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December 1, 2006

Table of Contents
The Fiasco That Is The South Korean Agreement
USDA's Announcement On Voluntary ID No Surprise
Bone Chip Halts Creekstone Beef Shipments To Korea
Canadian Cattle Over 30 Months
U.S. And Colombia Sign Free-Trade Agreement
UK Regulator Bans Junk-Food Advertising To Kids
AMS Looks For Input On Defining "Naturally Raised"
Factors That Determine A Cow's Daily Feed Consumption
Congress Returns for Lame Duck Session
Mycoplasma Bovis Ravaging Kansas Buffalo Herds
Czech Republic Confirms 25th Case Of BSE
Feeding Natural Cattle Is Topic Of Free Publication
USDA Reaffirms Voluntary NAIS; Premiums Show ID Pays
Angus Sets Dec. 18-19 Cattlemen's Boot Camp
Colorado Beef University Is Dec. 11 In Rifle
Wyoming Sets Crop Insurance Info Meetings
Rise In Corn Price Could Be To Beef's Advantage


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Our Perspective
The Fiasco That Is The South Korean Agreement
No, I'm not talking about world events in geopolitics, I'm talking about the global fiasco influencing the U.S. cattle industry -- the re-establishment of trade after BSE.

Our desperation to reopen Japan was understandable. The U.S. acceptance of the non-scientific 20-month age requirement reflected an understanding that Japan's political situation was unique. Its government having failed to enact the same safeguards as the rest of the world following the discovery of BSE, Japanese consumer confidence was destroyed when BSE was found in Japan in fall 2001. In the aftermath, Japan's government adopted extremist standards trying to recover consumer confidence. Those standards were in place long before the U.S. found its first case of BSE in December 2003.

Eventually, Japan will move toward the acceptance of valid scientific standards. This breach was pragmatic and reflective of political realities in Japan; it's also an exception and not a rule, so to speak.

Korea, however, is an unmitigated disaster. From the beginning, Korea made it clear that, while they wouldn't openly flout international standards, they would appease internal interests by restricting access to their markets as long as possible. First, they did this with delaying tactics, then by creating artificial trade barriers via rule interpretation, which obliterated the spirit of the agreements without clearly running contrary to the letter of the law.

Creekstone did what none of the major packers would do -- attempted a shipment to South Korea under the agreement that had been reached. As feared, they were rewarded with a major financial hit when a single small piece of gristle was found in a nine-ton shipment the South Korean government had sat on for nearly a month.

The message was sent loud and clear - the South Korean market is technically open but fundamentally it's closed tight to U.S. beef.

While it's Korea that's kept its market closed, the biggest share of the blame falls directly on U.S. shoulders. Everyone knew the score when the deal was inked; Korea just lived up to its end of the deal.

The deal simply was never a tenable proposition, and U.S. attempts to renegotiate it are casting us in a poor light with the Korean consumer -- just as Korea had planned. No deal is better than a deal that you can't live up to, and have to come back begging for concessions, too.

The Korean situation must be remedied quickly. Otherwise, instead of an exception, we'll have shown the world that non-tariff trade barriers are very much in play -- they just require more nuance than in the past.

Nobody can argue in good conscience that the U.S. beef industry doesn't need the global beef market. But, at the same time, nobody can argue that if we allow it to be established without guidelines and fairness, it can be viable either. It may be a reach to say the future of the beef business rests on how this issue is resolved and how quickly, but not as much of a reach as one might think.
-- Troy Marshall


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USDA's Announcement On Voluntary ID No Surprise
I don't agree with folks who view USDA's announcement last week that national ID would be a voluntary program as a big surprise. In my mind, the statement only reinforced the agency's position all along.

First of all, USDA believes the whole "mandatory" issue has been a stumbling block. And, actually, there's nobody calling for mandatory ID. One could argue the global marketplace and our biggest customers are calling for a mandatory program, but they really aren't. They just want their product source-, age-, or even process-verified. The National Cattlemen's Beef Association has remained steadfast in its position that national ID be voluntary, as well.

So the logical question is: "Is national ID dead? Those who view cow-calf producers as not being customer driven, while being totally resistant to change, will claim "voluntary" kills the program. I can understand their contention because protecting an entire industry from a debilitating threat is a lot different than a marketing type of program where the market provides the economic incentives for change.

I must admit that, for some reason, the bio-terrorism scenarios painted by experts don't seem quite real to me. I've listened to veterinarians and animal-health experts talk about how quickly virulent diseases can spread across a national population, and still I kind of shrug.

I'm glad they're vigilant and working on this, but I'm not going to waste much of my precious managerial time on a risk that seems far more remote than say $3.50 corn, drought and the like.

Right now, the vast majority of U.S. producers consider the risk of bio-terrorism or an animal-disease emergency too little to merit the burden of a national ID system. Still, progressive producers will respond to the demands of our customers and, in essence, implement a far more sophisticated and dynamic system as a result.

Not long ago, we were debating if the government should mandate how we market and label our product rather than allow market signals to work. Now, we're seeing the government step aside and allow a voluntary program in an area (protecting the consumer and the U.S. cattle herd from disease) that by its nature is a legitimate role for government.

It's refreshing and positive that this industry continues to fight for independence and for managerial freedom in decision-making. It also indicates this industry trusts its producers to listen to marketplace signals, and produce and market a product they believe the consumer wants and or demands, without the intrusive mandate of government.

Free enterprise, individual choice, freedom, capitalism, and the marketplace over government intervention are principles worth preserving. Certainly some will argue the marketplace response will be too slow and, if we have a problem in the near term, we won't be prepared.

That point is valid; government mandates are usually quicker. They're also almost universally more expensive, more cumbersome, and more limiting.

Of course, herd health is a different ballgame. It's a governmental role. National ID is another one. But government failed to provide leadership on the issue and abdicated it role; the marketplace is filling the gap. Will any serious cattleman not have electronic ID in his calves' ears two years from now?

If a case can't be made for why "voluntary" can't work, then it should be preferred to "mandatory" every time. Mandatory should be considered only when third-party oversight is required, and where the majority is potentially hurt badly because the minority elects out of the system.
-- Troy Marshall


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Foreign Trade
Bone Chip Halts Creekstone Beef Shipments To Korea
South Korea has suspended imports of U.S. beef from Creekstone Farms Premium Beef, Arkansas City, KS, after government inspectors found a 0.4-in. piece of bone in a shipment that arrived Oct. 30. The halt doesn't affect any other of the total of 36 U.S. beef-shipping firms cleared to do business in South Korea.

After a three-year ban due to the discovery of BSE in the U.S., South Korea in early September resumed U.S. imports of boneless U.S. beef products coming from cattle under 30 months of age. The first shipment of 9.3 tons arrived on Oct. 30, but had languished in quarantine ever since.

The discovery means the beef will be returned or destroyed, Kang Mun Il, director general at the National Veterinary Research & Quarantine Service says, Bloomberg.com reports. In addition, shipments from Creekstone have been barred until it provides an explanation, Kang said.

While the bone doesn't qualify as a specified risk material for BSE, Korean officials say it violates the U.S./Korean agreement that allows only boneless beef.
-- Joe Roybal


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Canadian Cattle Over 30 Months
USDA has sent to the Office of Management and Budget (OMB) its proposed rule to allow for the importation of Canadian cattle more than 30 months of age. After OMB's review, the proposed rule will have a 60-day public comment period. USDA would like to finalize the rule the second quarter of 2007.
-- P. Scott Shearer, Washington, D.C., correspondent


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U.S. And Colombia Sign Free-Trade Agreement
Representatives of the U.S. and Colombia signed the U.S.-Colombia Trade Promotion Agreement (CTPA). The comprehensive agreement eliminates tariffs and other barriers to trade in goods and services.

According to the U.S. Trade Representative, U.S. farm exports receiving immediate duty-free treatment include high-quality beef, cotton, wheat, soybeans, soybean meal, key fruits and vegetables including apples, pears, peaches, and cherries; and many processed food products including frozen french fries and cookies. U.S. ag products that will benefit from improved market access include pork, beef, corn, poultry, rice, fruits and vegetables, processed products and dairy products.

The U.S. and Colombia have worked to resolve sanitary and phytosanitary barriers, including food safety inspection procedures for beef, pork and poultry.
-- P. Scott Shearer, Washington, D.C., correspondent


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Consumers
UK Regulator Bans Junk-Food Advertising To Kids
British marketers got a big surprise this week when UK regulator, Ofcom (Office of Communications), banned the targeting of children under 16 with junk-food advertising. Ofcom also said it plans to apply a "nutrient-profiling" test to discern which products fall under its junk-food label.

AdAge.com reports Ofcom's ruling includes a total ban on advertising foods high in fat, salt and sugar (HFSS) in children's programming, as well as in youth-oriented and adult programs that attract a lot of viewers under 16. Many of the marketers involved have voluntarily stopped targeting young children in recent years, and moved their campaigns onto youth channels such as MTV, believing they were safe in targeting teenagers.

The article says Europe is "a patchwork of self-regulatory measures and outright bans" when it comes to advertising aimed at children. "Until now, the UK had leaned toward self-regulation. Hoping to fend off legal action in the U.K., KFC and Burger King both ended all toy promotions, and Coca-Cola, Cadbury, Kraft, Burger King and McDonald's Corp., all promised not to advertise to children under 12. The Incorporated Society of British Advertisers drafted a voluntary code banning the use of cartoon characters, licensed characters and celebrities who appeal to children in commercials."

AdAge reports the UK rules are clearer and may be easier to implement than those being mulled by the French. There, food marketers were supposed to either add a health message to ads for any manufactured food or beverage, except water, or pay a tax equal to 1.5% of their annual ad budget toward campaigns for more-healthful eating.
-- Joe Roybal


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Beef Marketing
AMS Looks For Input On Defining "Naturally Raised"
USDA is looking at development of a voluntary standard to address production practices associated with the term "naturally raised" for livestock. As such, the agency's Ag Marketing Service (AMS) plans three listening sessions to discuss definitions for such a labeling claim.

All listening sessions are set for 1 p.m. local time, and interested parties are encouraged to attend and provide either verbal or written comments. For more info, visit www.ams.usda.gov/lsg/; or contact Martin E. O'Connor at 202-720-4486 or martin.oconnor@usda.gov.

The dates and locations of the sessions are:
  • Dec. 11 -- Jefferson Auditorium, USDA South Building, Washington, D.C.
  • Jan. 17 -- Hyatt Regency Tech Center, Denver, CO; 303-779-1234.
  • Jan. 18 -- Seattle Marriott SeaTac Airport, Seattle, WA; 206-241-2000.
-- Joe Roybal


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Nutrition
Factors That Determine A Cow's Daily Feed Consumption
A number of different factors determine the daily intake of a cow, the University of Nebraska's Rick Rasby writes at beef.unl.edu/. The beef specialist lists the primary factors as cow weight, forage or diet quality, and production stage.

Cows weighing 1,300 lbs. will consume more on a daily basis than lighter-weight cows weighing 1,100 lbs., he says, while lactating cows will eat more feed than non-lactating cows. Intake also is different for cows in early lactation compared to those in late lactation.

He provides these "thumb rules" to help estimate daily feed intake of gestating or lactating cows on a dry matter (DM) basis consuming forages of differing quality:
  • When forage quality is low -- total digestible nutrients (TDN) of 52% or less -- non-lactating cows will consume 1.8% of their weight DM basis.
  • If forage quality is average (TDN of 52% to 59%), non-lactating cows will consume about 2% of their body weight daily DM basis, whereas a lactating cow will consume about 2.3% of her body weight daily an a DM basis of the same forage.
As an example, if the forage were 55% TDN and lactating cows on the average weigh 1,200 lbs., they'd eat about 28 (1,200 lbs. x 0.023) lbs. of hay daily on a DM basis. If the hay were 88% dry matter, on an "as-fed" basis, cows would eat about 32 (28 lbs./.88) lbs. daily. If there were 200 head of cows in the herd, it would take about 3.2 tons of this hay/day [(200 head x 32 lbs./head/day)/2000 lbs.] not accounting for any waste.

Taking the use of feed intake one more step, Rasby says a 1,200-lb. cow, the first 90 days post-calving and producing 20 lbs. of milk at peak milk production, needs to consume 2.7 lbs. of protein/day on a DM basis. If the hay is 8% crude protein and the cow eats 28 lbs. of hay DM, she will eat 2.24 lbs. of protein (28 lbs. x 0.08). This hay will need to be spiked with some protein to meet her post-calving protein requirement.

Likewise, if she needs 16 lbs. of TDN daily, then 28 lbs. of a forage that's 55% TDN yields 15.4 lbs. of TDN consumed. This forage will need to be spiked with some energy. A small amount of a good-quality alfalfa could fit the need.
-- Rick Rasby, University of Nebraska


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Government
Congress Returns for Lame Duck Session
Congress returns next week for a lame-duck session to try and finalize a number of issues including appropriations bills, Vietnam PNTR, tax extenders, etc., before the new 110th Congress begins on Jan. 4. A key issue for ag will be consideration of a disaster-aid package. House Republican leadership continues to raise objections.
-- P. Scott Shearer, Washington, D.C., correspondent


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Animal Health
Mycoplasma Bovis Ravaging Kansas Buffalo Herds
Nearly a quarter of the buffalo in Kansas' Maxwell Wildlife Refuge, located 50 miles north of Wichita, have died of Mycoplasma bovis. Refuge manager Cliff Peterson tells the Wichita Eagle that 47 of the refuge's 200 buffalo have died from the bacterium that causes pneumonia, mastitis and arthritis in cattle.

Peterson says he's aware of two other infected buffalo herds in the state. Half of one herd and a third of the other have died, the article reports.

While it's not clear how the buffalo were infected, Kansas State University DVM Larry Hollis says Mycoplasma bovis infections are rare in native Kansas cattle herds. He advises cattlemen to ensure they have a double fence between buffalo herds and cattle herds, as the bacteria is spread by sneeze droplets or nose-to-nose contact.

To learn more about Mcyoplasma bovis in cattle, read the BEEF magazine article, "Grappling with Mycoplasma" at beef-mag.com/mag/beef_grappling_mycoplasma/index.html.
-- Joe Roybal


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Czech Republic Confirms 25th Case Of BSE
The Czech Republic confirmed its 25th case of BSE this week, this one in a 72-month-old cow. It's the second BSE case diagnosed in 2006, after eight identified cases in 2005.
-- Joe Roybal


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Tips for Profit
Feeding Natural Cattle Is Topic Of Free Publication
A new South Dakota State University (SDSU) online publication discusses raising cattle without implants, ionophores or antibiotics. In the publication, "Feeding Natural Cattle" (find it at agbiopubs.sdstate.edu/articles/ExEx2056.pdf), SDSU Extension personnel Tyler Melroe and Erik Loe detail the market potential for "natural" beef, the requirements of such a management and marketing program, and the attributes, drawbacks and economics of "natural" feeding.
-- Joe Roybal


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Animal ID
USDA Reaffirms Voluntary NAIS; Premiums Show ID Pays
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 animalid.aphis.usda.gov/nais/naislibrary/documents/instructions_guidelines/NAIS-UserGuide.pdf.

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 QSAs and PVPs in more detail in the upcoming December issue of BEEF.
-- Wes Ishmael, BEEF Stocker Trends newsletter


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Industry Meetings
Angus Sets Dec. 18-19 Cattlemen's Boot Camp
The American Angus Association and Angus Foundation will sponsor a Cattlemen's Boot Camp, Dec. 18-19 in Stillwater, OK. Hosted on the Oklahoma State University campus, the program is aimed at allowing producers to enhance their knowledge of the industry and basic production skills.

The event begins at 1 p.m., Dec. 18, with a discussion on end-product merit and consumer needs. A bull-selection case study makes up the evening program. The following day's program includes presentations on nutrition and reproduction, and creating value in the cow herd.

Registration is $75, which includes materials and meals. Contact Kris Sticken at 816-383-5100 to register, or visit www.angus.org for more details.
-- Joe Roybal


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Colorado Beef University Is Dec. 11 In Rifle
Another in the Colorado Beef University series takes place in Rifle, CO, Dec. 11. A collaboration of the Colorado Beef Council, Colorado State University Extension, Colorado Cattlemen's Association, and the Colorado Livestock Association, the program runs from 10 a.m. to 3 p.m. in the Garfield County Fairgrounds' Event Hall, with lunch provided. RSVP by Dec. 8 to Patrick McCarty at 970-625-3969. For more info, contact Travis Hoffman at 970-491-2333 or Travis.Hoffman@colostate.edu; or visit ansci.colostate.edu/content/view/299/42/.
-- Joe Roybal


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Wyoming Sets Crop Insurance Info Meetings
The AGR-Lite (Adjusted Gross Revenue-Lite) federal crop insurance plan is now available in 28 states. The whole-farm revenue plan of insurance provides protection against low revenue due to unavoidable natural disasters and revenue fluctuations.

John Hewlett, University of Wyoming farm and ranch management specialist, says AGR-Lite provides producers blanket insurance against revenue losses that may occur for either livestock or crop enterprises. To help producers better understand the new insurance, Hewlett is presenting workshops in various Wyoming locations (contact your local Extension office for more details):
  • Dec. 4, Casper Parkway Plaza;
  • Jan. 18, Evanston;
  • Jan. 31, Riverton;
  • Feb. 1, Casper Parkway Plaza;
  • Feb. 5, Gillette;
  • Feb. 6-7, Worland;
  • Feb. 20, Lovell.
AGR-Lite policies are limited in size to a maximum liability of $1 million annually, with most ranch- and farm-raised crops, animals and animal products eligible for protection. The plan uses a producer's five-year historical farm or ranch average revenue, as reported on IRS tax returns (Schedule F or equivalent forms) and the current year's plan, as a basis to provide a level of guaranteed revenue for the insurance period. Sign ups must be completed by March 15, 2007.

For more info, visit www.rma.usda.gov/.
-- Joe Roybal


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Cow-Calf Weekly Mailbag
Rise In Corn Price Could Be To Beef's Advantage
Over the course of the last several months, as I've moved cattle and fixed fence, I've tried to sort out the impact the ethanol boom is having on the beef industry. My formal training is in the area of ruminant nutrition though I've been a full-time cowhand more than 10 years.

I think the net effect of ethanol on the beef cattle industry is going to be positive, but I want to float some mental meanderings in the hope of generating discussion.

For years I've complained about grain subsidies, primarily due to their effect on lowering the market price of program crops by reducing the cost of production. As a producer of feeder cattle, I like cheap corn. However, my competition, Tyson and Smithfield, absolutely love cheap corn.

In beef production, appreciable quantities of feed grains aren't part of the diet until after weaning, and possibly not until at least 120 days prior to harvest. Conversely, the pork and poultry industries rely almost solely on feed grains for the breeding female herd and in every production segment from there until harvest.

I ran through some calculations several years ago. My numbers suggest a reduction in corn price was about 50% more beneficial to the pork and poultry industries than the beef industry. Of course, the inverse would be true about an increase in corn prices.

Consequently, if $3/bu. corn is here to stay, it will cause some pain for the beef industry and force some readjustments in how we do business. However, it will absolutely clobber pork and poultry.

The second and equally important consideration is the byproduct generated from the ethanol-production process. The chemical and physical properties of distiller's grains will allow it to price into beef cattle diets more effectively than in poultry or swine diets.

Corn and soybean meal diets work extremely well for the non-ruminant species because the mix of amino acids provided effectively matches the needs of the animals for maximum growth and production. However, the amino acid profile of distiller's grains requires the addition of synthetic amino acids in the diets to attain a similar level of production as that generated with corn/soybean meal diets.

Of course, it's also a requirement that the distiller's grains be dried so they can be moved through the bins and augers. To be used in beef or dairy diets, this byproduct can be fed wet without impairing production, and even improving production in some cases. Of course, if plants can sell the product wet, they don't incur the expense of drying it. Thus, they can sell it for a lower price.

The defining rule of biological systems is the individuals that flourish are the ones that can best adapt to the environment. A similar statement would seem equally applicable to an economic system.

While the grains subsidies and the inexpensive feed grain supply it provided wasn't the sole reason the poultry industry flourished over the last 20 years, its ascent couldn't have happened without them. While the government didn't mean to discriminate against the beef industry by implementing these subsidies, that's exactly what happened.

If $3+/bu. corn is here to stay as a result of a government policy encouraging ethanol production, I don't think it's a problem for the beef industry. It's an opportunity to further regain the retail market share the poultry industry stole from us.
Mark Sip
Geddes, SD


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