Mexico buffoons cave again

I was out of town, and didn't get to post last Friday, when Mexico pols drove beef futures at the Chicago Mercantile Exchange into the ground with a transparently political, phony banning of U.S. beef imports due to alleged failures in Country-of-Origin labeling regs.

Anyone with even the vaguest, most shallow, rudimentary knowledge of Mexico trade machinations, could see through this one a mile away. Everyone, that is, except the traders at the Merc, who were salivating at the opportunity to harvest some quick trading commissions at the expense of U.S. cattlemen.

Mexico has already caved, three days later, allowing imports back in from 21 of the 30 U.S. beef plants it banned imports from. The others will be approved shortly. What a farce!

It happens with Mexico all the time, and was definitely of the "ho hum, so what?" category. As the events a mere 72 hours later have proven, this was just one more dalliance by the tinhorn pols in Mexico, taking great delight in kicking sand in the face of the big United States of America.

We could all have a good laugh at Mexico's expense, if it hadn't been so costly for U.S. producers. The Merc peeled a chunk off futures contracts, which naturally spilled over into the cash cattle market. Some of the loss has been restored, as traders sought to earn even more commissions by driving prices back up to where they belong--once the ruse was uncovered.

The stench of the rot and decay at the Merc, and its stranglehold over U.S. cattle prices, is overpowering and cries out for reform. Don't hold your breath, though, with a Democratic president from Illinois who took big campaign contributions from the Merc, voted their way in the Senate, and will most likely leave everything just the way it is.

Foolish consistency to resurface

Disgraced, corrupted Democratic Gov. Rod Blagojevich of Illinois, caught on wiretaps brokering President-elect Obama's Senate seat for campaign contributions, has just put his party in a vice--and particularly U.S. Senate Majority Leader Harry Reid, who said the party will never seat a Senator appointed by Blago.

He named former Illinois Attorney General Roland Burris, 71, to the seat. A revered figure in Illinois Democratic politics and trailblazing black officeholder, the Democrats will look terrible if they disallow the appointment of their body's only black member. They will also look terrible if they go back on their word, and seat a Blago nominee.

The problem is that the wheels of justice grind slowly, if at all, in Illinois and at the rate the legislature is moving to impeach and try Blago for his many crimes, it could be March or April before he's out of office. Then the Lt. Governor would take over and appoint a Senator. With the theft of a Minnesota Senate seat for comedian Al Franken likely to come up for a vote, the Democrats need the seat from Illinois filled as soon as possible.

Many members of the legislature in Illinois are bound up in Blago's transgressions, and as beholden as Blago is, to the Chicago Daily machine. They clearly see the truth of the scripture: "There, but for the grace of God, goeth I." Many would look like total hypocrites to impeach and convict Blago, but carry on their own transgressions.

The face-saving way out is to pass a bill setting up a special election, which Blago has said he will sign. Democrats in Washington hate this alternative, because in a single-shot election, given their total screwing up of the Senate seat, a Republican could well be elected to it.

Thoreau said "Foolish consistency is the hobglobin of little minds." This probably rings true to U.S. Senate Democrat ears, who are looking for a fig leaf to cover the acceptance of Roland Burris as the junior U.S. Senator from Illinois.

Some late, great Bush regs to fall

In the waning days of the George W. Bush administration, federal agencies are shelling out new regulations that are very favorable to ranchers and farmers, oil drillers and miners, as well as outdoor recreation buffs using motorized vehicles.

The real question would be, where have they been the last 8 years? Why is the pro-business Bush administration taking all these good actions at the last minute?

You can bet that the ones that Obama can overturn by executive order, will be quickly. It may take a little longer if they have to go through the same federal rule making process that Bush did, but you can bet that sharp-eyed environmentalists already have their strategy underway.

For instance, the CAFO air pollution regulations largely exempt cattle and hog feedlots, as well as grazing cattle on ranches, from federal air pollution regulations. This is only sensible and fair--so much so, that's ludicrous that federal bureaucrats even had to issue a rule. What is really driving enviros nuts is that motorized recreational vehicles such as ATVs are going to be allowed in national parks.

Other regs make it easier to drill for oil or mine shale on federal lands. This is badly needed, to ever have any hope of bringing America to energy independence. But that doesn't mean the enviros aren't apoplectic. They don't care that over 60% of Americans favor expanded drilling and mining for energy development. They've never supported the democratic principle of majority rule, so why start now?

It's fun to watch them squirm, but it's only for a season. The Obama administration will be coming on like gangbusters, and these rulings won't stand. You can count on it.

Obama ag appointments not too bad

If I were a member of the Democratic Party's left wing fringe, I would be livid. Only a handful of President-elect Obama's appointments to his cabinet and senior executive positions so far could be considered friendly. The gauzy leftist intellectual named as Energy Secretary, Michael Chu, is the only certifiable radical in the bunch.

Extremely mainstream Democrats, and moderate to liberal Republicans, comprise the cast. It would hard to pick out an appointment that wouldn't have fit in well with a Hillary Clinton administraton. In fact, all but a handful come straight out of husband Bill's team.

The two appointments most closely affecting agriculture certainly fit that description. Agriculture Secretary nominee, former Iowa Gov. Tom Vilsack, is an old Clinton hand who backed Hillary all the way, after he dropped out of the presidential race himself in the early going. He was the first guess made about a possible Ag Secretary, and as Iowa Governor, was right down the middle. Coming from a row crop farming state, with livestock on the side, Vilsack at least has knowledge of the business and was considered quite friendly to farmers and agribusiness.

Compared to former President Jimmy Carter's appointment of Carol Tucker Foreman to USDA, a radical consumer activist with no knowledge of production agriculture, Vilsack should be very little different his immediate predecessors on the Bush team. With a slumping economy, terrorist attacks and many other controversies on his plate, Vilsack and USDA will probably be fairly anonymous and quiet in the early days of the Obama term.

Colorado Sen. Ken Salazar as the Interior Secretary nominee greatly disappoints radical environmentalists. Coming from a farming and ranching family, even though a career government lawyer and bureaucrat himself, Salazar has fairly practical views on the use of public lands and environmental regulations. I'd have preferred his brother John, the Colorado congressman rumored to have become Ag Secretary, who is an actual hands-on farmer and rancher and more conservative than brother Ken.

Still, Ken Salazar, despite his goofy, ill-fitting cowboy hat, western suits and boots (He should go to a good western wear store, and let them dress him), is a westerner who understands the multiple-use concept on public lands. Not as moderate and non-partisan as he styles himself, Salazar is still a far cry from the environmentalist radical Obama might well have appointed.

Compared to what could have happened, production agriculture has thus far dodged a bullet.

It's Denver time again!

Once again, as Christmas approaches, that means the traditional beginning of the new Cattle Industry Year is about to begin: Denver's National Western Stock Show and Rodeo is right around the corner.

Beginning the second week of January, 2009, the National Western traditionally ushers in the new year in the cattle business. Always followed directly by first, the National Cattlemen's Beef Association annual convention--and the stock shows in Ft. Worth and then Houston--the die is usually cast for the rest of the year.

Denver is where the major players in the business gather first in the new year, each year. They'll see each other at the subsequent events, but the fresh, new wine comes out in Denver. The latest cattle styles are on display for the first time in the livestock shows, the latest industry chatter is still new at Denver time, and the prices that will carry over in the spring sales are first set in Denver.

They used to call the now defunct Mile High Kennel Club in Denver "the Big Store." The voter approval of casino gambling in the Colorado mountains drove the nails in the coffin of para-mutual dog and horse racing in the city, but the National Western has always been much more deserving of the Big Store designation anyway.

Not only the livestock on display and for sale, but the international power brokers who attend from 67 or more countries, come to Denver because that's where the first action is each year, where it all begins.

Read all about it in the Record Stockman's National Western Program Issue, enclosed as section two in this week's paper.

More importantly, in these challenging economic times, you don't want to miss being on the scene yourself, at the 2009 National Western, this year--of all years--to see the beef industry pull through one more time.

It will, and you certainly want to be a part, and not miss out on the fun.

Cattle profits will come

The Stock Market has overshadowed all else in the U.S. economy, so basic supply-and-demand fundamentals at work in industries like the cattle business are not currently reigning.

This is about to begin, in the next few weeks, because cattle supplies are very tight, and falling. Whether you're talking feeder cattle, calves or the shrinking U.S. cowherd--the numbers are all down, and falling.

U.S. and world beef demand may have leveled off some, but is still more than strong enough to support available beef supplies. Without the U.S. economic debacle, the beef industry was poised for a very good year, indeed. The ducks were in a row, and they still are.

As the U.S. adjusts and gets comfortable with the new economic math, and with the new Obama administration, the cattle business will return to basics.

And the basics are in line for several very good years in the cattle business.

I can hardly wait.

Declining to pardon a turkey

It may be the cattleman in me, or some would say the devil, but I would take great delight in this day: that when the turkey is presented to the president for a pre-Thanksgiving presidential pardon, he looks into the eye of the TV cameras and at the assembled press corps and says "This is a fine example of U.S. turkeydom, and we're looking forward to serving this bird on the White House table on Thanksgiving Day, and I want to thank this producer for this generous gift."

Gov. Sarah Palin of Alaska came close this year, when they slaughtered a turkey behind her, as she pardoned the ceremonial bird. Allegedly, she did not know what was going on around her, but I think she'd have been doing a real public service by pointing out that turkeys are grown to provide meat, and that the Alaskan industry humanely processes them for our enjoyment.

This same delusion, that somehow the president and governor are doing a great public deed by pardoning a single turkey, to return to live to a ripe old age on a farm somewhere. This is dishonest, and leads to many other fictions and allusions that continue to plague the meat animal industry to this day.

It is this same delusional thinking that has ended horse slaughter in the U.S. Horses are seen as pets, and the public is allowed to think that somehow horses live forever and certainly are never eaten. Try to make that go down in France and other countries, where horse meat is considered a delicacy and dietary necessity.

How much more healthy and real would it be, to openly admit that livestock are raised to provide protein and other essential life-giving nutrients to man--and to point out how humanely, sanitarily and wholesomely they are raised and processed into meat.

I'm not holding my breath, because I don't like to turn blue, for the day that a president or governor declines to pardon a turkey, and instead tells the truth. But what a great day that would be.

Energy development double-edged sword

A big recent story in the Wall Street Journal chronicles the travails of ranchers in the path of oil and gas drilling or other energy development sweeping across the Rocky Mountain and Plains states.

Ranchers frequently don't own all the mineral rights under their property. Even worse, the courts have ruled that surface holders, which includes ranchers, have to allow access to the owners of mineral rights to exploit them.

This means pastures criss-crossed by roads, gas lines and trucks coming and going without closing gates or watching out for livestock. Cattle have died drinking from ponds of polluted water that are a byproduct of gas drilling.

The income from oil and gas development is nice, if you happen to own a share of the minerals rights. You can come out ahead, if you're working with a conscientious oil company, just from the surface holders share and damage mitigation fees.

Energy development is, more often than not, incompatible with livestock production--and even in the best of circumstances, cuts into livestock profits. It is a judgement call whether or not the energy income offsets the livestock losses.

More and more cases are winding up in court, where so far the energy companies have largely won. However, environmentalists put in place by the incoming Obama administration in the federal agencies, and increasing numbers of Democrats in western state houses and congressional delegations, may soon be restoring some equilibrium to the situation.

The crying need for U.S. energy independence is coming face to face with the livestock and ranching business. There are tradeoffs that are different for each person, and only you can decide what's best for you.

U.S. economy driving cattle prices down

The U.S. financial collapse has overridden the fundamental soundness of the economics of the beef industry, leading to lower wholesale beef prices, lower cattle futures, and ultimately, lower cash cattle prices at both the feedlot and the sale barn.

Cattle numbers are well under control, and feedlots are very current. Despite the tough general economy, retail beef demand has stayed strong, and packers are able to sell all the beef they produce. U.S. beef exports continue to do well. Corn prices are down, as well as hay and other feed costs for the winter.

By all the normal indicators, it ought to be a great year for cattle prices and profits.

It's not turning out that way, and at the bottom of the pile is the cattle futures market.

It is a speculative crap shoot at best, and in an economy like this one, cattle futures just follow the Stock Market, which is down, down, down. I'm sure you're as impressed as I am at how the election of Barack Obama has straightened out the stock market, stabilized the economy, and brought the troops home from Iraq. Talk about instant action.

Just think how bad things would have been if John McCain had won.

That said, the cattle futures trade at the Chicago Mercantile Exchange is out of the control of cattlemen or other segments of the industry. As close as any cattle-connected people can come is the Big 3 packers and a few huge cattle feeders in the Texas-Oklahoma Panhandle. While they have on occasion combined to drive the futures up or down, even these power brokers in the cattle business are helpless right now.

In short, the ordinary cattleman is not immune to the worst economic crisis in our lifetime. We have our houses in order, but events beyond our control are swinging the dog. About the best cattlemen can do is hunker down, and weather the storm with everyone else.

It isn't just, but it's what is.

Obama Ag Secretary choice will say a lot

Speculation is rife in ag circles about who President-elect Obama will name as Agriculture Secretary.

It's not rife anywhere else, because in the Obama scheme of things, this is a very low priority appointment. The Secretaries of State and Treasury speak to the rest of the world, both our enemies and friends, so are early must-do's. Ag Secretary will be pretty far down the line.

The best we can hope for is some politician, like former Iowa Gov. Tom Vilsack, who briefly ran for president in 2004. Some one from a farm state, in touch with the production realities, will do the least damage. On the other hand, some special interest group zealot, like Carol Tucker Foreman was in the Carter administration, can be very harmful.

Obama would naturally lean to someone like Foreman. But politics, and the need to use up his best diehard soul mates in what he sees as higher priorities, could well let USDA slide to a career pol.

Farm policy needs a good shaking, restoring private enterprise with a lot fewer federal subsidies--particularly of things like ethanol production and food stamps. But this is philosophically opposite of Obama's bent, so it's a lot better to hope for the status quo than some radical, off-the-wall vegetarian, health food nut, New York City-style fast food fat zealot, or anti-bio crop bigot.

Things could be a lot better, if we had some free enterprise, free market conservative reforming agriculture. That's not going to happen in an Obama administration, so the best we can hope for is the doctor's Hippocratic Oath "First, do no harm . . ."

World should attack hunger, not global warming

It is probably a fore-drawn conclusion, with Obama as President and liberal Democrat's power strengthened in the U.S. Senate, that the Kyoto treaty will be ratified and vast billions of taxpayer money will be poured into fighting global warming.

Fully implemented, which hasn't and won't happen, the Kyoto accords would lower global warming by three one-hundredths of one degree.

The inconvenient truth is that global cooling is a far bigger threat, according to the most recent scientific data, along with world starvation from not developing agriculture sufficiently in poor countries to feed the teeming masses.

Writing in today's Wall Street Journal weekend edition, Danish scientist and intellectual Bjorn Lomborg points out that while Obama has pledged to spend $150 billion to fight global warming, the same money spent on direct malnutrition policies, immunization against preventable disease, and agricultural research and development, would return 15 to 20 times the good for the world's poor population.

The $150 billion spent on global warming mitigation would return 90 cents on the dollar, at best. Spent the other way, it will return at least 11 times the investment, in benefits.

Lomborg concludes "Change is definitely needed. Focusing on investment in malnutrition and disease could do enourmous good at low cost, brandishing a world where healthier and stronger human beings could take charge of their own lives and deal better with the many challenges of their futures."

The newly ascendant liberals in Washington seem hellbent on a costly "cap and trade" system to mitigate global climate change. It is merely an excuse to raise more billions for bureaucrats to spend. It will raise far more money than Americans would ever stand still for in direct tax increases.

Lomborg, instead, urges a different focus for the upcoming 2009 Copenhagen conference on global warming, that will actually make a difference.

Bet this is the only place you'll read about that.

Restaurant woes bad for beef business

Tight economic circumstances for many American families is giving the restaurant industry fits. Particularly hard hit are the middle market chains like Village Inn (in bankruptcy), Appleby's, Bennigan's (corporate locations shut down), Steak n' Ale (many locations shut down), etc. Raising more capital for expansion or at least remodeling, is crimped by the lack of bank liquidity and the U.S. economic crisis.

This is bad news for the beef industry, where well over 50% of the beef sold is through restaurants. Families are cooking more at home, and more downscale at that. That means more vegetarian meals, less expensive chicken and turkey, and more hamburger than steaks and roasts.

This is not altogether bad for the beef business though. Convenience still figures prominently into home cooking, as most wives work outside the home, and are too tired and time-pressed to cook elaborate meals when they get home. Ground beef is at the bottom of a lot of quick, easy, popular meals, be it hamburgers, Mexican food, Italian dishes, etc. Beef like pot roast also lends itself well to all-day cooking crock pot meals.

The well-conceived, famous study by food consultant Faith Popcorn identified consumer Chicken Fatigue, which shows that people grow tired of bland white meat, and eventually crave the texture and stronger flavor of red meat.

Thus far, consumer demand for beef, while showing signs of slowing, remains strong. Exports have continued to grow, taking up a lot of the slack in the domestic market. Exports, too, have slowed as the U.S. dollar strengthens against foreign currencies.

But cattle numbers are well under control, and cowherd expansion has stopped, according to the most recent statistics. This alone will keep cattle prices from falling completely out of bed.

The first two days of the post-election stock market has dropped nearly 1,000 points. Thus far the economy is not buying into the Obama phenomenon. But the beef industry, at least, seems to be well positioned to weather whatever economic storm the U.S. will continue to face.

Ag big election losers

It was well hidden by the Obama-fogged mass media, but Barack Obama is a big fan of far-left, anti-production-agriculture types, who have a totally unrealistic view of farm policy.

Obama uncritically accepted ideas from lefties that would destroy markets, limit food production and put agriculture in an environmentalist, vegetarian staightjacket that could leave the U.S. and the world without adequate food.

Obama's appointment of a Ag Secretary, and farm legislation sought in Congress, will tell an interesting story early in his presidency about his philosophy and priorities.

About the best we can hope for is that Obama will largely ignore agriculture and let the bureaucracy at USDA operate on auto pilot.

We could do much worse. At least they have a vested interest in keeping things like they are, untainted by bold new initiatives. Maybe that wouldn't be so bad, compared to the possible alternative.

First hard freeze hits farm areas

One of the seminal events of winter for farmers and ranchers has hit: the first hard freeze of winter.

In many areas, this means the winter grass has hardened, there is no more growth or maturation on the crops--so have to be gotten out of the ground with all haste, while they're still useable.

Many cattle buyers don't get serious about buying calves for winter feed until the first freeze. They know that ranchers then have to sell, as they're out of feed, and might get a better deal. It's a standard sign post every winter, and it's just happened.

Cash feeder cattle prices have dropped in the last month, due both to seasonal factors and the general economic crash. The good news is that they haven't dropped as much as cattle futures or as much as the Stock Market debacle and credit crunch indicated they might.

It has been a warm fall in most areas, allowing many of the late-maturing crops to finish and be harvested, and for ranchers to hang on to their calves longer than they are able to in many years.

As bad as it would be possible to think it is, for cattlemen and farmers, things look a lot brighter than you might expect.

Mass media finally discovers ethanol fraud

Belatedly, the mainstream press is discovering how the environmentalists who shoved Congress into subsidizing ethanol production as an alternative to imported oil, wrecking the U.S. food system and driving up prices.

No small part of the current U.S. economic crisis is the run-up in food prices, which can almost entirely be traced to ethanol production competing with food production for the U.S. corn crop. While corn prices have backed off now, they hit nearly $7 a bushel last spring, far above the usual $2-$3 price that undergirded the ability of soft drink manufacturers, baked goods producers and livestock producers to provide inexpensive food for U.S. consumers.

The disaster is about to get much worse, as ethanol producers have already started going broke in droves. As oil has dropped to $60 a barrel from its $150 summer high, and gas has plummeted well below $3 a gallon (It's $2.31 in my neighborhood tonight, with E-85 fuel from ethanol at $2.09), ethanol has become increasingly uneconomic.

E-85 gets about about 25% worse miles-per-gallon than gasoline does, so with only a 22-cent a gallon difference, gas is actually cheaper. Gasoline also burns hotter and gives better acceleration, so why would you buy ethanol at this little price difference?

Ethanol is subsidized by taxpayers to the tune of 58 cents a gallon, or it would cost at least $2.65 a gallon--way more than the present price of gas--for an inferior product. This is all coming unraveled, several ethanol companies have filed for bankruptcy already.

Food prices haven't dropped, as the mass media is finally pointing out, as manufacturers just take the cheaper corn price savings and put them in their pockets.

As they say--it's just starting to hit the fan.

Livestock like leftovers

Tonight, rather than go out and blow $10-$20 for dinner at a restaurant, I rummaged through the freezer and frig, and came up with enough chicken, peppers, mushrooms and onions to make a stir-fry, that actually wasn't too bad. It was all made out of stuff that had been there a long time, and was close to be being tossed.

That's how farmers and ranchers have to think about feeding their livestock in these volatile times. Corn stalks, beet tops and other leftovers after the harvest in the fields, work fine for cattle feed, and cost virtually nothing. Cattle like them, and while there is some soil nutrient value in plowing them under, its not enough to avoid fertilizer next year.

Of course, ranchers want to graze their pastures as long as they can before they are covered with snow, but then they have to look for others sources to feed until the pastures turn green again in the spring.

In a tough year like this one is turning out to be, buying hay or grain and hauling it in, can throw an operation so impossibly into the red that cattle prices can never be high enough to pay it out. These are the kinds of losses you never recover, and piled up year after year, can put you out of business.

It's easy to be a brilliant manager when livestock prices are high, the weather's good and grain's cheap. Your mettle is really tested in times like this, when it's all working against you.

Cattlemen can thank their lucky stars

Cattlemen can count their lucky stars that they sold fed cattle to the meat packers on Wednesday last week, before the Stock Market melted down on Thursday and Friday. Of course commodities, such as cattle futures, joined the meltdown at the Chicago Mercantile Exchange and grain futures at the Chicago Board of Trade, and later week trade would have been much lower.

As it was, many received $1 higher prices at $91 in the cash trade, after several weeks of dropping prices from a high of $99 about six weeks ago. The fundamentals of the cattle business are strong--cattle numbers well under control, grain costs dropping and consumer demand for beef still hanging in there. But some things are beyond the control of mere cattle producers, and all they can do is stand back and watch the broader world economy make a shambles out of their corner.

Once the Stock Market hits a bottom, and nobody knows when that will be, and prices begin to stabilize, profitability should return to cattle. All the economic indicators are strong. Even foreign beef sales have been climbing, although growth will slow as the U.S. dollar has gotten stronger against other currencies.

We can all mourn the overall U.S. and world economic collapse. But the cattle industry has great potential for coming back strong.

Blogger messes up posts--like the Stock Market

The idiots that run Blogger have eliminated the "publish post" button from the bottom of the posting form--so I've been unable to post anything for several days. If this one sneaks through, it'll be a miracle. I can't imagine running a service that stresses ease of participation and then, all of a sudden, making it infinitely more complicated. Oh well, the technical "mind . . ."

The topsy, turvy Stock Market continues to roil farm prices and agricultural markets. This is a major disaster for farmers and ranchers, many of whom are small businessmen and lack the resources to play with the Big Boys.

Particularly in the cattle business, the fundamentals are sound, with supply and demand in excellent balance. With grain prices way down, along
long with fuel prices, prices should be strong--if only Wall Street could get its act together.

Financial markets are expected to be a mess until at least after the election. We might as well fasten our seat belts, grit our teeth and enjoy it.

Food companies keep prices high

It has always burned farmer's shirts to see what a tiny percentage they get out of a loaf of bread or box of corn flakes at the supermarket. A $3-$4 loaf of bread at retail returns 30-40 cents to the farmer who raised the wheat to make it.

The percentage is even less on corn flakes and other grain-based products. Most of the expense is in marketing costs--designing, making and printing the box it comes in, producing and buying the radio and TV ads to sell it, and paying salesmen to go to the retail outlets and beg shelf space, paying spiffs if you will, from which to sell it to the consumer.

Second in the expense list is the factory and the union-scale workers who manufacture the product. The non-farm ingredients are more expensive that what small amount of wheat, corn, oats, etc. the product may contain.

So it is in these economic times, with commodity prices dropping like a rock, food companies haven't dropped the price of corn flakes, bread or oatmeal a single penny. Corn, for instance, is down from a high of $7.50 a bushel to about $3.67 a bushel. There have been no price cuts in corn flakes.

With tight budget times for the average homemaker, cutting expenses in the food segment has proved difficult, because prices haven't gone down. You can eat lower on the food chain, but prices haven't dropped.

You can only imagine the budget of the farmer who raised the corn, seeing his return drop from $7.50 to $3.67. That's where times are suddenly real tough.

Cattle prices--tail swinging the dog

Today's U.S. Department of Agriculture (USDA) cattle-on-feed report reaffirms what the numbers have shown all along: that the fundamentals of the cattle business are very strong, with the cattle population down, cattle-on-feed down, exports growing and beef demand steady.

The perfect formula for a strong, profitable period in the livestock industry. Right?

Wrong. Outside forces, with little to do with the cattle business, are in control, and about all cattlemen can do is sit back and watch what they're doing to us. The sub-prime mortgage crisis has morphed into an international financial disaster, dragging the Dow Jones and the Stock Market down with it.

Financial markets are roiled by uncertainty and loss, and want everybody to feel their pain. This has spilled over into the commodities business, where the speculators on Chicago Mercantile Exchange and the Chicago Board of Trade have used the Stock Market crisis to drive futures up and down, to generate all kinds of trading commissions.

The cash market for commodities like cattle and beef, sound on fundamentals, follow the futures--skewing prices and markets in all kinds gyrations that defy basic supply and demand economic principles.

About cattlemen can do is try to hold as many head off the market as they can, until things stabilize and go back to being guided by the supply and demand realities instead of spill-over emotion and outside forces. Those who are forced to deal in the present market are getting a haircut.

WTO blasts Europe on U.S. beef imports

For over 20 years, the European Economic Community (EC) has kept U.S. beef out of its member countries falsely, alleging that it contains growth-promoting hormones that are unhealthy for humans.

The U.S. has continuously fought the ban through the slow, laborious procedures of the World Trade Organization (WTO) and the World Court, winning at every turn, but just as continuously appealed by the EC, successfully keeping U.S. beef out.

This is a trade barrier to protect European farmers, who use stilbesterol--outlawed in the U.S.--to promote growth in their cattle. It is far more dangerous than the naturally-occuring vegetable substances used in the U.S. Beef in Europe is a by-product of the dairy industry. As most travelers to the continent will tell you, European beef is terrible. Tourist hotels are importing U.S. beef, due to popular demand from their customers, finding ways around the U.S. beef ban.

Now comes word that the WTO Appellate Body, acting on one of the EC's appeals, said the ban of U.S. beef has to be on the basis of science, not artificial trade barriers--all that the U.S. has asked for all along. A lifting of the ban is probably years away, even now, as the EC can thumb its nose at the WTO and World Court, as their judgements are largely unenforceable.

In addition to the hotel/restaurant trade, the U.S. heavily exported organ meats, such as hearts, livers, kidneys and tongues, to Europe, where such products are considered delicacies. In the U.S. they are largely considered offal, and wind up in cheap hamburger. They sold in quantity at much greater prices in Europe than is ever possible in the U.S. domestic market.

The WTO Appellate Body action is a ray of sunshine, encouraging--even if it doesn't represent any immediate change in the status quo. The U.S. beef industry has to "just keep on keepin' on" as the young folks say.

Ag policy it ain't, but ag must respond

A lot of things get dumped into the U.S. Department of Agriculture (USDA) besides things that have strictly to do with the propagation of crops and husbandry of animals. Over the decades, social welfare programs, foreign policy points and small town construction projects all fall under USDA purview.

One such program is school lunches. It probably began with farm programs that buy up excess production to keep farm income strong. To get rid of it, USDA started parceling out the surplus to school lunch rooms, military bases and government hospitals. Ultimately, as the social do-gooders decided to reform America's diet in the schools first, USDA wound up dead in the middle of who should pay for school lunches and who should get them free or at reduced rates.

This had led to all kinds of dictatorial policies about what can and cannot be served in the school lunch program. Lost in all the healthful mandates is "willl the kids eat it?" Salad and vegetables get thrown out in school lunchroom trash in droves, but the diet-health radicals pride themselves on having served them.

Now another Johnny-come-lately has proposed outlawing processed meats like bologna, hot dogs and Spam in the school lunch program. They ignore the protein, zinc, iron and B-complex vitamins that come from these meats. They scream "excess salt and nitrates," period. Many are vegetarians who wouldn't eat meat no matter what it contained, so are fine ones to talk.

These meats have been made a great deal more healthy in recent years, and with tight school lunch budgets, are one of the only ways many districts can afford to serve meat. It wouldn't matter if they were serving sirloin steak or poached chicken breasts--if it's meat, stamp it out.

New York City led the way in forcing fast food restaurants to cut out saturated fats in fried foods. Other liberal interventionist groups have followed suit, but been unsuccessful on a federal or state level. They don't care if its public preference, or the replacement tastes so bad sales drop. The socialists want to impose their vision of what's good on all of us.

That's why they're sneaking in the back door through the school lunch program.

Seen any COOL labels at the meat case?

October 1 was to be the deadline for implementation of Country of Origin Labeling (COOL) of meat packages in the grocery store meat cases. There are gaping holes in the law, and locally, no one has seen any labels.

One of those "hot damn, we oughta' do that" ideas that is better in theory than execution, COOL was hijacked by the food safety crowd, so meat can be traced back to its birth in case of a public health outbreak of something like BSE, listeria or E. Coli. Instead of benign labeling of meat packages, to gain an advantage for U.S. beef over its foreign competitors, COOL has turned into a bureaucratic, expensive and onerous burden for meat producers.

The rules are so unclear, cumbersome and full of loopholes, that you may not be seeing any COOL labels anytime soon.

For one thing, meat with multiple countries of origin does not have to be labeled. This applies to a big share of meat produced in this country. Cattle imported from Mexico or Canada into the U.S., or U.S. cattle shipped to one of those countries for processing and then the meat shipped back into the U.S.--are exempt. If one parent of a carcass follows this route, the meat is exempt.

There's also a gaping hole over whose responsibility it is to do it. A carcass, or primals, may be labeled, but when cut into retail size packages at the store--things fall apart.

We're being told its just the shake-down cruise, and we'll be seeing labels shortly.

Don't hold your breath.

Dow charge should rally farm prices

Today's record 936 point run-up in the Dow Jones industrial average, and comparable advances in Standard and Poors and the other indices, should spill over into ag commodity prices and lift some of the gloom from the nation's farmlands.

A rising tide lifts all boats, and now that the markets have finally bought into the U.S. and G-8 actions to bolster the world's credit and banking systems, it should rub off on livestock and grain prices.

Agriculture, for better or worse, is a credit-based, credit-dependent business. Lack of confidence in the banking system hits at its foundations quickly. A recessionary economy leads to reduced consumer spending, so the gloom leads commodity traders to drive down futures prices. This impacts the cash market, so farmers and ranchers take it in the pocketbook.

It remains to be seen whether this is a new trend or a one-day bounce, but is strong enough that it should signal a recovery of some magnitude. This is critical in the busy fall harvest, when livestock and crops are coming in out of the fields and on to the market. It's a once-a-year payday for many in agriculture, and a narrow window at that.

For the first time in two weeks, there is at least some reason for optimism.

Redoubling beef sales efforts in South Korea

The U.S. Meat Export Federation (MEF) has its executives, including head man Phil Seng, in South Korea, to redouble U.S. efforts to sell beef there. It has been a rocky road, with U.S. beef banned for two years due to alleged BSE contamination.

This itself is a farce, because South Korean domestic beef has far more exposure to BSE than any in the U.S. There have been only two BSE cases in the U.S., both in dairy cows imported from Canada

After heavy pressure from the Bush Administration, the South Korean government has very reluctantly opened its borders to U.S. beef again, with very severe restrictions. Despite that, all the beef that's jumped through the hoops has been snapped up and there is strong demand for more.

U.S. vegetarians and animal rights radicals funded professional South Korean demonstrators--quite common in Asian countries--to march and picket against U.S. beef. The pressure on the government nearly banned U.S. beef again, but the Bush Administration stood firm and it is still there.

It is against this backdrop that Seng and MEF are in South Korea, campaigning for U.S. beef. It is an old bromide of sales that it is easier to sell more to your best customers than to develop new ones from scratch. Before the badly-overblown U.S. BSE scare, Korea and Japan were huge U.S. beef export markets.

We can only hope that MEF's efforts restore this luster.

Here's another wild horse column

I've discovered that the greatest way to get hits on my ag blog is to expose the hypocrisy and stupidity of the "horses as pets" crowd. I wrote another blog a few days ago about the bottling up of a horse slaughter bill in a congressional committee until next year, and it brought them out of the wood work.

Anyone who dares question their carefully conceived defense of horses, and points out horses as the beasts of burden they are, gets blasted. Memories have faded of the pre-tractor days, when horses pulled wagons, plows and harvesting machines. To the days when men rode them across country or town out of necessity.

A good horse is a proud worker. Horses get wild and mean if they are not regularly trained and ridden. That's because it is what they were intended to do, and built for.

We don't eat horse meat in the U.S., but it is considered a delicacy in France and other countries.

To not open your eyes to the reality of the situation, denies credulity.

Irrational commodity markets sinking producers

Any reasonable reading of the fundamentals of supply and demand in the cattle business leads to the conclusion that prices should be at profitable levels, because there is a basic shortage of fed cattle coming out of the feedlot, and a shortage of yearling replacements to go back in the feedlot.

However, the plunge of the Stock Market has spilled over into commodities trading on the Chicago Mercantile Exchange and the Chicago Board of Trade, and futures prices have sunk like a rock. This has led the cash cattle market to be down $4-$10 on feeder cattle, and $3-$4 on fed cattle.

These are not unrealized, theoretical losses for cattle producers. They actually breed and own the cattle themselves, individually. They sell them once a year, in the fall, for their annual payday. The timing of this market crash is an unmitigated disaster for many farmers and ranchers.

Owners of retirement plans and 401Ks are urged to hang on, don't sell, and your retirement investment will come back when the market does. If you don't sell out, you've only suffered a theoretical, paper loss.

For ag producers, there is no hanging on. When the crop is ready to sell, be it grain or livestock, it has to go. Like the old saying of the grocery business goes "Sell it or smell it!"

Farmers and ranchers are taking their lumps as we speak, without any real alternative.

Can't blame ranchers for wind farm

One of the ugliest, and least productive, solutions to the "clean" energy problem is wind power. You can plaster the planet with wind farms, and they would not be capable of providing the electricity the world's population demands.

Wind farms are inefficient, with a very low return of energy for the dollars invested and the damage to the environment. They are only "clean" in the sense that they don't emit smoke or leave tailings. They kill birds who fly into the blades, are noisy and despoil whatever scenery is around them.

Nonetheless, for ranchers and farmers who live in isolated rural areas, they can be an economic godsend. As long as some "greenies" somewhere are willing to put up the investment capital and pay land rent to them, the state of agriculture today is such that farmers and ranchers have to take the money and run.

The crash in commodities futures prices on the Chicago Mercantile Exchange and the Chicago Board of Trade, only underscores the risky nature of farming and ranching. In addition to the fickle markets for their products, they still have to deal with the vagaries of weather, drought, weeds and pests--to say nothing of environmentalists. It is a tough way to make a living, and to have a steady source of income from wind power flashed to them looks like the Hope Diamond.

So it is that a group of ranchers in six counties in extreme northeastern Colorado have signed up with a Wind Power outfit for a large generating farm. It is a dank, windy area that is always risky for farming or cattle grazing--who can blame them for cashing in?

We can only hope the environmentalists will look so kindly when a truly efficient and environmentally-friendly solution to the clean energy problem comes forth--when one of these areas wants to host the building of a nuclear power plant. That will be a sight to see!

Horse slaughter bill bottled up

The main priority of Congress this fall is getting re-elected. They had to put in a few extra days to pass the bail-out bill, giving it the barest once-over, at best. They passed a bloated continuing resolution for the budget, good until next March. And then they left Washington for the campaign hustings.

Many bills were bottled up in committee or were the victims of other parliamentary sleight of hand. One such victim was yet another horse slaughter bill. It will resurface when Congress gets serious again next year, but for know, is buried in the legislative abyss.

It's just as well. No rational thought or discussion goes into the subject. The Horses as Pets crowd have scared enough solons witless, so rather than think rationally, they mindlessly do their bidding.

Western ranges are over run by wild horses, which are multiplying at breakneck speed. Official U.S. policy is that the wild horses have to rounded up and broken to become saddle horses. This is accomplished largely at prisons, and then the horses are available to the public.

There is a shortage of adoptees to start with, and those that do, quickly discover that the horses are not formerly wild. They still are. They last in their new homes a very short time, and then wind up at sale barns or horse rescue farms.

Ultimately, the horses formerly went to slaughter, and the carcassees shipped overseas to countries like France, where they eat horse meat. This was too much for the Horses as Pets crowd, so Congress has horse slaughter restricted and on hold for the moment.

The backlog of unwanted, but unresolved horses is piling up, waiting for something to happen.

Consumer spending drop bad sign for ag

The U.S. financial mess is buttoning pocketbooks nationwide. Americans are spending less on everything, including food, energy, travel, non-essential items like furniture and jewelry--you name it, and its down. They are hoarding cash at the moment, quite justifiable in light of recent banking and Wall Street stumbles.

This is an especially bad omen for agriculture, because so much of what people spend money on comes from the farm.

Food is the most obvious. People do have to eat, but they can eat much lower on the feeding chain, and do it at home instead of in restaurants. For higher valued products like beef, this could be very costly. This fear is being reflected in the commodity futures markets on the Chicago Mercantile Exchange and the Chicago Board of Trade. After a big crash most traders are referring to as Black Monday yesterday, only modest progress toward recovery was made today.

This current consumer spending trend is something of a self-fulfilling prophecy. As revenues drop at businesses, they cut employees and people who are out of work are forced to spend less. Backlogged, unsold inventory in stores and warehouses lead to layoffs and cuts in manufacturing activity--and less raw material is purchased from the farm.

The first line of defense to businesses facing this prospect is a bank line of credit, to tide them over until good times return. Banks are cutting back credit lines right and left. Businesses, including farms and ranches, lay off employees or close down altogether, in response.

Restoring the nation's banking system, as the bail-out attempts to do and the Federal Reserve and FDIC are moving to do, is certainly one of the needed steps.

To the extent that this restores consumer confidence--that's when the real recovery begins.

Big boys make the mess, little boys pay the price

Cattle have dropped like a rock during this last week at the local auction markets, off as much as $6-$10 over a two-week period. The downward trend continued today, at the bellweather Oklahoma City market.

Drying up the credit markets with ill-advised mortgage lending, pulling most of their money out of commodities markets like the Chicago Mercantile Exchange products--both have caused the record price drop. These were factors far outside the purview of the local farmer or rancher. He had nothing to do with causing it, and could not prevent it if he wanted to.

In simple supply-and-demand economics, cattle numbers are down and prices should be up.

And yet he is the one paying the price. The big strings of feeder cattle are being held off the market by their wealthy owners, waiting for things to get better. The little guy can't do this, because he doesn't have the feed to keep them, and having gone to the expense of hauling them to the sale barn, can't afford to take them home. The little guy is stuck with whatever price he gets that day.

Fall cattle sales represent a year's wages for many ranchers, and a price drop of this magnitude is an unmitigated disaster. There is no kinder or more socially acceptable way of putting it.

If you have the feed and capital, you can wait out a market crash like the present one. Most individual ranchers are not in that category. When you read of all the banks being bailed out by the government, taking two or three months to straighten out the credit markets--think of the little guy, who had his credit line halved, if he can renew it at all, because of the lost equity in the sale of his cattle.

That's who's paying the price.

COOL underway, enforcement unclear

September 30 brought Country of Origin Labeling (COOL) into play in meat marketing at the supermarket. It is a can of worms, and it's very unclear how it will affect either the industry or consumers.

COOL is one of those "hot damn" ideas that is great in concept, but very difficult in execution. Cattlemen justifiably believe that U.S. beef is a clearly superior product, and just putting their name on the label--as well as putting an inferior foreign name on beef from other countries--will greatly increase sales and decrease competition from imports.

If only it were that simple. For one thing, a lot of beef has more than one country of origin. Calves may have been imported from Mexico or Canada, but raised, fattened and slaughtered in this country. What label do you put on the beef?

For another thing, the feds and do-gooders have muddied the waters, so COOL is no longer just a marketing thing. BSE, E.-coli and other public health scares have bullied USDA into piggybacking on COOL to require all kinds of expensive paperwork to give beef traceability from birth to the dinner plate, to allegedly help root out disease in meat--and, of course (wink, nod), prove country of origin for the label.

What was a simple, clear marketing plan has become an expensive, onerous, bureaucratic tangle.

The law provides a $1,000 fine per occurance for violating COOL. That ought to make for some interesting court cases, as murky and muddled as the law and its enforcement has become.

First high country snow bad omen for crops

The corn and other grain harvest is behind, as the hurricanes, cool spring and early summer weather, and then later-than-usual summer rains, made the crops develop later.

This, in turn, has resulted in a late harvest, as the crops were just plain not ready at the normal time. This is fine, as long as fall is unusually warm and dry, which it largely has been to date.

However, major snow is forecast for tonight in the high Rocky Mountains, about 9,000 feet. It is then supposed to rain at the lower elevations, such as in Denver. This, in and of itself, is not damaging to the late harvest, but portends a more normal fall and oncoming winter. If the crops aren't out shortly, they aren't coming out.

The U.S. Department of Agriculture (USDA) has already cut its forecast for the grain crop harvest. The nation's financial crunch at first had a flight of capital into commodity markets, insulating them from the first stock market crash. When full-fledged panic set in, the money fled everything, including the commodities, so grain futures are down. The expected late harvest and lower USDA forecast played into that, but it was largely the mortgage crisis that ultimately drove commodities in the tank.

As the stock market showed Friday, the bail-out isn't going to spark an immediate turnaround. The same is probably true for commodity prices like corn and soybeans, which tend to go lower when the actual crop hits the grain bin, rail cars and elevators. Bad weather keeping the crop from even being harvested, on top of it all, is a bad omen.

Markets turn on Bush bail-out signature

The head-long congressional and presidential rush to get a bail-out bill passed and signed has borne fruit, but Wall Street failed Friday to go along.

High unemployment data, and the realization that the bureaucracy could take months to actually implement the bail-out bill, trumped Bush and Congress once again--and the Dow Jones on Friday fell like a rock.

The commodities markets, including cattle futures, did recover modestly, unlike the Dow. But it was far from a triumphant turn-around. Sort of a whimper that they had overdone things Thursday.

The real problem was that many people have sold cattle and crops based on Black Thursday pricing. The mild Friday recovery was too little, too late for producers who sell a perishable product that has to go to market when its ready. Market timing might work on the stock market, but not for live animals on the scene at the sale barn or crops ripening by the hour.

This great media-spun panacea has so far failed to catch fire. Wet logs, lack of lighter fluid.

Maybe Monday will bring some recovery. Farmers and ranchers are eagerly waiting.

Cattle overcome by outside economic factors

Another crash in the Stock Market today, despite yesterday's easy Senate passage of the bail-out bill, took cattle cash and futures trade into the tank.

Futures were massively lower, with January live cattle down the limit and other months sharply lower. This followed much lower cash cattle trade in all areas. Which came first, the chicken or the egg?

Fed cattle, both live and dressed, sold $3-$4 lower, although trade volume was low and some cattle could sell at higher prices Friday, traders said.

In truth, factors beyond the control of either futures traders or cattlemen, finally caught up with cattle prices. The credit crunch and lack of liquidity is undoubtedly limiting buyers of cattle, who notoriously operate on borrowed money. When you can't borrow, you can't bid and buy.

The Black Thursday for the cattle business sets up a likely Rally Friday scenario, as most such crashes are overdone, and there are bargains to be bought, as well as cash on the sidelines, waiting for the smoke to clear.

The conventional wisdom is that the 348-point Stock Market crash was a shot across the bow of the U.S. House of Representatives, warning them that they must pass the Senate's bail-out bill. It only takes a swing of 12 votes in the House for that to happen. It is likely because of sweetening up the Senate bill with an extension of tax credits and increasing federal deposit insurance from $100,000 to $250,000 per account, among other things.

The cattle industry could certainly take a little of that.

Ag commodities dive, recover, with stocks.

Farmers and ranchers are not immune to the stock market crash and recovery. Monday was truly Black Monday for owners of livestock or grain crops, as the futures market crashed and drove cash prices through the floor.

This time of year, many farms and ranches get their annual income in one week, from the sale of their calf crop or grain crop. A precipitous drop like Monday's, over which they have no control, is a disaster.

If you own stocks and bonds, you only took the hit if you sold them. As a farmer and rancher, if your crop came to market Monday, you took the full hit. Even if it were possible to pull it back off the market--which is tough, since you've already paid to ship it for sale that day--you incur substantial costs.

Commodities recovered somewhat Tuesday, just like the Stock Market did. But that was too late for many hapless farmers and ranchers. The Big Boys on the Chicago Mercantile Exchange and the Chicago Board of Trade, where most commodities trade, only theoretically lost money Monday, and probably even made money from buying newly cheap contracts at the bottom Monday and selling them at a substantial profit Tuesday.

If you own actual, existing cattle or grain on the ground, you can't practically do that. You take the hit, and hopefully have enough left to move on. Such is the lot of the family farmer or rancher.

U.S. beef still the preferred world choice

Tonight I ate dinner with a visiting missionary from Thailand, and took him to a medium-range U.S. steakhouse. It was sure all right, but definitely not in the Morton's, Ruth's Chris or Capitol Grille class.

We were just getting acquainted, and before he found out the breadth of my experience in the beef business, he proceeded to regale me with how one of his favorite benefits in visiting the U.S. is the beef. He travels the world, particularly Asia, but says he cannot beat beef in the U.S., especially for the price.

A good U.S. beef steak in Thailand, if you can find one, is very pricey. My daughter lives there, and I went there for Christmas to see her. We always have Prime Rib for Christmas dinner, and she wanted to continue that tradition. It was costly for a U.S. meal of imported U.S. beef, but worth it. Not having eaten U.S. beef for a year, my daughter was doubly impressed. But at some $40 a piece in Thailand, you sure wouldn't do it very often.

We in the U.S. beef industry trumpet these facts all the time, but sometimes we forget how consumers from other countries feel about our beef.

I was reminded tonight, and we must not forget that we do produce a vaunted and valued product. We must not let our guard down. Then we will surely continue to profit from foreign marketing. Definitely, the market is there and U.S. beef is the first choice.

Europeans slowly thaw toward U.S. beef

The hypocritical trade barriers to importing U.S. beef are slowly falling in Europe.

Major tourist hotels that cater to Americans are demanding better beef than the used dairy cows slaughtered in Europe for that purpose. A small amount of U.S. beef is quietly making its way onto the continent for the hotel restaurant trade.

The World Court has knocked down all the defenses Europe keeps throwing up to keep U.S. beef out and protect its farmers. Europe was the King of BSE a few years ago, and killed tens of thousands of cattle in an attempt to eradicate it. The two cases in the U.S., both in dairy cows imported from Canada, so pale by comparison, that this cannot be credibly used as an excuse.

The U.S. has much stiffer regulations on growth promotants in calves than the Europeans themselves do, so this one doesn't hold water either. What beef is being allowed in is all-natural, with no hormones or antibiotics used in raising it. Independent tests done on European beef show high levels of stilbesterol, the most dangerous and least used of the growth stimulants.

It is glacial progress at best, but encouraging to U.S. cattlemen, nonetheless.

Cattle carcasses gum up hurricane recovery

No one has an accurate count of how many cattle were lost in Texas and Louisiana in the Hurricane Ike debacle, but estimates are as high as 50,000 head.

What is known, is that as the water recedes in the affected areas, the dead cattle carcasses are rotting and polluting streams and drinking water--becoming a major public health menace.

It took longer than expected for the water to recede in many areas, so the decay of dead animals got a head start on the clean-up workers--becoming a real problem now. Quite properly, the focus has been on restoring electric power and safe drinking water too, so the rotting carcasses took a back seat.

It is doubly painful for cattlemen, because of not only the cost of losing substantial portions of their herd, but now the clean-up of their ranches and repair of fences and grazing.

The cattle that are alive are frequently far from home, as they took grazing anywhere they could get it, with no fences to stop them.

It is hard to look a trashed-out rancher in the eye, who has lost all or part of his herd to the hurricane, and make him see anything good that comes out of the carnage. But from a national beef industry perspective, the severe losses of mother cows do help keep overall cattle numbers in check and cattle prices higher.

It's hard to see, in the face of such devastation, but there is a minor silver lining in the cloud.

Ag a credit-based business, liquidity squeeze real

For the average American, the inability of banks to make loans due to a lack of liquidity is more of a concept than a reality.

Unless you're on the cusp of buying a home, getting a student loan or need a second mortgage to finance your business or bail out a debt situation, you're largely unaffected.

For the average farmer or rancher, it is not a concept. Most get a loan at the bank each year to finance putting a crop in the ground or buy bulls to breed cows, as well as provide a paycheck to keep the family going, Once a year, when the crop or calves are sold, they pay off the loan and hopefully have a little profit left over.

Most small businesses operate this way. They are seasonal, in one way or another, and use credit to tide them over the down times. When banks don't have money to lend, they are up a tree. Some can figure out how to scrape by, borrowing from Peter to pay Paul, but many can't.

Their liquidity crisis is just as real--maybe more so--than the big boys. A few might get help, if drought or hurricanes can qualify them for low interest loans from the U.S. Department of Agriculture. This could tide some over, but for the majority that finance each year with the local bank, it could be tough times indeed.

Financial crisis blowback, numbers sink cattle

Fall is always a challenging time for cattle prices, as the big numbers of calves come to the market from summer grazing. Its a supply-and-demand situation, and as the supply increases, demand doesn't always keep up.

It's even more challenging this fall, as the nation's financial crisis of failed home mortgages, Wall Street bail-outs and blowhard politicians cause people with money to grow more conservative by the hour, hanging on for dear life. At the cattle auctions this week, many buyers were on the sidelines, waiting for things to sort out. Feeder cattle were $2-$4 lower, fed cattle were only steady when they should be going up in the face of tight supplies--and even cull cows and bulls were lower.

It is easy to yawn, and say "so what?" if you're not affected. But for many farmers and ranchers, this is their annual payday, that won't come around again until next fall.

The market is being ruled by panic, speculation and fear rather than cattle industry fundamentals, which are sound. Supplies are tight, both in slaughter-ready cattle in the feedlots and the numbers of calves and yearlings available to restock them. Fundamentals would dictate that prices would stay strong, and maybe even go up.

But external forces beyond the control of the individual cattleman, and even the whole industry collectively, are calling the shots and costing the industry money.

Raising cattle is a risky business at best, what with weather, disease and balky markets to contend with. You're prepared for those, and even expect them.

But a Wall Street crisis percolating down to the ranch gate? Who'd a thunk it?

Cattlemen not baffled by Google "discovery"

Those ubiquitous spies from the heavens, relentlessly staring down at us 24 hours a day by satellite--Google and Map Quest, among others--thought they'd discovered groundbreaking new scientific truth, when they observed that cattle out grazing always face north to south.

This has been repeatedly publicized by the popular media like the 7th Wonder of the World. If they only knew.

They were sure that it was the magnetism of the earth's core, or some supernatural revelation beamed directly into cow's brains that made them line up this way.

Well, cattlemen do know. More than one veteran rancher I've talked to said it's very simple. The prevailing winds blow most often from north to south. By lining up with the wind, cows keep flies off, and rain or snow pass them by. They are not fighting the wind, but using it.

A veteran, old-time pilot told me that they have always navigated their "string and baling wire" single engine plane by watching how the cows down below were lined up. and selecting their direction accordingly.

There you go. The latest high tech doesn't always expand knowledge. Sometimes, it needs to acquire some.

Fall work underway on the ranch

There's no doubt what's going on at the average American ranch this week and last. You don't even have to call and ask.

It's one of the busiest weeks of the year, a demanding and important time for the economic health of the business side of the ranching enterprise.

The grazing season is over on public lands, which are leased for a specified number of days of grazing each year. When the time is up, it's up. The cattle have to come home, where there isn't enough feed to keep them all very long. Important decisions must be made quickly.

If the calves aren't weaned from their mothers, that must be done. In any case, they must be evaluated, deciding which females are worth keeping in the herd as cows, and if there any steers that should be marketed as show or club calves. The rest of the calf crop is either already sold on the summer video events and must be shipped by the agreed-on date, or ready to sell at the local sale barn or to an order buyer representing a stocker or feeder buyer.

The cows must be preg-checked, and the open ones culled. The number of these will influence how many heifers will be kept out of the calf crop. It is a crucial economic decision, as an open cow means no calf to sell for cash. This is very expensive. The factory didn't produce.

This fall is the major payday for most ranchers. There's little dibs and drabs of income here and there, from selling feed and cull cattle, but marketing the calf crop each year is the major source of a year's earnings.

Yes, it's an important week, out on the ranch.

City folks get used to it: ag's been bailed out for years

Those primarily from the Right, who are decrying the $700 billion federal bailout proposed by President Bush for bad mortgage loans, need to talk to their rural brothers: this is nothing new, with primarily drought or excessive moisture as an excuse, low interest loans and outright grants have been funneled to farmers and ranchers for decades.

Subsidies on crops like peanuts, tobacco and cotton, as well as corn, wheat, oats and barley--have repeatedly distorted free markets, leading to all kinds of twisted and contorted results. Corn subsidies are the most obvious ag subsidy to convolute the market: such federal largesse is why ethanol from corn ever made sense in the first place, and why corn in recent years has jumped from a dollar or two a bushel to over $7--with consumers paying the bill in high gas and food prices.

Peanuts and tobacco are marginal crops, kept in business by federal acreage allotments and subsidies. That why these products are so expensive on the consumer market, and you have the odd spectacle of the government subsidizing farmers to grow them on one hand, and spending lavishly to urge consumers not to buy them on the other.

We don't know yet how the markets will react to the federal bailout of bad mortgage loans. But almost certainly, some market distorting effects will result.

The economists Chuck Murray and George Gilder have written "that whatever you subsidize, you get more of." They were referring to welfare, and its bad effects on work, personal responsibility, character and morals.

Presumably, just as in agriculture, we'll see more lenders that need bailing out from under bad loans, rather than fewer--and more lax lending standards, once its clear the government will save you from yourself.

Farmers are a great example.

The more things change . . .

Despite all the smoke and mirrors, hue and cry--financial markets ended the week right where they started.

After a stirring 370 point rally Friday, and a couple of hundred the day before, the stock market closed at roughly the same level it had opened on the previous Monday. Fed cattle sold steady with the previous week, at $99 live and $154 dressed.

All the hand wringing and finger pointing by the politicians, who are meeting in smoke-filed rooms in Washington D.C. over this weekend in emergency session to craft a bail-out bill for the nation's economy, it's all pretty much where it started. Last weekend featured the bailout of AIG and Merrill Lynch, and the refusal to bail out Lehman Brothers. Then came the raising of some $200 billion in short term liquidity loans from the world's reserve banks to ordinary bankers.

None of this seemed to be good enough, and after Thursday meetings of Congressional leaders with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke--from which reportedly people like House Finance Committee Chairman Barney Frank, Speaker Nancy Pelosi and Senate Majority Leader Harry Reid emerged "ashen faced," Congress supposedly is set to pass yet another massive bipartisan bail-out bill before they adjourn for the really crucial fall campaigning break at the end of next week.

The nation is running out of "emotional on-edgeness" and is starting to accept crisis as normal and usual. The gut-wrenchingly overly dramatic is only that way if you let it be--and the public is started to be innurred and seared to the point of numbness.

Cattlemen and farmers face risk and crisis almost every day, by way of weather, pestilence, fickle markets and the folly of politicians. They take it in stride and move on. They have a unique perspective and ability to digest the day's events without panic or breathlessness.

If only the press and politicians could adopt some of that.

Corn suddenly not so rosy

It was thought in the spring, when planting corn, that it was like sewing gold into the soil. Corn futures approached $7 a bushel, and food prices soared as corn refiners hiked the prices for sweeteners and thickeners used in the food processing industry for things like soda pop and baked goods.

The folly of futures trading has played out once again, as the reality of actual corn being harvested by real farmers driving real tractors and combines, on real land--plays out.

Early season cold weather and drought stunted early corn growth, so the crop is smaller, some 8% by U.S. Department of Agriculture guesses, as well as later in maturing. The harvest could be delayed 1-3 weeks in many areas, maybe even bumping up against an early freeze and really decimating the crop.

Now corn futures have dropped like a rock, as have cash prices for corn. It is suddenly not so daunting to feed corn to livestock, and as an input for ethanol, a more affordable commodity.

Even the corn farmer is still due to receive a profitable price for his corn.

Just not the windfall he expected in the spring. Reality trumps dreams and guesses every time.

Wall Street mess hits commodities hard

America's ranchers and farmers have a strong, if unintended, tie to the financial markets. Even if they don't actively and personally participate, the outcome of the prices they receive for their crops and meat animal production is determined there.

We're speaking, of course, of futures trading on the Chicago Mercantile Exchange and the Chicago Board of Trade, where contracts in most commodities are traded, including hogs and cattle, poultry, grains, lumber and other products. Many farmers and ranchers intensely dislike futures trading and its effect on their markets--but it is nonetheless a reality that they have to live with.

Starting last winter, and on into this spring, as stocks and bonds whipsawed every which way, investors took refuge in commodities, feeling they were safer, as they were theoretically backed by actual assets, such as livestock, grain in the bin or field, etc. This alleged safety is questionable, but for those holding secondary paper backed by sub-prime mortgages rapidly spiraling into foreclosure, they thought the commodities markets looked real good.

This resulted in a pretty good burble in commodity prices, with lots of speculators suddenly entering the market, willing to buy the other side of contracts on cattle, hogs, etc. put out as "hedges" by owners of the underlying commodity.

The chickens came home to roost this week, as investment funds liquidated their futures contracts and prices plunged. Corn futures dropped the most, probably because they had attracted the most outside investment due to ethanol. Livestock felt it too, with prices down $1-$2 today on Merc, when the more normal move is a few cents per day.

It falls back to the old saw that whatever goes up must come down. Now that the futures markets are back to mainly agricultural owners, with the speculator money evaporating or chasing a new dream--the earth is shaking.

Agriculture is not immune from the travails of Wall Street.

COOL deadline creating havoc for cattlemen

Country of Origin Labeling (COOL) is set to take effect September 30 in all meat products governed by the U.S. Department of Agriculture, including beef, pork, veal and lamb.

The idea is to create traceability for all meat, so that if BSE, E.-Coli or some other disease is found in a particular shipment to a foreign country, it can be traced back to its source. In concept, this sound like a great idea, that will eliminate disease once and for all.

In practice, the burden of record keeping is very onerous and costly for the producer, who must bear it alone. Once again, the federal government laid out stout mandates, but no technical help or money to implement it. It might well put small producers out of business, and later be found to contain widespread fraud and a paper trail that leads to nowhere.

Producers unintentionally brought this on themselves. Long before BSE and boycotts of U.S. beef, a group of well-meaning cattlemen thought it would create a marketing coup for U.S. beef to be labeled as such. They finally got Congress to pass such a law many years ago, which has been postponed and stalled ever since.

Voila! BSE came on the scene, and federal regulators saw this law already on the books, which could be manipulated to create traceability for meat products, without having to get Congress to pass new legislation. The original intent of the proponents of the law was subverted and changed--bringing the steel trap of government regulation to the ranch gate.

Producers across the country rue the day they supported the original law, but the genie is out of the bottle, and they must comply. Interesting days are ahead.

Fed cattle supplies short--retail beef higher

This week, the first week of fed cattle trading after the Labor Day holiday, the tightness of fed cattle supplies became apparent, as prices held steady. Futures reflected what the USDA Cattle-on-Feed report shows and feedlot records bear out--there just aren't enough cattle out there to fill the feedlots or fully satisfy retail demand.

This is bound to make fed cattle prices go up at the feedlot as the fall wears on, which in turn will be reflected in higher retail beef prices at the meat counter. It is classic supply-and-demand economics in action.

Maybe consumer beef demand will drop to meet the expected supply, but probably there is demand available at a still-profitable level that will be unable to be fulfilled with domestic beef. The supply situation will ease as the new year 2009 approaches, but will tighten up again after the spring cattle run is over.

This is because many cows were slaughtered due to drought and will be not be having calves this year. Industry fundamentals, including high corn prices, are preventing widespread holding back of heifers to breed, so an expansionary phase has not begun yet.

That's why those steaks will cost you more at the meat counter.

Farm land values strong and rising

The real estate market for farms and ranches is a great deal stronger than that in residential or commercial property.

Farms are sold on the basis of the income they'll produce, and with strong grain prices--particularly corn--land values have risen between 11 and 17%, according to the Federal Reserve. Ranches have stayed strong too, as cattle prices are at profitable levels, but are probably on a less steep trajectory than farms in the cornbelt.

The credit crunch definitely affects the farm and ranch real estate market, with loans-to-value of much more than 50% are hard to come by. The main action right now is in seller-carried financing.

This all has certain positive aspects for lovers of rural America and the American agrarian tradition. Speculators and investors seeking to convert rural lands into urban and ex-urban areas has slowed. Farmlands are selling more on the basis of what they will produce as farms, rather than as real estate developments.

It is a small trend so far, but there are people moving back to the country to farm and ranch, since we are in a profitable period for doing so. It isn't necessarily easy, with high input costs, but is more possible to do than in many years.

It is a bright outlook right now, for rural real estate.

Palin does mention farmers . . .slightly

Sarah Palin did mention "the farmers here in this great state of Minnesota" in slamming Obama's tax policies, and their effect on small business. She talked about her sister's new gas station and other small businesses that need to be encouraged, not torn down, by excessive taxation and federal regulations.

It was very effective, and showed that a lot of Palin's role will be to relate to the little guy. She introduced her husband Todd, and noted that he was a proud member of the United Steelworkers Union, and world champion snowmobiler.

The one reference was the extent of ag issue mentions at the GOP confab, about like the Democratic parley last week in Denver. Once the Iowa caucusses are over each election year, so are the high level discussions of farm issues.

The GOP platform, which has already received about all the notariety and publicity it will ever get, does call for ending the mandates to use ethanol in motor fuels. This would knock the props out from under this highly subsidized, inefficient fuel and take corn farmers back down the slippery slope.

Actually, this is inevitable eventually and any smart corn farmer is banking his windfall profits while the getting is good, to be ready to batten down the hatches when better alternatives to corn-based ethanol are fully developed.

If nothing else, the inclusion of this plank in the GOP platform speaks volumes about the power of the livestock lobby and particularly the food processing lobby versus the corn lobby--in the power structure of Washington. Now that food prices are rising smartly because of the high cost of corn for sweetner and fattening livestock--corn-based ethanol's days are clearly numbered.

Crucial fall decisions facing cattlemen

As the cows and calves come down off the mountain from summer grazing on Forest Service, Bureau of Land Management or state lands, two things happen: the calves are weaned and sold, and decisions are made about whether to keep the cows for another year.

Cows that didn't have a calf, had a substandard calf, got injured over the summer or are past 8 years old, will be shipped this fall. The best of the heifers will be sold for breeding or kept in the herd to replace the cows that are culled, and the bulls steered to ultimately become choice beef.

The cattle must return to the rancher's private property for the winter, so he must sell at least the calves as his privately-owned land probably won't support them all. In a year like this one, when feed is expensive to buy or your own feed is short because of drought, one strategy is to stretch the feed by selling more cattle than usual. Selling off more cattle might also allow a rancher who raised feed to sell some of it at today's good prices and generate even more cash.

This is likely to happen in many cases, because cattle prices are pretty good, and its smart to generate cash and pay down debt. Bankers are pressed by the mortgage lending crisis, so aren't in a generous mood. If this leads to more cow culling and fewer heifers being held back to breed, it'll mean fewer calves are born next year and beef supplies will be tighter.

Decisions, decisions. These are the ones cattlemen are facing right now.

Palin big on state's rights in managing land

GOP vice presidential nominee-to-be, Alaska Gov. Sarah Palin, is a major fighter for allowing states to manage the lands within their borders--state, private or federal. She even clashes with her boss on this issue, John McCain, who is a misguided environmentalist wannabe--and among other things, opposes drilling for oil in ANWR. Palin is a big-time proponent of ANWR drilling and exploration.

For agricultural and rural interests, this is vitally important for livestock grazing, water rights and fire management, among other things. No "one size fits all" policy formulated in Washington can possibly fit the diverse topography of the whole United States, with only the state and local government on the scene having enough knowledge and perspective to say what ought to be done with their local land mass.

Coming from the "big empty" of Alaska, the biggest state in the U.S. in land area, Palin knows first hand how incompetent the federall government is in handling local problems. Left to their own devices, Alaska has returned hundreds of millions of dollars to local citizens in profits from oil and minerals development--$1500 per capita in just the last year alone.

Not every state has this kind of natural resource bounty, but it does show what the local folks are capable of doing--particularly when you see the feds out-foxed repeatedly by oil, timber and mining companies on federal lands. Left to their own devices, the locals--who still have to live there after the drillers and miners are gone--have done an admirable job of balancing resource development with environmental preservation.

Unlike the Washington D.C. environmentalists, who just want to lock everything up and let us freeze in the dark, the locals have a sixth sense about preserving their land and still producing revenue and badly needed resources from it.

Sarah Palin understands this, and can bring a badly-needed new perspective to Washington--which has the liberals and environmentalists scared witless.

Fruits and vegetables: fresh or frozen?

The standard orthodoxy is that fresh fruits and vegetables are superior to frozen ones, in vitamins and minerals. The line continues that raw fruits and vegetables are superior to cooked ones.

That may or may not be true. It turns out that frozen fruits and vegetables go right from the vine to the flash freezer, frequently on the same day, sealing in all the vitamins and minerals.

The fresh product you buy at the produce counter of your friendly local supermarket may be several weeks old by the time you can get your hands on it. Many of the vitamins and minerals have evaporated out into the air, sitting around, waiting for you to buy it.

Similarly, cooking in moderation frequently releases vitamins and minerals into a more easily digestible form for your body to absorb. Lightly steamed carrots are much more useable by the human body than raw ones. Tomatoes concentrated into spaghetti sauce or something, release the health-giving lycopene more potently than raw tomatoes, which is excellent for male prostate health, in particular.

The real enemy of vitamins and minerals in cooked fruits and vegetables is excessive boiling. Light steaming, saute or roasting them seals in the nutrients--while heavy duty boiling leaches the nutrients all out into the water, where they're thrown away.

Just a little tip from the farm, for you city slickers out there . . .

Corn harvest out of sync

The highly sophisticated, scientific farmers when I was growing up always said the corn crop was good if "you could bury a jug in it by the 4th of July."

In a lot of the corn belt of the U.S., which includes Iowa, parts of Nebraska and Kansas, Illinois and Indiana, this year that was not the case. The highly technical, scientific way corn is raised today, the official terms were that it silked late and tasselled late. This was due to a late spring, late moisture and summer temperatures that never did heat up to the maximum.

In practical terms, this means harvest will be one to three weeks later in the fall. That's fine, if the weather gods give you a hot first few weeks in September and early October. More likely, at least some areas will turn cold or even freeze and a less than bumper crop will be harvested. This has played out the last few days on the Chicago Board of Trade, where corn futures have risen, after a prolonged slump, on the basis that the crop will not be as big as projected.

There might not be enough corn to go around, between the needs of ethanol producers, livestock feeders and poultry producers, and corn refiners who make corn syrup to sweeten soda pop, commercial baked goods and candy.

An unusually late and hot fall, could send all these projections into the tank too. Farmers have always been at the mercy of the weather, and 2008 is no exception.

Big cattle nunbers right around the corner

Labor Day marks the time every year when the cattle start coming off the public lands, like National Forests, Bureau of Land Management and National Grazing Reserve lands, and go to market.

Winter is on the way, and the cattle move off those lands until next summer. A few ranchers will winter the cattle on their place if they have beet tops, corn stalks or some other feed. Most will sell them--in fact, many already have, on the summer video auctions. for fall delivery.

The sale barns will start seening big runs, and many others are sold direct, right from the ranch to winter wheat grazing in the Texas-Oklahoma Panhandle.

This is the time when cattlemen assess their feed supply and preg check their cows, deciding who to keep, and how many, on winter grazing. Many think culling will go deeper than usual this fall, compensating for high feed prices, high energy costs and a shortage of feed in some areas.

There is little marketing activity in the summer, as the cattle are all out on summer pasture. Now they're all coming in for winter, and marketing kicks into high gear.

Those with wheat pasture or other grazing will be buying, and many cow/calf producers will be selling, for their only paycheck of the year.

For cattlemen, it's an exciting and busy time.

Ho hum. No mention of agriculture, again

Suprise, surprise! Barack Obama and the Democrats made no significant mention of agriculture, farming or ranching from the podium at the Democratic National Convention. Actually, there probably won't be any mention at the GOP fest in Minneapolis next week either.

The farm vote pales into obscurity, once the Iowa caucuses are over each election year. This one has proven to be no different. The only hope we'd have is if they ran out of food, and the delegates were hungry. Perhaps then we wouldn't be ignored.

Admittedly, the power of the farm vote to swing the election is miniscule. Maybe in a few minor western and plains states, the farm vote could be significant. But they're not competitve, and McCain will carry them hands down.

There's enough urban votes in big farm states like Illinois, Indiana, Georgia, and North Carolina that agriculture doesn't come into play in determining the electoral outcome.

But if we suddenly had a famine, a food shortage, starvation in the land. . .

American agriculture is too productive, too efficient and does its job too quietly and too well. As the old saw says "It's the squeaky wheel that gets the grease."

The bounty of the garden

City folks this time of year can savor the special joy and sense of accomplishment that comes from farming. Millions of Americans are havesting tomatoes, green beans and many other crops out of backyard gardens, canister gardens on a deck or even little pots of herbs in a window sill.

The produce is the freshest possible, so the taste and flavor are incredible. Even better, is the satisfaction of knowing that you planted it, watered it, weeded it, fertilized it and made it grow. You can take rightful pride in what you did.

If you added up all the man hours, the cost of the seeds and fertilizer and the water, maybe you didn't save much over buying the same stuff at the supermarket or farmer's market. But the personal achievement of starting something and seeing it through to completion is worth a lot.

In microcosm, you have experienced what keeps people farming and ranching. Each year brings new life, as you see baby animals born and seeds sprout through the topsoil. The greater the effort you make to nurture them and see them through to maturity, the greater the sense of pride and satisfaction.

Even if the market is bad, and the return on your work isn't all you'd hope it would be, nobody can take the satisfaction away. Even a bad storm, drought or other natural disaster doesn't dissuade you trying again next year.

That's the addiction of the agrarian lifestyle.

Grass fed beef not for everyone

The Wall Street Journal and other mass media are suddenly running puff pieces playing up the virtues of grass fed beef. They are right that it is lower in fat, cholesterol and calories.

If that's all you eat for, then grass fed beef is for you. If, on the other hand, you dine rather than merely eat--most of the pleasure of eating beef is missing in grass fed. The taste, texture, flavor--and most importantly--tenderness, in beef comes from that last 120 days or so, of the steer's life in the feedlot.

They call it finishing a steer, for a reason. A high energy diet of grain and less roughage, plus less exercise from roaming the range, tenderizes the beef, adds the ribbons of marbling that gives beef its unique taste, texture and flavor. Extended aging of the carcass in the cooler after it is hung, finishes the process.

Grass fed beef is tough and stringy, with much less marbling, as the steers must still roam the range for forage. There is only a limited amount that can be done with cutting and aging of the grass fed carcass. Without the marbling to moisten the meat, no amount of aging or unique cutting will improve it.

If all you eat is hamburger, or long, slow cooked cuts like stew, pot roast or swiss steak, then grass fed beef won't make that much difference--although frankly, even these dishes will be improved with corn fed beef.

On the other hand, if you savor an expensive steak--love to cut into it and just watch the medium rare juices run, a grass fed steak will grossly disappoint you. The incomparable aroma and flavor of a rare prime rib, sliced off the roast at your table, won't work with grass fed beef.

It all depends on whether you merely eat, or you dine.

Wild weather portends early fall, winter

The oldtimers in the Rocky Mountains and Great Plains know more about the weather than the professional forecasters.

Because of the spring floods in the Midwest and unseasonably cool weather into June, crops are behind. The corn isn't silking land tasseling on time. Farmers need a warm fall to get a late harvest out of the ground.

August rain and tornados, as we've had in the last two weeks, with temperatures at night dipping down into the 40s in the Rockies, portend snow in September and freezing by early October, according to local lore. Freezing is not all bad--that's how the insects like grasshoppers and bark beetles get their larvae killed, and when the winter's warm, they survive and have a big summer.

This weather pattern, if it develops, is the opposite of what farmers and ranchers need, to get the maximum production out of late-blooming crops and fall grazing. For ranchers to have to start feeding hay early is very costly, and can lead to shortages before the winter is over.

Just as the professional forecasters refuse to stand by their predictions, oldtimers won't guarantee theirs either. Take your pick, as to what kind of fall and winter we're going to have.

There's a 50% chance you'll be right.

Labor Day another beef opportunity

The last big barbecue of summer occurs over the Labor Day weekend. Some of us brush the snow off the grill and use it year around, but many will put the grill away in the garage until next summer, after the big Labor Day bash.

And what will be on most people's Labor Day grill? Beef, by an overwhelming margin. There may be a few pork brats or ribs on a corner of the grill, but steaks or hamburgers have the center. A few folks barbecue chicken or fish, but it takes special handling and does not absorb the smoke and flavor like red meat.

The beef industry counts on holidays each year, and makes them an integral part of the annual promotion campaign. Beef for Father's Day, Prime Rib for Christmas, grilling cuts on summer holidays Memorial Day, July 4 and Labor Day. Wholesale and retail beef clearance is heaviest on these events, and the sales numbers prove the industry's wisdom in its holiday promotional emphasis.

Feedlots get more cattle ready a few weeks before these holidays, as packers increase slaughter rates in anticipation of big holiday beef sales. Supermarkets clear more room in the meatcase, to increase the beef offerings at holidays. The trend is well known, and percolates throughout the business.

Enjoy three days off this coming weekend. But be secure in the knowledge that an industry has worked hard to make your celebration possible--and in fact, counts on it.

Food price inflation caused by ethanol

The competition for the natiion's corn crop between livestock, food manufacturers and ethanol producers has driven the price through the stratosphere. Corn briefly hit over $7 a bushel and still hovers around $6. To farmers used to $2 corn, this is seriious stuff.

Corn thickeners and sweeteners are used in commercial baked goods, soft drinks and other beverages and candy bars. All are rising in price due to the corn price inflation. Hershey just announced an 11% across the board increase in candy bar prices. This is the third one this year.

Hog, poultry and beef producers all are formulating alternative rations for their livestock, with less corn and more less expensive feedstuffs. Meat prices are high, which should lead to big producer profits, but the high cost of corn and energy makes profits elusive for many farmers and ranchers.

This is all because the federal government subsidizes ethanol to the tune of over 50 cents a gallon, as well putting price supports under corn to boot. This has created the ethanol industry and created the price-busting competition for corn. The government alone is skewing the economy with its unwise ethanol subsidies.

Ethanol is not the best alternative to gasoline anyway, because it takes as much energy to raise and produce it as it returns. It would be completely uneconomic, except for the government subsidies.

Only a few consumers have flex-fuel vehicles that can take advantage of cheaper ethanol, but everyone has to buy food and pay much higher prices for it--all to underwrite the few who profit from ethanol.

On-feed report encourages cattlemen

Today's U.S. Department of Agriculture (USDA) monthly Cattle-on-Feed Report shows very tight cattle numbers in the nation's feedlots, much smaller than a year ago at this time. The veracity of these reports is somewhat open to question, as they are not actual counts of cattle, but computer simulations and estimates--but the traders at the Chicago Mercantile Exchange treat them like the Holy Grail, so they are influential.

This should mean higher cash fed cattle prices through this fall, which is very good news for cattlemen. As this blog has written before, however, Merc traders only make money off volatility and don't care if the market goes up or down--as long as it moves. That's how their sole source of income--trading commissions--are generated. You can bet that they are figuring out all the angles as I write, along with their Big Three Packer and Feedlot customers, to feather their own nests.

This latest report is good news for cattlemen as long as they figure out how to make it that way. The interests of cattlemen who actually make their living that way, and the Merc traders, frequently diverge. In any case, one considers Merc traders a reliable friend at their own peril.

In a bigger context, it does mean retail meat prices will stay high this fall and winter, and this will percolate to some extent down to individual cattlemen. High corn and energy costs, among other inputs, leave this somewhat of a mixed blessing, but the outlook is much more favorable than what had previously been forecast.

Hard money chases commodities

As frequently happens in shaky economic times, when safety questions surface about popular traditional investments, "hard" money investments lean toward commodities, which allegedly are backed by actual metal, agricultural products or live animals like cattle and pigs. How sound this is probably is open to question, as well, but a fact nonetheless, in times like this.

This additional money flowing into commodity contracts at the Chicago Board of Trade and Chicago Mercantile Exchange skews the market, and leaves each commodity open to speculation, rather than pure supply-and-demand economics.

Along with the weak dollar internationally, this speculative investment is a major factor in the huge price run-up in corn, wheat and other grain futures, as well as the cattle and hogs who then are fed the corn. This creates an artificial market, that makes it harder for the producers of the actual commodities themselves, and the buyer-users, to make a profit.

An actual farmer or rancher, who makes his living this way, as opposed to an investor or speculator in commodities futures contracts, is the victim of the market flim-flam.

If those making the public outcry about speculation in the commodities markets including oil, were really concerned about who was aggrieved, rather than only making political hay, they would look seriously at the problems this causes individual farmers and ranchers.

That'll be the day!