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News and views on stocker segment issues from BEEF magazine.
June 12, 2007 A Penton Media Publication
ISSUE CONTENTS
U.S. Beef Goes Truly Global

Melamine found In Cattle-Feed Ingredient

Corn on Track -- Drought Deepens For West-Southeast

Monitoring Water Access -- Quality For Gain

Market Turns Bearish

Questions & Comments


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News
U.S. Beef Goes Truly Global
It's one thing to export beef out of the U.S. or import beef products into the country. An entirely new dimension emerges though, when one of the world's largest beef processors -- a non-U.S. entity -- enters the U.S. beef-harvesting business through ownership.

Just like that, on May 29, J&F Participações, S.A. (JFP), which owns 77% of Brazil's JBS, S.A. (JBS), Latin America's largest beef processor, became the third-largest beef packer in the U.S. by purchasing Swift & Company (Swift), the world's third-largest processor of fresh beef and pork products.

The transaction value of $1.4 billion includes $225 million in cash for all Swift stock held by HM Capital and Booth Creek Management Corporation, its investment partner in the September 2002 acquisition of Swift from ConAgra Foods, Inc., and the assumption by JFP of $1.2 billion in Swift debt plus all transaction-related expenses.

"This is a win-win transaction for everyone involved," says Edward Herring, an HM Capital partner. "The proceeds from this transaction, coupled with our earlier leveraged recapitalization of Swift, will together produce a very attractive return for our investors. For JFP, the strategic combination of Swift and JBS -- industry leaders with no market overlap -- will create the world's leading beef processor. The transaction also will benefit Swift's customers, employees and business partners by creating a combined Swift-JBS enterprise in which Swift will retain its organizational identity, customer and supplier relationships and substantially all of its employees and leadership team while becoming part of the world's largest beef processor."

Apparently, the new owner intends to leave the current Swift structure pretty well intact. That and JBS' lengthy history in the business -- JBS began operations in 1953 -- has left many producers in the U.S. feeling neutral-to-positive about the transaction.

The sale also means the U.S. may end up with more packer competition. Smithfield Foods -- long rumored to be a suitor for the Swift assets -- has moved slowly in its announced plan to construct a new beef packing plant at Texas County, OK, in partnership with ContiGroup Companies, Inc. (announced last October). Perhaps the move by JFP will speed up the process.


Melamine found In Cattle-Feed Ingredient
If things keep going this way, 2007 may long be remembered as the year of melamine.

First it was the pet-food debacle that began in March. It was then extended to pork, poultry and fish feed when it was discovered that pet food contaminated with melamine -- used widely in the plastics industry -- had been used in manufacturing some of these livestock feeds.

On May 30, FDA and USDA recalled livestock-feed ingredients contaminated with melamine and melamine-related compounds. Unlike the earlier pet-food recalls and recalls related to pet-food ingredients that were linked to exporters in China, this one appears confined to a single North American manufacturer.

Within the cattle business, the recalled ingredient -- Xtra-bond, supplied by Tembec BTLSR of Toledo, OH to Uniscope, Inc., of Johnstown, CO -- was being used as a binding agent in pelletted cattle feed. Though that ingredient was recalled, the finished feed made with it wasn't -- due to the low amount of melamine and melamine-related compounds found in Xtra-Bond. Two other ingredients -- AquaBond and Aqua-Tec II manufactured by Tembec -- used as binding agents for fish feed were recalled, as well as the finished feed containing these binding agents.

Tembec BTLSR is a subsidiary of Tembec, Inc., an integrated forest products company based in Montreal, Quebec.

"Uniscope, Inc. recently informed the Food and Drug Administration that a sample of resin incorporated into a binding agent for animal feed tested positive for the chemical compound melamine. Uniscope manufactures a variety of binding additives for use by feed manufacturers, including the binding agents, Xtra-Bond and Aqua-Tec II, where resin is used," explain Uniscope officials. "The melamine in the resin source comes from its suppliers who added it, without Uniscope's knowledge or consent, into a resin used by Uniscope to make the products. These types of resin products have been historically used in animal feeds... Upon learning of the test results, Uniscope immediately stopped the manufacturing and delivery of Xtra-Bond and Aqua-Tec II and notified the FDA of the issue. In addition to cooperating with the FDA, Uniscope is in the process of notifying its distributors and customers of the issue."

According to the Uniscope folks, they've received no reports of any illness or deaths associated with these products.

"In addition, the company has seen no publicly available information that would lead it to believe that its products pose any adverse consequences to the health of humans or animals," says a Uniscope news release.

Founded in 1975, Uniscope voluntarily recalled its products containing the melamine and melamine-related compounds.

"Melamine is not an approved additive for animal or fish or shrimp feed, and the companies have stopped adding melamine to the feed products," says David Acheson, FDA assistant commissioner for feed protection. "FDA is advising feed manufacturers and others who mix their own feed not to use these products and to contact the manufacturers."



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Weather And Crops
Corn on Track -- Drought Deepens For West-Southeast
"In the Southeast, despite some much-needed precipitation, mostly along the Atlantic Coast, drought conditions continued to persist," say reporters from National Agricultural Statistics Service (NASS). "Likewise, irrigation demands remain heavy throughout the Southeast, while pastures and summer crops are under severe stress... In California, pastures remain in poor conditions... Farther east, a dry pattern continued across the eastern Corn Belt and the Ohio Valley. Although not a major concern as of yet, the dry weather has begun to show some stress on pastures and summer crops."

Abundant and unexpected late-spring moisture in the Southern Plains helped the winter wheat crop but didn't solve the problem, with early yield coming in below normal.

"Elevator bids are handsome and in the current harvest area they are averaging near $4.75/bu., but much of this year's crop has already been rolled up into large hay bales. Some wheat producers feared low yields, while others simply wanted to stockpile some cattle feed following last winter's desperate shortage of hay," say Ag Marketing Service analysts.

For the week ending June 5, according to NASS:
  • Corn -- 94% of the crop had emerged, 1% ahead of last year and 6% ahead of average. 78% is rated Good or Excellent, compared to 71% at the same time last year.

  • Soybeans -- 88% is in the ground, the same as last year but 7% ahead of normal. 70% has emerged, which is 4% ahead of last year and 14% ahead of the five-year average. 71% is rated Good or better, which is 1% ahead of last year.

  • Winter Wheat -- 88% advanced to the heading stage, the same as last year but 3% ahead of average. 53% is rated Good or Excellent, compared to 27% a year earlier.

  • Spring Wheat -- 96% of the crop has emerged, which is 2% ahead of last year and 7% ahead of the five-year average. 85% is rated Good or Excellent, compared to 69% a year ago.

  • Barley -- 95% has emerged, compared to 91% at the same time last year and 88% for average. 81% is rated Good or Excellent, compared to 74% a year ago.

  • Sorghum -- 54% of the intended acreage is sown, which is 9% behind last year and 7% behind average.

  • Oats -- 32% of the crop was at or beyond the heading stage, which is 2% ahead of last year and 1% ahead of the five-year average. 74% is rated Good of Excellent, compared to 51% last year.

  • Pasture -- 51% is rated Good or Excellent, compared to 46% last year. 22% is rated Poor or Very Poor, compared to 25% a year ago.
States with the worst pasture conditions -- at least 30% of the acreage rated poor or worse -- include: Alabama (74%); Arizona (46%); California (97%); Florida (85%); Georgia (90%); Kentucky (36%); Mississippi (41%); Nevada (36%); North Carolina (40%); Tennessee (52%).

On the wet side of the fence, states with the most lush pasture conditions -- at least 40% rated good or better -- include: Arkansas (61%); Colorado (70%); Idaho (56%); Illinois (60%); Indiana (42%); Iowa (73%); Kansas (60%); Louisiana (74%); Maine (87%); Maryland (46%); Michigan (61%); Minnesota (69%); Missouri (42%); Montana (71%); Nebraska (65%); New Mexico (67%); New York (71%); North Dakota (70%); Ohio (50%); Oklahoma (73%); Oregon (57%); Pennsylvania (51%); South Dakota (74%); Texas (72%); Utah (40%); Virginia (41%); Washington (78%); Wisconsin (58%); and Wyoming (45%).


Management
Monitoring Water Access -- Quality For Gain
The quality of the water livestock drink can have a major impact on their water intake and weight gain, according to a North Dakota State University (NDSU) water-quality expert.

"Canadian studies have shown the quality of water accessible to livestock is directly tied to the amount of forage they consume," says Roxanne Johnson, an NDSU Extension service water quality associate. "Improved water palatability increases water and feed consumption, which is demonstrated as an increased rate of gain."

In fact, Johnson says the Canadian research indicates cattle weight gain increased 0.33 lbs./day for cattle receiving water treated by either coagulation/chlorination or aeration, compared to untreated water consumed directly from a dugout.

Cattle in the study also spent considerably more time grazing and less time loafing when they had access to fresh water, compared with drinking from the dugout.

The treatment groups included:
  • direct access to the dugout,

  • water pumped from the dugout to a trough,

  • water aerated and pumped to a trough,

  • and water coagulated/chlorinated prior to pumping to a trough.
When researchers pumped water to a trough, they fenced the dugout to prevent cattle from accessing it. Each treatment allowed cattle to have full access to a water source.

Research was conducted at the University of Saskatchewan's Termuende Research Farm by the Western Beef Development Center, Prairie Farm Rehabilitation Administration, and the research branch of Agriculture and Agri-Food Canada.

"If the key is increasing water consumption, then producers should consider palatability of accessible water, too," Johnson says. She explains some compounds found in water have characteristics offensive to humans and may contribute to decreased water intake in livestock. Examples include geosmin, which imparts an earthy odor; 2-methylisoborneol, which is associated with a musty taste; hydrogen sulfide, which is associated with a rotten-egg odor; chlorine, which has an offensive smell; and the metals iron and manganese, which give water a metallic taste and change the color of the water.

"I urge producers to evaluate their watering methods and see if changes could be made to improve the quality of water provided their livestock," Johnson says. "Not only will the lifespan of the dugout be extended through exclusion of livestock, cattle performance will improve through improved water quality."

Especially with the ravages of widespread drought, Karl Hoppe, an NDSU Extension livestock specialist at the Carrington Research Center, encourages producers to consider whether water accessibility has changed.

"The lower water table created by last year's drought has exposed unstable soil," Hoppe says. "The cows and calves are having difficulty in accessing water."

Karlyle Erickson, an NDSU Extension animal systems agent from Pierce County, says mud on grazing cattle's legs, bellies and sides are likely signs that water in ponds or bogs is low or the animals are having trouble getting to the water.

Moreover, low water levels can affect water quality, which can impact cattle performance and health, as noted earlier.

Though spring runoff, combined with thunderstorms, has helped recharge surface water in many North Dakota pastures, Hoppe and Erickson believe producers should consider permanent solutions to the water supply and access problem.

"Options to fix pasture water problems are seldom easy or cheap and have to be thought of as long-term investments," Erickson says. "The best water-development options will vary by the planned need and use of the pasture, availability of power, depth and availability of ground water, cost and a host of other considerations."

According to Hoppe and Erickson, options worth considering are:
  • Periodically clean and re-dig ponds and dugouts to improve their capacity and longevity because cattle going in and out of a dugout can cause sediment to get into the water.

  • Fence cattle out and pump water to a tank to help conserve water, protect the dugout and enhance water quality.

  • Restrict livestock access to the water to a sloped, graveled area.

  • Lay shallow water lines to move water from a good well to dry pastures. This allows producers to place water taps at multiple locations for controlled rotational grazing. Lack of water access in subdivided pastures is the major obstacle to rotational grazing, which is a practice that can increase stocking rates by 15-20%.

  • Drill wells and install freshwater tanks and watering points.
Hoppe points out the last option requires a heavy commitment of resources. Besides money, producers must consider access to electric power, well depth and water quality. Hoppe suggests producers consider wells powered with propane-driven generators, windmills or solar energy in locations far from electrical power.

Both specialists also recommend that producers check with their local soil conservation office and Natural Resources Conservation Service about the availability of cost-share programs and technical assistance.

"Enhancing pasture utilization and grazing management through water development both addresses immediate needs and enhances economic opportunities in the future," Erickson says.



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Markets
Market Turns Bearish
"Losses definitely outweighed gains on last week's calf and yearling markets as a bearish tone fell over the entire cattle and beef sector," say analysts for the Agricultural Marketing Service (AMS). "Losses were posted on the CME cattle futures, boxed beef cut-out values, and the cash fed-cattle market, which lost $2 for the second week in a row to close at mostly $91."

The strongest feeder demand came from areas near the Northern Plains feedlot areas as receipts have become seasonally light, say the AMS folks. They explain northern feedlot operators typically have to look harder for cattle this time of year, and area farmer-feeders are also in the market as they clear space in their personal corn bins for this year's crop.

On one hand, grass pasture conditions are unusually lush across the vast Plains from Texas up through the Dakotas and Montana, AMS says. On the other, many parts of the normally wet Southeast continue to suffer through drought with wildfires burning on what is typically swampland.

The summary below reflects the week ended June 8 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 34,000 $124.56 $107.24 $109.94 $110.51 $105.16 $102.68
MO 30,900 $126.66 $116.04 $103.94 $114.34 $104.71 $105.00
KY* 28,600 $107-117 $103-113 $98-1085 $96-106 $93-1033 $86-965
TX 25,500 $116.64 $114.12 $108.24 $112.86 $106.61 $101.45
AL 19,600 $113-117 $104-113 $104-1124 $100-110 $93-103 $88-964
TN* 16,900 $113.73 $107.34 $98.65 $102.27 $98.19 $89.44
Dakotas 14,600
South Dakota
North Dakota

$134.77
**

$124.07
**

$119.84
**

$121.75
**

$117.42
**

$111.27
**
GA*(***) 11,700 $102-117 $95-110 $85-104 $94-109 $88-106 $84-92
Carolinas* 10,100 $100-117 $92-113 $85-102.50 $87-110 $86-99.50 $78-94
MS* 8,800 $105-1051 $95-1053 $90-955 $95-105 $80-903 **
AR 8,000 $116.13 $108.92 $99.35 $105.90 $100.43 $96.00
FL* 6,900 $97.50-114 $92-103 $89-1004 $90-111 $89-99 **
KS 5,100 $123.70 $116.10 $111.77 $113.42 $108.30 $103.64
LA(ND) 4,500 $104-120 $104-1162 ** $95-112 $88-1082 **
NM 4,300 ** ** $101.056 $101.952 ** **
WY 2,900 ** ** ** ** $110.42 $106.794
IA 2,800 $130.39 ** $110.25 $113.91 $114.78 $104.74
VA 2,200 $115.072 $110.45 $105.33 $95.09 $96.05 $98.86
NE 2,000 ** $126.20 $123.95 $111.322 $106.834 $105.916
MT 1,900 ** $114.504 ** ** ** $101.846
WA* 1,800 ** ** ** $103.932 ** **
CO 1,600 $127.30 $118.78 $106.386 $117.95 ** **

* 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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Calendar of Events
June 14 -- Kentucky Forage & Grassland Council Summer Field Day; Mt. Hermon; www.uky.edu/Ag/Forage.

June 14 -- Tennessee beef and forage field day, Blount Unit of East Tennessee Research and Education Center; 865-974-7201 or knoxville.tennessee.edu/events.

June 20 -- Range monitoring workshop, 10 a.m., Freemont County Courthouse, Lander, WY; 307-332-1044.

June 20 -- Summer Grazing Field Day, CRP Research and Demonstration Farm, Corning, IA; 641-322-3184 or 641-322-3116.

June 24-26 -- American Forage and Grassland's Council's annual meeting, Penn Stater Conference Center and Hotel, State College, PA; info@afgc.org or 1-800-944-2342 or www.afgc.org.

July 16-20 -- Cattle Industry Summer Conference, Adam's Mark Hotel, Denver, CO; 303-694-0305 or www.beefusa.org.

Aug. 29 -- 8th Annual University of Nebraska-Lincoln Gudmundsen Sandhills Laboratory Open House, Whitman; 308-696-6701.

Nov. 7-8 -- BEEF Quality Summit, Holiday Inn Centre, Omaha, NE; 1-800-722-5334, ext. 14606; or www.beefconference.com.

Dec. 13 -- Alabama Forage Conference, Troy, AL, contact Eddie Jolley at 334-887-4564, or Don Ball at 334-844-5491.



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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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