Beef Market Advisor

Saturday, April 29, 2006

Monday (May 1, 2006) Major Packing Plants Closing

It sounds like all of the major packers are planning on being mostly shut down on Monday, as many of their workers will be participating in immigration protests again. It looks like the May 1 demonstrations may be considerably larger than the similar event in mid-April. Cargill will be closing five beef packing plants on Monday, though the company has announced plans to make up at least part of that lost production with a big day on Saturday.

Dow Jones also reported on Friday that Tyson would not operate five of its nine beef plants on Monday. Swift and Company issued a press release on Friday noting that it would also be shutting down four of its five beef packing plants "due to a combination of factors including * advance employee requests for time off."

One would assume that all of these companies plan to make up as much of the down time as possible with bigger Saturday kills tomorrow and next week, though Cargill is the only one to make that explicit. With the large supplies of market-ready cattle that we have been anticipating for weeks just now starting to materialize, this is not a good time for packing plants be going quiet.

Source: John D. Anderson, Department of Agricultural Economics, Mississippi State University

posted by Dr. Harlan Hughes 4:31 PM [edit]

Grid Premiums Up Over Fiscal Year 2005

U.S. Premium Beef has paid out nearly $2 million more in grid premiums in fiscal year 2006 compared to the same time period in 2005 on a similar number of cattle marketed. That equates to approximately $6.50 per head more this year versus 2005.

"Part of the increase in grid premiums can be attributed to a wider Choice/Select spread in 2006 compared to 2005," Brian Bertelsen, USPB Director of Field Operations, ex-plains.

"Our Choice/Select spread has averaged $11.65 so far this year compared to $5.03 during the same time period last year, so cattle that grade well have been rewarded bet-ter in 2006.

"USPB cattle have also yielded better this year com-pared to last year," Bertelsen points out. "That has also resulted in more money paid for our cattle this year. And, although we're delivering slightly more Yield Grade 4 and 5 carcasses, the industry has experienced the same trend. So, USPB members have actually received smaller discounts for Yield Grade in 2006."

The table below shows where USPB premiums have been earned during fiscal year 2006.

Where USPB Premiums Came From
Fiscal Year 2006 YTD     Top75%    AllCattle
------------------------------ ---------------- ------------
Quality Grade Premium   $15.61      $12.86
Yield Benefit             $16.12       $10.70
Yield Grade Discount   -$2.38       -$3.28
Outweight Discount    -$1.95       -$2.33
Age Verified Premium    $0.40       $0.34
Steer/Heifer Premium    $1.74       $1.72
Total Premium             $29.54       $20.01

Source: US Premium Beef Newsletter 28 April 2006

posted by Dr. Harlan Hughes 4:17 PM [edit]

Bone-Fragment Issue Rises As Concern For US Beef Trade

--Foreign concerns over bone fragments in "boneless" beef shipments has U.S. government officials working to prevent potential trade disruptions as the U.S. regains trading partners. Hong Kong, Thailand, Singapore and South Korea are new to the concept of buying only boneless beef from the U.S., but that is a condition all of them have either placed or are in the process of placing on U.S. beef as trade bans are gradually being eased. "We're talking with them," a U.S. Department of Agriculture official said about foreign governments and their concerns over bone fragments.

Most major foreign markets banned U.S. beef in December 2003 after the first case of mad-cow disease, or bovine spongiform encephalopathy, was discovered here. Many of them have begun importing again, but with restrictions such as a "boneless" provision.

Just last month Hong Kong surprised U.S. government and industry officials by suspending beef imports from Swift & Company's Greeley, Colo., facility because of a shipment containing bone fragments.

Swift & Company (SWT.Xx) at first called Hong Kong's concern "a minor quality issue" that should not have disrupted trade and the company dismissed it as something USDA would deal with. But since then, Swift & Company spokesman Sean McHugh said the company has made changes in its production procedures at the Greeley plant with the hope of resuming shipments to Hong Kong. McHugh said the company has prepared special labels for beef it would ship to Hong Kong and added "supplemental quality assurance personnel" to increase inspections and make sure product will comply with Hong Kong's expectations.

USDA spokesman Ed Loyd confirmed that the U.S.-Hong Kong deal contains "no accepted tolerances" for bone fragments. "The only nations with which we have established tolerances are Canada and Mexico."

Lynn Heinze, a spokesman for the U.S. Meat Export Federation, said the bone fragment issue could be "huge" because a "zero tolerance" is not possible now for U.S. processors.

"That is essentially the issue we are dealing with in Singapore and Hong Kong," Heinze said. "We're seeing it a little bit in Thailand. Clearly the (South) Koreans have indicated to us that a zero tolerance is what they are going to be looking for once that agreement goes into place."

South Korea, one of the largest U.S. beef buyers before December 2003, is now in protracted negotiations with USDA over resuming trade, but only to buy boneless cuts.

Mexico, despite having signed on to a deal with the U.S. and Canada to allow for some bone fragments in boneless meat trade, raised some alarm this year when it considered a zero tolerance proposal. The proposal has been rejected twice by Cofemer, Mexico's equivalent of the U.S. Office of Management and Budget.
North American Free Trade Agreement partners Mexico and Canada are the only two beef importers that have agreed to a tolerance level that allows for some bone fragments in beef shipments.

A "Food Safety or Public Health Defects" section in the NAFTA deal classifies small bone fragments such as "bone scrapings less than 1/32-inch thick by 1/8-inch wide by 3 inches long attached to muscle tissue" as not even worth scoring. Other larger bone fragments are classified as "minor," "major" and "critical." Mexico partially lifted its ban on U.S. beef in March 2004 to allow in boneless product and it agreed in February 2006 to allow in bone-in cuts.

Mexico, now the largest foreign buyer of U.S. beef, has demanded that the U.S. maintain different regulations for the two categories - boneless and bone-in.

Source: Bill Tomson; Dow Jones Newswires; 202-646-0088;

posted by Dr. Harlan Hughes 3:15 PM [edit]

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