Articles

MAY 30, 2013
By: University News Release
By Aimee Nielson, University of Kentucky
Just as the summer grilling season is heating up, beef supplies across the country are down, meaning it might cost a little more to host that backyard party. In fact, the number of beef cattle in the U.S. is reportedly less than 30 million—the lowest number since the early 1960s. And when numbers go down and feed prices go up, consumers end up paying more at the grocery store.
“In the interest of telling the whole story, productivity has also increased since that time,” says Kenny Burdine, an University of Kentucky (UK) College of Agriculture economist. “But, the combination of fewer cattle over the past several years and generally strong export markets has left beef supplies relatively tight.”
UK beef specialist Les Anderson explained that for the past several years, many beef producing areas of the U.S. have experienced drought situations and increased feed costs.
“Drought affected vast segments of many of the beef producing states, and that led farmers to reduce the number of cattle they produce,” he says. “Also, many feed costs have been markedly higher during the drought periods, so ranchers have been reluctant to hold onto their cattle simply because it costs too much to feed them.”
Because of those conditions, Burdine says the industry has seen sizeable decreases in cattle inventory in many areas—most notably the Southern Plains.
“Many areas have been impacted by the weather, including the Southeast,” he says. “Another factor worth noting is that we are seeing a considerable conversion of pasture and hay ground to row crop production.”
Even in Kentucky, beef cow numbers are down, about 15% from January 2007 to January 2013, but beef specialists expect the beef industry in the state to hold steady.
“Kentucky farmers have leased land, previously used for pasture, to crop farmers because of high prices being paid for land leases,” says Roy Burris, UK beef specialist at the UK Research and Education Center in Princeton. “But, a lot of land here is not suitable for cropping, so the best use for that land is to continue grazing. Barring any severe droughts, I really think cattle numbers in Kentucky will hold steady.”
All that says, consumers still have a strong demand for beef products, and that means the U.S. will export about 2% less beef and import about 15% more.
“Even with strong demand, U.S. beef consumption per person dropped to about 55 lb. per year, compared to 63 lb. in 2008,” says Lee Meyer, UK College of Agriculture economist. “It had peaked at 94 lb. in 1976 and was at about 65 lb. just 10 years ago.”
Jim Robb, director of the Livestock Marketing Information Center in Denver says in a recent Wall Street Journal article that in 2012, Americans spent $288.40 per person on beef, a 4.2 percent increase from $276.80 a year earlier as retail prices rose. He says U.S. beef sales reached $90.6 billion last year, up from $86.4 billion in 2011. Yet volume is in decline.
At the grocery store, […]

May 17 (Bloomberg) — Bill Gates is once again the world’s richest person.
The 57-year-old co-founder of Redmond, Washington-based Microsoft Corp. recaptured the title from Mexican investor Carlos Slim yesterday, according to the Bloomberg Billionaires Index, as the software maker hit a five-year high. It is the first time Gates has held the mantle since 2007. His fortune is valued at $72.7 billion, up 16 percent year-to-date.
Slim’s America Movil SAB, the largest mobile-phone operator in the Americas, has dropped 14 percent this year after Mexico’s Congress passed a bill that could quash the billionaire’s market dominance. That’s helped erase more than $3 billion from the 73- year-old tycoon’s net worth.
“When they’re talking about reform in a country that’s generally poor, and the guy shows up No. 1 on the list — not a good thing,” said Greg Lesko, managing director at New York- based Deltec Asset Management LLC, which oversees $750 million and has an “underweight” position in Slim’s flagship company. “He’s had a pretty good monopoly situation in Mexico, and the Mexican cellphone user has been paying more than he should. We applaud it for the country.”
Earlier this month, a group of kazoo-playing protesters confronted Slim when he appeared at an event at the New York Public Library, denouncing him for overcharging consumers to enrich himself. He denies the accusation.

Microsoft Rally
The bill passed in Mexico last month, which is backed by President Enrique Pena Nieto and is now before state legislatures, would allow regulators to break up phone companies with more than 50 percent of the market or force them to share their networks. America Movil has 70 percent of Mexico’s mobile- phone subscribers and 80 percent of the country’s landlines.
Microsoft shares have surged 28 percent this year, buoyed by cost controls and sales of business and server software amid weak demand for personal computers running the new Windows 8 operating system. Gates’s fortune has also benefited from a rally in stock holdings that include the Canadian National Railway Co. and waste-collection company Republic Services Inc.
Most of Gates’s fortune is held in Cascade Investment LLC, a holding entity through which he owns stakes in more than a dozen publicly traded companies and several closely held operations, including Four Seasons hotels and Corbis Corp. Less than a quarter of Gates’s fortune is held in Microsoft. He’s donated $28 billion to the Bill & Melinda Gates Foundation.
Bridgitt Arnold, a spokeswoman for Gates, declined to comment. Arturo Elias, Slim’s spokesman, didn’t return phone and e-mail messages.
Buffett, Ortega
Berkshire Hathaway Inc. chairman Warren Buffett is the world’s third-richest person with $59.7 billion, according to the Bloomberg ranking. He is $3.7 billion ahead of Spaniard Amancio Ortega, Europe’s wealthiest person.
Ingvar Kamprad, the founder of IKEA, ranks fifth with a $55.6 billion fortune. The world’s largest furniture retailer generated more than $36 billion in revenue and $4 billion in net income in 2012.
Google Inc. co-founders Larry Page and Sergey Brin have seen their fortunes rise more than 22 percent year-to-date as shares of the world’s most […]

May 8, 2013

Source: University Of Illinois news release

Farm Bill markup likely will begin soon in both the Senate and House Agricultural committees. Much of the focus for traditional program crops will be around three programs: a revenue program, a target price program, and a supplemental crop insurance program.

While the exact nature of the programs will depend on negotiations, what is almost certain is that the programs’ rationale will be risk management. Given a risk management focus, Farm Bill negotiations will need to debate and somehow resolve the following seven questions.

Question 1: Will support provided to some crops be greater than the support provided strictly by risk management considerations?

Risk management programs provide a level of payments that more closely follows gross revenue than do the historical Farm Bill Title 1 programs. For example, a continuation of the current direct payment program results in higher payments for rice and peanuts than for corn, soybeans, and wheat. Modifications of the risk management focus may be needed to gain political support for differing regions and crops.

Preferential treatment can be implemented by various measures. For a revenue program, minimum prices could be put in place, as was done for rice and peanuts in the 2012 Senate Farm Bill.

Target prices can be set higher relative to expected market prices for some crops than other crops, as was done for rice and peanuts in last year’s House Agricultural Committee Farm Bill.

In a supplemental crop insurance program, higher subsidy levels and higher loss multiples can be given to some crops over other crops, as was done for cotton in their STAX program compared to the Supplemental Coverage Option (SCO) proposed for other program crops in the 2012 Senate Farm Bill and 2012 House Agricultural Committee Farm Bill.

Question 2: Will the programs focus on across-year or on within-year protection?

A supplemental crop insurance program will enhance crop insurance protection, thereby increasing within-year protection. A revenue and target price program respectively protect against revenue and price declines that occur across years.

Because all three of the programs must fit within budget parameters, the greater the focus on a supplemental insurance program the lower will be across-year protection, and vice versa.

The discussion in the preceding paragraph presumes that the supplemental insurance coverage provided by STAX and SCO programs is the same proposed in last year’s Farm Bill drafts. Both of these programs based their revenue guarantees on crop insurance’s pre-plant projected prices.

These projected prices are based on harvest futures prices for the crop year. This design choice results only in within-year protection. An alternative design option is to base prices on historical prices, which would introduce the potential for across-year protection.

Question 3: Will the across-year programs focus on price or revenue protection?

It is easier to forecast payments with a price program. Prices lower than the support price will results in payments.

In contrast, payments by a revenue program depend on low revenue not low price. Low prices may be […]

April 23, 2013
by Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist
There seems to be a chill on cattle markets…both literally and figuratively. Cattle markets remain hunkered down due to weather and other impacts. The unrelenting cold, wet spring continues to have a variety of impacts on both the supply and demand sides of cattle and beef markets. Domestic beef demand is stagnant and certainly seems to be lacking the seasonal push that usually accompanies warm weather.
Choice boxed beef cutout has been hovering near the $190/cwt. range with little sense of direction the past three weeks. The Choice-Select Spread has widened seasonally but is the result of weaker Select values rather than strength in Choice values. International demand for U.S. beef has also weakened amid Russian concerns with Ractopamine and weakness in major markets, such as Mexico, where relatively high U.S. beef values have been aggravated by a somewhat stronger dollar since January.
There is growing evidence that extended cold weather has increased beef cow liquidation. Total beef cow slaughter has been up 11.1% the last 4 weeks after declining early in the year. Year to date beef cow slaughter is now down a scant 3.7% from last year. Increased beef cow slaughter appears to be regionally widespread, though regional slaughter data are incomplete. In Region 6, the Southern Plains, beef cow slaughter has been up 15.2% the last four weeks but is still down nearly 12% for the year to date. Oklahoma auction data confirms the recent increase in cow culling as cow and bull volumes in federally reported auctions have been up nearly 23% since mid-March after declining over 24% from January through mid-March.
The latest Cattle on Feed report also suggests weather impacts on feeder markets. Unexpectedly large March feedlot placements were largely concentrated in Texas and Kansas. The Kansas placements were mostly heavy weight feeders from winter backgrounding programs. In contrast, the Texas placements were spread across lightweight to heavier feeder cattle and were likely partly the result of drought induced sales. Some may have been directly from cow-calf liquidations and others the result of forage shortages in winter stocker programs. The fact that large placements occurred in conjunction with weak feeder cattle prices suggests that the movement was more of a supply driven market situation rather than demand driven.
The Cattle on Feed numbers may also suggest implications for the broader cow herd. The number of heifers on feed has fallen sharply since the middle of 2012. The April 1 heifer on feed inventory was down 7.6% year over year. However, this value is less of a decrease than the January 1 heifer on-feed total, which was down 9.5% from the previous year. This likely indicates that much of the increased feedlot placements were heifers, probably including some heifers designated as replacements in the January inventory report. The combination of increased beef cow slaughter and relatively more heifers on feed at this point likely means that any prospects to avoid […]

By: Jeanne Bernick, Top Producer Editor

How do recent droughts compare to 30 years ago?
The drought that settled over more than half of the U.S. last summer was the most widespread in more than 50 years, and now a long dry winter has set up farmers for a nail-biting spring.

Little in our lifetimes tops the 2012 drought disaster, which goes down as among the ten worst of the past century, according to a new report released by the National Climatic Data Center (NCDC). With records dating to 1895, NCDC’s State of the Climate shows only the extraordinary droughts of the 1930s and 1950s covered more land area than the 2012 drought. By a slight margin, last summer’s drought actually covered more land mass than the infamous 1936 drought.

However, when areas classified as “moderate” drought are excluded, the historical rankings change, notes Elwynn Taylor, Iowa State University climatologist. Some droughts were extremely intense, but focused on specific regions rather than sprawling across large swaths of the country.

For example, droughts in 1988, 2000 and 2002 included more than 35% of the U.S. in the “severe” to “extreme” drought categories on the Palmer Drought Severity Index. By comparison, severe to extreme drought covered 32.7% in June 2012.

The drought of 30 years ago was no slouch. The 1983 Midwest drought was associated with very dry conditions, severe heat and substandard crop growth, which affected prices and caused hardship for farmers. Multiple disaster declarations went out in Indiana and neighboring states. Readings of 100° F and higher became prevalent in 1983 during these dry spells across the Midwest, Ohio Valley and Great Lakes regions. The heat waves killed 500 to 700 people.
Heading into 2013. In an ironic end to a winter spent fretting about drought, late snows and heavy rains last month renewed the rising of Midwestern rivers. Current conditions show a change in deep soil moisture levels in the eastern U.S.

Nevertheless, drought situations today will have more impact on food prices than 30 years ago, to the tune of about $3.4 billion during the next year or two, says Paul Walsh, a weather analyst for The Weather Company and The Weather Channel. “It has a huge impact, particularly on winter wheat and areas like Colorado,” Walsh says.

By March, Colorado had only seen 50% of its normal snowpack. “That affects agriculture dramatically because water from the snow pack services crops throughout the West.”
Apples-to-Apples Drought Comparison Difficult
The Drought Monitor report debuted in 1999, and the period of detailed records began in January of 2000. One of the many inputs in the Drought Monitor report is the Palmer Drought Severity Index. This index, developed by meteorologist Wayne Palmer in the 1960s, uses mathematical equations incorporating precipitation and temperature data to estimate evaporation, runoff and soil moisture recharge.

The National Climatic Data Center maintains a database of monthly Palmer drought indices dating to 1895. Because of this much longer period of record, the Palmer index can be used as more of an “apples to apples” comparison between recent […]