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INSIDE WLJ SHORTAGE SHORTAGE—The quantity of beef available to consumers in the U.S. has declined a startling amount in recent years, and that trend is going to continue. Unfortunately, even higher retail beef prices can be expected for consumers, said Chris Hurt, a Purdue University Extension economist. Page 4 WILLIAMSON ACT ACT—After months of uncertainty, a bill signed by Gov. Brown last week reinstates a revised Williamson Act program intended to preserve the state’s landmark farmland-conservation law. Brown signed Assembly Bill 1265 by Assemblyman Jim Nielsen, R-Gerber, which establishes the revised form of the Williamson Act through 2016. Page 7
August 1, 2011 • Vol. 90, No. 43
A Crow Publication
U.S. cattle herd declines further to 100 million head The U.S. semi-annual cattle inventory report released July 22 by USDA’s National Agricultural Statistics Service (NASS) confirmed what many industry analysts had been predicting for months; the U.S. cowherd continues to shrink and there is little likelihood the trend will reverse this year. The ongoing drought in the southern half of the U.S. has sent many cows to packing plants during the first half of the year and, in many cases, calves have also been sold earlier than normal as cattlemen cope with the dry
conditions. According to the NASS report, the U.S. cattle inventory fell 1 percent from July 1, 2010, falling to 100 million head. Beef cow numbers were down 1 percent from last July, reaching 31.4 million head. Dairy cows also declined 1 percent to 9.2 million head during the period. Although there are plenty of signs pointing toward the need for herd expansion in the beef industry, there are also several factors holding back growth. Along with the rising cost of inputs, regula-
tory concerns are adding to the problems created by drought and cattle producers are showing little willingness to add to their herds. The high prices being offered for feeder cattle is also a likely factor in the lack of herd growth as heifers are sold to capture the value rather than being retained in herds. Replacement heifer numbers dropped to 4.2 million head, down 5 percent from the prior July 1 report. It seems likely that further liquidation may continue for much of the year, particularly now that
many crops in the southern Plains have failed and hay prices are moving higher across the country. Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel said last week that Oklahoma combined totals for federally reported auctions over the prior two weeks have shown a 56 percent increase in feeder cattle sales and a 205 percent increase in cow and bull sales compared to the same period one year ago. “The auction totals include significant numbers of double-stocked See Inventory on page 15
CORN STOCKS—The STOCKS July USDA Crop Production and World Agricultural Supply and Demand Estimates reports put corn ending stocks below trade expectations, allowing the corn market to recover from overnight losses and post solid gains last Tuesday morning. Page 11 COMMODITY PRICES PRICES—While the American consumers have been the primary force in the markets in the past, they are now being supplanted by Chinese consumers. And, while American farmers have worked long hours to build markets for their products, the ethanol success story has also become a driving force beyond consumers and livestock. Page 14 INDEX Beef Bits ............................... P - 3 Markets ............................... P - 10 Classifieds .......................... P - 12 Sale Calendar ..................... P - 15 Weekly Forward Contract Slaughter Volume
LIVE STEERS DRESSED STEERS CME FEEDER $107.00 $171.00 $134.36 WEEK ENDING: 7-28-11
Photo courtesy of Texas AgriLife Extension Agency.
Water can be too Fed cattle trade steady despite much of a good thing lackluster domestic demand
As Texas experiences one if its worst droughts on record, the Texas Veterinary Medical Diagnostic Lab (TVMDL) in Amarillo, TX, is reporting increased numbers of cattle dying from water intoxication. Although rare, water intoxication occurs when cattle over-drink, usually following a period of water deprivation. It can produce acute death in a majority of cases. “This year we are getting feedback from the field of an increase in the number of water intoxication deaths in cattle versus the one or two cases that normally occur per year,” said Dr. Robert Sprowls, veterinarian at TVMDL. “Climatic conditions in 2011 with intense
heat, low humidity and minimal moisture content in forage have contributed to this situation.” Natural sources of water are diminishing across the state, forcing producers to haul water or move their livestock this summer. In addition to extreme drought conditions, Texas has been dealing with steady high heat. These two factors combine causing decreased moisture content in plants. “Cattle normally receive a portion of their daily water requirements from grazed forage which rehydrates them while grazing pastures or range. An average cow grazing green forage consumes about 3.5-8.4 gallons of water See Water on page 9
NEWS:
Time Sensitive Priority Handling
Placements exceed expectations The drought is forcing cow liquidation in the southern Plains, and it’s also pushing calves and lightweight feeder cattle into feedlots, according to USDA’s July cattle on feed report. The National Agricultural Statistics Service (NASS) reported that the number of cattle on feed in feedlots of 1,000 head or more in the U.S. rose 4 percent to 10.5 million head. The report had a mildly bearish impact on the market last week as the number of cattle on feed and the number of cattle placed into feedlots during June came in larger than pre-report estimates. Placements of cattle reached 1.7 million head, up 4 percent from June 2010. The increase was
largely blamed on the drought in the south which has depleted pastures and other feed resources, forcing heavy culling and herd liquidation across the southern third of the country. Chicago Mercantile Exchange analysts Steve Meyer and Len Steiner noted last week that the placement number exceeded prereport expectations by a wide margin. Analysts had predicted that, on average, placements for the month of June would fall 6.6 percent. “Our contacts indicate that the extra placements are coming from late fall and early spring calves for which there simply is little grass on which to graze from New See Cattle on feed page 8
There was some early light trade last week that appeared to be setting the tone for the fed cattle markets. In Kansas, live cattle were trading in low numbers at $107 live at midday last Thursday. In the Corn Belt, early dressed trade was reported at $170. Although the volume was light, it was expected that most of the week’s trade would fall close to those levels, which were steady with the previous week’s action. Packers were said to be a little light on their inventory of cattle last week and although they have been cutting back on production slightly, there was a need for them to procure some inventory to fill orders placed in early July. Market analyst Troy Vetterkind said last week that he expected at least steady money for the week’s trade as a result. “I imagine that packers will move bids close to steady money with last week to at least get some inventory bought to start next week’s kill,” he noted. However, he also pointed out that packers were likely to remain a little cautious about how high they would bid cattle as a result of the continued slow movement of beef in the domestic retail sector. Despite sluggish movement in the U.S. market, beef prices remain very good and some of that is a result of continued strength in the export channels. Although export sales last week slipped back from the large movement of the previous week, they were still respectable. USDA reported sales last week of 18,100 metric tons, with Mexico emerging as the largest buyer, taking 5,100 metric tons. Canada was a close second with purchases equaling 3,200 metric tons and South Korea and Vietnam made purchases of 2,700 metric tons each. The demand from the export market has helped keep beef cutout prices elevated in recent weeks as the domestic demand tapered off slightly due to hot summer weather in the U.S. At midday last Thursday, Choice boxed beef was down 29 cents at $175.44 while Select was off 20 cents at $170.20 on moderate volume. Vetterkind reported that middle meat markets remain a little soft while the end meats are receiving significant support from the export trade. He also reported last week that the large volume of cows being shipped to slaughter is causing some pressure on cow beef markets. However, he expects that the supply will fall again once this big push of cows to market in the southern Plains is over. At the present time, cows from southern Kansas to Texas and east across the U.S. to the Carolinas are being sold in high numbers to alleviate the pressure of drought which is hammering herds in the region. However, Vetterkind noted last week that some of the volume may be easing slightly and as a result, trucks have become more readily available. Shipping has been a concern among buyers in the See Market on page 11