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OSU Extension BEEF Team
BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor
Previous issues of the BEEF Cattle letter
Issue # 421
February 9, 2005
Implications of the Canadian Border Reopening - Brian Roe, OSU Extension Livestock Economist
The importation of Canadian cattle younger than 30 months of age and the importation of beef from Canadian cattle more than 30 months of age is scheduled to resume on March 7, 2005. In this column, I'll discuss how this reopening might impact prices observed in US fed and feeder cattle markets and then discuss several proposed efforts to stop or delay the border reopening.
First, several details concerning the border reopening are crucial. First, imported animals must either go directly to slaughter or reside on only one single feedlot before going to slaughter. The implication is that US cow-calf operators who typically sell to buyers interested in backgrounding cattle will not face direct competition from Canadian feeder cattle. However, those backgrounders with cattle they would like to sell to feedlots later this spring will likely face the brunt of the competition from the Canadian border re-opening.
One can think about the additional flow of cattle due to the border reopening as coming from three distinct pools of Canadian cattle. First, there is resumption of the normal flow of imported livestock in these age classes. For the months March-December a normal number of fed cattle directly imported for slaughter would be about 550,000 head and while a normal number of feeder cattle would be about 250,000 head. The feeder cattle number, however, may include some calves imported for backgrounding programs and should be considered an upper limit.
Second, because the border to the US has been closed for nearly two years, there may be a pool of backlogged cattle that is just waiting for the border to reopen. USDA pegs the size of this pool of cattle at about 400,000 head of fed cattle and 200,000 head of feeder cattle.
Third, the re-opening of the border to beef from cattle more than 30 months of age means that Canada's limited slaughter capacity may be re-directed to accommodate additional slaughter of Canadian cows and reduce the slaughter capacity dedicated to younger animals. Why would this be the case? Since the fall of 2003 the US has allowed imports of beef from younger cattle, but not older cattle. Most Canadian packing plants have focused on slaughtering younger beef cattle because there was an export market for young beef. This drove the price of cull cows in Canada very low and reduced the pace of cow slaughter. With the border reopening to trade in young cattle and trade in older beef, Canadian packing plants will pay more for younger cattle and receive more from beef from older cattle. This may mean more young cattle than expected will cross the US border as Canadian plants focus on 'cleaning up' the excess supplies of older Canadian cattle. USDA projects that as many as 460,000 head of additional young cattle will cross the border during 2005 due to this effect.
The numbers of cattle from these 3 pools that will eventually enter the US supply chain during 2005 is subject to a wide range of forecasts. USDA projects that approximately 1.5 million additional cattle will be slaughtered in the United States during 2005 due to the border reopening. Private cattle-market analysts peg this number at about 700,000 head, implicitly arguing that USDA has underestimated the degree of slaughter capacity expansion that has already occurred in Canada.
If USDA's projections are accurate, and our beef trade with Japan is not resumed until the final quarter of 2005, then I fear that spring and summer cash prices may be significantly lower than prices trading on live cattle futures contracts for April through August (mid-$70's vs. low-$80's). Even if the trade projections favored by industry analysts are accurate, I still see second and third quarter cash prices falling $2 to $4 below recent futures prices for those months. In short, unless Japanese trade in beef happens quickly or the Canadian border reopening is substantially delayed, I see downside risk for fed cattle prices this summer with a potential for average cash prices to drop below $80.
Several scenarios could still delay the Canadian border reopening in part or in full. US Senators and Representatives from both parties and from several states have taken issue with the border reopening. One or more legislators may mount a legislative challenge to the rule that allows for the reopening of the border. One possible outcome from this line of pressure may be for tying the fate of importation of beef from cattle more than 30 months of age to importation of live cattle of 30 months of age. Under the current scheme, live cattle older than 30 months are not permitted but the beef from these animals is permitted. Several legislators have pointed out the apparent inconsistency of this position with regard to the net effect on the risk to public health; the new Secretary of Agriculture has conceded that he too saw this as a possible inconsistency. If beef from older cattle were not allowed in it would likely keep more of Canada's young cattle at home for slaughter.
A second scenario that would delay the border re-opening stems from a request by a western cattle group (R-CALF) for a temporary injunction of the rule that facilitates the re-opening. If the district federal court in Montana that is contemplating this requests grants it, the courts may delay the re-opening and judge the rule to be illegal, which would further delay any movements into the US.
However, the most likely scenario continues to be a border reopening on the scheduled March 7 date. Given the slow pace of trade talks with Japan, this means there is a potential for downside risk during the second and third quarter of 2005. Feeders with a low degree of risk tolerance might try to use options, futures of livestock price insurance to provide some downside risk protection for these months. Fall futures prices, in my estimation, continue to be in line with fundamentals even if trade with Japan never materializes during 2005.
Crazy Calves Are a Pain in the Wallet - Steve Boyles, OSU Extension Beef Specialist
Over 13,000 calves were studied in feedyards to evaluate the effect of disposition on feedlot gain and carcass quality. The calves represented 12 states, but were fed in Iowa. The Beef Improvement Federation Disposition Scoring System
The scoring was done at on-test weight, re-implant time, and pre-harvest. A common diet and health program was utilized at each feedlot. The following are some of the results with regard to starting weight and average daily gain.
|Arrival Weight, lbs||632||628||612|
|Average Daily Gain, lbs/day||3.17||3.1||2.9|
Morbidity rate (sickness rate) was higher for docile calves (19.2%) than restless and aggressive calves (16.8% and 16.2%, respectively). However, mortality rate (death rate) was higher for aggressive calves (1.91%) than for docile and restless calves (1.09% and 1.02%, respectively). The following are some of the results with regards to carcass grade.
In addition the number of black-hided calves that were Choice-average or above was 29%, 23%, and 14% for docile, restless and aggressive calves, respectively. When feedlot performance and quality grades were taken into account, docile calves returned $62.19 more than aggressive calves. In summary aggressive calves were lighter upon arrival at the feedlot, gained less, had higher mortality rates, reduced quality grades and reduced acceptance into some special marketing programs compared to docile calves.
Source: Effect of disposition on feedlot gain and quality grade. W. Busby, P. Beedle, D. Strohbehn, L. Corah, and J. Stika. J. Anim. Sci.
Successful Transfer of Passive Immunity in Calves Born via a Difficult Birth - Dr. Glenn Selk, Extension Cattle Specialist, Oklahoma State University
Calves born after dystocia are at a high risk of failing to receive adequate colostrum by natural suckling because of greatly decreased colostrum intake. Calves that are born to a prolonged stage II of parturition very often suffer from severe respiratory acidosis. Acidotic calves are less efficient at absorbing colostral immunoglobulins even if artificially fed colostrum, therefore effort should be made to provide weak newborn calves with the best source of colostrum available via bottle suckling or tube feeding.
The amount of immunoglobulin ingested is also a major determinant of final serum immunoglobulin concentration. A practical "rule-of-thumb" is to feed 5 to 6% of the calf's body weight within the first 6 hours and repeat the feeding when the calf is about 12 hours old. For an 80 pound calf, this will equate to approximately 2 quarts of colostrum per feeding. Read more about these important topics in Oklahoma State Extension Fact Sheet F-3358, Disease Protection for Baby Calves.
NutriDense Corn: Questions about Agronomic Performance and Management - Peter Thomison, OSU Extension Corn Specialists and Allen Geyer, OSU Research Assoc.
I've received several questions recently about the agronomic performance and management of NutriDense corn. NutriDense corn hybrids have been licensed to seed companies for distribution by BASF. NutriDense corn is one of several types of specialty corn that have been developed with improved nutritional traits to enhance the feed value of corn grain. Because of the greater concentration of nutrients on a dry weight basis, feeding nutritionally enhanced grain from NutriDense corn may be a viable method to improve feed efficiency and reduce expensive fat and protein inputs for livestock producers. Contract production of Supercede corn grain might also provide growers with higher profits through premiums based on protein and oil concentration.
We evaluated NutriDense corns in 1999 and 2000 at the OSU-OARDC Research Farm at Wooster in northeast Ohio and the OSU-OARDC Northwest Research Station near Hoytville in northwest Ohio. Testing nutritionally enhanced corns is more difficult than testing conventional corn hybrids due to isolation requirements. If pollen from conventional (low oil, low protein) corn hybrids pollinates nutritionally enhanced corn hybrids, then the specialty traits may not be fully expressed. Nutridense hybrids were separated from conventional hybrid checks by at least 20 rows (50 feet) planted to a Nutridense corn hybrid to minimize pollen contamination.
Test results from 1999-2000 indicated that NutriDense hybrids were available with grain yields similar to normal corn. Severe stalk lodging was a major factor contributing to the lower yields of some NutriDense hybrids at Wooster in 2000. (I've been informed by seed company agronomists that the stalk quality of NutriDense hybrids used in grain production has improved since these tests were performed four years ago.)
In 2000, grain produced by NutriDense corn was characterized by higher oil content than grain of conventional corn hybrid ( 5.1% vs. 4.0 % at Hoytville, 5.5% vs. 4.3% at Wooster). The NutriDense hybrids exhibited significantly higher grain protein levels than the conventional corn. Grain protein levels of nutritionally enhanced hybrids averaged 1.9 percentage points higher than the conventional corn at Hoytville, but only 0.9% higher at Wooster. Similar differences in grain protein content were observed between test locations in 1999. Averaged across locations, starch levels in grain were 2.8 percentage points less in nutritionally enhanced corn compared to conventional corn.
A major consideration in successful production of nutritionally enhanced corn is effective use of nitrogen (N) fertilizer to ensure high yields and optimize grain protein. Effects of N application on the performance of nutritionally enhanced corn hybrids, including Nutridense corn, have received little attention. We conducted research at Hoytville, OH from 2000 to 2002 to determine effects of different timings of N application (at planting vs. split) and N rates (0, 60, 120, and 180 lb/acre) on the grain yield, protein, and oil of two corn hybrids with enhanced grain quality traits, similar to NutriDense corns. Grain protein concentration showed more consistent response to increasing N rates than did yield. Protein exhibited a linear response to increasing N rates each year. Yield responded positively to increasing N rates in two of the three years, but showed no additional response above 60 lb N/acre in 2000. Split applications of N increased grain protein concentration in two of the three years, but had little or no effect on yield. Grain oil concentration was not influenced by the timing of N application. For all N treatments, including the zero N check, oil consistently exceeded 6.0 % (dry weight basis); however grain protein was usually below 10.0% (except for the split N treatment of 180 lb/acre in 2000). Grain protein concentration, averaged across hybrids and N treatments, ranged from 7.5 to 9.4%. Relatively low percent grain protein in 2001 may be have been due to protracted wet soil conditions during the spring, which favored loss of N through denitrification and leaching. Results of the study demonstrated that N management will be an important factor in maximizing the grain protein of nutritionally enhanced hybrids, but producing grain with consistently high protein concentration may be difficult given the variation in growing conditions and environments characteristic of Ohio.
June live cattle continue to trade up relative to the nearby contracts. Boxed beef values have faltered across the past two weeks but have turned to the upside again. Cash cattle were at $91 on Friday and we have seen limited sales at $91 on a live basis in early week activity. On the June futures, you can draw a trend line across the late November and early January lows and let this market continue its climb to the upside. I would not place short hedges here until we see a close below the trend line or a challenge of contract highs at $84.50, and I believe this market can and will eventually take out the $84.50 high as we move toward June.
The March feeder cattle are holding around the $100 level for the time being and I still like long hedges in this market. If June and the later live cattle contracts can continue to climb back up after dipping from the recent bearish cattle on feed placements number, then the March feeder cattle can challenge its highs above $105. It is corn costs and the prices for the distant live cattle contracts that drive pricing in the nearby feeder cattle futures, and corn looks cheap and slaughter cattle prices look to be high as we move through this year.
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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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