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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 # 627

March 11, 2009

Monthly Market Profile: Economic Policy Critical to Beef Complex - Nevil Speer, Professor, Animal Science, Western Kentucky University

The fed market spent the month of February dancing around $81-2. Unfortunately, within that range downside risk caught up with cattle feeders: the third week of the month officially finished below $80 - the first time since late July, 2006. On a more positive note, February's live cattle trade averaged $81.41 - only about a buck behind January's pace despite lots of grim economic news. Looking ahead, broader economic concern has manifested itself at the CME. June Live Cattle peaked at $88+ in early-January; the contract is currently parked at $81. Notwithstanding some easing in the corn market, bearish sentiment within the deferred contracts has pressured feeder cattle: CME's Feeder Cattle Index ended February at $91.63; that's $5 off from January's peak early in the month.

From a broader perspective it's important to remember that total dollars coming into the industry stem from four major factors: 1) throughput, 2) domestic beef sales, 3) drop value and 4) exports. That said, the beef complex is especially vulnerable to the general economic slowdown. No matter how you measure it - real estate values, unemployment claims, consumer confidence, etc. . . - there's not much good news out there. That spells less consumer spending meaning weaker wholesale activity. Consumers at all income levels are tightening their belts, shoring up their balance sheets and being increasingly judicious about all types of expenditures including food. That's forced an unfriendly-to-beef rotation from restaurant to retail while trading down to pork and poultry. The outcome is less beef being purchased at lower prices. The first graph below depicts average monthly wholesale cutout values; February's action witnessed the trade break through an important support level of $140 - the last time that occurred was September, 2005.

A slowdown in consumer spending for the beef sector creates weakness in boxed beef prices. That translates to a softer fed market which serves as the gateway for money entering the production sector. Lower fed cattle coupled with reduced marketings means less revenue for producers throughout the value chain. Cumulative revenue for November, December and January is sharply below the previous three-year average (see second graph below) - to the tune of $500+ million (that equates to $2 billion annually).

Total dollars available to the beef complex is directly related to consumer expenditures - both domestically and abroad - and currently trending in the wrong direction. I outlined the importance of revenue in January as one of the three key factors influencing the industry during the coming year: That's a troubling trend and portends an industry which will have to contract. At the very least, less revenue coupled with tightened cattle supply will further tighten the noose around the feeding and packing sectors already burdened by overcapacity.

That reality has implications throughout the industry. The most obvious play of lower fed cattle values equate to negative closeouts. Feedyards are getting hammered and they're no different than some larger companies in the news - they're now forced to monitor their cash burn rate. Meanwhile, as alluded to above, slower marketings and less cattle on feed equates to the feedyard sector operating at less than optimal capacity (see the third graph below outlining slower cumulative placement rate beginning in mid-2008). That subsequently forces proportionally higher fixed costs per unit of production.

What about the less obvious connotations? Less revenue, derived from fewer cattle sold at lower prices, translates to reduced cash flow available for all other aspects of business operations. The result being operational decisions such as deferred maintenance, cutback on various inputs, suspension of new hires, etc . . . Lastly, it means pushing back feeder prices - and those operational aspects just mentioned begin to also occur at the stocker and cow/calf level.

Perhaps the most important outcome of this scenario plays out at the ranch level and further-reaching implication for beef's support industries. Lower prices may serve as the catalyst for even further cutbacks in the nation's cowherd. Fewer cows means fewer calves and subsequently less spending by producers throughout the value chain: industries such as animal health, nutrition, ag credit, livestock markets, etc… will all begin to feel the effects. If that occurs, ultimately the industry reaches a critical mass in which it can no longer sustain current levels of infrastructure. And once infrastructure disappears it's very difficult to replace. That potentially signifies a very business structure going forward.

Will all that come into play? That remains to be seen. But the take-home message here is the current economic slowdown isn't something that's happening "out there" or "doesn't really matter" over the long run. Granted, agriculture is in relatively good financial shape but there are important ripples of the current recession all the way up the value chain and out to support industries. And as such, ongoing policy decisions relative to the broader economy remain critically important to the beef industry and important to monitor.

Price Summary

EDITOR's NOTE: Next week in the Ohio BEEF Cattle letter, read Speer's AgSight column entitled COOL - Moral Hazard / Miserable Timing.

Ohio Beef Expo to Feature Educational Seminars

The Ohio Beef Expo is continuing with a great attraction for attendees for the March 20-22 event. This year, Educational Seminars will take place in the trade show area during the day on Friday and Sunday. These seminars will allow producers the chance to learn how to better their operation through different management and marketing techniques. A complete list of these seminars is listed below as well as on www.ohiobeefexpo.com. Farm Credit Services is sponsoring the technology for the seminars.

Friday, March 20

10:30 a.m.; Animal Health at the Producer Level, By Livestock Concepts, Sale Ring 2

Learn what you can do at the producer level to improve animal health and success of your operation. The pros and cons of each castration strategy will be discussed. Learn implanting strategies of show cattle, cow/calf operations finishing operations and more. Find out more about proper techniques for restraint or immobilization that are safe for the animal and the producer. Discover custom programs that will work for your operation.

11:15 a.m.; Common vaccinations for your cattle operation, By Boehringer-Ingelheim & PBS Animal Health, Sale Ring 1

PBS/RJMatthews and Boehringer Ingelheim will be teaming up to educate producers on current vaccination practices in cow/calf, stocker, and feedlot operations. Boehringer-Ingelheim professional services veterinarian Dr. Joe Campbell and Ohio territory manager Jake Osborn will present. Along with PBS, they will discuss what you need to protect your cattle from and the best vaccination protocols to stretch your producer dollar. Bring your questions for Dr. Campbell, and be sure to take notes in order to win door prizes at the end of the seminar.

11:45 a.m.; Banding with the Callicrate Bander, By No-Bull Enterprises, Sale Ring 2

The Callicrate Bander, with built-in tension indicator and unique winding mechanism, insures proper application. The low-stress, bloodless, castration method enables cattle on feed to maintain high performance levels. The high-tension improves any kind of surgical removal, including de-horning, tail docking, and prolapse treatment. For use on cattle, goats, and sheep.

12:30 p.m.; Managing Cattle for All Natural Markets, By Dr. Francis Fluharty, OSU Beef Team, Sale Ring 1

1:00 p.m.; Why minerals are important to animal production, By Buckley Bros., Ring 2

This presentation will focus on why minerals are important to the production and care of your animals. Topics covered will include the need for supplementation, how minerals are absorbed into the body and signs of copper, zinc, and manganese mineral deficiency. Attendees will also learn what a chelated mineral is and why is important to nutrition.

1:45 p.m.; Concepts of Profitable Beef Forage Management, By Fowler Seed, Sale Ring 1

This seminar will teach inexpensive, simple pasture maintenance. Learn how to renovate and improve beef pasture. Become prepared for and know how to manage through drought. Find out why improved grass and legume varieties produce superior hay. Manage fertility for forage quality and yield. Utilize ways to fit forages into row crop system and become proficient in the economics of growing quality beef.

2:15 p.m.; Fitting Demonstration, By Purina Show Feeds, Sale Ring 2

This seminar will feature Dave Guyer who will be demonstrating proper clipping and grooming practices. This seminar was a feature of the 2007 Ohio Beef Expo!

3:30 p.m.; Rotational Grazing Practices, By Gallagher, Sale Ring 2

This seminar will feature rotational grazing practices using Gallagher portable fencing. Learn how to overcome drought and feed shortages by management intensive grazing. The experts at Gallagher will instruct you how to select the correct energizer for your operation and safe, proper grounding techniques. They will also be discussing the importance of water placement and the benefits of automatic watering systems.

Sunday, March 22

10:30 a.m.; Animal Health at the Producer Level, By Livestock Concepts, Sale Ring 2

Learn what you can do at the producer level to improve animal health and success of your operation. The pros and cons of each castration strategy will be discussed. Learn implanting strategies of show cattle, cow/calf operations finishing operations and more. Find out more about proper techniques for restraint or immobilization that are safe for the animal and the producer. Discover custom programs that will work for your operation.

For complete details on the 2009 Ohio Beef Expo, visit www.ohiobeefexpo.com. The Ohio Beef Expo is a function of the Ohio Cattlemen's Association (OCA). The OCA is an affiliate of the National Cattlemen's Beef Association and is the state's spokesperson and issues manager for all segments of the beef cattle industry including cattle breeders, producers and feeders. It is the grass roots policy development organization for the beef business. Through the Ohio Cattlemen's Association, cattle producers work to create a positive business environment, while providing consumers with a safe and wholesome product.

Catalogs now available for OCA Seedstock Improvement Bull Sales

The Ohio Cattlemen's Association is hosting two Seedstock Improvement Bull Sales scheduled for April. The sales, scheduled for Friday, April 3 at Muskingum Livestock in Zanesville and Saturday, April 18 at Union Stock Yards Company in Hillsboro, offer an affordable way to buy bulls from multiple breeds in one location and on one day. Buyers have the assurance of buying bulls with known genetics, a completed vaccination regiment and a breeding soundness exam. This year there are 38 bulls consigned to the sale at Muskingum and 32 to the sale at Union Stock Yards.

Catalogs are now available for both sales at www.ohiocattle.org. The bulls in both sales range in age from one to four years and are all registered and have expected progeny differences. The bulls are placed in sale order based on a within breed evaluation star system using EPDs for birth weight, weaning weight, yearling weight and milk. Many of the proven bulls available will have additional performance based information including offspring data. Breeds represented are Angus, Charolais, Gelbvieh, Hereford, Limousin, Maine-Anjou, Red Angus, Shorthorn, SimAngus and Simmental.

For more information on the sales, visit www.ohiocattle.org and look under the Beef Improvement section or call the OCA office at 614-873-6736 or e-mail beef@ohiobeef.org.

Cattle Outlook, March 6, 2009 - Glenn Grimes & Ron Plain, Ag Econ, University of Missouri

Fed cattle prices were higher this week. The 5-area daily weighted average price for slaughter steers sold through Thursday was $81.47/cwt on a live weight basis, up $1.56 from a week earlier but $9.40 lower than a year ago. Steers sold on a dressed basis averaged $129.74/cwt, a penny higher than the week before but $15.58 lower than the same week of 2008.

Choice boxed beef cutout values also were higher this week. On Friday morning, the choice carcass cutout value was $1.3501/pound, up 2.9 cents for the week. The select cutout was up 4.26 cents from the previous Friday to $1.3484 per pound. The choice-select spread is less than a penny per pound. The normal spread for this time of year is 7 cents. The select cutout is 12.62 cents lower than this day last year.

Cattle feeders have suffered huge losses this winter with many closeouts in the red by over $200/head. As often occurs in this situation, feedlots have slowed marketings to try and force up prices. Mostly they have forced up slaughter weights. Steer carcass weight averaged 854 pounds for the week of February 21, up 29 pounds from the same week in 2008. Thus far in 2009 steer weights are up 23 pounds and heifer carcass weights are averaging 19 pounds above the same period last year.

The April live cattle futures contract ended the week at $82.45/cwt, down $3.47 for the week. June settled at $81.07, down $2.83 from the week before. August settled at $82.20/cwt and the October live cattle contract ended the week at $86.00. March feeder cattle futures ended the week at $90.50/cwt, $2.10 lower than last Friday. The April feeder cattle contract settled the week at $90.62/cwt and May closed at 92.25/cwt.

Federally inspected cattle slaughter for this week was 603,000 head, down 2.4% from the week before and down 6.8% compared to a year ago. Thus far in 2009, cattle slaughter has been below year-ago levels for 6 weeks and above last year for 3 weeks. Year-to-date slaughter of dairy cows is up over 20%.

Cash bids for feeder cattle were higher this week. The price ranges at Oklahoma City for medium and large frame steers were: 450-500# $106-$113, 500-550# $108.50-$114, 550-600# $102.50-$107.50, 600-650# $98-$105.25, 650-700# $93.75-$99.50, 700-750# $89-$95, 750-800# $86-$92, and 800-1000# $82-$89.50/cwt.

It's been a tough winter for cattle producers, but they are not alone. All meat and dairy prices are well below breakeven, and it appears that all are cutting back on production. USDA continues to predict that production of beef, pork, chicken, and turkey each will be lower this year. In total USDA expects red meat and poultry production to be down 1.9% in 2009. The last year all four meats had lower production was 1973.

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

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up Monday. The APR'09LC contract closed at $83.20/cwt; down $0.750/cwt but $0.75/cwt lower than a week ago. The AUG'09LC contract was up $0.425/cwt at $82.625/cwt but $0.325/cwt lower than last Monday. Smaller show lists, short covering, and improved fundamentals seem to be kicking in. A slump in the Dow/Jones at the end of its trading day took some wind out of live cattle sales. Technical action was supportive as fund rolling from April into June futures remained light and local traders unwound bear spreads in April futures. The roll is done by funds moving some spot April long positions into the nearby-June contract. USDA put choice boxed beef at $135.23/cwt, up $0.23/cwt early Monday. Early week expectations for cash cattle are steady to $1 higher as USDA placed its 5-area average at $81.605/cwt, $0.16/cwt higher than last Monday. Processors are expected to take a harder look at show lists this week as margins continue to slide. According to HedgersEdge.com the average packer margin was lowered $9.45/head from this time last week to a negative $31.55/head based on the average buy of $81.53/cwt vs. the average breakeven of $79.09/cwt. This should affect demand and price later in the week. However, processing lines have been expanded to Saturday shifts in many places so the hold out is not expected to last long. It would be a good idea to hold off pricing any corn for about a week. Hold fats until they are ready to sell.

FEEDER CATTLE at the CME closed up on Monday behind live cattle and outside market strength. MAR'09FC futures were up $0.225/cwt to $90.725/cwt; however this closing was $0.275/cwt lower than a week ago. The APR'09FC contract closed at $90.925/cwt; up $0.300/cwt but $1.425/cwt lower than last Monday. Spreaders bought back months and sold nearbys. Feeders were supported by higher fat cattle, short covering, and front-month's discounts to the CME Feeder Cattle index. The CME Feeder Cattle Index for March 5 was placed at $91.77/cwt, up $0.06/cwt. Cash cattle were $1-$4/cwt higher last week in Oklahoma City. Wait to price corn until next week and only price what you need to get you to good grass.

Visit the OSU Beef Team calendar of meetings and upcoming events

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

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