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BEEF Cattle questions may be directed to the OSU Extension BEEF Team through Stephen Boyles or Stan Smith, Editor

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Previous issues of the BEEF Cattle letter

Issue # 518

December 27, 2006

2006 Cattle Market Review and 2007 Forecast - Dillon M. Feuz, Livestock Marketing Specialist, Utah State University

A year ago I wrote the following price forecast for 2006 and posted it on this web site: "If I am optimistic on how fast we regain export markets, than I could also make the argument that cattle and beef prices will remain close to 2005 levels. However, being a little more cautious on trade, I expect prices will decline from 2005 levels. Furthermore, given that the supply increase is being driven at the cow-calf level and that demand is being pulled at the retail level, I would expect calf prices to decline relatively more than beef prices. Fed cattle price changes will be between those for calves and those for beef."

Let's examine how I well I forecast the market, why I was right or wrong, and what trends are likely to influence the 2007 cattle markets. In 2005, Choice and Select box beef prices average $145.58 and $136.28. Prices in 2006 through November averaged $1.54 higher at $147.12 for Choice and average $3.19 lower for Select at $133.09. The 3rd quarter of this year was particularly strong relative to 2005 and current Choice beef prices are near the lows established earlier in the year. Live cattle prices have average $85.53 this year compared to $87.35 in 2005, a drop of only $1.82 per cwt. First and 3rd quarter prices were higher than in 2005 and 2nd and 4th quarter prices were lower. Feeder cattle and calf prices have been two different stories for 2006. If we look at prices through September, 750-pound steer prices in Nebraska were steady with 2005 prices and 550-pound calf prices were less than $3 per cwt lower. However, prices dropped sharply this fall. October and November prices were $17 per cwt. lower for 550-pound steers and $13 per cwt. lower for 750-pound steers compared to the same time period last year. For the year, 2006 prices were $114.32 and $133.78 for 750 and 550 pound steers, respectively, compared to $117.18 and $139.04 for 2005.

While my forecasts for 2006 were fairly close, for the yearly averages, I certainly did not expect corn prices to do what they have done and therefore to bring calf and feeder price down so rapidly in the 4th quarter. This will have an impact at least for next year and maybe several years to come. I will discuss that more later, but first I will start at the factors impacting beef markets. Economists are estimating that domestic beef demand in 2006 will be down a little from 2005. That will mark the 2nd year of declining beef demand; a trend that may not be reversed in 2007. With that kind of domestic demand, I would have expected lower box beef prices for the year. However, our beef exports increased about 50% on a weight basis from 2005 levels. Most of the growth occurred in the Mexico and Canadian markets. There as essentially been no trade with South Korea and only very limited trade with Japan. Mexico and Canada are back to trading at pre BSE trade ban levels. There probably will not be much growth in the Canadian market next year, but I think we could still see further growth in beef exports to Mexico. It appears that growth in the Pacific Rim market is going to be very slow and frustrating to cattle producers. I would not expect much growth there in 2007. Beef imports were also lower this year relative to 2005. Preliminary estimates are that imports may be down by 15%. Expanded exports and reduced imports are the reason that box beef prices were able to maintain price levels in 2006 that were similar to 2005. Exports will be the key next year to supporting box beef prices. We likely will not see increased domestic beef demand and projections are that we will have an increase in domestic supply of beef on the market.

Severe droughts in Texas and Oklahoma as well as persistent drought in some of the Northern Great Plains and Rocky Mountains may have limited beef herd growth this year. Cow and heifer slaughter data would suggest that at least in some areas of the country, some liquidation likely occurred. I would expect that the 2007 January beef inventory will not be much different from the 2006 inventory. That will be supportive of calf and yearling prices, compared to the scenario of an increasing beef cow herd. However, corn prices are at record price levels and indications are that those prices will remain at much higher levels than they have previously been. Economic forces will encourage more corn acres to be planted, but it may take a few years for all the adjustments in acres and production to match the new demand for corn for ethanol. That will therefore continue to pressure calf and feeder prices lower, relative to fed cattle prices. Unless we get major corn price relief next year from a huge corn crop, I would not expect calf and yearling prices to improve over current price levels. There may be some seasonal price increases, but 2007 prices will likely be much lower than 2006 prices for all weights of calves and yearlings for most of the year. Fall 2007 prices may even decline somewhat over 2006 price levels.

If there is a small positive that may come from the higher corn prices, it will come from two different areas. First, the higher corn prices and hence higher feed costs may lead to some lighter fed cattle weights. That will have the impact of reducing total pounds of beef on the market and could be supportive of box beef and fed cattle prices. Second, the hog and poultry industry are also experiencing increased feed costs. This might tend to dampen expansion plans in both of those industries, which would mean less total pounds of red meant and poultry on the market. This would be supportive of higher beef, pork and poultry prices. Forecasts for 2007 fed cattle prices are that they will likely be near 2006 price levels.

Feedlots generally lost money in 2006. With higher feed costs, feedlots will try and purchase feeder cattle at lower levels in 2007 to be able to return a profit from feeding.

To summarize, I expect box beef and fed cattle prices in 2007 to remain at similar price levels as 2006. However, calf and yearling prices will likely be substantially lower in 2007 than they were for most of 2006. Fall 2007 prices may only be slightly lower than current price levels and may actually improve if corn prices moderate with next year's crop.

Using Animal ID as a Marketing Tool - Rory Lewandowski, OSU Extension Educator Athens County

There continues to be debate regarding the issue of a national animal identification system. Depending upon the publication you read, animal identification might be some government plot to drive the small livestock farmer out of business, or an absolutely necessary step to insure the safety and protection of the livestock industry, or maybe something in between. Separating fact from rumor can be a challenge. However, stepping back from some of the emotional baggage that a national animal identification system brings, I want to consider just the issue of animal identification. For most beef producers this concept by itself presents no problem. Most beef producers have some system of identifying cows and calves. Are we at a place in the market and consumer demand where animal identification could be leveraged as a marketing tool?

In mid-November I was a part of a small meeting that had been set up by Ben DeLong, a sales manager with ADM Alliance Nutrition. The purpose of the meeting was to hear a presentation by Mark Wellman, a regional sales manager with a company called CattleLog. CattleLog is a software, data service, and reporting company that provides animal identification and information service to its customers. The focus of CattleLog is to add value to cattle through this service. It has approximately 3000 customers in 41 states and 70% of those are involved with the cow/calf enterprise.

The use of animal identification through private industry is being driven by market demand for process age and source verification of beef. That is, increasingly the market, packers, meat exporters, foreign customers such as Japan, and even domestic consumers, want to know without a doubt where the animal they eat came from and how old that animal was at the time of slaughter. According to Mr. Wellman, source verified calf sales have averaged a $5/cwt premium which translates into an extra $20-$25 per head. In order to get this type of value-added marketing, there obviously needs to be a cooperating sales barn/livestock auction that can put together at least 500 calves that are source verified.

So, how does the CattleLog program work? It is a USDA certified process verified program, meaning that cattle approved under this process can enter any supply chain. It is expected that these type of cattle will become increasingly more desired by packers or other buyers because of the supply chain options available, both domestic and foreign. The CattleLog system provides the cow/calf producer with electronic ID ear buttons/tags, and provides a worksheet that the producer fills out regarding calf ID, birth date and any other information the producer wants to enter. That worksheet is sent back to CattleLog where it is entered in a database. At least two weeks before a calf is sent to a sale, the producer must contact CattleLog and request an audit. CattleLog sends a trained certifier to the farm to look at the records, match calves and cows to the record and verifies the age and source of the calves. The producer receives a copy of the audit report along with an official approval letter and listing of each individual animal that is verified. The cost for the basic program that includes age and source verification is around $3.75 per head.

According to Mr. Wellman of CattleLog, the service can also be used by various beef alliances, branded beef and specific breed programs to verify their marketing criteria. For example, in addition to cattle being age and source verified, cattle can be verified as an all-natural beef using no antibiotics, or implants. Some alliances are using animal ID verification to market animals as Beef Quality Assurance (BQA) certified. Whatever qualifications a particular group or even individual producer might want to use to distinguish their beef in the market can be verified through records and an audit by an independent, certified service such as CattleLog. The ADM Alliance connection to CattleLog is that there is a discount in the price/head to any producer who uses ADM products, however this is not necessary to participate in the CattleLog program.

For those with access to the Internet, more information about the CattleLog program can be found at the following web site: http://www.cattlelog.com

Trouble-shooting Reproductive Failure - W. Mark Hilton, DVM, Purdue University School of Veterinary Medicine

With fall preg-checking season well underway, some herd owners are surely pleased with their results. Meanwhile, others are looking for bred females to purchase.

The goal shouldn't be to have 100% of your cows bred each year. Herds at or near 100% pregnant year after year generally represent one of two situations -- a very extended calving season or overfeeding. Neither option is cost-effective for overall herd profitability.

Financial analysis indicates a pregnancy percentage of 90-95% in 65 days is both achievable and likely most profitable. If your herd is below this level, some investigation by you and your herd-health veterinarian is needed.

When I investigate a reproductive problem, I break it into the following categories: For bull problems, it's Breeding Soundness Exam (BSE), overuse, or lack of libido. For cow problems, I look at nutrition, environment, disease and genetics.

Bull problems - When a large percentage of cows are open, my first thought is generally a bull problem. With a national annual average of about 10% of bulls failing their BSE, an annual BSE on every bull before turnout is a must. Nearly every year I've been in practice, I've seen a group of cows all open due to a sterile bull. It's an easy situation to figure out.

Another bull problem is simply overuse. My rule of thumb for Midwest herds is you need a month of bull age for every cow in a 65-day breeding season. If you have 100 cows in a group, you need "100 months of bull" to breed them.

This means three bulls at three years of age, or two bulls at four years of age, would be adequate bull power. We know some bulls can service more than 50 cows in a breeding season, but 50 cows to a bull is our upper limit.

We also know using bulls of greatly differing ages doesn't work well. Having a yearling bull in the pasture with a three- and four-year-old adds up to 100 months, but the yearling will likely get no cows bred due to dominance issues by the older bulls.

The final bull problem is lack of libido. These bulls generally get some cows bred but not enough. To diagnose this problem, place a group of open cows with the bull(s) in question. If the bull lies down in the shade when a cow is in heat, he's asking to leave the herd.

Cow problems - Nutrition tends to be the most common reason for a less-than-desirable pregnancy percentage; the most common nutritional problem is lack of Body Condition Score (BCS) before calving. This is primarily an energy deficiency.

The period between weaning and the third trimester of pregnancy is the most cost-effective time to improve BCS. A good BCS prior to calving is key to breeding back in a timely fashion.

If thin cows are over-represented in the open pen, you may already have the answer. If your younger cows are over-represented, it can be the same problem.

Mature cows that calve too thin (below BCS 5) are at higher risk of being open, compared to cows in good BCS. Young cows are also at increased risk of being open as they need additional energy for skeletal growth. If you have a cow both young and thin, she's at a severe disadvantage.

Post-calving cows need 45% more energy and 40% more protein than a pre-partum cow. Be sure not to shortchange cows at this critical time.

Mineral and vitamin deficiencies also can reduce pregnancy percentage. While phosphorus deficiency historically was listed as a cause of reproductive failure, it's now very rare as most all cows are adequately supplemented with phosphorus.

Other elements that can cause reproductive failure include deficiencies of selenium, vitamin E, cobalt, copper, iodine and manganese. Check with your nutritionist, Extension beef specialist or herd-health veterinarian for requirements in your area.

Environment - A cow herd out of synch with what's going on in the environment can pose problems. The biggest concern is an overly productive cow in an average or poorer environment. We don't want high-maintenance cows weighing 1,700 lbs. trying to get rebred while grazing infected fescue.

Heat stress can also affect reproduction. It can cause reduced embryo viability early in pregnancy, as well as reduced sperm quality and breeding activity by the bull.

Disease - When disease causes reproductive failure, other manifestations of the same disease are generally seen. Abortions, early embryonic death, calves born weak or dead, and calves that die soon after birth are common manifestations. Most disease factors don't simply cause an increase in the percentage of open cows. This is another area where you need to get your herd-health veterinarian involved early in the course of the problem.

Genetics - There are differences in the inherent fertility of different beef breeds. Research also indicates an increase in pregnancy rate in crossbred vs. purebred cows. If you can't attain the pregnancy rate you desire, there may be an underlying genetic component.

If your herd's fall pregnancy results look good, then congratulations. If it's less than desirable, work with your beef team to get to the bottom of the problem. This time next year, you can be reflecting on a job well done.

Forage Focus: Effects of Three Hay Feeding Methods on Cow Performance and Wintering Cost - Michigan State University Beef Cattle Research Update

The primary objective of this 3 year North Dakota Univ. project was to compare the effects of three different hay feeding methods on cow wintering cost. The three methods were: 1) Round bales fed by rolling bales on the ground; 2) Round bales shredded with a power takeoff driven bale processor and fed on the ground; and 3) Round bales fed by placing the bale in a tapered cone round bale feeder.

Cows were in their third trimester of pregnancy, and were on feed for an average of 59 days. Alfalfa grass hay was fed during the first two years, whereas oat hay was fed in the third year. Compared with treatments 1 and 2, feeding bales in a tapered cone feeder significantly increased cow wt. gain; resulted in greater positive rib fat gain; reduced hay consumption an average of 10.2%; and reduced hay waste in the two years of the study when alfalfa/grass hay was fed, but not when oat hay was fed. Average cost per cow over the 3 year period for a 100 cow herd were $109.00, $127.00, and $100.30 for treatments 1, 2, and 3, respectively. Under the conditions of this study, feeding round bales in a tapered cone feeder clearly had an advantage over the other two methods (Landblom et al. 2006. North Dakota State Univ. Beef Cattle and Range Research Report).

Effect of Storage Method on Round Bale Hay Loss - Source: University of Tennessee

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BEEF Cattle is a weekly publication of Ohio State University Extension in Fairfield County and the OSU Beef Team. Contributors include members of the Beef Team and other beef cattle specialists and economists from across the U.S.

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