A Publication of:

OSU Extension - Fairfield County

831 College Ave., Suite D, Lancaster, OH 43130

and the

OSU Extension BEEF Team

BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor

You may subscribe to the weekly Ohio BEEF Cattle letter by sending an e-mail to smith.263@osu.edu

Previous issues of the BEEF Cattle letter

Issue # 723

February 16, 2011



Forage Focus: Plan Now to Improve Pasture Yields, Lower Feed Costs - Stan Smith, PA, Fairfield County, OSU Extension -

Two weeks ago in the February 2 issue of this publication we explored what it might take to "make feed" for various stages of brood cow reproduction out of typical first cutting mixed hay harvested throughout Ohio. While hay is a staple for most Ohio beef cattle farms, the fact is that with proper planning and management, many winter hay quality and feeding issues can be significantly reduced and perhaps eliminated through a more aggressive, year long pasture management.

As a follow up to the hay quality program hosted a few weeks ago in Hocking County, Rory Lewandowski did two presentations for that same group this past Monday which focused on Pasture Management, and also on the question, Does Pasture Management Pay?. As a result you have two opportunities to enjoy learning from Lewandowski's expertise in forage management. First, you can see and hear both of these new presentations at the following links:

Pasture Management (approximately 105 minutes)

Does Pasture Management Pay? (Approximately 30 minutes)

Perhaps an even better opportunity would be to visit with Lewandowski first hand while sitting in on his presentations during the Educational Seminars being hosted by the Ohio Cattlemen's Association at the Ohio Beef Expo in March. At 10 a.m. on Sunday, March 20, in Sale Ring 1 of the Voinovich Center, Rory will do his presentation entitled Evaluating and Using Hay in Beef Cattle Rations. At 11:15 a.m. Lewandowski will be back in Ring 1 to present Managing a Rotational Grazing System. Both sessions will allow an opportunity for questions.

For a complete listing of all the Educational Seminars being presented during the Ohio Beef Expo, visit the Expo web site at: http://www.ohiobeefexpo.com.





Beef Sire Evaluation Farm Tour and Information Update

Beef cow-calf producers are invited to inspect a new on-farm beef sire performance evaluation facility and hear how to use performance data and expected progeny differences to make wise beef sire choices. Saturday February 19, 2011 will be the date of an open house event at the Wayview Angus Farm in Licking County. Wayview Angus was the recipient of the Ohio Cattlemen's Association Seedstock Producer of the Year award in 2010. The event will get underway at 11 a.m. at the new beef sire evaluation facility, located at 8683 Gale Road Hebron, Ohio 43025.

Sixty angus bull are currently on test with a high roughage diet. At noon participants will move to the home farm of Fred Penick where they will observe the calving facilities and the heifer grow-out program. This is located at 6264 Refugee Road SW, Hebron,Ohio.

Lunch will be enjoyed courtesy of Wayview Angus Farms and the Licking County Cattlemen Association. Dr. Steve Boyles, OSU Animal Scientist, will participate and offer his views on using sire performance data in conjunction with EPD information in make decisions on sire selection that meet a producer's goals.

The program should adjourn by 2 p.m. No advance reservations are needed. The event is sponsored by Licking County OSU Extension in cooperation with the Licking County Cattlemen's Association.





2 Ways to Learn About Composting Dead Livestock

What do you do with a dead cow the size of a Smart Car? A dead pig as big as a washing machine? More and more, the answer is composting - it saves farmers money, protects the environment and returns animals slowly to the earth - and two programs next month will feature it.

Livestock Mortality Composting Workshops are being offered March 7 in Carey, about 60 miles south of Toledo, and March 8 in Newark, about 40 miles east of Columbus. Registration costs $10 and can be done at the door. A composting manual is included.

Proper composting - done without odors, vermin or objectionable gases - is the focus. The program will be the same at both places.

"The livestock industry is faced with discovering innovative and economical ways to dispose of mortality losses," says the flier for both events. "This need has been brought on by the disappearance of rendering plants, concerns over groundwater pollution from burial, and the economic and environmental issues of incineration.

"Composting of dead animals," the flier says, "is an option that is available to all livestock producers."

Speaking will be experts from Ohio State University Extension and from area Soil and Water Conservation Districts (SWCDs).

The March 7 workshop runs from 7-9 p.m. at the Wyandot County Recycling Center, 11385 County Highway 4, Carey. Call Ken Stucky at 419-447-7073 or Chris Bruynis at 419-294-4931 for more information.

OSU Extension's Wyandot County office and the Crawford, Seneca, Sandusky and Wyandot SWCDs are the hosts.

The March 8 workshop goes from 7:30-9:30 p.m. at the office of the program's host, OSU Extension in Licking County, 771 E. Main St., Suite 103, Newark. For details, contact Howard Siegrist, 740-670-5315.





Margins and Markets - Nevil C. Speer, PHD, MBA, Western Kentucky University

February opened business with the beef complex, like many other industries, playing catch-up because of the massive winter storm. Packers scurried to normalize business operations in order to refill the supply pipeline ahead of consumers emerging from their storm-induced hibernation. That proved supportive for the market and February's first trade halted a two-week slide. Live sales began the month mostly $105-6 coupled with some Friday holdouts that were rewarded with $107. Replenishing efforts were likely a little overdone with wholesale prices softening the following week and capped any upside moves for fed trade.

The more significant business development during the past month(s), though, doesn't revolve around the market itself but rather around operating margins at all levels of production. During that time the feeding sector has witnessed corn and feeder cattle markets leap to new levels thereby introducing a new round of adjustment in terms of operating capital. And prospects for diminished corn demand appears far-fetched at this point (given the absence of any political fortitude to rescind the current ethanol policy - that's being saved for health care - and export demand will remain strong). As such, carryover remains tight for several years. That establishes continued price volatility and ensuing uncertainty. Perhaps most importantly, that scenario contributes to ongoing reluctance to rebuild the cowherd. And therein enters the squeeze for cattle feeders. The convergence of high feed prices and tight feeder supplies drives the need for evermore operating capital. As mentioned last month, it may be the primary limiting factor for the sector - a game changer in which missteps at these levels are increasingly consequential.

But those types of concerns aren't isolated to the production sector. Rising input costs are having an impact throughout the supply chain. January's MMP noted that, "protein costs, coupled with a general rise in commodity costs, will ultimately have to work their way into the business model. But that becomes especially challenging amidst ongoing consumer frugality. Retail and restaurant chains must walk a fine line - the need to balance margins on one side versus maintaining traffic on the other." Food company earnings reports in the past week consistently reveal the fallout from the reality is beginning to emerge.

For example, Sysco's (SYY) recent quarterly earnings were weaker-than-expected; the disappointment largely resultant of higher product costs and limitations upon the ability to pass that along: "For the second consecutive quarter, we experienced double-digit rates of product cost increases in three categories: meat, seafood and dairy, that comprised 1/3 of our total sales dollar mix. These are key product categories for many of our customers and absorbing steep and rapid price increases is difficult for them, especially at this early stage of what we all hope is a sustainable and somewhat uneven economic recovery." Meanwhile, Sara Lee's (SLE) quarterly results were also below expectations: "The decline was primarily driven by higher commodity costs net of pricing (-$54 million), as well as volume declines net of mix improvements . . ." The company attempting to maintain margin and pass higher costs along to their customers - that resulted in decreasing sales volume. Kraft Foods (KFT) indicated that, "Looking ahead, we expect the operating environment to remain challenging, with significant input cost inflation and persistent consumer weakness in many markets." And lastly, Whole Foods (WFMI) provided investors with another favorable quarter. However, Walter Robb, co-CEO, addressed rising prices based on questions from the company's conference call: ". . . we saw the consumer, in the last couple of years, learn how to trade down or trade up in the other categories and resist price increases. And I think they've still learned that behavior and still have that flexibility . . . it looks like the marketplace is generally moving forward rationally and incrementally with these price increases. You've got corn and soy and these sorts of things, which are coming . . . there's some incremental movement on those things coming ahead." At all levels the impact of rising costs is affecting business strategy.

Within the context of the food-company reality alluded to above, it's likely we'll witness new adaptive ventures across segments within the food industry - sooner rather than later. That means risk mitigation strategies will likely begin to permeate the entire food business supply chain in a very tangible way. Downstream food companies begin pushing back on their suppliers. That's especially true for the beef industry; it lags pork and poultry in terms of its responsiveness to a shifting business environment - the result of an extended production scheme makes reaction and versatility more difficult. Therefore, there's more reason to mitigate risk from both an operational (meeting program supply needs while ensuring consistent throughput) and financial standpoint.

That likely means more contracting and marketing agreements in the future - not less. That outlook makes some within the industry very uncomfortable. Contractual agreements are frowned upon by a vocal portion of the beef industry. And those concerns are heightened when business realities, like those outlined above, are discussed. However, a potential nuance of the cash trade discord caught my attention of late. That is, the overall market may be working adequately but important regional discrepancies exist which unfairly hamper producer bargaining position along with some important seasonal interactions. Most notably, producers in the northern tier are unduly penalized by the packer at various times through the year. So is there any credence to that argument?

That question can be answered from several perspectives. First, utilizing weekly price data from January, 2004 through December, 2010, yields the following correlations:

Weekly Fed Market (January, 2004 - December, 2010) Correlation (rxy)

KS NE TX/OK
CO .993 .995 .990
KS .987 .997
NE .983

Respective regions are fundamentally underpinned by the same dynamics: wholesale meat prices and drop values. Therefore, they behave similarly from week-to-week. In other words, no major anomalies occur because of captive supply within the respective regions.

The question still remains, though, about regional market mechanics and participant behavior (especially with respect to the seasonal issue). So, let's drill down a little further into the data. The second graph below represents regional deviations (basis Nebraska) over time. The deviations are repeatedly larger at the first part of the year and diminish as the market transitions into spring. The underlying fundamentals are functioning as expected - it represents seasonal differences between supply (showlists) and demand (capacity) across the regions. The discrepancy (south premium) becomes larger in the winter as fed cattle supply wanes; excess capacity in the south drives the market higher to pull cattle into the region. The difference proportionally declines as showlists increase into late-spring / summer. Lastly, the difference has gotten larger over time as the overall fed population decreases and more cattle are increasingly fed in the Nebraska region (see last graph below).

The data speaks clearly. As such, in the midst of rapidly changing business realities, the beef industry is best served by looking ahead and adapting appropriately - any time or effort otherwise doesn't really contribute to innovation and/or establishing new prosperity.

Price Summary

Item

Week Ending:

2/11/11 2/4/11 1/28/11 1/21/11 1/14/11
Slaughter Steers ($/cwt) 105.30 105.78 104.13 105.79 107.74
Choice Cutout ($/cwt) 169.24 172.40 173.25 172.52 168.24
Select Cutout ($/cwt) 168.02 170.87 171.17 169.56 163.35
Hide and Offall ($/cwt) 12.83 12.85 12.89 12.73 12.50
USDA Slaughter Weights (lb) 1302 1307 1309 1311 1309
USDA Steer Carcass Weights (lb) 846 850 849 852 856
CME Feeder Cattle Index ($/cwt) 126.52 125.02 125.55 127.64 125.55
Cow Cutout ($/cwt) 154.98 150.91 150.37 148.19 141.62
Corn (basis Omaha: $/Bu) 6.83 6.55 6.20 6.30 6.22
Cattle Harvest (000 head) 637 624 650 630 628
Beef Production (million lb) 496.1 486.8 508.6 493.7 491.9





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BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868



Fairfield County Agriculture and Natural Resources