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OSU BEEF Team
BEEF Cattle questions may be directed to the BEEF Team or Stan Smith, Editor
Previous issues of the BEEF Cattle letter
Issue # 204
September 13, 2000
OBT NOMINATION DEADLINE IS FRIDAY
Nomination deadline for the Ohio Bull Test is this Friday, September 15. If you haven't sent your nominations yet, please do it today. If you don't have a copy of the nomination form, simply put the information we need on a piece of paper and send it with the nomination fee to: The Ohio Cattlemen's Association, 10600 US Hwy 42, Marysville, OH 43040. The only required information we need at this time is:
The OBT committee is excited about the prospects for this year's bull test - especially in regard to the opportunities for getting the high quality bulls marketed. As an example, the United Producers people have committed to visiting with us after the bulls are on test, and searching for a group that will fit the criteria for their bull leasing program. This is a program that has grown every year.
We are also exploring the prospect of interactive video as a new marketing tool for these bulls next spring. Additional new marketing alternatives are also being explored.
If you have any questions, please see the OBT website (http://www.ag.ohio-state.edu/~bulltest)
or contact the Ohio Cattlemen's Association (614.873.6736) or any OBT committee members -
and get your nominations in the mail today!
FEEDLOT PEN SURFACE MANAGEMENT - Stephen Boyles, OSU Extension Beef Specialist
Many concerns at feedlot operations are linked to pen maintenance and manure management. Dust, odors and insect problems, animal health and performance, water runoff and protection of groundwater and surface water are interconnected with feedlot pen surface management.
DUST - If the feedlot surface is too dry, dust will become a problem. A major source of dust can be a dirt surface feedlot pen. However, dust can also come from roads, service areas and feed processing. Generally, the peak time for dust in a feedlot is around sunset, when the temperatures start to cool and cattle become more active.
Routine cleaning of pen surface can help to minimize dust problems. Keep the loose manure layer to less than 1 inch deep. Windbreaks can be used to capture dust and prevent it from traveling to neighboring property.
Hard surface feedlots can provide control of dust. Concrete has been used for many years. Newer products such as fly ash and geo- textile cloth also hold promise.
ODOR - Offensive odors from feedlots are closely related to manure management. Pens with a minimum of 3 percent slope are best for managing excess moisture. If you are siting a new feedlot, select a site downwind from neighbors with a well-drained land base. Do not allow water from drain spouts to cross the feedlot. Apply manure when the wind is calm, preferably in the morning, and incorporate it as soon as possible.
Pen cleaning can be done but aggressive pen cleaning can damage the underlying compacted "hard pan" and contribute to groundwater contamination. Remove the manure but not the dirt. Certainly use of other materials such as concrete make this less of a concern.
INSECT CONTROL - Feedlot pen maintenance also plays a role in insect control. Insects reproduce in wet areas such as muddy pens, wet manure piles, and wet spots around waterers and feed bunks.
One area commonly overlooked in pen maintenance is manure buildup directly under fence rows and adjacent to water troughs and feed bunks. These are not readily accessible with heavy equipment and require small equipment and/or manual labor. However, they are significant breeding areas for insects.
If chemical control is to be used for insects be somewhat strategic in it's placement. A couple of
favorite places for insect to land is the "bottom side" of fence panels and that mid-way area in
barns between sunlight and the shade in the barn. Walk around and observe where insects appear
to congregate when not on the cattle.
MARKETING PRACTICES IN BEEF COW-CALF OPERATIONS - Stephen Boyles, OSU Ext. Beef Specialist
Producers can use various management tools to modify the weaning percentage and weaning weight of calves. However, the price that the operator receives is determined by market fluctuations that cannot be controlled by the individual producer. Different marketing strategies may decrease the price risk for the operation.
The USDA's National Animal Health Monitoring System (NAHMS) collected data on marketing practices of beef cow-calf producers. The NAHMS Beef '97 Study included 2,713 producers from 23 of the leading cow-calf states. This study represented 85.7 percent of all U.S. beef cows on January 1, 1997, and 77.6 percent of all U.S. operations with beef cows.
Two out of three operations (67.4 percent) sold steer calves while one out of two operations (52.1 percent) sold heifers intended for slaughter in the year preceding the study. Larger operations were more likely to sell calves in the preceding year than smaller operations
When producers sold steers, the auction was the most common method used (84.9 percent of operations. Private treaty was the second most popular marketing method for producers (10.4 percent). Other forms of marketing were rarely used.
The percentage of steers sold at auctions was lower than the percentage of operations selling steers through this method, indicating that smaller producers were more likely to utilize auctions. Larger operations were more likely to use strategies such as video, forward contracts, or sale on a carcass basis.
Forward pricing was used by 1.5 percent of operations as a means to market weaned calves in 1996. This method of marketing can decrease price volatility by allowing the producer to lock-in a price before calves are marketed. Larger operations were more apt to use forward pricing for their calves. When producers forward priced their calves, they did so with only 53.8 percent of the calf crop. This strategy allows for price diversification by not relying on one single market.
There are many ways to establish a forward price for calves. The most common method used by
producers was a cash forward price (49.0 percent). A cash forward price is an agreement
between the buyer and seller on a fair price at some point in the future. There is usually a "slide"
established based on the number and weight of calves at time of delivery. Futures contracts and
options were utilized by 28.5 percent and 10.9 percent of producers respectively.
BEEF CATTLE OUTLOOK: September thru November - Mike Zuzolo, Utterback Mktg. (August 24, 2000)
Overview: Between the end of August and the end of September, we see feeder cattle losing value, both in the futures and in the cash market, due to live cattle prices leading the feeders lower. Lower fat cattle prices would be caused by the following factors:
1. Marketings on monthly cattle on feed reports showing a lack of keeping current.
2. This is reinforced with a continuing trend of higher dressed weight almost on a weekly basis. Versus last year, dressed weights are up 6 lbs. In July versus July, 1999(July USDA Livestock, Dairy, Poultry). Cheap feed prices are indeed having their effect on the market.
3. The end of summer seasonally means an end to summer demand and features/sale specials hitting grocery store advertisements.
4. Most important, retail prices have jumped enormously versus last year, we believe drastically curtailing consumption levels of earlier this year. June's retail price for choice beef was $3.11 ½ versus June, 1999's price of $2.83 ¼(July USDA Livestock, Dairy, Poultry).
5. Cold Storage Stocks are increasing to very high levels: Beef in cold storage on July 31, 2000 came in at 366.1 mil pounds, versus July 31, 1999 of 292.7and increase of 25%. Both boneless and cuts are showing increases versus last year.
Downside Potential Between end of August and end of September:
Price Action From September thru November:
If we're correct about a down-turn in September, then the likelihood of heifers being held back and feeder steers being bought aggressively is high, in our view. Cheap feed has already got producers looking to lock in feeders this fall, and a cheaper cash feeder cattle price this fall would 'sew up' the decision to hold back this fall and winter, in our view. And if this occurs, another round of longs should come into the market and another push to the upside should ensue. We turn bullish the feeder complex after October, especially if cash feeder prices do fall in September. Slaughter levels in the spring and summer contracts should be looked upon by the market as heading lower if this plays out, and firm live cattle prices should support the feeder complex once again.
Another important, very over-looked fundamental factor that has been bringing a lot of feeders into our market since January 1 of this year looks to be changing. Because of a downturn in their economy and a drought (no forage or feed), Mexico has been sending feeder cattle to the U.S. in very large amounts. Thru May, 2000, feeder cattle imports from Mexico are up 40% versus last year. Since their economy and weather are both improving, we foresee less feeders coming up here after September. Why September? Because there is a strong seasonal tendency for Mexican cattle shipments to slow due to improving prices, on strong consumption. This factor cannot be understated, in our view. Nearly all live cattle imported from Mexico have been feeder cattle. And over 95% of these have been in the 200-700 lbs. Range. This might well explain how the bi-annual reports of January and July were so conflicting: we continued to see increased placements and on-feed numbers during 2000, even though the January report looked as if our supplies were going down. In fact, on Jan. 1, 2000, USDA reported 98,048 Cattle and Calves. On July 1, 2000, that number had grown to 106,400. Similarly, the Calf Crop On Jan. 1, 2000 was reported at 38,710. But for July 1, 2000, this number jumped to 38,900. And this upon increasing placements versus the previous year! We would suggest that this was due to the large numbers of Mexican cattle coming across the border.
Anticipated Price for November Feeders by November 20th: Testing the August 15th high of $88.25.
DISCLAIMER: Hypothetical performance results have many inherent limitations, some of which are described below.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In
fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently
achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are
generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no
hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the
ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which
can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to
the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical
performance results and all of which can adversely affect actual trading results. Before trading, one should be aware that
with potential profits there is also potential for losses, which may be very large. You should read the 'risk disclosure
statement' and 'option disclosure statement' and should understand the risks before trading. Commodity trading may not
be suitable for recipients of this publication. Those acting on this information are responsible for their own actions.
Although every reasonable attempt has been made to ensure the accuracy of the information provided, Utterback
Marketing Services Inc. assumes no responsibility for any errors or omissions. Any republication, or other use of this
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prohibited. Copyright Utterback Marketing Services Inc. 2000. Price quotes obtained from csi (firstname.lastname@example.org).
In the livestock markets, we had a nice rally in the live cattle futures last week, largely on a technical basis from some oversold conditions. There is a downtrend line on that December cattle futures chart, for example, and the closes late last week and Monday were right on that line. This market is somewhat lower in Tuesday's trade, reflecting increasing concerns about the cash market and the reality that boxed beef values are now down in the $107-108 range for the Choice carcasses. I rather expect to see this market pushed back down to and challenge the support across the September 6 low at $66.25 on the October futures and $68.42 on that December contract. Whether the market will need to discover still lower prices will depend largely on the Cattle on Feed report coming out on Friday and whether or not the placements are starting to come back down to or below last year's levels. Also important will be whether or not we can get cattle moved and get some of the pressure off the market that is being placed by record high steer slaughter weights. Behind the scenes, we are in a higher priced phase of the cattle cycle, but that is being covered up right now by the short-term weight problems and details. I believe we will see this market hold and make something approaching a double bottom across those lows I mentioned above in the October and December. I would be inclined to take a hard look at lifting short hedges in this market if these prices do dip back down toward those lows.
The feeder cattle moved even lower on the price dip about 10 days back reflecting continued
concerns about the fed cattle complex and the growing recognition that feeder cattle have been
priced too high given where the fed cattle are moving in the current cash market. Look for that
October contract to go back down toward the $84.50 level again, especially if the fed market and
live cattle futures back off. We need to start thinking about the possibility that we are seeing an
attractive opportunity start to present itself in these fall months to be placing long hedges on
spring feeder cattle. This is a program that I have watched and recommended with some success
across the years, so across the next few weeks, let's think about lifting short hedges on
September, October, and November feeder cattle if we move back down and challenge those
recent lows, which is explicitly $84.10, back on September 6 on that October feeder cattle
contract. We might also want to start thinking about covering cattle needs you know you will
have to buy in the first two quarters of 2001 by placing long hedges here.
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.
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