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Previous issues of the BEEF Cattle letter
Issue # 507
October 4, 2006
Summer Placements and February Futures - Brian Roe, Associate Professor, OSU Dept. AED Economics
Over the past 12 months (September 2005 - August 2006) U.S. and Canadian feedlots have placed 1.3 million more cattle on feed than during the 12 months prior to that. That is a lot more, considering that the 2005 US-Canadian calf crop, i.e., the source of placements over the past 12 months, was only about 400,000 head larger than the 2004 calf crop. Mexican cattle imports - another possible source of these extra placements - were up a little during the last 12 months compared to the previous year (about 70,000 more), but not enough to account for the surge in placements.
The monthly placement data points to a simple fact: over the past year cattle are entering feedlots at lighter weights. The USDA and Statistics Canada divide new placements of cattle into 4 different weight categories: greater than 800 pounds, 700-800 pounds, 600-700 pounds and less than 600 pounds. Over the past 12 months the number of placements in the two largest weight categories (greater than 700 pounds) has been nearly identical to the previous year. However, there have been more than 300,000 extra cattle placed in the 600-700 pound category and a whopping 1.08 million extra (30%) that have entered via the lightest weight category. In fact, for each of the past 10 months the number of placements under 600 pounds has been higher than the year previous. The last time we had a streak where lightweight placements surged was from April 2003 to March of 2004, though it was smaller (placements in the under 600 pound category were up by about 700,000 head) and there was no simultaneous surge in placements in the 600-700 pound group.
Placing this many cattle at these light weights can really shift the dynamics of feedlot production. Lightweights need more intense management and death loss rates are often twice that of heavier placements. Add to this the fact that many of these light placements may have been coming off cows that were heat and drought stressed, and we might have even larger death rates than normal among our lightest placements.
Let's breakdown this past year's lightweight placement frenzy. Clearly the biggest burst in lightweight placements has been over the past three months. June, July and August placements of cattle under 600 pounds was 578,000 more than the previous year while 600-700 pound placements were up 188,000. It is difficult to predict exactly when this cohort will graduate from the feedlot, however, because of the diverse initial placement weights and the heterogeneous rates of gain among younger placements (e.g., many get sick, which drags down the rate of gain, while some grow like a weed). One can imagine the heaviest and most robust June placements coming to slaughter by Christmas while the lightest, feeblest of the August placements hanging around until spring.
Let's see how this information has been processed by USDA in terms of its supply projections for the upcoming year. Currently USDA has first quarter 2007 supplies pegged to be 5% higher than last year while second quarter 2007 supplies are pegged at +1.5% higher. It appears that USDA is projecting that most of these placements to emerge next winter rather than next spring, though the last USDA estimate was published prior to the last cattle on feed report, which contained the largest August placement of cattle under 600 pounds for at least the last decade. This may cause them to shift increase second quarter production projections during their next monthly report, though it is not obvious that it will cause them to diminish their first quarter projection.
Recent futures prices for February 2007 live cattle contracts have been trading around $90.50 or, after basis, at about the same level as average cash prices during February of 2006. So, the futures market is basically saying that cattle demand will be so strong next February that packers will bid the same amount as last year even though cattle supplies will be 5% larger. What about increased Asian exports - couldn't that justify the demand optimism? Well, it is October and we haven't yet shipped anything to Korea. Japan is slowly warming up to our beef, but how many cattle can qualify under the 20-month rule? USDA projects first quarter 2007 beef exports to be up 55%, which would make that extra 5% of production feel only like an extra 3%. So, Asia could justify some of the optimism, but how much?
I worry that February futures may face downward price pressure ($2 - $5) once analysts fully ruminate on these supply figures and if Asian exports hit an early plateau. April futures prices, recently trading around $90, may also take a hit if USDA dramatically increases 2nd quarter supply projections, though $90 is a reasonable price, particularly if Asian exports pick up steam by that point. June futures have recently traded around $85. Let us not forget that June 2006 prices only averaged around $81. The $85 price appears to assume that the recent bulge in lightweight placements will clear the marketing channel before June and that Asian demand has at least met USDA projections. If this surge in placements hangs on into late spring, however, June could also lose a couple of dollars. However, once we get to the fourth of July, I think that prices during the second half of 2007 could be quite remarkable. With all these recent light placements through the system so quickly in 2007 and the possibility that the fall calf crop is stressed due to the summer drought, fall 2007 supplies could be quite favorable to fed cattle prices, particularly if Asian demand can rebound.
Forage Focus: Evaluating Hay Quality - Rory Lewandowski, Extension Educator, Athens County
Fall can be a good time for the livestock owner to evaluate hay quality. Why evaluate hay quality? There are several reasons, but a primary one is because animal performance is dependent upon the nutrients hay can provide. In turn, the level or quality of nutrients an animal needs depends upon factors such as the age or growth condition of the animal, desired weight gain goals, whether the animal is pregnant or not, and if so, what stage of pregnancy the animal is in, level of milk production, and environmental conditions. On top of this, hay quality can vary widely depending upon forage species, stage of maturity at which hay was harvested, the extent to which the hay was rained on before baling, the moisture content of the baled hay, soil fertility, and storage conditions. The livestock owner must match the needs of his/her livestock with the hay/forage available; either farm produced or purchased. This requires evaluation.
There are two primary means of evaluating hay/forage quality. One is by visual means and the other by chemical analysis of nutrients and fiber. Visual appraisal of hay takes into account the stage of harvest, the leafiness of the hay, color of the hay, odor, softness of the hay, and the amount of weeds, dirt and or trash that might be present in the hay. Chemical analysis generally provides information regarding the moisture content of the hay, the crude protein value, some measurement of fiber content, an estimated energy value, and possibly some mineral content percentages.
Visual estimates of hay quality can be useful to the livestock owner as far as determining general uses for various lots of hay. Hay that is harvested at an early maturity stage with few seed heads, that is very soft and pliable, with few weeds and that is very leafy, with a clean odor and a bright green color is generally a high quality hay. Conversely, a hay that is very stemmy and brittle with lots of seed heads, interspersed with weeds throughout the bale, and having a yellow to brownish color combined with a musty odor is a low quality hay. The high quality hay should be set aside to use for animals with the highest nutrient requirements; young, growing animals, females in the last one-third of gestation or early stage lactation. The poor quality hay should be used for animals with low nutrient requirements, such as females in early gestation after weaning, or animals grazing in a very high quality forage like turnips that could use some poor quality hay for additional fiber content.
Obviously there are some limitations to a visual estimate. Even though a visual examination can help the livestock owner to distinguish between a good quality hay and a poor quality hay, it is often difficult to distinguish between hays of a medium quality. Also, a visual determination will not provide specific quantitative information. For example, suppose that a visual appraisal leads to determining that a second cutting group of hay is of higher quality than a group of first cutting hay. The livestock owner still does not know for certain that the level of nutrients needed by a female in late gestation, or by a young, growing animal will be met by that lot of second cutting hay.
In order to really get a good handle on hay quality there must be some kind of qualitative analysis that provides a number with regard to nutrient value. The least cost method is to use book values. This will give us a ballpark idea, better than nothing, but still lacking information regarding our specific hay. Book values can also vary depending upon the reference used and how the hay is defined. As an example, I looked at orchardgrass hay from three different reference sources. The following table shows the results:
| Orchardgrass Hay | Crude Protein (CP) | Total Digestible Nutrients (TDN) |
| Ref 1: early bloom | 15.0% | 65% |
| Ref 1: late bloom | 8.4% | 54% |
| Ref 2: early bloom | 12.0% | 60% |
| Ref 3: OG hay | 10.0% | 59% |
This table illustrates some of the challenges involved in using book values. Even though reference 1 and reference 2 both list an early bloom stage of orchardgrass hay, the analysis is different, 3 percentage points in crude protein and 5 percentage points in TDN. Depending upon which numbers you used, it might be the difference between supplementing and not supplementing the diet of a young growing animal or of an animal in early lactation. Reference 3 didn't even have a listing for maturity stages as it just listed orchardgrass hay. Looking at the numbers listed it might be suspected that it also is late bloom hay, but perhaps not quite as mature as the late bloom hay in reference 1. So, there are limitations, but combined with a visual appraisal, ballpark numbers might be satisfactory for some classes of livestock.
The only way to know specifically what value your hay has a feedstuff is to get a laboratory analysis on your hay. Making sure those numbers are useful depends upon sampling. Just as in soil sampling, the actual sample you submit to the laboratory for testing/analysis should be made up of many smaller sub-samples. In other words, don't just take a sample from 1 or 2 bales. That will provide you with a lot of information about that 1 or those 2 bales, but may not provide you with good average values to work with. Sample from at least 10 to 12 bales from the same lot of hay if large round bales are used and from at least 20 bales of the same lot if small square bales are used. Lots refer to hay of similar quality and handling (visual appraisal is helpful with this). For example, all first cutting hay would be sampled separately from second cutting hay. If a cutting is spread out over a long time period, there might be divisions within the cutting. First cutting hay, early June versus first cutting hay early July for example. Different samples also should be submitted for different forage species. Analysis of a first cutting fescue hay, first cutting orchardgrass hay or first cutting fescue/clover hay would require different samples.
Reaching into a bale and grabbing a handful of hay is not the way to sample for a lab analysis. Samples should be taken with a core probe, which basically is a tube about 30 inches long and ¾ inch in diameter that can be drilled or driven into the bale. Once the probe is withdrawn, the hay material can be shoved out into a bag or bucket using a dowel. The sub-samples are mixed and a representative sample that fills a quart zip-lock bag can be submitted for laboratory analysis.
Forage and hay testing is offered through the Athens County Extension office, we use Spectrum Analytic Lab out of Washington Courthouse. The cost for a basic hay analysis that includes moisture %, crude protein, acid detergent fiber, TDN and net energy is $22. Other tests providing neutral detergent fiber, relative feed value, digestible dry matter, dry matter intake, and mineral information are also available for additional costs. Forage testing is also offered through area feed dealers, sometimes as a service or at a reduced price. There is always the option of selecting an independent lab and sending in a forage/hay sample for analysis on your own as well.
It is important to read through the test results and understand what the numbers mean in relation to your livestock nutrient needs, but this is a topic for another article. Contact me at the Athens County Extension office for more information about forage testing, sampling procedure and interpretation of test results. Matching forages and hay to livestock needs requires the livestock producer to do some level of evaluation. Visual appraisal and lab analysis are tools that can be used to accomplish this task.
Heifer Selection and Development…How About Future Planning and Profitability? - Bill Doig, M.S., Beef Program Specialist, OSU Extension & O.C.A
When evaluating the beef industry, replacement heifer decisions have one of the longer effects on profitability within the herd. Decisions made today can impact your overall program for several years. The replacement heifer offers the opportunity to represent profitability and genetic improvement, but she also presents a challenge of both nutrition and management. After selecting which heifers are to be kept as replacements, it is imperative to place these females in a separate location from the remainder of the herd in order to properly feed and manage them. However, not many producers apply this to their operation. In a study conducted by the National Animal Health Management Survey, it was found that approximately one-third of producers managed and fed heifers separately. While that study was conducted in 1994, today that number has increased slightly, but it still indicates that the majority of producers choose to not manage heifers differently from the rest of the cow herd. Most often, this is due to the fact that farms do not have the facilities available or the time and labor to manage replacement heifers separately. If the nutritional needs of a replacement heifer are not met from weaning until she is bred, this can have a dramatic impact on her future as a productive and profitable cow.
In Ohio, if we select approximately 20% of the cow herd for replacements, this represents nearly 60,000 heifers per year. Based on the current value of a heifer at weaning and the costs to develop and breed the heifer on an individual farm, it equals nearly $1,000 per head. Basically, this means that replacement heifers in Ohio are worth $60,000,000 annually. Mismanagement of replacement heifers can be very costly for both producers and the entire state.
Heifer Development programs can offer numerous benefits to producers. A few benefits will be discussed now. First of all, there can be a decrease in bull costs. In most operations, a calving ease bull is usually kept for breeding heifers. This bull is not usually the same bull that is servicing the mature cow herd. Ideally, the bull that breeds the mature cow herd will focus more on growth and performance and less on calving ease. If heifers are developed in a replacement program, this eliminates the need to have that calving ease bull kept strictly for heifers.
Secondly, from a management standpoint, these replacement programs allow the focus of the operation to change. If heifers are developed elsewhere, producers can place more management emphasis on young cows. Research has shown that the females most difficult to breed back are young 2 and 3 year olds in production. This group of females is just reaching their prime production. If more focus can be placed within this group, and conception rates are improved, there will more likely be increased profitability for your operation.
The upcoming Ohio Heifer Development Program can provide a potential solution to the challenge of raising replacement heifers from both an economical and management standpoint. This program allows producers to bring in their replacement heifers to a central location to be developed. Producers will retain ownership in the heifers and pay a daily fee that covers the cost of feed, medicine, reproductive associated costs, and labor. By combining feed, labor and management resources, this will provide an opportunity for economic relief compared to individual on farm development.
Heifers will be provided proper nutrition to meet their constantly changing requirements. It is critical to have heifers beyond their first estrous cycle prior to the breeding season. This is correlated to keeping the heifers at proper weight ranges. Ideally, heifers should be fed to reach approximately 60-65% of their mature body weight at breeding time. Heifers in the program will be bred to bulls with proven genetics, focusing on calving ease and balanced traits and EPDs. By focusing on calving ease bulls with balanced traits, this will likely result in a decrease in calving difficulty while having offspring that perform adequately. Heifers will be bred to calve early in the season. Research indicates that heifers bred to calve early in the season will have calves that are heavier at weaning and the longevity of the heifer increases. In this program, after heifers are confirmed pregnant, they will then be allowed to return to the producer.
Currently, we are in the preliminary stages of developing this program. Across the country, there have been various successful heifer development programs. Our goal is to find out what works and to implement a program here in Ohio that combines the best of those other programs, while focusing on the specific needs and goals of our producers. Ultimately, this program will be a hands-on educational tool as well as a production vehicle for traveling into the future of Ohio cattle production.
If you are interested in being a cooperator for this program, or you would like to place your replacement females into our program, please contact me at doig.7@osu.edu or calling me at 614-873-6736. As we continue to develop this program, more information will be provided.
Weekly Roberts Agricultural Commodity Market Report - Mike Roberts, Commodity Marketing Agent, Virginia Tech
LIVE CATTLE in Chicago (CME) closed higher on Monday with the OCT'06LC at $91.575/cwt, up $0.925/cwt and the DEC'06LC up $0.650/cwt at $90.50/cwt. Both months made it higher than their 40-day moving averages. Bulls closed out long hedges behind last week's higher futures supported by stronger cash cattle sales. Last week, cash cattle traded $2/cwt - $3/cwt over the previous week, mostly at $91/cwt - $92/cwt, with some going as high as $92.50/cwt in various southwest feedlots. Early on Monday, USDA put the choice beef cutout at $142.63/cwt, up $0.54/cwt. According to HedgersEdge.com, the average beef plant margin for Monday was near a negative $30.50/head, up $3.60/head from a negative $34.10/head on Friday and $16.10/head better than last week's negative $46.60/head. Floor sources are still saying they are watching for signs of beef packers reducing kill rates amid negative profit margins. However, those expectations may diminish in the next few days as margins are expected to improve. Due to burdensome supplies cash sellers should still remain ready to protect a portion of 4th quarter '06 and 1st quarter '07 marketings at this point. Hedgers should be sensitive to any downturn in this market. Corn users may want to consider selling a put option at this time.
FEEDER CATTLE at the CME closed up with the OCT'06FC off $0.400/cwt at $113.300/cwt and still $1.675/cwt lower than last week at this time. The NOV'06FC contract finished the day up $0.350/cwt at $111.200/cwt, $2.200/cwt lower than last Monday. Feeders followed live cattle higher but roaring corn futures in Chicago limited gains at times. January/November spreading was noted in feeder cattle amid a higher CME feeder cattle index and an oversold support status. The CME Feeder Cattle Index for September 28 was placed at $16.21/cwt, up $0.44/cwt. Cattle feeders may want to watch these markets still looking to catch those "up" days to sell. Corn users may want to consider selling a put option at this time.
Visit the OSU Beef Team calendar of meetings and upcoming events
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.
All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status. Keith L. Smith, Associate Vice President for Ag. Admin. and Director, OSU Extension. TDD No. 800-589-8292 (Ohio only) or 614-292-1868
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