Comments from the director: January 2008

Iowa Beef Center Director Dr. John Lawrence has a monthly column published in Iowa Cattlemen magazine discussing current happenings at the Beef Center and issues in the beef industry.
Below is his December column about IBC. To view his column about the cattle market outlook, which he co-writes with Shane Ellis, ISU Extension livestock economist, click here.

Publications available to help producers consider

alternative production systems

Iam writing this article while it is sunny and 70 degrees, and hopefully you are reading it before the snow flies. The rain in October that delayed harvest and the baling of cornstalks reminds us how agriculture is still dependent on the weather. With higher corn prices, more cattle farmers are thinking about planting hay meadows with corn and using stalks as winter forage. But years like this one may have them reconsidering.

Producers who plan on baled stalks as a forage supply for the winter have to be ready to roll when the weather permits. Planning also becomes important. How much winter feed supply is enough? If I don’t enter the winter with enough, what are my options? Long term, how much hay ground should I maintain to help manage the risks — risks of short summer pastures and having to graze the meadow or not getting enough cornstalk grazing or bales for the winter?

Drought conditions during 2006 in the Great Plains and Southeast have limited this year’s hay supply and pushed prices higher. The reduction in beef cow and heifer numbers seen in the U.S. Department of Agriculture’s July cattle report is expected again in the January cattle report. Cow herds will be tempted to hold more heifers, but feed supplies and prices may limit that potential. The USDA’s cattle on feed report for October showed 52,000 fewer heifers and more than 400,000 fewer steers in feedlots this year compared to last year. If these heifers are in the breeding herd, it will account for only a 1-percent increase from the year before, which likely is not enough to signal an expansion of the breeding herd.

When it comes to expanding, the cost of forage, as well as the availability, is a major hurdle. The Iowa Beef Center at Iowa State University has evaluated alternative grazing systems and reported the advantages and disadvantages for each in a series of publications on its Web site, www.iowabeefcenter.org. These analyses will help producers consider alternative production systems that will increase carrying capacity since land costs are increasing due to competition from crops. To view these publications, simply click on the Cow/Calf Management link on our Web site; then look under Land and Production Management on the first page. The publications are listed together under the heading “Alternative Systems for Beef Herds with High Land Costs.” They include information about stretching pasture resources, alternative beef cow herd production systems that use less hay and/or less pasture, and the costs of these systems.

One way to extend forage supplies during the summer and winter is to increase concentrate feeding of corn grain or grain processing co-products. The growth of ethanol production that is driving up the price of corn and land also is providing a growing supply of distillers grains with solubles (DGS). The dry DGS is relatively easy to feed, but these distillers grains are in high demand by hog and poultry producers and cattle producers in other parts of the country. In general, the wet DGS is an excellent feed and is more affordable for farmers who live near an ethanol plant. But, it has storage and handling challenges.

Farms with a cow herd and a feedlot probably feed enough wet DGS to keep it fresh. They also have the loader tractor and feed wagon and are accustomed to mixing and feeding cattle daily. Thus, a total mixed ration with wet DGS and tub-ground forage is not new, nor is it a challenge. However, cow herds that typically feed hay with a bale-spike are not prepared to switch feed systems. The opportunity exists, though, if there is a way to overcome those challenges.

So, the Iowa Beef Center, in conjunction with Iowa Farmer Today, is sponsoring an inventor’s contest to find innovative methods to store, feed and handle corn co-products. Farmers and hometown blacksmiths are some of the most creative people in the country. This contest, called “Iowa’s Next Top Inventor,” is a chance for them to showcase their ideas and win a prize for the best invention. The rules are pretty simple, and the contest is open to out-of-state residents, as well. Just be sure to enter your invention by Jan. 25, 2008. The official rules and entry form are available here. A panel of five judges will evaluate the inventions on five criteria: practicality, affordability, functionality, accuracy and style. The top three entries determined by the judges will be presented at the Ottumwa Cornbelt Cow-Calf Conference on Feb. 23, 2008. People attending the conference will vote on their favorite invention to choose the winner. Cash prizes will be awarded to first and second place. Even if you don’t have a good idea, but are looking for one, come and see these inventions on display.

Watch the Iowa Farmer Today for more news about the contest and prizes. Also, plan on attending the Ottumwa Cornbelt Cow-Calf Conference Feb. 23 to help choose the winner and pick up on ideas that you can use at home. Better yet, enter the contest with your invention. We are always looking for good ideas.

Fed cattle prices enter fall strong,

but weaken in October

Fed cattle prices entered the fall quite strong, but they weakened during October. Record pork and poultry production put ample supplies of meat proteins in the market. Small to negative packer margins limited bids, and record carcass weights and rising corn prices limited sellers’ leverage. Dressed prices fell from more than $149 in late September to less than $143 in late October.

Cattle on feed inventories were down 3.7 percent Oct. 1, with a 5.1-percent decline in steer inventories and 1.3 percent fewer heifers on feed compared to the year before. Summer placements were lower, but in-weights higher than the drought influenced placements in 2006. Through the first nine months of 2007, feedlots placed 4 percent more cattle weighing more than 700 pounds, but 13 percent fewer cattle weighing less than 600 pounds, compared to the same period in 2006. The heavier placement weight will likely result in heavier average slaughter weights. Because the reduced placements this summer were from light-weight cattle, don’t look for a marketing hole in the winter months.

Fewer cattle on feed should result in reduced beef production. However, steer and heifer carcass weights are at record levels going into the fall and should peak before Thanksgiving. Last year, due in large part to difficult weather and feedlot conditions across much of the feeding region, weights were lower than the previous year. It is doubtful that weather will be as harsh as it was last year, and weights likely will remain above year-earlier levels for much of 2008. Thus, supplies are forecast to be only slightly lower than 2007 levels.

Fed cattle and corn prices will factor heavily on yearling prices. Yearling prices are expected to be stronger this fall and winter compared to the year before. Likewise, calves are forecast to be a little higher this winter compared to last but should be similar prices for the year.

BEEF AND CATTLE TRADE
Beef exports have increased rapidly since the first quarter of 2004 when only 34 million pounds of beef were exported. This number increased to 363 million pounds by the second quarter of 2007. While this is 320 million per quarter below where we were in 2003, it took more than eight years (1995-2003) to grow exports by 330 million pounds per quarter.

Japan and South Korea, our first- and third-largest beef export markets in 2003, are buying a small fraction of their previous levels. In the first half of 2007, these two countries purchased 82 million pounds of U.S. beef compared to 740 million pounds during the first two quarters of 2003. There has been a lot of press about the restrictions on U.S. beef trade to Japan and South Korea. As these issues are resolved, these markets will begin to rebuild. However, it will take time to reach their levels from 2003, before the first U.S. case of bovine spongiform encephalopathy (BSE) was discovered. Mexico, our second-largest export customer, and Canada, our fourth-largest customer, have returned to their pre-BSE levels of U.S. beef purchases. The weaker U.S. dollar in relation to some currencies should help exports, but it will take a breakthrough in Japan and South Korea to significantly increase beef exports.

Beef imports have been relatively stable since 2003. Australia and Canada were the two largest beef importers during the first half of 2007. When comparing the first half of 2007 to the first half of 2003, imports from Australia and New Zealand are down 20 percent and 16 percent, respectively, as these countries have shifted more product into the void left by the U.S. Imports from Canada to the U.S. were up 1 percent during this period. Imports from Uruguay increased dramatically — raising by more than 200 million pounds in the first half of 2007 from its FMD restricted trade in 2003.

Canadian fed cattle for slaughter and feeder cattle have been imported since July 2005.  Imports of Canadian feeder cattle from January through Oct. 20 were 49 percent more, or 119,000 head, than the same period in 2006. Slaughter cattle imports were 14 percent, or 76,000 head, higher than during the same time frame. Record-high wheat prices and near record barley prices limit what Canadian feedlots can pay for feeder cattle, therefore making U.S. bids more attractive.

The Canadian border is expected to open Nov. 19 for cattle born after March 1, 1999, and for beef from cattle older than 30 months of age. Dentition may be used for some live cattle, but actual birth records will be needed for others, limiting the potential number that will be eligible. Possible implications of resumed trade include: larger imports of trimmings competing with imports from Uruguay, Australia and New Zealand; more cows for slaughter, pressuring cull prices; and more dairy replacement heifers.

Canada has reduced its cattle herd during the BSE problems. Since July 2002, before the first discovery in May 2003, total cattle numbers have declined 2.3 percent. Beef cow inventory is up 0.6 percent, or about 27,000 head, but beef replacement heifer inventory is 23-percent lower than five years ago. Time will tell whether resumed trade with Canada for older than 30-month cattle and beef will impact U.S. prices. The U.S. Department of Agriculture’s economic analysis indicated it would have little effect. U.S. producers should watch this development and consider marketing cull cows at another time. Historically, November is the seasonal low for cull cows, and the potential for more cows from Canada will not help the bid.

To view other previous columns, click here.

I Back to Column Archives I

Copyright © 2008 I Nondiscrimination and Information Disclosures