While this blog is not a fan of big government or government intervention in private business, a recent example of government doing exactly what its supposed to be doing, came forth.
The U.S. Department of Agriculture (USDA) is guaranteeing a $267 million rural development loan to build wireless broadband facilities across rural America. This will extend the power of the internet to tens of thousands of ranchers and farmers across rural America, who have been limited to the slow, easily interrupted dial-up internet access.
I believe this is potentially the biggest, most impactful change in rural America since the TVA in depression days. That initiative extended electric power to farms, ranches and small towns that never had it before. That brought a revolution to life in rural America and transformed the way everything was done. It greatly increased agricultural production and eased life on the farm.
High speed internet service will do no less for rural America. Whether we like it or not, the internet has changed the face of the world and isn't going away. Since Al Gore invented it (ha!), the internet has completely changed the speed at which business is transacted, the speed at which news travels around the world, and the way we communicate with each other. It is a personal value judgement whether this is good or bad, but it is reality and rural America cannot afford to be left out.
This is what government is all about. Rather than intruding into things we can do for ourselves, government needs to act when there is no other way to do it. Farms and ranches are too remote, spread out and isolated for business to profitably wire up internet service to each one. With a federal guarantee, private business can being satellite broadband to the country.
This is a tremendous step to empower rural America, and we will all stand back and be amazed in a few years at what it brings.
Sunday, March 30, 2008
Saturday, March 29, 2008
Country folks not a bunch of rubes and hicks
There is a tremendous fountain of accumulated wisdom and common sense on farms and ranchs across America. Government officials and popular culture are fond of backhandedly dismissing rural America as lacking sophistication and modernity. They're constantly sending out government officials and social workers to help them and try to reform them, but somehow, some way the farms and ranches keep shelling out a surplus of food for Big City Americans year after year.
Storms, floods, blizzards and pestulence fail to keep them down for long. While Congress debates and dithers on a Farm Bill, trying to make farms "greener" and produce more "natural food," U.S. farmers just keep up the bounty at the supermarkets, with plenty left over to export to countries and peoples worldwide who are less fortunate.
You have to be tough to live isolated and lonely in rural America. You have to have a reservoir of strength, courage and resolve to overcome whatever comes along. There is a self-reliance and personal responsibility in rural America that has been the backbone of this nation.
Reality TV shows and other media try to play on the simple life and naivete of country folks, but the truth is that rural values and family life are a great example for city folks.
That's where many of them came from.
Storms, floods, blizzards and pestulence fail to keep them down for long. While Congress debates and dithers on a Farm Bill, trying to make farms "greener" and produce more "natural food," U.S. farmers just keep up the bounty at the supermarkets, with plenty left over to export to countries and peoples worldwide who are less fortunate.
You have to be tough to live isolated and lonely in rural America. You have to have a reservoir of strength, courage and resolve to overcome whatever comes along. There is a self-reliance and personal responsibility in rural America that has been the backbone of this nation.
Reality TV shows and other media try to play on the simple life and naivete of country folks, but the truth is that rural values and family life are a great example for city folks.
That's where many of them came from.
Friday, March 28, 2008
Democrats: patronize, socialize agriculture
The agriculture news service DTN has been running profiles of the last three standing major candidates for president--Senators John McCain, Barack Obama and Hillary Clinton. None speaks in depth, knowledgeably or specifically when talking about ag issues. Sen. McCain at least stresses cutting subsidies and supporting free enterprise in agriculture.
For the Democrats, its a bidding war, to see how many farm state votes they can buy with taxpayer's money. To hear Barack or Hillary talk about, you'd swear all farmers were down to their last dollar, hopeless and begging. They love ethanol and its plethora of federal subsidies, citing the old bromide about lessening U.S. dependence on foreign oil with domestically, agriculturally produced fuel. They ignore the fact that it takes more energy to produce ethanol from corn than it returns in fuel. They ignore the heavy federal subsidies--the only thing that makes the ethanol industry economically viable.
They ignore the record commodity prices that have made many farmers extremely prosperous on their own. They reiterate the old cliches about big corporations ripping off the family farms. They talk bravely about returning federal subsidies to family farmers.
They are also talking out of both sides of their mouths about foreign trade. On agriculture, that we have to send every ounce of feed overseas that we can grow. Yet they blast NAFTA and the other trade agreements that make that possible. You can't have it both ways--foreign trade is a two-way street, and you either support it or you don't. It's like being a little bit pregnant--either you are or you aren't. There's no "little bit."
Like all presidenttial campaigns, agriculture gets the short shrift until somebody's elected, and then we're stuck with the consequences. About the only conclusions you can draw from the campaigns are philosophical: is the candidate a free enterpriser, or a big government man? Do you pay farmers to keep them quiet and buy their votes, or do you allow them to compete, based on the quality of their product and service, just like the rest of business? Do you choke them with federal regulations, or let the markeplace tell them what's acceptable and not acceptable?
It's somebody's living, and their ability to earn it, that we're talking about. It's vitally important, even if its hard to tell from the lack of emphasis and media coverage agriculture gets in campaign season.
For the Democrats, its a bidding war, to see how many farm state votes they can buy with taxpayer's money. To hear Barack or Hillary talk about, you'd swear all farmers were down to their last dollar, hopeless and begging. They love ethanol and its plethora of federal subsidies, citing the old bromide about lessening U.S. dependence on foreign oil with domestically, agriculturally produced fuel. They ignore the fact that it takes more energy to produce ethanol from corn than it returns in fuel. They ignore the heavy federal subsidies--the only thing that makes the ethanol industry economically viable.
They ignore the record commodity prices that have made many farmers extremely prosperous on their own. They reiterate the old cliches about big corporations ripping off the family farms. They talk bravely about returning federal subsidies to family farmers.
They are also talking out of both sides of their mouths about foreign trade. On agriculture, that we have to send every ounce of feed overseas that we can grow. Yet they blast NAFTA and the other trade agreements that make that possible. You can't have it both ways--foreign trade is a two-way street, and you either support it or you don't. It's like being a little bit pregnant--either you are or you aren't. There's no "little bit."
Like all presidenttial campaigns, agriculture gets the short shrift until somebody's elected, and then we're stuck with the consequences. About the only conclusions you can draw from the campaigns are philosophical: is the candidate a free enterpriser, or a big government man? Do you pay farmers to keep them quiet and buy their votes, or do you allow them to compete, based on the quality of their product and service, just like the rest of business? Do you choke them with federal regulations, or let the markeplace tell them what's acceptable and not acceptable?
It's somebody's living, and their ability to earn it, that we're talking about. It's vitally important, even if its hard to tell from the lack of emphasis and media coverage agriculture gets in campaign season.
Thursday, March 27, 2008
Study vindicates Distiller's Grain in E.-Coli growth
A by-product of the growth in the use of corn to produce ethanol for fuel is that the leftovers from the process are still available to feed livestock. This is a hotly-debated subject, as the best part of the corn for fattening cattle and hogs is lost in the distilling process. Distiller's grain still has to be supplemented in the feedlot ration to get proper finishing of cattle.
A side controversy has been the increase in E. Coli contamination in cattle, potentially sickening hundreds of consumers. Many had blamed this on Distiller's Grain, the byproduct of ethanol production fed to cattle. Kansas State University has just completed a study that vindicates Distiller's Grain as a source of E. Coli contamination of beef.
E. Coli is thought to come from cattle manure remaining on the carcass as it enters the packing plant. This has led to chemical rinsing of carcasses to kill E. Coli. The bacteria exists on the exterior of the carcass, and spread through ground beef when the exterior meat is mixed with interior meat in the grinding process.
E. Coli from the use of Distiller's Grain was merely speculation to start with. The rise in E. Coli just happened to coincide with the greater use of Distiller's Grain, with little evidence that the two events were related. The Kansas State study confirms this.
Beef safety is a major concern of industry organizations, and the focus of the industry is on solving it internally, rather than through excessive federal regulations and heavy-handed enforcement of them, to drive up operating costs. Feed additives for livestock are one option underway to kill E. Coli bacteria in livestock before they get to the packing plant.
Until such time as there is a more defined cause of E. Coli contamination, regulations alone are a hit-and-miss proposition at best. It behooves the feds and the beef industry to work together for a viable solution, rather than pass a bunch of ham-handed regulations that ultimately are unable to fix the problem.
It is easy to slap your thigh and say "By damn, there out to be a law" at every problem that breaks out, but a whole different matter to adopt enforceable laws that can actually impact the problem. More research is needed to find out what stamps out E. Coli contamination the best.
On E. Coli, we aren't there yet
A side controversy has been the increase in E. Coli contamination in cattle, potentially sickening hundreds of consumers. Many had blamed this on Distiller's Grain, the byproduct of ethanol production fed to cattle. Kansas State University has just completed a study that vindicates Distiller's Grain as a source of E. Coli contamination of beef.
E. Coli is thought to come from cattle manure remaining on the carcass as it enters the packing plant. This has led to chemical rinsing of carcasses to kill E. Coli. The bacteria exists on the exterior of the carcass, and spread through ground beef when the exterior meat is mixed with interior meat in the grinding process.
E. Coli from the use of Distiller's Grain was merely speculation to start with. The rise in E. Coli just happened to coincide with the greater use of Distiller's Grain, with little evidence that the two events were related. The Kansas State study confirms this.
Beef safety is a major concern of industry organizations, and the focus of the industry is on solving it internally, rather than through excessive federal regulations and heavy-handed enforcement of them, to drive up operating costs. Feed additives for livestock are one option underway to kill E. Coli bacteria in livestock before they get to the packing plant.
Until such time as there is a more defined cause of E. Coli contamination, regulations alone are a hit-and-miss proposition at best. It behooves the feds and the beef industry to work together for a viable solution, rather than pass a bunch of ham-handed regulations that ultimately are unable to fix the problem.
It is easy to slap your thigh and say "By damn, there out to be a law" at every problem that breaks out, but a whole different matter to adopt enforceable laws that can actually impact the problem. More research is needed to find out what stamps out E. Coli contamination the best.
On E. Coli, we aren't there yet
Wednesday, March 26, 2008
Message to South Korea: just do it
The overarching, commanding principle in all dealing with Asians one-on-one is to save face.
Any unpleasantness, difficulty or disagreement is put off and glossed over in personal encounters. So it is with the negotiations with South Korea for a new multi-lateral trade pact with the U.S. Korea needs such a pact much worse than the U.S. does, as its a land-poor, crowded country with practical limits on agricultural production, manufacturing capacity and raw materials to make into goods.
Consequently, South Korea needs to ship what products it does produce to the U.S. market for cash, and buy lots of ag products and raw materials that it can't produce itself. Fortunately the Bush Administration, probably because President Bush considers himself a rancher, has made the complete re-opening of beef trade the lynchpin of any such trade agreement. Just today South Korea expressed the hope that beef trade would resume soon, as if somebody other than they themselves, were responsible for that decision.
So far it's been a farce. South Korea has repeatedly declared the border open for U.S. beef, only for a shipment of U.S. beef to arrive on their shore and be rejected by government inspectors for a very miniscule finding of a bone fragment in one box out of a whole ship load. This is not a health issue--U.S. beef has way fewer BSE questions than Korea's locally produced beef--it is a protectionism issue, to keep beef prices high for Korea farmers.
So as trade negotiations resumed today between high level U.S. and Korean trade representatives, this empty expression of hope for beef trade means nothing. The time has passed for face-saving platitudes. It's time for action. It's been three long years since Korea cut off U.S. beef trade due to BSE, and there no longer is a defensible reason for not opeing the beef trade.
The windy platitudes and feeble excuses of Korean officials have worn very thin, and must be replaced by concrete action.
Any unpleasantness, difficulty or disagreement is put off and glossed over in personal encounters. So it is with the negotiations with South Korea for a new multi-lateral trade pact with the U.S. Korea needs such a pact much worse than the U.S. does, as its a land-poor, crowded country with practical limits on agricultural production, manufacturing capacity and raw materials to make into goods.
Consequently, South Korea needs to ship what products it does produce to the U.S. market for cash, and buy lots of ag products and raw materials that it can't produce itself. Fortunately the Bush Administration, probably because President Bush considers himself a rancher, has made the complete re-opening of beef trade the lynchpin of any such trade agreement. Just today South Korea expressed the hope that beef trade would resume soon, as if somebody other than they themselves, were responsible for that decision.
So far it's been a farce. South Korea has repeatedly declared the border open for U.S. beef, only for a shipment of U.S. beef to arrive on their shore and be rejected by government inspectors for a very miniscule finding of a bone fragment in one box out of a whole ship load. This is not a health issue--U.S. beef has way fewer BSE questions than Korea's locally produced beef--it is a protectionism issue, to keep beef prices high for Korea farmers.
So as trade negotiations resumed today between high level U.S. and Korean trade representatives, this empty expression of hope for beef trade means nothing. The time has passed for face-saving platitudes. It's time for action. It's been three long years since Korea cut off U.S. beef trade due to BSE, and there no longer is a defensible reason for not opeing the beef trade.
The windy platitudes and feeble excuses of Korean officials have worn very thin, and must be replaced by concrete action.
Tuesday, March 25, 2008
Cattlemen in an economic vice
Several factors largely beyond their control are making the cattle business for individual producers a very volatile, high risk venture of late. Supply fundamentals are very favorable for producers currently, as due to recent droughts and winter storms that killed large numbers of cows, there is certainly no surplus, and probably a shortage of market-ready cattle.
The other factors are not so favorable for cattlemen at the present time. Beef demand is an unknown, but probably weaker due to high energy costs, the mortgage market and unemployment. Consumers may well be buying down--chicken instead of beef, hamburger instead of steak, etc.
Three dollar gasoline is not just a problem for consumers. Running tractors down crop rows, diesel pumps for irrigation water and cattle trucks over the highways on $3.75 diesel have cost cattlemen heavily, without being able to pass the added costs on to the price of their cattle. Fertilizer for crops is largely made out of petroleum, and is much more costly.
Crop prices, and particularly corn due to ethanol production, are high and a costly input to making beef. It's great if you're raising and selling grain at these prices, but terrible if you are buying grain to feed cattle or running your crop through cattle instead of selling it on the cash market. The cash grain market is so good that pastures are being converted to grain production, to the detriment of cattlemen.
International trade offers great promise for cattlemen, but to date is largely unrealized. Regulations against U.S. beef due to BSE, political rivalries and the weak U.S. dollar all leave this market in a state of flux, with little impact on producer's current income.
On top of all this, is the lack of a Farm Bill and the increasing likelihood that there won't be one until after the 2008 election.
This breeds uncertainty, making ag financing hard to line up and adds to the difficulty of long range planning.
Fasten your seat belt, in order to ride out challenging times in the cattle business.
The other factors are not so favorable for cattlemen at the present time. Beef demand is an unknown, but probably weaker due to high energy costs, the mortgage market and unemployment. Consumers may well be buying down--chicken instead of beef, hamburger instead of steak, etc.
Three dollar gasoline is not just a problem for consumers. Running tractors down crop rows, diesel pumps for irrigation water and cattle trucks over the highways on $3.75 diesel have cost cattlemen heavily, without being able to pass the added costs on to the price of their cattle. Fertilizer for crops is largely made out of petroleum, and is much more costly.
Crop prices, and particularly corn due to ethanol production, are high and a costly input to making beef. It's great if you're raising and selling grain at these prices, but terrible if you are buying grain to feed cattle or running your crop through cattle instead of selling it on the cash market. The cash grain market is so good that pastures are being converted to grain production, to the detriment of cattlemen.
International trade offers great promise for cattlemen, but to date is largely unrealized. Regulations against U.S. beef due to BSE, political rivalries and the weak U.S. dollar all leave this market in a state of flux, with little impact on producer's current income.
On top of all this, is the lack of a Farm Bill and the increasing likelihood that there won't be one until after the 2008 election.
This breeds uncertainty, making ag financing hard to line up and adds to the difficulty of long range planning.
Fasten your seat belt, in order to ride out challenging times in the cattle business.
Monday, March 24, 2008
U.S. beef exports continue to rise
Now that the BSE scare (jocularly called Mad Cow Disease) is largely behind us, the U.S. is slowly rising from the floor and exporting more beef to countries that can afford to import it, like Japan, South Korea, Taiwan, Mexico and Canada.
There still are too many ridiculous restrictions in place to allow the U.S. to get the export tonnage up to Pre-BSE levels, but its coming up month by month. What is particularly ludicrous is that U.S. beef is the purest, most wholesome, most heavily tested, of any beef on earth.
No other nation has controlled and stamped out BSE like the U.S. has. Japan, South Korea and Canada all have double digit cases of BSE, while the U.S., with many more cattle, has only two. TWO. These countries ought to import more of the U.S. product, because its safer than what they produce themselves. The import restrictions on U.S. beef are way more stringent than what they have put on their own beef.
The restrictions are aimmed at protecting their own local cattlemen from competition, and to kick sand in the face of the big United States because they can. Economic protectionism and not scientific fact is what's guiding import restrictions.
It's time for scientific fact and realism to overtake the beef trade, and put the safe, wholesome U.S. beef back to its rightful, earned and deserved place in the world beef and cattle trade.
There still are too many ridiculous restrictions in place to allow the U.S. to get the export tonnage up to Pre-BSE levels, but its coming up month by month. What is particularly ludicrous is that U.S. beef is the purest, most wholesome, most heavily tested, of any beef on earth.
No other nation has controlled and stamped out BSE like the U.S. has. Japan, South Korea and Canada all have double digit cases of BSE, while the U.S., with many more cattle, has only two. TWO. These countries ought to import more of the U.S. product, because its safer than what they produce themselves. The import restrictions on U.S. beef are way more stringent than what they have put on their own beef.
The restrictions are aimmed at protecting their own local cattlemen from competition, and to kick sand in the face of the big United States because they can. Economic protectionism and not scientific fact is what's guiding import restrictions.
It's time for scientific fact and realism to overtake the beef trade, and put the safe, wholesome U.S. beef back to its rightful, earned and deserved place in the world beef and cattle trade.
Sunday, March 23, 2008
A blessed Easter to all
Cattlemen and ranchers are big on family and holidays. The ranch life lends itself to everyone gathering at home and celebrating.
Easter Sunday 2008 was no different. After a time at church with friends and neighbors on Sunday morning, a day you go even if you miss a bunch of other Sundays, you gather close the family at home for a big meal and fellowship time afterward. It's a great time to be amused by the little grandchildren, see how the older ones have grown and get brought up to date on where everyone is and what they're planning. Probably a big Easter Egg hunt for the little ones after lunch.
Here's a Big Happy Easter from all the folks in ranch country.
Easter Sunday 2008 was no different. After a time at church with friends and neighbors on Sunday morning, a day you go even if you miss a bunch of other Sundays, you gather close the family at home for a big meal and fellowship time afterward. It's a great time to be amused by the little grandchildren, see how the older ones have grown and get brought up to date on where everyone is and what they're planning. Probably a big Easter Egg hunt for the little ones after lunch.
Here's a Big Happy Easter from all the folks in ranch country.
Saturday, March 22, 2008
The used cow market
Good ranchers regularly cull their cow herd, taking out the older, less productive cows and replacing them with some of the best females held back from their latest calf crop. This is the approved, recommended method for keeping a strong, profitable cow herd.
The best ranchers are mercenary: if a cow fails to breed one year, or loses her calf prior to birth, she is gone. Tragically, ranchers fall in love with certain of their cows and give them a second chance. The cost of carrying an open cow for a year, with no calf born to sell and offset the cost, negates such a soft-hearted decision.
Most cows are productive for 8 or 9 calves in their life. It is not cost effective to baby them along beyond this point, and almost always better to have a younger, more vital cowherd. All it takes is one drought, storm disaster or sickness plague, and the younger the cow herd, the better you weather it.
Cows do have salvage value, which it is very much in the rancher's interest to maximize. They'll bring more when you cull them at a younger age and they're fleshier. Skinny, old cows bring less per pound than ones that are in better shape. There are people who buy so-called "short term cows," planning on only getting one calf out of them, so if you cull them when they still have a calf raising possibility, they'll bring a better price than they will for slaughter.
Other buyers will take cows that are still in decent shape, and feed them on corn stalks or some other cheap feed for a month or two and make a profit on the gain. This is an equally mercenary proposition, because only a limited amount of added weight will bring back more money than the cost of the feed. Old cows are less efficient converters of feed to pounds than young steers or heifers.
Most of the ground beef served at fast food restaurants like McDonald's, the school lunch program and other government feeding programs is from culled cows, either beef or dairy. So is the imported grinding beef they use to fill out the nation's hamburger supply, when the U.S. doesn't produce enough on its own.
There is more to this business than meets the eye.
The best ranchers are mercenary: if a cow fails to breed one year, or loses her calf prior to birth, she is gone. Tragically, ranchers fall in love with certain of their cows and give them a second chance. The cost of carrying an open cow for a year, with no calf born to sell and offset the cost, negates such a soft-hearted decision.
Most cows are productive for 8 or 9 calves in their life. It is not cost effective to baby them along beyond this point, and almost always better to have a younger, more vital cowherd. All it takes is one drought, storm disaster or sickness plague, and the younger the cow herd, the better you weather it.
Cows do have salvage value, which it is very much in the rancher's interest to maximize. They'll bring more when you cull them at a younger age and they're fleshier. Skinny, old cows bring less per pound than ones that are in better shape. There are people who buy so-called "short term cows," planning on only getting one calf out of them, so if you cull them when they still have a calf raising possibility, they'll bring a better price than they will for slaughter.
Other buyers will take cows that are still in decent shape, and feed them on corn stalks or some other cheap feed for a month or two and make a profit on the gain. This is an equally mercenary proposition, because only a limited amount of added weight will bring back more money than the cost of the feed. Old cows are less efficient converters of feed to pounds than young steers or heifers.
Most of the ground beef served at fast food restaurants like McDonald's, the school lunch program and other government feeding programs is from culled cows, either beef or dairy. So is the imported grinding beef they use to fill out the nation's hamburger supply, when the U.S. doesn't produce enough on its own.
There is more to this business than meets the eye.
Friday, March 21, 2008
Good Friday closes commodity markets
American politicians love to propagate the fiction that the U.S. practices the separation of church and state, as laid out in the constitution and the Bill of Rights. The truth is that the subject is not mentioned in the Bill of Rights or the Constitution. It was talked about by the founding fathers, who were Christians drummed out of their native lands because of their faith. What they were talking about was protecting the church FROM the state.
So while the U.S. practices this non-practice most of the time, they also don't hesitate to take advantage of the church when it is more conventient. Take the New York Stock Exchange and the Chicago Mercantile Exchange, for instance. They close on one of the most blatantly religious holidays of the year, Good Friday. That's right--there was no trading today due to the overtly Christian holiday, Good Friday--the commemoration of the day when Jesus was hung on the cross.
As relates to the cattle futures trade on the Merc, Thursday was the last day of trading. Cattle futures were up sharply. It was also the day USDA issued its monthly Cattle-on-Feed Report after the Merc close, which was considered bullish for cattle prices, because it showed more cattle sold in February than forecast, and fewer head placed in the feedlots than forecast.
That still left fed cattle trading to be done on Good Friday, despite having no government reports or futures trading to guide the way. Based on Thursday's good news for cattle prices, the cash market for cattle would have gone wild, right?
Wrong. Packers held out to the last minute to buy cattle. In the dressed trade in Nebraska and Iowa, prices were indeed up $2-$4. But in the far larger trade on a live basis in Texas, Kansas and Oklahoma, sellers struggled to get packers to keep prices steady. It was thought that having a day since the government report and the higher futures to digest it, the old saw came into play "Oh, it was already figured in," so there's no need to raise prices.
Packers are very short of cattle. It's thought that some they bought today were killed today. Usually they hold them a day or two, unless they're short-bought. This condition usually results in paying higher prices, to get more cattle purchased. Closing the markets for the Christian holiday of Good Friday, and issuing the USDA report early for the same reason, probably held fed cattle prices down.
What happened to the separation of church and state when we need it?
So while the U.S. practices this non-practice most of the time, they also don't hesitate to take advantage of the church when it is more conventient. Take the New York Stock Exchange and the Chicago Mercantile Exchange, for instance. They close on one of the most blatantly religious holidays of the year, Good Friday. That's right--there was no trading today due to the overtly Christian holiday, Good Friday--the commemoration of the day when Jesus was hung on the cross.
As relates to the cattle futures trade on the Merc, Thursday was the last day of trading. Cattle futures were up sharply. It was also the day USDA issued its monthly Cattle-on-Feed Report after the Merc close, which was considered bullish for cattle prices, because it showed more cattle sold in February than forecast, and fewer head placed in the feedlots than forecast.
That still left fed cattle trading to be done on Good Friday, despite having no government reports or futures trading to guide the way. Based on Thursday's good news for cattle prices, the cash market for cattle would have gone wild, right?
Wrong. Packers held out to the last minute to buy cattle. In the dressed trade in Nebraska and Iowa, prices were indeed up $2-$4. But in the far larger trade on a live basis in Texas, Kansas and Oklahoma, sellers struggled to get packers to keep prices steady. It was thought that having a day since the government report and the higher futures to digest it, the old saw came into play "Oh, it was already figured in," so there's no need to raise prices.
Packers are very short of cattle. It's thought that some they bought today were killed today. Usually they hold them a day or two, unless they're short-bought. This condition usually results in paying higher prices, to get more cattle purchased. Closing the markets for the Christian holiday of Good Friday, and issuing the USDA report early for the same reason, probably held fed cattle prices down.
What happened to the separation of church and state when we need it?
Thursday, March 20, 2008
Growing season weather looking shaky
Of all the risks of farming, probably the least predictable, and potentially the most devastating, is the weather.
Drought is probably the worst condition, followed closely by excessive snow or flooding rains and then tornados, hurricanes or other pestulence. Even the best farmer, with the best equipment, seed, fertilizer and scientific methods, is still a pawn of the weather gods.
Now comes the latest from the National Weather Service: "U.S. farmers in the Midwest and Plains risk drought this summer, while those in much of the eastern half of the U.S. could face flooding. There is said to be an enhanced risk of drought going into the spring and even summer in the Corn Belt, largely because of a fading La Nina. But the first problem is getting rid of the unprecedented wetness for this time of year.
Drought conditions currently plaguing the southeastern U.S. wiill improve, the weather prognosticators say, but drought will most likely persist in western Texas, eastern New Mexico, western Kansas and Nebraska and possibly the western Dakotas. Above normal flooding is possible in much of the Mississippi River basin, the Ohio River basin, the lower Missouri River basin, New England and portions of the West that had a lot of snow, including Colorado and Idaho. Warmer-than-normal weather will persist through June in Nevada, Utah and Colorado, moving south into Texas and stretching east toward the Carolinas, Georgia and Florida.
That all said, the best farmers know better than to feast on every word of the weather report and just throw up their hands. Weather forecasting is among the least precise of activities, and just the opposite is just as likely to happen. This winter has been much wetter than forecast, and much colder. It may get dry, but most areas of the west are heading into spring with excellent moisture conditions. Just a little rain, and the weather forecast is shot full of holes yet again.
Really, it's anybody's guess what the weather will actually do.
Drought is probably the worst condition, followed closely by excessive snow or flooding rains and then tornados, hurricanes or other pestulence. Even the best farmer, with the best equipment, seed, fertilizer and scientific methods, is still a pawn of the weather gods.
Now comes the latest from the National Weather Service: "U.S. farmers in the Midwest and Plains risk drought this summer, while those in much of the eastern half of the U.S. could face flooding. There is said to be an enhanced risk of drought going into the spring and even summer in the Corn Belt, largely because of a fading La Nina. But the first problem is getting rid of the unprecedented wetness for this time of year.
Drought conditions currently plaguing the southeastern U.S. wiill improve, the weather prognosticators say, but drought will most likely persist in western Texas, eastern New Mexico, western Kansas and Nebraska and possibly the western Dakotas. Above normal flooding is possible in much of the Mississippi River basin, the Ohio River basin, the lower Missouri River basin, New England and portions of the West that had a lot of snow, including Colorado and Idaho. Warmer-than-normal weather will persist through June in Nevada, Utah and Colorado, moving south into Texas and stretching east toward the Carolinas, Georgia and Florida.
That all said, the best farmers know better than to feast on every word of the weather report and just throw up their hands. Weather forecasting is among the least precise of activities, and just the opposite is just as likely to happen. This winter has been much wetter than forecast, and much colder. It may get dry, but most areas of the west are heading into spring with excellent moisture conditions. Just a little rain, and the weather forecast is shot full of holes yet again.
Really, it's anybody's guess what the weather will actually do.
Wednesday, March 19, 2008
Dems can't get Farm Bill act together
What little attention the national media and the presidential candidates pay to agriculture, is largely tied to the myth that the Bush administration has shortchanged farmers and is in the pocket of big agribusiness.
The truth is that the Democrats, and not the Republicans, are the ones who cannot pull their act together to pass a new Farm Bill, despite the months we are now past the expiration of the old one. Senate Ag Committee chairman, Sen. Tom Harkin of Iowa, keeps turning out bills that Montana Sen. Max Baucus, chairman of the Finance Committee, keeps rejecting. Surely the two could quit sending out angry press releases aimmed at each other, and instead sit down for 15 minutes and hack something out.
The situation in the House isn't much better. House Ag committee chairman Colin Peterson of Minnesota can't get Speaker Nancy Pelosi or House Ways and Means committee chairman Charles Rangel of New York to agree on his priorities either. All want to add $10 billion in new spending to the Farm Bill, but can't decide how to spend it. Some want $2.5 billion for a permanent ag disaster fund, while Baucus in particular, wants $5.1 billion.
The betting here is that an extension of the existing Farm Bill will wind up being passed, until a new President is seated in 2009 and rejiggered Congressional majorities can figure things out. If somehow, a Farm Bill with $10 billion in new ag spending did pass both houses of Congress, President Bush would probably veto it, sending everybody back to square one.
Count on it. It'll be the old Farm Bill for one more year.
The truth is that the Democrats, and not the Republicans, are the ones who cannot pull their act together to pass a new Farm Bill, despite the months we are now past the expiration of the old one. Senate Ag Committee chairman, Sen. Tom Harkin of Iowa, keeps turning out bills that Montana Sen. Max Baucus, chairman of the Finance Committee, keeps rejecting. Surely the two could quit sending out angry press releases aimmed at each other, and instead sit down for 15 minutes and hack something out.
The situation in the House isn't much better. House Ag committee chairman Colin Peterson of Minnesota can't get Speaker Nancy Pelosi or House Ways and Means committee chairman Charles Rangel of New York to agree on his priorities either. All want to add $10 billion in new spending to the Farm Bill, but can't decide how to spend it. Some want $2.5 billion for a permanent ag disaster fund, while Baucus in particular, wants $5.1 billion.
The betting here is that an extension of the existing Farm Bill will wind up being passed, until a new President is seated in 2009 and rejiggered Congressional majorities can figure things out. If somehow, a Farm Bill with $10 billion in new ag spending did pass both houses of Congress, President Bush would probably veto it, sending everybody back to square one.
Count on it. It'll be the old Farm Bill for one more year.
Tuesday, March 18, 2008
It's Cattle-on-Feed report week
This is that week that rolls around every month, where the U.S. Department of Agriculture (USDA) issues its monthly Cattle-on-Feed report. It is avariciously devoured by the cattle traders at the Chicago Mercantile Exchange and the cattle trade media like it was the inspired Holy Grail, coming down from on high.
In truth, it is far short of that. In fact, it is not an actual count of the cattle out standing in feedlots. It is a statistical simulation USDA statisticians extrapolate from their computer models--an estimate of how many head might be on feed. It falls in the category of "your guess is as good as mine." Frequently, months after the damage is already done, USDA issues a correction based on how many cattle were actually slaughtered, and therefore actually on feed, as opposed to their flawed estimates
This would all be harmless, innocent fun if everyone looked at the guesses, had a good laugh, and let it pass out into eternity. Unfortunately, the Merc traders take it very seriously and trade contracts on the basis of the figures, no matter how wacky they are. This can be devastating to the cash cattle market, and extremely costly to individual cattlemen.
Futures trading in cattle contracts badly distorts the cash market, even without the phony USDA numbers it uses to lend itself legitimacy. There are only a handful of major buyers and sellers in cattle contracts on the Merc, representing the nation's very largest meat packers and cattle feeders. They can--and do--manipulate the market at will by buying and selling futures contracts. Ordinary ranchers and smaller cattle feeders cannot begin to afford to compete with the big boys in driving the market on the Merc, but frequently suffer the consequences.
Futures traders themselves work on a straight commission basis. They get paid every time a contract is purchased or sold. They trade on the volatility, and don't care whether the market goes up or down. The worst thing for them is a stable market, with very little day-to-day change. They exacerbate swings in the market, to cause more trading, and of course, generate commissions for themselves.
The prospect of this Friday's Cattle-on-Feed report mostly draws the "oh oh, here we go again" response in actual cattlemen, but is eagerly anticipated and salivated for, by the Merc traders, big feeders and big packers.
In truth, it is far short of that. In fact, it is not an actual count of the cattle out standing in feedlots. It is a statistical simulation USDA statisticians extrapolate from their computer models--an estimate of how many head might be on feed. It falls in the category of "your guess is as good as mine." Frequently, months after the damage is already done, USDA issues a correction based on how many cattle were actually slaughtered, and therefore actually on feed, as opposed to their flawed estimates
This would all be harmless, innocent fun if everyone looked at the guesses, had a good laugh, and let it pass out into eternity. Unfortunately, the Merc traders take it very seriously and trade contracts on the basis of the figures, no matter how wacky they are. This can be devastating to the cash cattle market, and extremely costly to individual cattlemen.
Futures trading in cattle contracts badly distorts the cash market, even without the phony USDA numbers it uses to lend itself legitimacy. There are only a handful of major buyers and sellers in cattle contracts on the Merc, representing the nation's very largest meat packers and cattle feeders. They can--and do--manipulate the market at will by buying and selling futures contracts. Ordinary ranchers and smaller cattle feeders cannot begin to afford to compete with the big boys in driving the market on the Merc, but frequently suffer the consequences.
Futures traders themselves work on a straight commission basis. They get paid every time a contract is purchased or sold. They trade on the volatility, and don't care whether the market goes up or down. The worst thing for them is a stable market, with very little day-to-day change. They exacerbate swings in the market, to cause more trading, and of course, generate commissions for themselves.
The prospect of this Friday's Cattle-on-Feed report mostly draws the "oh oh, here we go again" response in actual cattlemen, but is eagerly anticipated and salivated for, by the Merc traders, big feeders and big packers.
Monday, March 17, 2008
An odd "inverted" beef market
The arcane world of selling beef at retail is totally different from producing cattle on the ranch, or feeding them in the feedlot, or even slaughtering them at the packing plant.
80% of the beef produced is sold ground, largely through fast food restaurants like McDonald's. It's that other 20% of the crop where the greater profits lie and where the challenge to marketers is most severe. Most of the ground beef is so-called "no roll," which is not graded. Next most common is the lower USDA grade, select, which also winds up ground. The challenge is to sell as much of the select beef and most of the higher grade, choice, in cuts like steaks and roasts rather than ground. The price per pound is higher, with higher profit margins.
When cuts don't sell after a day or two, they can always be ground and sold readily, but that is not the highest and best use of the most tender, flavorful beef. Lately, the industry has been discovering ways to take muscles that were previously always ground and sell them as steak (the flat iron cut comes to mind), or develop a new use, such as was done a few years ago for inside skirts, used in fajitas.
With this background, its easier to understand the panic among beef marketers last week, when select beef rose in price higher than choice at wholesale. Traders moved quickly to restore choice to its more pricey norm, ending the so-called inverted market. Most attributed it to the season, when summer grilling of steaks hasn't begun yet and buyers are looking more for long-cooking, cheaper cuts like pot roast or stew meat, while the weather's still cool.
Industry analysts and historians could only find a handful of days when such a market inversion occurred, but it's noteworthy when it does, because its so unusual. Some blamed it on economic conditions, where fewer people are eating out in restaurants, where the more expensive cuts are sold.
In any case, all agreed it was no cause for panic. Feedlots will feed cattle to select (fewer days) rather than choice (more time on feed), to bring the market back into equilibrium.
80% of the beef produced is sold ground, largely through fast food restaurants like McDonald's. It's that other 20% of the crop where the greater profits lie and where the challenge to marketers is most severe. Most of the ground beef is so-called "no roll," which is not graded. Next most common is the lower USDA grade, select, which also winds up ground. The challenge is to sell as much of the select beef and most of the higher grade, choice, in cuts like steaks and roasts rather than ground. The price per pound is higher, with higher profit margins.
When cuts don't sell after a day or two, they can always be ground and sold readily, but that is not the highest and best use of the most tender, flavorful beef. Lately, the industry has been discovering ways to take muscles that were previously always ground and sell them as steak (the flat iron cut comes to mind), or develop a new use, such as was done a few years ago for inside skirts, used in fajitas.
With this background, its easier to understand the panic among beef marketers last week, when select beef rose in price higher than choice at wholesale. Traders moved quickly to restore choice to its more pricey norm, ending the so-called inverted market. Most attributed it to the season, when summer grilling of steaks hasn't begun yet and buyers are looking more for long-cooking, cheaper cuts like pot roast or stew meat, while the weather's still cool.
Industry analysts and historians could only find a handful of days when such a market inversion occurred, but it's noteworthy when it does, because its so unusual. Some blamed it on economic conditions, where fewer people are eating out in restaurants, where the more expensive cuts are sold.
In any case, all agreed it was no cause for panic. Feedlots will feed cattle to select (fewer days) rather than choice (more time on feed), to bring the market back into equilibrium.
Sunday, March 16, 2008
Shuffling deck chairs on the Titanic?
The National Cattlemen's Beef Assn. (NCBA), headquartered in Denver but with a strong presence in Washington D.C. out of necessity, announced a staff reorganization last week, re-grouping association functions largely under existing staff.
Still the dominant beef industry organization, NCBA still lacks the grassroots touch with out-on-the-soil cattlemen. That's why much smaller renegade groups like R-CALF keep popping up and see some success on a regional basis. Even R-CALF's original founders split off to form a new group, which should be an opening for NCBA.
The major problem is NCBA's buttoned down, agribusiness oriented staff. They elect bonafide cattlemen to the elected positions but you rarely see one on the salaried staff. Cattlemen who call, e-mail or physically visit the office don't relate to the city atmosphere or the less than rural-oriented staff.
NCBA must be pretty sophisticated to lobby in Washington and function within the larger agricultural industry, which it is. But it still has to have that ranch flavor to keep the members happy. That's an art it has yeat to master.
Still the dominant beef industry organization, NCBA still lacks the grassroots touch with out-on-the-soil cattlemen. That's why much smaller renegade groups like R-CALF keep popping up and see some success on a regional basis. Even R-CALF's original founders split off to form a new group, which should be an opening for NCBA.
The major problem is NCBA's buttoned down, agribusiness oriented staff. They elect bonafide cattlemen to the elected positions but you rarely see one on the salaried staff. Cattlemen who call, e-mail or physically visit the office don't relate to the city atmosphere or the less than rural-oriented staff.
NCBA must be pretty sophisticated to lobby in Washington and function within the larger agricultural industry, which it is. But it still has to have that ranch flavor to keep the members happy. That's an art it has yeat to master.
Saturday, March 15, 2008
Beef byproduct value soats in 2008
A little noted, but critically important, part of the beef industry equation is byproduct value. Everyone thinks of roasts and steaks and all the hamburger pushed out through fast food restaurants, but just as important to total return from each beef carcass is the byproduct value. In just the last year, this value has risen from $9.70 per hundredweight to $10.72 this year.
Bone meal value is up 85% from last year, edible tallow is up 76% and inedible tallow 61%. Variously dismissed as offal or leftovers or worse, byproducts are actually very important in the manufacture of soap, pet food, gelatin and many other products. This is to say nothing of hides and leather, another valuable part of the beef carcass. The oil and feedstuff markets have bid up byproduct prices in the last year.
In a year when cattle prices have been volatile, and lower than in recent years, strong byproduct prices are an especially important source of revenue for the industry. It is harder to measure, and to the producer, is a more indirect part of keeping cattle prices up. But important nonetheless.
In all the mass media feeding frenzy over the possible slaughter of "downer" cows at the Hallmark plant in California, what's missing is reporting of the likelihood that those carcasses were sifted from the beef line to the byproduct line, once inside the plant. It is not entirely a loss to the packer when a diseased or other carcass is sifted, as it goes into byproducts that still bring back revenue to the company. Sold at meat prices, of course the carcass is more valuable, but as byproduct it has value too.
Consumers, and even vegetarians, are unaware of the plethora of products they buy everyday that are made from beef byproducts. They are harmless, since the rendering process leaves them clean and sanitary for non-eating purposes.
There's be a lot holes in the grocery store shelves, if beef byproducts suddenly disappeared from the market.
Bone meal value is up 85% from last year, edible tallow is up 76% and inedible tallow 61%. Variously dismissed as offal or leftovers or worse, byproducts are actually very important in the manufacture of soap, pet food, gelatin and many other products. This is to say nothing of hides and leather, another valuable part of the beef carcass. The oil and feedstuff markets have bid up byproduct prices in the last year.
In a year when cattle prices have been volatile, and lower than in recent years, strong byproduct prices are an especially important source of revenue for the industry. It is harder to measure, and to the producer, is a more indirect part of keeping cattle prices up. But important nonetheless.
In all the mass media feeding frenzy over the possible slaughter of "downer" cows at the Hallmark plant in California, what's missing is reporting of the likelihood that those carcasses were sifted from the beef line to the byproduct line, once inside the plant. It is not entirely a loss to the packer when a diseased or other carcass is sifted, as it goes into byproducts that still bring back revenue to the company. Sold at meat prices, of course the carcass is more valuable, but as byproduct it has value too.
Consumers, and even vegetarians, are unaware of the plethora of products they buy everyday that are made from beef byproducts. They are harmless, since the rendering process leaves them clean and sanitary for non-eating purposes.
There's be a lot holes in the grocery store shelves, if beef byproducts suddenly disappeared from the market.
Friday, March 14, 2008
A self-fulfilling prophecy
It is suddenly is all over the airways, and in a front page article in the Wall Street Journal, that due to high gasoline prices and other inflation, consumers are short of cash and buying less expensive pork and chicken instead of higher-priced beef.
Whether this is really happening or not, consumers will hear these reports and read the stories, and decide "you know what, the media says I'm financially pressed and I better start buying pork and chicken. I can't afford beef."
Beef supplies are tight right now, due to cows lost in last year's severe Great Plains blizzards and drought in the Southeast. Cow numbers are down, and therefore the number of calves born is down. Not as much beef is being produced. It's just basic supply and demand economics that beef prices go up. This is not the blessing for cattlemen that it would seem, because at the same time, chicken and pork supplies are bulging and their price dropping.
All meats are pressed because of the high prices of grain, and particularly corn. Ethanol producers are buying up corn in competition with cattlemen and driving the price to record levels. It's great if you raise corn, tough if you raise livestock.
It takes one year for one cow to raise one calf. This biological fact tends to stabilize cattle numbers and level out the booms and busts caused by high or low numbers. Chickens and pigs reproduce several times a year, so the supply of both meats goes up and down quickly. Let prices get into profitable territory, and a glut of chicken and pork, such as we're seeing right now, materializes overnight.
The three meats are always in competition with each other for the consumer's dollar, but it's tougher for beef when supplies are down, such as in the current situation.
The main salvation for beef is the phenomenon identified by noted consumer food expert Faith Popcorn (yes, that's really her name), she calls Chicken Fatigue. Pork (the other white meat) and chicken largely take their flavor from the sauce they're cooked in or the spices cooked with them. They are bland and boring by themselves. After a few meals of chicken and pork, consumers long for the stronger flavor, texture and "tooth" of beef, and gravitate back to it.
That's what we in the cattle industry are counting on, despite what the media is currently promoting.
Whether this is really happening or not, consumers will hear these reports and read the stories, and decide "you know what, the media says I'm financially pressed and I better start buying pork and chicken. I can't afford beef."
Beef supplies are tight right now, due to cows lost in last year's severe Great Plains blizzards and drought in the Southeast. Cow numbers are down, and therefore the number of calves born is down. Not as much beef is being produced. It's just basic supply and demand economics that beef prices go up. This is not the blessing for cattlemen that it would seem, because at the same time, chicken and pork supplies are bulging and their price dropping.
All meats are pressed because of the high prices of grain, and particularly corn. Ethanol producers are buying up corn in competition with cattlemen and driving the price to record levels. It's great if you raise corn, tough if you raise livestock.
It takes one year for one cow to raise one calf. This biological fact tends to stabilize cattle numbers and level out the booms and busts caused by high or low numbers. Chickens and pigs reproduce several times a year, so the supply of both meats goes up and down quickly. Let prices get into profitable territory, and a glut of chicken and pork, such as we're seeing right now, materializes overnight.
The three meats are always in competition with each other for the consumer's dollar, but it's tougher for beef when supplies are down, such as in the current situation.
The main salvation for beef is the phenomenon identified by noted consumer food expert Faith Popcorn (yes, that's really her name), she calls Chicken Fatigue. Pork (the other white meat) and chicken largely take their flavor from the sauce they're cooked in or the spices cooked with them. They are bland and boring by themselves. After a few meals of chicken and pork, consumers long for the stronger flavor, texture and "tooth" of beef, and gravitate back to it.
That's what we in the cattle industry are counting on, despite what the media is currently promoting.
Thursday, March 13, 2008
Harvesting political hay on the cheap
The blowhards in the Democratic majority in the U.S. Senate are taking full advantage of the Hallmark meat packing case to rake up a big pile of political hay, to be dispersed as this fall's presidential election draws near.
California's bookend pair of far left senators, Barbara Boxer and Diane Feinstein, have led the charge to stomp down hard on meat packing regulation, at the same time throwing up the ugly spector of innocent school children's health being endangered by crass corporate profiteers. They're joined by other great, knowledgeable experts on meat packing, like disgraced Alaska Sen. Ted Stevens and octogenarian Sen. Daniel Akaka of Hawaii. Both need to get the press glare off their own foibles, so maybe clean meat can be their tickets to political restoration.
Where's a great farm state senator, who might actually know something he's talking about, or at least have a constituent who does? I guess we shouldn't spoil the fun, by bringing facts, reason and common sense to the meat packing regulation debate. (Actually, I totally agree with a friend who says "common sense really isn't so common after all).
What is amazing is the total lack of anyone in either the meatpacking industry, or a farm state senator, trying to restore balance to the debate. Admittedly, the president of Hallmark shot himself in the foot at his hearing, nervously admitting that maybe a couple downer cows did make it through his kill line, after he was shown the specious HSUS video. Why aren't these people airing the charges of fake video, to force the vegetarians and animal rightists to defend what they did?
They're being given a free ride, to spew their anti-meat-animal line unchallenged. He who fails to defend himself, gets trampled. The meat packing industry should take note, and at least launch a defense. The failure to stand up for themselves gives the public totally the wrong impression. Even if the facts aren't totally on your side, if there's controversy, the public sloughs it off rather just accepting a slam dunk condemnation from the radical fringe, as they are now.
There's a lot of us who would like to stand up and help you, meat packers, but first you've got to help yourselves.
California's bookend pair of far left senators, Barbara Boxer and Diane Feinstein, have led the charge to stomp down hard on meat packing regulation, at the same time throwing up the ugly spector of innocent school children's health being endangered by crass corporate profiteers. They're joined by other great, knowledgeable experts on meat packing, like disgraced Alaska Sen. Ted Stevens and octogenarian Sen. Daniel Akaka of Hawaii. Both need to get the press glare off their own foibles, so maybe clean meat can be their tickets to political restoration.
Where's a great farm state senator, who might actually know something he's talking about, or at least have a constituent who does? I guess we shouldn't spoil the fun, by bringing facts, reason and common sense to the meat packing regulation debate. (Actually, I totally agree with a friend who says "common sense really isn't so common after all).
What is amazing is the total lack of anyone in either the meatpacking industry, or a farm state senator, trying to restore balance to the debate. Admittedly, the president of Hallmark shot himself in the foot at his hearing, nervously admitting that maybe a couple downer cows did make it through his kill line, after he was shown the specious HSUS video. Why aren't these people airing the charges of fake video, to force the vegetarians and animal rightists to defend what they did?
They're being given a free ride, to spew their anti-meat-animal line unchallenged. He who fails to defend himself, gets trampled. The meat packing industry should take note, and at least launch a defense. The failure to stand up for themselves gives the public totally the wrong impression. Even if the facts aren't totally on your side, if there's controversy, the public sloughs it off rather just accepting a slam dunk condemnation from the radical fringe, as they are now.
There's a lot of us who would like to stand up and help you, meat packers, but first you've got to help yourselves.
Wednesday, March 12, 2008
Cowboy hats in the nation's capitol
It's that one week out of the year when you see significant numbers of cowboys in boots and hats, roaming the halls of Congress and the streets of Washington D.C. The National Cattlemen's Beef Assn., the National Corn Growers and other groups journey to the Puzzle Palaces on the Potomac each spring to lobby their legislators on issues of concern to the industry and meet with officials at the federal agencies such as the U.S. Department of Agriculture (USDA).
A handful of goofy oddballs like Colorado Sen. Ken Salazar and his brother, Congressman John, wear boots and hats regularly in Washington, but mostly the industry is represented by buttoned down professional lobbyists that look like all the other armtwisters, backslappers, and deal cutters.
There's always some issue that the annual trip focuses on, and this year it was foreign beef trade, and the Congressmen and feds gave the expected optimistic pronouncements that Japan, South Korea and other Asian markets were close to opening up for U.S. beef. We've been hearing this for months, with few actual results. If indeed the proof is in the pudding, we in the beef industry are still waiting for the actual pudding, not just the aroma.
Farm state senators and congressmen always throw out the welcome mat, with lots of free tour passes and meals in the House and Senate cafeterias, to impress their homestate constituents. And after the week's over, the solons may have a few passing thoughts about agricultural subjects due to their rural visitors.
But longterm results from this annual trek of several decades' standing are rare. But everyone feels good afterwards.
A handful of goofy oddballs like Colorado Sen. Ken Salazar and his brother, Congressman John, wear boots and hats regularly in Washington, but mostly the industry is represented by buttoned down professional lobbyists that look like all the other armtwisters, backslappers, and deal cutters.
There's always some issue that the annual trip focuses on, and this year it was foreign beef trade, and the Congressmen and feds gave the expected optimistic pronouncements that Japan, South Korea and other Asian markets were close to opening up for U.S. beef. We've been hearing this for months, with few actual results. If indeed the proof is in the pudding, we in the beef industry are still waiting for the actual pudding, not just the aroma.
Farm state senators and congressmen always throw out the welcome mat, with lots of free tour passes and meals in the House and Senate cafeterias, to impress their homestate constituents. And after the week's over, the solons may have a few passing thoughts about agricultural subjects due to their rural visitors.
But longterm results from this annual trek of several decades' standing are rare. But everyone feels good afterwards.
Tuesday, March 11, 2008
Beef, cattle not immune from U.S. economy
Whether or not the "R" word is actually applied to the U.S. economy, there's no doubt things are slowing down. Why else would the fed be loaning more money for longer periods to banks, mortgage companies setting up bail-out plans for homeowners, and Congress doling out $600-$1200 to every American that has a pulse?
Whatever you choose to call it, the current period of tightening credit, higher prices for basic commodities like oil, and higher unemployment (businesses cut 60,000 jobs in February), will affect beef and cattle prices. It probably already has. When money's tight, at the meatcase do you buy $8.99 a pound steaks, $3.99 a pound pork chops or $1.99 a pound chicken leg quarters? Do you go to the white table cloth restaurant for Steak Diane, or to the Value Menu at Wendy's or Taco Bell?
These are pretty basic questions, with fairly obvious answers. But they have big implications for cattle owners, feeders, packers, meat wholesalers, restauranteurs and retailers--ie, everyone in the beef chain. They talk about how some products like Spam are recession proof, but beef is not.
No matter how diligently and correctly an individual ranchers takes care of his business, he is only one link in a much bigger chain--and all the links are interdependent. We're all in the boat together and will sink or swim to a similar extent.
Welcome to the real world.
Whatever you choose to call it, the current period of tightening credit, higher prices for basic commodities like oil, and higher unemployment (businesses cut 60,000 jobs in February), will affect beef and cattle prices. It probably already has. When money's tight, at the meatcase do you buy $8.99 a pound steaks, $3.99 a pound pork chops or $1.99 a pound chicken leg quarters? Do you go to the white table cloth restaurant for Steak Diane, or to the Value Menu at Wendy's or Taco Bell?
These are pretty basic questions, with fairly obvious answers. But they have big implications for cattle owners, feeders, packers, meat wholesalers, restauranteurs and retailers--ie, everyone in the beef chain. They talk about how some products like Spam are recession proof, but beef is not.
No matter how diligently and correctly an individual ranchers takes care of his business, he is only one link in a much bigger chain--and all the links are interdependent. We're all in the boat together and will sink or swim to a similar extent.
Welcome to the real world.
Monday, March 10, 2008
Agriculture: the original environmentalists
The so-called Green Movement loves to blast farmers for pouring chemicals on the soil to raise crops, and destroying both the soil and the grounwater. They point out that sheep and cattle destroy the grass by eating it and walking on it, and pollute the water by relieving themselves on the streambank.
Such wild charges, constantly on display in environementalist literature and videos, and testified to at any congressional or local public hearing, fly in the face of common sense.
Why would those who make their living off the soil, do anything to endanger or weaken their livelihood?
As pointed out in an earlier post, grazing livestock is what keeps the range healthy and alive. The grass is just like your lawn: you have to harvest the grass for it to grow. The waste products from livestock deposited on the ground are then trampled down into the roots by their hooves. This is subtle cultivating of the soil, allows moisture and nutrients to reach the roots of the grass and grow the range. Professional ranchers, who raise livestock year in and year out, have no desire to destroy the range they make their living from.
Professional farmers are the same way. They have to use the same soil year in and year out, so must keep it healthy. They rotate crops and replenish the nutrients so they can stay in business.
The horror stories of the Dust Bowl of the 1930s were because speculators took the livestock off the range, plowing up land for farming that never should have been plowed, and upon discovering that, left it bare to blow. These were not professional farmers and livestockmen--they were fast buck artists, who then moved on to the next get rich quick scheme.
It was the professional ranchers who came back in, seeded the blowing soil, and eventually brought back livestock to nurture the range and keep it healthy.
The next environmentalist screed you hear or read, about getting all the agriculture off the land, is a greedy desire to use the land for their own recreational purposes. The nation's food supply be damned!
Such wild charges, constantly on display in environementalist literature and videos, and testified to at any congressional or local public hearing, fly in the face of common sense.
Why would those who make their living off the soil, do anything to endanger or weaken their livelihood?
As pointed out in an earlier post, grazing livestock is what keeps the range healthy and alive. The grass is just like your lawn: you have to harvest the grass for it to grow. The waste products from livestock deposited on the ground are then trampled down into the roots by their hooves. This is subtle cultivating of the soil, allows moisture and nutrients to reach the roots of the grass and grow the range. Professional ranchers, who raise livestock year in and year out, have no desire to destroy the range they make their living from.
Professional farmers are the same way. They have to use the same soil year in and year out, so must keep it healthy. They rotate crops and replenish the nutrients so they can stay in business.
The horror stories of the Dust Bowl of the 1930s were because speculators took the livestock off the range, plowing up land for farming that never should have been plowed, and upon discovering that, left it bare to blow. These were not professional farmers and livestockmen--they were fast buck artists, who then moved on to the next get rich quick scheme.
It was the professional ranchers who came back in, seeded the blowing soil, and eventually brought back livestock to nurture the range and keep it healthy.
The next environmentalist screed you hear or read, about getting all the agriculture off the land, is a greedy desire to use the land for their own recreational purposes. The nation's food supply be damned!
Sunday, March 9, 2008
Inflation breaking back of cattlemen
While congressmen and even President Bush are wringing their hands, trying to decide if the U.S. is in a recession or not, and figuring out how to squeeze maximum 2008 election leverage out of it, ag producers--and particularly cattlemen--are being eaten up by rising costs.
High priced corn, caused by much of the crop being diverted to ethanol production, leads the parade, followed closely by rising fuel costs. It costs real money to buy gasoline and diesel to run trucks and tractors across the fields, and to run pumps to draw up irrigation water out of ever-deepening wells. Rising oil prices also run up fertilizer costs made from petroleum, as well as electricity and other utility costs.
On top of this, banks and farm credit institutions, in the face of the over-hyped and over-blown subprime lending "crisis," are cutting back loan-to-value ratios, repayment terms and loan renewals. Agriculture is largely a credit-based business. You borrow money to get the crop in the ground or the cows bred, and pay the loan back when the crop or the calves are sold. Hopefully there's enough left over to show a profit some years. If you can't borrow or can't borrow as much as you need, it means a job in town for your wife or a night job for you.
Any weather or other natural disaster, bad economy or credit crunch throws this already-bleak picture into disaster. And much of the cause is out of the hands of the individual rancher or farmer. His livelihood is at stake, but in many ways, he is an innocent bystander to games being played out on the national and international stage.
Even at that, most cattlemen are not crying. They suck it up and persevere, glad for the lifestyle and independence of the ranch life. Just like the 92% of Americans whose mortgages are current and in no danger of going into default. You never read about that either, do you?
High priced corn, caused by much of the crop being diverted to ethanol production, leads the parade, followed closely by rising fuel costs. It costs real money to buy gasoline and diesel to run trucks and tractors across the fields, and to run pumps to draw up irrigation water out of ever-deepening wells. Rising oil prices also run up fertilizer costs made from petroleum, as well as electricity and other utility costs.
On top of this, banks and farm credit institutions, in the face of the over-hyped and over-blown subprime lending "crisis," are cutting back loan-to-value ratios, repayment terms and loan renewals. Agriculture is largely a credit-based business. You borrow money to get the crop in the ground or the cows bred, and pay the loan back when the crop or the calves are sold. Hopefully there's enough left over to show a profit some years. If you can't borrow or can't borrow as much as you need, it means a job in town for your wife or a night job for you.
Any weather or other natural disaster, bad economy or credit crunch throws this already-bleak picture into disaster. And much of the cause is out of the hands of the individual rancher or farmer. His livelihood is at stake, but in many ways, he is an innocent bystander to games being played out on the national and international stage.
Even at that, most cattlemen are not crying. They suck it up and persevere, glad for the lifestyle and independence of the ranch life. Just like the 92% of Americans whose mortgages are current and in no danger of going into default. You never read about that either, do you?
Saturday, March 8, 2008
Telling a cow from a bull
On those rare occasions when the nation's non-agricultural media cover some farm or ranch subject, the results are often hilarious. If not funny, they are usually at least pitiful.
Just as asking an inner-city child where milk comes from, they'll say either "cartons" or "the grocery store," the media thinks that if it walks like a cow, bellars like a cow and looks like a cow, it's a cow. Rarely does the mass media make the correct distinction between bulls (male cattle), cows (female cattle), and steers (neutered male cattle).
It's even worse if they're talking pigs. The male is called a boar, the female a sow and the neutered versions, gilts and barrows. They're all pigs, as far as the non-ag media is concerned. There's a reason city folks don't know the correct terms: the mass media doesn't tell them, because they don't know either. The difference is, its the job of the media to find out.
Similar ignorance comes through on just about any other farm story, be it corn, wheat, strawberrys or cotton. I've read all the stories from the health food extremists touting the healthfulness of soy. They rarely tie the product to the crop grown across the midwest and used for many different purposes: soybeans. You can just read between the lines, and assume they harvest those little soys somewhere.
And this is to say nothing of the overwhelming ignorance displayed in translating grocery prices from farm prices. Its rarely pointed out that a $2-$4 loaf of bread contains 5 cents worth of wheat. It's hardly ever pointed out that the reason milk is so expensive is the heavy dairy price supports pushed by Vermont Sen. Patrick Leahy, to support the dairy farmers of his tiny state. All the heavy price you're paying at the supermarket for basic foodstuffs barely trickles back to the farmer who produced it.
What a differenc simple truth in the mass media on ag matters would bring to consumers.
Just as asking an inner-city child where milk comes from, they'll say either "cartons" or "the grocery store," the media thinks that if it walks like a cow, bellars like a cow and looks like a cow, it's a cow. Rarely does the mass media make the correct distinction between bulls (male cattle), cows (female cattle), and steers (neutered male cattle).
It's even worse if they're talking pigs. The male is called a boar, the female a sow and the neutered versions, gilts and barrows. They're all pigs, as far as the non-ag media is concerned. There's a reason city folks don't know the correct terms: the mass media doesn't tell them, because they don't know either. The difference is, its the job of the media to find out.
Similar ignorance comes through on just about any other farm story, be it corn, wheat, strawberrys or cotton. I've read all the stories from the health food extremists touting the healthfulness of soy. They rarely tie the product to the crop grown across the midwest and used for many different purposes: soybeans. You can just read between the lines, and assume they harvest those little soys somewhere.
And this is to say nothing of the overwhelming ignorance displayed in translating grocery prices from farm prices. Its rarely pointed out that a $2-$4 loaf of bread contains 5 cents worth of wheat. It's hardly ever pointed out that the reason milk is so expensive is the heavy dairy price supports pushed by Vermont Sen. Patrick Leahy, to support the dairy farmers of his tiny state. All the heavy price you're paying at the supermarket for basic foodstuffs barely trickles back to the farmer who produced it.
What a differenc simple truth in the mass media on ag matters would bring to consumers.
Friday, March 7, 2008
Spring cattle market doldrums
The bloom was off the rose in cattle markets this past week, both feeder and fed. As winter recedes and spring grasses start to turn green, the realities of cattle prices, ranch inputs and domestic beef demand come home to roost.
It might be happening a week or two early this year, spurred on by $5 corn, the spector of $4 gasoline and consumers buying less beef because pork and chicken are currently cheaper in the grocery meat case. They're buying $3-$4 gasoline too, and cutting back on grocery spending to cover the added cost. Negative media coverage and presidential campaign buzz to make things look as bleak as possible, are spilling over into consumer perceptions. Many really aren't personally affected by the housing crash, subprime mortgage crisis and higher unemployment.
Afterall, if you have a well-paying, stable job and own your home on a low interest, fixed mortgage with plenty of equity in it, which is the case with most Americans, all these overblown "crises" really don't affect you. But most people button their pocketbook anyway, expecting a rainy day right around the corner. That's what's happened to consumer beef demand.
This gloom was reflected this past week in cattle markets, as feeder cattle were $4-$6 lower and fed cattle out of the feedlot were $2-$4, mostly $3, lower. Markets have held up admirably so far this year, given the glut of negative news and market prognosticators forecasting lower prices that until this week, never happened. But finally, boxed beef demand retreated at the wholesale level, and packer operating margins sunk into the red. It was only natural they would pay less for fed cattle.
At the local feeder cattle auctions, spring graziers had begun to pencil in the cost of cattle, the cost of inputs, how much grass they really would have, and what the cattle will likely sell for off grass next fall, and decided to pay less for feeder cattle or not buy them.
Only the rookies were in panic, for veteran cattlemen have been through all this many times before--and certainly, much worse downturns than this one. It's just that annual time we always face, when reality sinks in.
It might be happening a week or two early this year, spurred on by $5 corn, the spector of $4 gasoline and consumers buying less beef because pork and chicken are currently cheaper in the grocery meat case. They're buying $3-$4 gasoline too, and cutting back on grocery spending to cover the added cost. Negative media coverage and presidential campaign buzz to make things look as bleak as possible, are spilling over into consumer perceptions. Many really aren't personally affected by the housing crash, subprime mortgage crisis and higher unemployment.
Afterall, if you have a well-paying, stable job and own your home on a low interest, fixed mortgage with plenty of equity in it, which is the case with most Americans, all these overblown "crises" really don't affect you. But most people button their pocketbook anyway, expecting a rainy day right around the corner. That's what's happened to consumer beef demand.
This gloom was reflected this past week in cattle markets, as feeder cattle were $4-$6 lower and fed cattle out of the feedlot were $2-$4, mostly $3, lower. Markets have held up admirably so far this year, given the glut of negative news and market prognosticators forecasting lower prices that until this week, never happened. But finally, boxed beef demand retreated at the wholesale level, and packer operating margins sunk into the red. It was only natural they would pay less for fed cattle.
At the local feeder cattle auctions, spring graziers had begun to pencil in the cost of cattle, the cost of inputs, how much grass they really would have, and what the cattle will likely sell for off grass next fall, and decided to pay less for feeder cattle or not buy them.
Only the rookies were in panic, for veteran cattlemen have been through all this many times before--and certainly, much worse downturns than this one. It's just that annual time we always face, when reality sinks in.
Thursday, March 6, 2008
Bush a friend to foreign U.S. beef trade
The George W. Bush administration has been especially friendly to overseas trade of U.S. beef. They have kept it on the front burner of all trade negotiations during his two terms in office. Predecessors shuffled beef trade off to the background or corners of previous trade efforts, but perhaps due to his Texas cattle connections, Bush has been a strong friend.
This has been particularly true since the first Mad Cow Disease discovery in the U.S. and the subsequent bans of U.S. beef in Japan and South Korea, our two biggest markets for American product, after our continental partners of Canada and Mexico. As Japan and South Korea have sought improved access to this country for their manufactured goods, the price has always been acceptance of more U.S. beef in their countries.
While Democratic U.S. Sen. Max Baucus of Montana, who fancies himself a cattleman and great friend of agriculture, and is chairman of the Senate Finance Committee, criticizes the Bush Administration on the issue for partisan advantage in this presidential election year, most objective observers applaud administration efforts. Bush trade chief Susan Schwab says the governments of South Korea and Japan understand that Congress will not budge on approving a coveted bilateral trade deal until the beef issue is resolved.
Closed markets for U.S. beef are largely blocked by political barriers, not the health smokescreens Asian and European nations throw up to protect their own inefficient, small domestic beef producers. Asian nations, previously quite open, use the Mad Cow Disease scare--very hypocritical, since they have had vastly more cases in their own cattle than the two discovered in the U.S. in dairy cows imported from Canada.
Similarly, Europe claims U.S. beef producers use unhealthy growth promotants, and allows virtually no U.S. beef on the continent. In truth, stilbesterol and other hormones far more damaging than any allowed in the U.S., are highly prevalent in samples of European beef the U.S. has tested. This is protectionism, not protection of health. U.S. beef is the healthiest product available, far beyond the standards these countries allow in their own domestically-produced beef.
Foreign trade is crucial to the future of the U.S. beef industry, as this country produces a surplus of its product that must be sold overseas. Beef sold overseas is higher value than that sold domestically, and serves as a safety valve source to sell beef to, when the domestic market is saturated. There are nativist forces in the beef industry led by R-CALF, who are unwilling to do what it takes to sell beef internationally, but they are in a small minority among U.S. catttlemen.
More each passing year, beef, like all businesses, is part of a global economy and the more progressive forces within the industry recognize the necessity of reaching beyond our borders. Led by the internet and easy worldwide travel, the world is smaller and more interdependent than ever before.
The Bush administration has recognized this truth, and pushed foreign trade virtually across the board. But beef has been a centerpiece of it's policy.
This has been particularly true since the first Mad Cow Disease discovery in the U.S. and the subsequent bans of U.S. beef in Japan and South Korea, our two biggest markets for American product, after our continental partners of Canada and Mexico. As Japan and South Korea have sought improved access to this country for their manufactured goods, the price has always been acceptance of more U.S. beef in their countries.
While Democratic U.S. Sen. Max Baucus of Montana, who fancies himself a cattleman and great friend of agriculture, and is chairman of the Senate Finance Committee, criticizes the Bush Administration on the issue for partisan advantage in this presidential election year, most objective observers applaud administration efforts. Bush trade chief Susan Schwab says the governments of South Korea and Japan understand that Congress will not budge on approving a coveted bilateral trade deal until the beef issue is resolved.
Closed markets for U.S. beef are largely blocked by political barriers, not the health smokescreens Asian and European nations throw up to protect their own inefficient, small domestic beef producers. Asian nations, previously quite open, use the Mad Cow Disease scare--very hypocritical, since they have had vastly more cases in their own cattle than the two discovered in the U.S. in dairy cows imported from Canada.
Similarly, Europe claims U.S. beef producers use unhealthy growth promotants, and allows virtually no U.S. beef on the continent. In truth, stilbesterol and other hormones far more damaging than any allowed in the U.S., are highly prevalent in samples of European beef the U.S. has tested. This is protectionism, not protection of health. U.S. beef is the healthiest product available, far beyond the standards these countries allow in their own domestically-produced beef.
Foreign trade is crucial to the future of the U.S. beef industry, as this country produces a surplus of its product that must be sold overseas. Beef sold overseas is higher value than that sold domestically, and serves as a safety valve source to sell beef to, when the domestic market is saturated. There are nativist forces in the beef industry led by R-CALF, who are unwilling to do what it takes to sell beef internationally, but they are in a small minority among U.S. catttlemen.
More each passing year, beef, like all businesses, is part of a global economy and the more progressive forces within the industry recognize the necessity of reaching beyond our borders. Led by the internet and easy worldwide travel, the world is smaller and more interdependent than ever before.
The Bush administration has recognized this truth, and pushed foreign trade virtually across the board. But beef has been a centerpiece of it's policy.
Wednesday, March 5, 2008
Not a cattle futures fan
I like beef cattle. Live, standing before me on the ground, countable, so you know how many actually exist in a feedlot pen, on a ranch pasture or in a corral at the packing plant. These are breathing, actually existing cattle, owned by real people with real money invested in them, real commitment on the dotted line.
This is as opposed to trading cattle futures contracts at the Chicago Mercantile Exchange. One side of each contract allegedly owns real existant cattle, while the other side is a speculator who does not. Bringing them together is a futures floor trader at the Merc, who is paid a commission on each contract he trades.
The futures trader does not care whether prices go up or down, north or south--just so they move. He makes his money on the volatility. The wilder the market swings, the more trading and more money he makes. Cattle futures encourage market volatility, just the opposite of the often-quoted saw that they bring stability and liquidity to the market. The claim for futures is that they limit risk, when in reality they create and cause greater risk.
The two major movers of futures markets are breaking news, and government reports on the industry covered. Both have played in to the major drop in cattle futures prices yesterday and today.
The news is the sales of both National Packing Co. and the beef packing division of Smithfield Foods to the Brazilian conglomerate that already owns Swift and Company in the U.S. This will make them the largest meat packer in the U.S. and probably the world. They will be bigger than current number one Tyson Foods and Excel. A favorite futures trader word came into play, saying this news added "uncertainty" to cattle futures markets.
Government reports are a stickier wicket. The most famous are the USDA Cattle-on-Feed Report and USDA's biennial Cattle Inventory Report. These are received by the futures markets as the holy grail, handed down from on high as the unassailable truth of how many cattle exist.
The dirty little secret is that USDA does not go out to a single feedlot pen or a single ranch and actually count the number of cattle that really exist. Their reports are estimates, based on computer models and simulations, that are frequently corrected weeks and months after they have already destroyed market prices--in essence, the government admitting, too late to do any good, "oops, we screwed up the estimate."
Futures markets dictate, or at least heavily influence, cash prices received by actual cattle owners for their production. That is, rather than the supply-and-demand equation of cattle slaughtered and meat sold, a few market manipulators in the bowels of the Merc in Chicago are determining cattle prices. You don't want to get me started on how a few big cattle feeders, owned by packers themselves and their major stockholders, corner the futures market and seesaw it up and down for their own profit and gain.
That's why you have to take cash cattle price quotations with a grain of salt--and unfortunately to the bank, even when the price you received dropped precipitously due to somebody's market manipulations in Chicago.
This is as opposed to trading cattle futures contracts at the Chicago Mercantile Exchange. One side of each contract allegedly owns real existant cattle, while the other side is a speculator who does not. Bringing them together is a futures floor trader at the Merc, who is paid a commission on each contract he trades.
The futures trader does not care whether prices go up or down, north or south--just so they move. He makes his money on the volatility. The wilder the market swings, the more trading and more money he makes. Cattle futures encourage market volatility, just the opposite of the often-quoted saw that they bring stability and liquidity to the market. The claim for futures is that they limit risk, when in reality they create and cause greater risk.
The two major movers of futures markets are breaking news, and government reports on the industry covered. Both have played in to the major drop in cattle futures prices yesterday and today.
The news is the sales of both National Packing Co. and the beef packing division of Smithfield Foods to the Brazilian conglomerate that already owns Swift and Company in the U.S. This will make them the largest meat packer in the U.S. and probably the world. They will be bigger than current number one Tyson Foods and Excel. A favorite futures trader word came into play, saying this news added "uncertainty" to cattle futures markets.
Government reports are a stickier wicket. The most famous are the USDA Cattle-on-Feed Report and USDA's biennial Cattle Inventory Report. These are received by the futures markets as the holy grail, handed down from on high as the unassailable truth of how many cattle exist.
The dirty little secret is that USDA does not go out to a single feedlot pen or a single ranch and actually count the number of cattle that really exist. Their reports are estimates, based on computer models and simulations, that are frequently corrected weeks and months after they have already destroyed market prices--in essence, the government admitting, too late to do any good, "oops, we screwed up the estimate."
Futures markets dictate, or at least heavily influence, cash prices received by actual cattle owners for their production. That is, rather than the supply-and-demand equation of cattle slaughtered and meat sold, a few market manipulators in the bowels of the Merc in Chicago are determining cattle prices. You don't want to get me started on how a few big cattle feeders, owned by packers themselves and their major stockholders, corner the futures market and seesaw it up and down for their own profit and gain.
That's why you have to take cash cattle price quotations with a grain of salt--and unfortunately to the bank, even when the price you received dropped precipitously due to somebody's market manipulations in Chicago.
Tuesday, March 4, 2008
Meat packing: the big keep getting bigger
Meat packing has been a near-monopoly business in the U.S. for several years, and a blockbuster announcement today that the Big Four packers are now the Big Three makes it even worse.
The distant fourth, National Packing of Dodge City and Liberal, Kansas, was purchased by the Brazilian interests who recently bought Swift and Company. This vaults Swift near the top with Tyson Foods as the nation's largest. Excel, the other major player in meat packing, is probably third.
If competition is the mother's milk of free enterprise, the very essence of the supply and demand economy, there is suddenly even less of it now in the meat packing business. This is bad news for America's cattle producers, as there is now one less bidder out there each week at the feedlot pens, looking for cattle to kill. The livestock sector is having trouble already, with bad winter weather, drought and high grain prices spurred by corn diverted to ethanol production.
One less competitor for slaughter cattle cannot be good news. Beef cattle production probably does not lend itself to the factory, market-cornered trend we've seen in poultry and pork. The truth is today that if you want to raise chickens or pigs, you better have a contract in hand to sell them when you're done, before you start. So far, the cattle market is more open than that, and the individual producer still can compete, unlike chicken and hogs, but the days could be numbered.
National Packing is probably too small to be on the radar screen of federal anti-trust regulators, and since they sold to Swift rather than Tyson, will probably skate by. But it bears watching.
The distant fourth, National Packing of Dodge City and Liberal, Kansas, was purchased by the Brazilian interests who recently bought Swift and Company. This vaults Swift near the top with Tyson Foods as the nation's largest. Excel, the other major player in meat packing, is probably third.
If competition is the mother's milk of free enterprise, the very essence of the supply and demand economy, there is suddenly even less of it now in the meat packing business. This is bad news for America's cattle producers, as there is now one less bidder out there each week at the feedlot pens, looking for cattle to kill. The livestock sector is having trouble already, with bad winter weather, drought and high grain prices spurred by corn diverted to ethanol production.
One less competitor for slaughter cattle cannot be good news. Beef cattle production probably does not lend itself to the factory, market-cornered trend we've seen in poultry and pork. The truth is today that if you want to raise chickens or pigs, you better have a contract in hand to sell them when you're done, before you start. So far, the cattle market is more open than that, and the individual producer still can compete, unlike chicken and hogs, but the days could be numbered.
National Packing is probably too small to be on the radar screen of federal anti-trust regulators, and since they sold to Swift rather than Tyson, will probably skate by. But it bears watching.
Monday, March 3, 2008
Markets demand long term view
If you live and die with hour-by-hour watching of the cattle market, or any other commodity for that matter, you'll probably die.
The twists and turns of the market even day-by-day can drive you crazy. For one thing, the market really only matters if you need to trade--whether it be buy or sell. It's fun to value what you already own with today's prices, but until you're ready to buy or sell, it really doesn't mean very much. You become less a visionary and tracker of the long term trends, and more a day trader, when you don't take a more seasonal view.
You don't buy and sell cattle every day, unless you're a professional trader who doesn't actually raise livestock. That's why you need to know the trend for the year, rather what the market did yesterday. That's what separates the professional cattleman from the pure speculator.
You can trade cattle futures on the Chicago Mercantile Exchange and never actually own a single head. But that's really no different from trading any other stock or commodity. You're a trader and not a cattleman. You're not concerned with genetic improvement, improved efficiency or the psychic rewards of ranching.
You're just chasing the buck.
The twists and turns of the market even day-by-day can drive you crazy. For one thing, the market really only matters if you need to trade--whether it be buy or sell. It's fun to value what you already own with today's prices, but until you're ready to buy or sell, it really doesn't mean very much. You become less a visionary and tracker of the long term trends, and more a day trader, when you don't take a more seasonal view.
You don't buy and sell cattle every day, unless you're a professional trader who doesn't actually raise livestock. That's why you need to know the trend for the year, rather what the market did yesterday. That's what separates the professional cattleman from the pure speculator.
You can trade cattle futures on the Chicago Mercantile Exchange and never actually own a single head. But that's really no different from trading any other stock or commodity. You're a trader and not a cattleman. You're not concerned with genetic improvement, improved efficiency or the psychic rewards of ranching.
You're just chasing the buck.
Sunday, March 2, 2008
Agriculture dead last as campaign issue
Once the Iowa caucuses are over, agriculture drops out of sight as a topic of discussion in presidential politics. That's why federal ag policy is the mess that it is. John Q. Public never hears enough intelligent discussion about it to even become mildly interested in agriculture, much less well informed.
What minor attention agriculture receives, it is to pander to one ag segment or another to garner votes, not to make sound policy that makes economic sense. The worst offender is ethanol manufactured from corn, a completely uneconomic solution to America's energy woes (see blogs below). Close in line behind it, at the federal trough, are subsidies for cotton, tobacco and peanuts.
Even worse, food stamps for poor and indigent people are part of the agriculture budget. Many naive people think food stamps are America's heart of compassion, to keep children from going hungry. The truth is, the big force behind constantly higher spending for food stamps are the major food manufacturers and grocery chains, who make big money out of food stamps.
The federal government subsidizes big grocery chains like Kroger, SuperValu and Walmart to a lush degree with the heavy food stamp spending that comes their way. These chains pay fancy money to Washington lobbyists to keep the federal food stamp budget continually going up.
All this is lumped together as "agriculture policy," when in reality it is little more than payoffs to politically well-connected industries, who feed off the federal government through indirect subsidies. It is well known that you carry southern states in a presidential election with tobacco, peanut and cotton subsidies. In a close election, the rural vote makes all the difference. Corn, soybean and other grain subsidies are key in midwestern states in a close election.
This is what passes for "farm policy." Using the taxpayer's money to buy agriculture votes is hardly good economics, and it raises the price of U.S. farm commodities to the point that it hinders badly needed foreign trade. U.S. farmers produce far more food than Americans could ever eat, so selling it overseas is almost mandatory.
If you even have the chance (fat chance of that every happening), ask Hillary Clinton, Barack Obama or John McCain about that. They wouldn't dare tell you the truth you've just read here.
What minor attention agriculture receives, it is to pander to one ag segment or another to garner votes, not to make sound policy that makes economic sense. The worst offender is ethanol manufactured from corn, a completely uneconomic solution to America's energy woes (see blogs below). Close in line behind it, at the federal trough, are subsidies for cotton, tobacco and peanuts.
Even worse, food stamps for poor and indigent people are part of the agriculture budget. Many naive people think food stamps are America's heart of compassion, to keep children from going hungry. The truth is, the big force behind constantly higher spending for food stamps are the major food manufacturers and grocery chains, who make big money out of food stamps.
The federal government subsidizes big grocery chains like Kroger, SuperValu and Walmart to a lush degree with the heavy food stamp spending that comes their way. These chains pay fancy money to Washington lobbyists to keep the federal food stamp budget continually going up.
All this is lumped together as "agriculture policy," when in reality it is little more than payoffs to politically well-connected industries, who feed off the federal government through indirect subsidies. It is well known that you carry southern states in a presidential election with tobacco, peanut and cotton subsidies. In a close election, the rural vote makes all the difference. Corn, soybean and other grain subsidies are key in midwestern states in a close election.
This is what passes for "farm policy." Using the taxpayer's money to buy agriculture votes is hardly good economics, and it raises the price of U.S. farm commodities to the point that it hinders badly needed foreign trade. U.S. farmers produce far more food than Americans could ever eat, so selling it overseas is almost mandatory.
If you even have the chance (fat chance of that every happening), ask Hillary Clinton, Barack Obama or John McCain about that. They wouldn't dare tell you the truth you've just read here.
Saturday, March 1, 2008
Blown badly out of proportion
Veteran pols know the power of "the children." They couch all manner of normally unacceptable government programs in terms of how "but it's for the children" to tug at people's heart strings.
So it is with the record 143 million pound ground beef recall of Hallmark Packing of Chino, California. Since Hallmark is the sixth largest ground beef supplier to USDA's school lunch program, this whole farce (see previous blog below) is tear jerkingly labeled as endangering the health of the nation's school children. This is patently false, as no tainted samples of hamburger have been found or alleged, not a single case of sickness has been found and attributed to the Hallmark meat. Using "the children" for cover, vegetarians, animal rights radicals and union activists are blowing up the Hallmark case all out of proportion.
It's bad enough that the video shot by People for the Ethical Treatment of Animals might well have been staged, rather than shot as a picture of a daily practice at the plant. Now comes word of union trouble at the plant, disputes between labor and management.
Meatpacker unions are notorious for alleging unsafe meat handling practices, any time they need to claw for advantage and an upper hand with management. They put Cattle King clear out of business in Denver a few years ago with spurious charges. And that's far from the only packer driven out of business by union chicanery.
Iowa Sen. Tom Harkin of Iowa, chairman of the U.S. Senate Agriculture Committee, is using the Hallmark case to justify a huge federal incursion into the livestock business, using it to justify a federally-mandated Animal Identification program that will be hugely expensive for both the taxpayers and individual farmers and ranchers, with very few results in return. Harkin is a favorite of Big Labor and its meatpacking unions.
The mass media, union members all, continue to trumpet the Hallmark case. Read those stories with a jaundiced eye, because what you see is not what you get. John Q. Public is being had.
So it is with the record 143 million pound ground beef recall of Hallmark Packing of Chino, California. Since Hallmark is the sixth largest ground beef supplier to USDA's school lunch program, this whole farce (see previous blog below) is tear jerkingly labeled as endangering the health of the nation's school children. This is patently false, as no tainted samples of hamburger have been found or alleged, not a single case of sickness has been found and attributed to the Hallmark meat. Using "the children" for cover, vegetarians, animal rights radicals and union activists are blowing up the Hallmark case all out of proportion.
It's bad enough that the video shot by People for the Ethical Treatment of Animals might well have been staged, rather than shot as a picture of a daily practice at the plant. Now comes word of union trouble at the plant, disputes between labor and management.
Meatpacker unions are notorious for alleging unsafe meat handling practices, any time they need to claw for advantage and an upper hand with management. They put Cattle King clear out of business in Denver a few years ago with spurious charges. And that's far from the only packer driven out of business by union chicanery.
Iowa Sen. Tom Harkin of Iowa, chairman of the U.S. Senate Agriculture Committee, is using the Hallmark case to justify a huge federal incursion into the livestock business, using it to justify a federally-mandated Animal Identification program that will be hugely expensive for both the taxpayers and individual farmers and ranchers, with very few results in return. Harkin is a favorite of Big Labor and its meatpacking unions.
The mass media, union members all, continue to trumpet the Hallmark case. Read those stories with a jaundiced eye, because what you see is not what you get. John Q. Public is being had.
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