Beef Market Advisor

Saturday, March 05, 2005

Border Action Goes On

Partial Story From

Of course, the big news in the market this week was the Canadian border situation. On Wednesday, U.S. District Court Judge Richard Cebull issued an injunction to prevent the resumption of cattle imports from Canada. The injunction was being requested in connection with a lawsuit filed by R-CALF against USDA over the new minimal-risk region rule, under which imports were to resume on Monday, March 7. Both parties to the lawsuit have 10 days to agree to a date for scheduling a trial. Most observers expect an appeal by USDA before any schedule for a trial is set. How quickly that appeal would be heard is hard to say. Likewise, it is anybody's guess as to how the appeals court would be likely to rule on the issue. If an appeal is successful, the injunction will be lifted, cattle imports will resume, and the trial on the issue of the minimal-risk region rule will be heard in the higher court at some later date. If the appeal is not successful, the injunction will remain in place, and the trial will take place in the federal district court in Montana*probably beginning sometime this summer.

After the injunction was granted, Live and Feeder Cattle futures surged to their highest levels in several weeks. Cash fed cattle also improved by about $3 over last week (supported not only by the unexpected continuation of the border closing and by improving wholesale beef values). Whether or not cattle prices maintain those gains will depend a lot on the wholesale beef market. Packers have faced pretty unattractive operating margins for some time now. If wholesale prices improve, packer operating margins will start to look better, and packers will be inclined to pay more for cattle. If wholesale prices don't improve, packers will be more inclined to slow down their production, much as we have already seen so far this year. On Friday, Cargill perhaps gave some indication of which way they think the situation will play out. According to Dow Jones news service, Cargill announced on Friday that it would be making additional cuts in production at seven of its U.S. beef packing plants.

A final border note: on Thursday, the Senate passed a bill that would completely overturn USDA's minimal-risk region rule. For this action to have any impact on the situation, it would have to be passed by the House and signed by the President. The bill will likely have a tough time getting through the House, and even if it does, President Bush has given every indication the he will veto it. Thus, this legislative action is unlikely to affect the U.S./Canadian trade. The injunction handed down this week in Montana is the key issue to keep an eye on.

for the full story, see

posted by Dr. Harlan Hughes 8:59 AM [edit]

Friday, March 04, 2005

Cattle Outlook

Glenn Grimes & Ron Plain,
University of Missouri - Columbia
March 4, 2005

The big news this week was Wednesday's announcement that a U.S.
district court judge in Montana has put a stay on USDA's plans to
reopen the border to certain Canadian cattle on March 7. Unless this
decision is overturned by another court, the border will remain closed
until a federal court can hear a lawsuit against USDA filed by R-CALF
USA. Presumably, this could take months.

USDA had planned to begin on Monday allowing cattle under 30 months of
age to be imported from Canada for immediate slaughter and to allow
feeder cattle imports if the cattle were going into an approved
feedlot to be fed-out and slaughtered before reaching 30 months of

Live cattle futures contracts responded favorably to the news by
closing higher on both Wednesday and Thursday. Various analysts have
predicted 1-2 million Canadian cattle will be imported in the first 12
months after the border is reopened.

On Thursday, the U.S. Senate voted 52 to 46 in favor of legislation to
prevent USDA from reopening the border. As with all legislation, this
will only be implemented if also passed by the House, signed into law
by the President and not overruled by the courts.

Cattle prices moved higher on this news. The 5-area daily weighted
average price for slaughter steers sold through Thursday was
$89.91/cwt on a live weight basis, up $3.21 from a week earlier, and
$4.95 higher than a year ago. Steers sold on a dressed basis averaged
$142.09, $5.26 higher than the week before, and $6.95 higher than the
same week of 2004.

On Friday morning, the choice carcass cutout value was $1.4358/pound,
up 3.6 cents for the week. The select cutout was up 3.04 cents from
the previous Friday to $1.3987 per pound. Steer and heifer slaughter
weights are running 10-20 pounds above year ago, when they were
unusually light.

Feeder cattle prices were mostly steady to stronger this week. The
price ranges on the Oklahoma City report for medium and large frame
steers were: 400-500# $127.50-$145, 500-600# $116-$137.25, 600-700#
$104.50-$123.50, 700-800# $100.50-$110.25, and 800-1000#

BSE continues to dominant beef trade. The U.S. exported $3.9 billion
of beef and beef variety meats in 2003 but only $808 million worth in
2004. In 2003, 9.6% of U.S. beef production was exported, but only
1.9% of 2004 production. U.S. beef imports increased from the
equivalent of 11.6% of 2003 beef production to 15% of last year's

Federally Inspected cattle slaughter for the week totaled 598,000
head, down 2.6% compared to a year ago. Year-to-date slaughter is
down 5% compared to last year.

The April live cattle contract closed Friday at $89.02, up $2.75 for
the week. June settled at $84.40, up $2.45 from the week before.
August settled at $81.22/cwt.

The March feeder cattle contract closed Friday at $102.67, up $4.27
for the week. April settled at $101.67, up $4.05 from the week
before. May settled at $100.42, up $3.50, and August closed at

posted by Dr. Harlan Hughes 3:24 PM [edit]

Wednesday, March 02, 2005

Judge postpones reopening of border to Canadian cattle

Of The Billings Gazette Staff, March 2, 2005 (Montana)

A federal judge Wednesday issued a preliminary injunction prohibiting the U.S. Department of Agriculture from opening the U.S. border on Monday to Canadian live cattle under 30 months of age. U.S. District Judge Richard Cebull ruled from the bench after a three-hour hearing that pitted attorneys for a national cattleman's group against lawyers representing the USDA and U.S. Justice Department. He ordered attorneys to agree within 10 days to a proposed schedule for holding a full trial with testimony from experts and cross-examination on the cattlemen's request for a permanent injunction against USDA's planned resumption of live cattle trade with Canada.

Whether attorneys for USDA could or would appeal the injunction to the Ninth Circuit Court of Appeals in San Francisco was unclear at midday. One government official said the judge's order could be appealed. Cebull said that a request for stay to the Ninth Circuit would not affect his injunction. He said he wanted to hear testimony from experts in order to clear up some significant issues.

The Billings-based Ranchers Cattlemen Action Legal Fund United Stockgrowers of America had asked the court to bar USDA from implementing its final rule issued in December that found the threat of bovine spongiform encephalopathy mad cow disease in the Canadian herd was a minimal risk and would reopen the border to live cattle imports which were halted in May 2003 when a BSE-infected cow was identified in Alberta. In January, two other cases of BSE in Canada were reported.

Bill Bullard, CEO of R-CALF, said following the hearing, "We are very thankful for the judge's decision and a system of checks and balances. We greatly appreciate the opportunity to further prove the science of our position." Cliff Edwards, a Billings attorney, representing R-CALF, said that USDA could ask the Ninth Circuit for emergency relief, but doubted the appeals court would act without a full record of the hearing. "They have the power, but I don't expect them to act," Edwards said, referring to the Ninth Circuit judges.

R-CALF contends in its lawsuit there are volumes of scientific data that suggest Canada's risk status should not be considered minimal. USDA's only risk assessment of importing BSE or having BSE spread in the U.S. herd because of trade with Canada is low and USDA has not defined low, R-CALF argues. Additionally, the final rule contains substantial changes from the preliminary rule and these changes have not been subject to public or industry comment. In December 2003, a cow in Washington state was found with BSE. That cow came from an Alberta dairy herd. Nevertheless, foreign buyers of U.S. beef closed their borders to imports from the United States. Japan, the largest buyer of U.S. beef, has said it will open its borders to U.S. beef from cattle between 12 and 17 months, but has set no date for resumption of trade.

Bovine spongiform encephalopathy is a brain wasting disease that causes the animal to lose its neuromuscular control. It is caused by deformed proteins in the brain and central nervous system of the infected animal and is always fatal. A human form for BSE called variant Creutzfeldt-Jakob disease was identified in Great Britain in 1995 and since then about 150 people in the United Kingdom have died from vCJD. Another 11 people have died in Europe. There has been one reported death in the United States from vCJD. The BSE transferred to humans who consumed tissues - brain and spinal cord - from cattle infected with BSE, which scientists believed developed from feeding rendered animal parts from ruminants such as sheep, cattle and goats.

posted by Dr. Harlan Hughes 6:26 PM [edit]

Dentition may be more accurate

From Texas A&M

Texas - USDA beef carcass standards estimate maturity based on skeletal shape and appearance and on lean color and texture. These standards indicate that A maturity classification corresponds to cattle less than 30 months of age. Eruption of permanent incisors is related to chronological age. Based on 16 research studies, the first pair of incisors aver­ages erupting at 23.8 months (range across studies was from 22.5 to 27.0 months), and the second pair at 30.4 months.

Researchers at West Texas A&M compared den­tition and estimates of carcass maturity. Two stud­ies were conducted, one involving 1,264 Mexican origin steers and the other a sample from a four-day kill of 11,136 steers and heifers. In general, there was little relationship between teeth and estimates of carcass maturity. For example, even for cattle with four pairs of incisors, 40% were classified as A maturity by the USDA graders. Based on this and other research, it appears that dentition, not "matu­rity," might be a more accurate predictor of chrono­logical age.

Editorial Comment by Harlan Hughes: Based on personal conversations with Canadian ranchers that were punished by faulty Dentition age determinations, I certainly can not support the use of Dentition to determine the age of cattle. Why don't cattlemen just ID their calves at birth, record the birth date, and forget all the proxies for determining age? North Dakota CHAPS herds have been IDing at birth for 25-30 years. It is no big deal!
It is my contention that birth date is needed to intensively manage profits from today's beef cows. Recording birth dates is a money making management action.

posted by Dr. Harlan Hughes 11:12 AM [edit]

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