marketed to quote a trend, some calf prices were as much as $5-$8/cwt. early last week, according to USDA's Ag Marketing Service (AMS). Direct fed cattle sales early last week were also up 50¢ to $2, at $87-$88.

"October feedlot placements were down by 13% from last year. The immediate effect is to contribute to a sharp reduction in feedlot inventories, up 4% from last year, compared to the Oct. 1 level, which was up more than 8% from a year ago," explains Derrell Peel -- Oklahoma State University ag economist -- in his most recent "Market Comments."

He writes: "Clearly, the second drought-induced bulge in feedlot inventories is passing and feedlot totals should continue declining through the end of the year. Additionally, lower placements means there simply aren't as many cattle available and feeder supplies will remain tight through the first half of 2007."

Still, AMS reporters point out, "The big negative factors aren't getting any relief. Orbiting feed costs, corn at a 10-year high and more than $3.50/bu., staying in outer space. Corn is up another 15¢ this week. A year ago, corn was around $1.65/bu. Large areas of drought conditions are getting dryer and expanding. Winter wheat needs moisture to germinate. Cattle numbers in feedlots are still above a year ago."

The summary below reflects the week ended Nov. 24 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.
MO 22,900 $111.24 $102.38 $100.71 $98.52 $98.34 $99.85
OK 14,000 $117.27 $103.59 $103.20 $101.36 $97.06 $90.434
TX 12,100 $108.01 $100.68 $92.35 $95.03 $93.98 $88.474
IA 11,400 $112.35 $105.352 $105.79 $101.56 $99.484 $101.45
SD 10,500 $1120.05 $109.812 $104.44 $1049.10 $98.87 $95.41
NE 8,100 $114.86 $113.922 ** $106.22 $103.632 **
CO 6,900 $113.94 $98.14 ** $100.84 $96.682 **
WY 4,300 $117.66 $104.592 ** $100.63 ** $94.536
MT 4,000 $122.38 $106.422 ** $100.58 $98.082 **
AR 3,300 $103.17 $92.87 $989.784 $910.35 $85.48 $85.00
KS 1,200 ** $104.31 $102.846 $103.98 $95.55 $90.304
WA* 800 ** $93.852 ** ** ** **
VA 4,500 ** $103.61 ** $88.672 $80.55 **

* 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.

Questions & Comments
Please send questions to:

Wes Ishmael, Contributing Editor, BEEF Stocker Trends, at

Joe Roybal, Editor, BEEF magazine, at


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