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Previous issues of the BEEF Cattle letter

Issue # 691

June 16, 2010

It's Your Responsibility to Fend Off FADs - Marlys Miller, Editor, Pork magazine

Anyone who has traveled overseas knows that returning to the United States is a mixed bag of experiences, especially when it comes to moving through customs. The effort, and the potential smoothness or hassles involved, depends largely on the agent that you happen to draw; how much the person likes or hate his or her job, whether the drive to work was easy, whether the person's home life is trouble-free.

For our part, most travelers are anxious to move through the airport quickly because no matter how well a vacation or business trip went, you're ready to get home as soon as possible.

Back in 2001, after 911, I was among a group of agricultural representatives who traveled to Japan and China on a whirlwind, 8-day trip. While we didn't visit livestock production units, we did tour several wet markets and a live slaughter-hog market in China. Upon returning to the states on a Saturday afternoon, the Chicago customs agents were lackluster in their inspection process, even though a few of us specifically flagged to their attention that we had been around livestock. What's worse, a few in our party didn't declare those visits, as they "didn't want to be delayed."

It's that scenario that makes me lose sleep at night whenever I hear of a "foreign animal disease" outbreak, such as foot-and-mouth disease, in another country. We've learned long ago how small, and flat, today's world is in terms of people and product movement. One only has to look back at last year's Novel H1N1 influenza virus to see how broadly and quickly an ailment can spread, and the fall out for U.S. producers.

In recent weeks, FMD surfaced in China in hogs (640 reported cases, and let's face it, that country is not exactly known for its accurate reporting.) South Korea culled more than 30,000 animals at more than 225 farms due to FMD. Japan also had an outbreak and all pigs, beef cattle and dairy cows in the affected areas were culled, bringing the number to about 205,000 head.

African swine fever is swine-specific disease that's still found throughout the world. classical swine fever, also known as hog cholera, is as close as Mexico and the Caribbean island of Hispaniola (which includes Haiti). There's also exotic Newcastle disease in chickens, Rhinderpest in cattle, and others.

None of those FADs are in the United States and we all need to work to keep it that way. Many U.S. agricultural companies, veterinarians and consultants are doing business in these countries and elsewhere. Let's hope they're more conscientious than most U.S. Customs Agents.

This week, pork production representatives across the globe will converge in Des Moines, Iowa, for the World Pork Expo. While such an event raises the importance of being aware of and enforcing biosecurity protocols, all livestock producers should monitor their practices and their animals regularly.

In one of the FMD cases, a pork unit worker received a bundle of clothing and work boots from home (in a different region), and wore them on the job. As a result, FMD was introduced and transmitted to the production site and spread to neighbors.

James McKean, DVM, Iowa State University, says it's easy to overlook basic biosecurity protocols like clothing and footwear changes and equipment cleaning, but that's all the more reason to make it a priority, especially when dealing with foreign visitors or workers. Be aware that food can carry such diseases into a country as well.

Now, biosecurity measures vary across species, and there's no shortage of guidance. Your industry associations and/or veterinarian can assist in reviewing your on-farm program. There also are fact sheets available and additional measures farmers can take. Some basic steps include:

* International travelers should always declare to customs if they've been on a farm, in contact with livestock or if they possess any meat, dairy and other animal products.

* Whenever a new animal moves onto a farm, be sure that both its health status and origin are known.

* New animals or animals returning to a farm should be separated from the rest of the herd for at least two weeks.

* When possible, exclude foreign visitors from your farm for at least five days after they arrive in the United States.

* Ask foreign visitors to provide information about recent farm visits and animal contacts.

* Clothing worn on farms in other countries should always be washed in hot water and footwear should be disinfected before entering your farm.

* Do not allow animal products, clothes, luggage, cameras and other items from FAD affected countries onto your farm.

* Discourage foreign visitors from walking through feed mangers and having any physical contact with animals.

* Farms should have one common entrance/exit with disposable boots or a disinfectant footbath provided there.

* All footwear should be disinfected before entering and after leaving an animal housing area.

* Keep vehicles, such as milk, feed and livestock trucks, from driving through areas where animals are housed or feed is stored.

Certainly if an FAD entered the United States meat and poultry export markets (depending on the disease) would slam shut. While these diseases have no spillover to humans, you can expect that domestic consumers will find it all very unsettling and question the quality of U.S. meat and poultry as well. Everyone will feel the impact, it won't matter if your herd, or even species, is infected or not.

I'm not even going to begin to paint the picture here of the costly and extended monitoring and clean up efforts that will follow. It doesn't take much imagination to see that it would be devastating.

"The current FMD outbreak in Japan should be a wake-up call to all of our livestock producers, as well as the businesses that serve them," said the New York animal health commissioner.

It is your responsibility to fend off foreign animal diseases. Don't take it lightly.

Your Animals' Good Health Benefits Everyone - Dr. William Shulaw, Ohio State University Extension Veterinarian

In the accompanying article above, Marlys Miller highlights the concerns about foreign animal diseases and emphasizes our collective responsibility to keep them out of the USA. Foot and mouth disease (FMD) is such a terrible disease that it rightly deserves the attention it gets. However, we often forget about it until we hear of a neighboring country or a trading partner that has experienced a new outbreak. How often have you thought about it since the severe outbreak in Great Britain in 2001? The reality is that it is relatively common throughout the world. According to the World Animal Health Information Database, an informational division of the OIE or World Organization for Animal Health, forty-two countries reported clinical FMD in 2009 alone. The outbreak in Japan continues to spread to previously unaffected areas. Accidental introduction of FMD into US livestock herds is more than a remote possibility. Intentional introduction would be frighteningly easy.

Although implementing appropriate biosecurity measures is critical whenever a risk for introduction of foreign animal disease is identified, biosecurity shouldn't be something you think about only when you hear about a disease outbreak in another country or another state. There are a number of serious infectious diseases of cattle in the USA that may have a long incubation period or exist as a silent infection in carrier animals. Among these are BVD, IBR, Johne's disease, and anaplasmosis. A disease some people have largely ignored in recent years as a result of the success the national eradication program which was begun by our grandparents is bovine tuberculosis. However, bovine tuberculosis is alive and well thanks to careless and unscrupulous cattle and captive deer movements. Since January of 2009, tuberculous cattle have been identified from herds in Texas, Indiana, Nebraska, Michigan, South Dakota, and most recently in Kentucky and Colorado. Tracing of cattle movements from the Texas herd led to testing a large herd in Ohio, fortunately with no test-positive cows identified, and we may be testing cows in additional Ohio herds as a result of finding the disease in one of the other states. Nebraska officials tested over 40 herds that were somehow connected with the source herd. Even when no positive animals are found in these tracing activities, the costs of testing potentially exposed animals are enormous, and WE ALL pay for it indirectly.

Even the more common diseases you may have heard about can be very costly and frustrating to have to deal with. Animal movement between herds and between states is very common. And the exhibition season is now upon us. Every farm should have a basic biosecurity plan in place to not only anticipate and minimize the impact of disease on your farm - but also your country. Consult your veterinarian and develop specific traffic control, quarantine, and testing strategies for your farm to reduce your risk for disease introduction.

During the 2001 outbreak of FMD in Europe, Dr. Bowman and I wrote a series of four articles on biosecurity and cleaning and disinfection practices that are still relevant. They can be found at http://ohioline.osu.edu/vme-fact/index.html and may help in your planning. In addition, you may find these World Animal Health Information Database links helpful: http://www.oie.int/wahis/public.php?page=home and http://www.oie.int/wahis/public.php?page=disease_status_lists&WAHIDPHPSESSID=20dfbedae15ca274d651ae406e12d89e

Monthly Market Profile: Now Comes the Hard Work - Nevil Speer, Professor, Animal Science, Western Kentucky University

Markets are always demanding (and simultaneously interesting) because they never really allow you to settle in - there's constant flux around every potential dynamic. That reality played out in May for the beef complex. And in my attempt to walk that line last month's Monthly Market Profile opened with somewhat of a celebratory note touting the market as, "Almost too good to be true!" However, it also ended with a cautionary tone about market sentiment: "...it's time to turn bearish when everything, or everyone, appears bullish," including the warning to "tread carefully."

In retrospect there was no "almost" about it - it probably was too good to be true. That's especially true within the context of MMP discussion during the first several months of 2010. Unfortunately, that makes the latter "tread carefully" portion the half that was mostly correct. The fed market has experienced a sharp correction in recent weeks transitioning from a seasonal high of $100 in early May down to $92 during the course of just four weeks. That's equivalent to a weekly equity loss of about $25/head. And now the market is on the defensive in search of support levels in coming weeks and months. From a historical perspective, this year's market has downside risk back to the mid-$80s during the course of the coming summer.

The breakdown during May stems from several different causes. First, buyers are on the defensive as they being to make the seasonal shift from a spring demand mentality to more of a summer mindset. Second, investment funds have been active participants at the CME. But, as discussed last month, that had to eventually rotate; that action began in earnest in May (see the first illustration below).

Overwhelmingly, though, weakness on the live side has been largely driven by the sharp reversal in the wholesale market. The Choice cutout nose-dived from $170+ in early-May back down to the low-$150s as June opens for business (see second graph); a slide of over $18 in just four weeks. Buyers seemingly turned their backs on beef products once Memorial Day needs were met and subsequent inventory replacement has been relatively muted.

That's not surprising given the ongoing broader economic concerns. Most importantly, weakness on the wholesale front has a dual impact on the fed market: one, it directly influences the spot price for fed cattle; two, more indirectly, it negatively influences prospects at the CME which in turn also affects the cash market. The run was good while it lasted. It healed closeouts for at least a brief period of time. The problem is that any positive cash flow got plowed back into the purchase of replacements which have gotten very expensive in the interim. Regardless, real prosperity and business growth occurs at the hands of the consumer.

The consumer remains under pressure - primarily in terms of the ongoing need to deleverage the personal balance sheet. And in the meantime, real economic recovery (that being driven by the private sector) continues to be hampered by high unemployment. So, "getting back to normal" will likely take some time. That's reinforced by the Federal Reserve's May Consumer Credit report which revealed the 19th consecutive month in which consumers have pared down borrowed funds. Americans are saving rather than spending: retail sales declined by 1.2% from April to May. Interestingly enough, grocery store spending revealed some improvement while restaurant spending was nearly flat. Those trends are consistent with the observation provided several times during the past year: "...one of the major cutbacks affecting beef spending has been at the restaurant / food-service level: consumers are eating out less and cooking at home more...Spending trends have been, and continue to be, away from high-end and mid-scale venues in favor of quick-serve outlets. That's an important pattern! Domestically-derived premiums for beef sales stem from restaurant traffic; both travel and leisure dining are fundamental to beef expenditures."

Of special interest with respect to consumers and the cutout is this year's relative price differential between end-meats and middle-meats. The third graph below represents the relative price differential between the middle-meats and the overall cutout value. The price surge in 2010 is somewhat surprising given the relative lack of restaurant dining; generally, restaurant traffic and increased demand for high-end cuts is what drives wholesale values higher. Not this year, though. It's been the end cuts and grinding values that have held the cutout together. December's MMP included some discussion about a relative new trend among restaurants. As reported in the Technomic / American Express Restaurant Market Brief (November, 2009), restaurants "...are finding one virtually foolproof way to please their regular customers and attract new ones: burgers, both traditional and innovative...Nearly half of consumers say restaurants should offer a variety of burgers sizes, from dainty mini-burgers to half-pound behemoths." Apparently, that dynamic is coming to fruition in the marketplace and certainly proving supportive!

Price Summary


Week Ending:

6/11/10 6/4/10 5/28/10 5/21/10 5/14/10
Slaughter Steers ($/cwt) 92.42 94.53 93.85 97.03 99.90
Choice Cutout ($/cwt) 156.70 162.48 165.76 168.19 170.52
Select Cutout ($/cwt) 148.28 154.78 158.97 162.88 166.30
Hide and Offall ($/cwt) 10.48 10.44 10.63 10.65 10.73
USDA Slaughter Weights (lb) 1251 1251 1250 1249 1252
USDA Steer Carcass Weights (lb) 810 808 807 806 804
CME Feeder Cattle Index ($/cwt) 109.94 110.50 107.93 110.06 112.33
Cow Cutout ($/cwt) 128.07 129.61 130.54 131.51 134.29
Corn (basis Omaha: $/Bu) 3.35 3.25 3.41 3.51 3.47
Cattle Harvest (000 head) 661 625 674 681 671
Beef Production (million lb) 496.8 469.6 505.9 511.0 504.0

Weekly Roberts Agricultural Commodity Market Report - Mike Roberts, Commodity Marketing Agent, Virginia Tech

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. JUNE'10LC futures were up $0.275/cwt at $89.775/cwt but $0.025/cwt under last report. The AUG'10LC contract closed at $88.125/cwt; up $0.850/cwt and $0.40/cwt higher than last Monday. A stronger stock market; higher commodities; and short covering were all supportive factors. The weaker U.S. dollar is also seen as supportive for U.S. beef exports. The increasing DOW is signaling traders that people are doing a little better now and will be able to afford higher end beef cuts. Lower cash cattle last week put a drag on Monday's prices. Cattle in U.S. Plains feedlots last week traded lower to $92-$93/cwt. USDA on Monday put the 5-area average price at $92.68/cwt. The choice beef cutout plunged to $153.17/cwt; off $1.99/cwt and $7.28/cwt lower than a week ago. Activity was noted in the June and August months because of continued discounts to last week's cash. According to HedgersEdge.com, the average packer margin was lowered $47.35/hd from last report to a negative $13.65/hd based on the average buy of $93.60/cwt vs. the average breakeven of $92.51/cwt.

FEEDER CATTLE at the CME closed higher on Monday. AUG'10FC futures closed at $110.425/cwt; up $0.350cwt and $2.025/cwt over this time last week. The OCT'10FC contract finished up $0.40/cwt at $110.375/cwt. Short covering and higher fat cattle were supportive even though feed prices rose. Cash feeder sales in Oklahoma City were delayed due to flooding and power outages. Compared to relative data from the latest sales feeders heifers were steady to $2 higher while steers were steady to $4 higher. It was estimated that even though the sales got off to a rocky start receipts would be around 8,200 head compared to last week's 12,751 and 10,280 sold this time last year. The latest CME feeder cattle index was placed at $109.94/lb; up $0.31/lb.

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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.

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