High returns for sheep and beef picked to continue

images Sheep and beef farmers have been told they can look forward to another high-earnings year, after pre-tax profit jumped 75 per cent in the past year as lamb and wool remains in demand in key markets.

Average farm income before tax is estimated at $106,200 in the June year ahead.

Beef + Lamb New Zealand economist Rob Davison says this will be a slight dip after the dramatic 75 per cent rise to $114,200 in income for the year ended June 30.

Davison’s predictions in the farmer body’s new season outlook are based on exchange rates of US81c, 50p and 0.59 euro to the kiwi dollar.

He also gives estimates of what a shift in the US dollar rate would mean. At US91c, income would drop to $62,000, but at 71c, it would climb to $157,100.

Last year’s strong earnings came from a 43 per cent jump in lamb prices, a 62 per cent rise in other sheep meat prices and a 43 per cent leap in wool, from a 100-year low. Beef was up 18 per cent.

This was the best year, in inflation-adjusted terms, since 2001-02, Davison says.

Looking ahead, he predicts prices to remain at around the same levels but for more meat to be sold.

He expects a rising exchange rate will cut into that extra income leaving gross farm earnings unchanged.

Farmers are expected to spend more on their farms, particularly on fertiliser, which will eat into net earnings.

Davison says after tax is paid farmers will reduce debt and spend on machinery and living expenses.

This year, lamb export receipts are expected to remain at $2.9 billion.

Beef is likely to ease 2.1 per cent to $2.6b, with exports up 3.1 per cent but on 5 per cent-lower prices from an expected increase in the exchange rate.

Davison says wool production is estimated to fall 1.3 per cent due to lower sheep numbers but with some offset from an increased clip.

Wool export receipts are predicted to remain similar to the previous year at $718 million.

He also provides regional estimates, saying Taranaki-Manawatu farmers will be spending big on fertiliser, after deferring it in recent years. Average pre-tax profit is expected to be $116,000.

In the East Coast-Hawke’s Bay-Wairarapa region, lamb production is expected to fall as replacements are kept to rebuild drought-hit flocks.

Pre-tax profit is forecast to fall 28 per cent to $93,900 after farm maintenance spending.


Ludwig as bad as drought, say beef farmers

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Federal Agriculture Minister Joe Ludwig’s decision to halt live cattle exports to Indonesia so angered the industry that beef producers have now put him on par with floods and droughts.

Farmers fronted a Senate inquiry in Broome on Thursday complaining of their lot in life, namely "floods, droughts and Ludwigs".

West Kimberley producers said they were shocked at the lack of knowledge Senator Ludwig demonstrated during a meeting with cattle farmers two days after the trade’s suspension had been lifted.

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"I kid you not, he said, `Please explain it, how does it work? How do you get the order for cattle? If a boat comes to town, how do you know you can put cattle on it?’ We thought it was a trick question," one told the committee.

The beef producer said it was astonishing to see the agriculture minister asking such basic questions of people "whose industry he has just smashed to smithereens".

"He never even had the decency to learn about our industry before he killed it," the producer said.

Senator Ludwig wasn’t the only target during the hearing, with producers also attacking the government overall, animal activists who sparked the trade suspension, and individual senators.

One producer had a go at independent senator Nick Xenophon, who would like to see the live export trade shut down permanently in favour of boxed meat, saying that blaming producers had resulted in a big social impact.

The producer said his daughter had been bullied at school based on the portrayals of farmers as "these evil, capitalist pigs, living in the north, just gauging profits out of poor, sad animals that die horrendous deaths".

Australian Greens senator Rachel Siewert also got into a tiff with another producer after he questioned the footage that led to the ban, which was coordinated by Animals Australia’s Lyn White.

"Do you believe everything you see?" he asked the senator.

"Do you seriously think she got in there without paying someone off?"

Asked to substantiate the claims, which have already been denied by Ms White, the producer argued that Animals Australia’s footage of abattoirs in Indonesia and more recently in Turkey had not been independently verified.

"It came from the same source … produced by the same director," the producer said.

"Who’s proved it?"

Another producer rubbished the government’s initial $30 million compensation package, which offered immediate cash grants of $5000 and up to $20,000.

The government has increased the compensation by another $70 million, taking the payments on offer above the $100 million mark.

The Senate committee is due to submit its final report on animal welfare standards in Australia’s live export trade by September 21.


CME: 2011 Beef & Pork Packer Margins Up

tải xuống (3) US – In the past, record-high livestock prices such as we have seen this year usually meant that packers lost money by the boatload — but not so in 2011, write Steve Meyer and Len Steiner.

Packer margins in both the beef and pork sectors have been exceptionally good for much of the year and have, on occasion, neared all-time record levels.
The top chart (see below) shows our estimates of gross pork packer margins for this year, last year and the average for 2005- 2009.
These are not NET PROFITS since packers must still pay utilities, transportation costs, labor, plant costs, etc. from these gross margins.
It is clear that 2010 and 2011 have been very good years, though, as gross margins neared the all-time highs set in 1999 (which were realised when hogs were less than $20/cwt. live weight!) last autumn.
Further, gross margins have stayed well above the five-year average every week since late 2009! And, after dipping this summer when hog supplies got relatively tight and performance was hampered by very high temperatures, they have recorvered to over $30 per head since early July.
Why the strength? In the long-run, middleman margins are driven primarily by costs. There is no doubt that packers’ costs have increased since 2007 as energy prices have grown.
Prices of everything from diesel fuel to plastic film have risen. While we don’t have a detailed model of packers costs, we are pretty confident that these costs have not risen by nearly as much as have margins. Recent quarterly reports from Tyson, Smithfield, Seaboard and others bear this out pretty clearly.
We think that the biggest reasons for strong packer margins are strong domestic and international demand and a packing sector that is very close to the perfect size for current hog supplies.
Demand provides pricing “space” for higher-valued products. A correctly sized sector means packers seldom have to chase pigs to keep lines running at speeds that keep unit cots near their optimum.
And then there is the roll of by-products (see the top graph on page 2- full report). These items have collectively fetched over $23/head in recent weeks and, unlike the China-driven spike in 2008, these levels appear to have some staying power — at least as long as the US dollar stays relatively low.
Beef packer margins have been generally good in 2011 as well but, as can be seen in the lower chart below, they have been wildly volatile.
Twice this year, beef packer gross margins have increased by $115/head in two weeks or less and then dropped by nearly that much in the same time period.
Margins in May were near record high but those of mid-March and the week of 14 August (the last week for which complete data are available) were among the lowest since late 2007.
Beef packers, like pork packers, have benefited from relatively strong domestic demand and exceptional exports. Those factors have kept cutout values near record-high virtually all year.
And by-product values (see the bottom chart on page 2- full report) have been even friendlier to total beef packer revenues than they have to revenues of pork packers.
Drop values have been over $160/head all year, driven by a cheap US dollar and recovery in the auto business which drives leather and hide values.
But there is one major difference between the beef and pork packing sectors: The beef packing business is still too large relative to fed cattle supplies — and that problem will get worse before it gets better.
This excess capacity is very likely a major reason for margin volatility — which will likely continue as well.


Dillon Feuz: Beef demand on the rise for several reasons

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Fed steer prices in Nebraska through mid-August have averaged $112 per hundredweight this year. Over the same time period last year they averaged $92 per hundredweight. That is a price increase of 22 percent relative to last year. Is there one reason, or several reasons, for this price increase? As an economist, I am always going to look at supply and demand to try and answer this question.
Let’s begin with supply. Even though the U.S. cattle inventory has been declining for the past few years, this year the number of fed cattle marketed on a monthly basis has exceeded the prior year in four of the first seven months of the year. In two months, fed cattle marketing numbers have been about equal with last year and in only one month have the number of head marketed been lower. Through the first seven months, the total number of fed cattle slaughtered has been greater this year than last year. If everything else had remained unchanged from last year (it obviously hasn’t) then I would have expected fed cattle price to be lower rather than higher than last year’s prices.
Total beef production has also been greater this year than last year. Fed cattle weights have been greater than a year ago and that has added more total pounds of beef to the market place. Again, I would expect price to be lower rather than higher based on these supply numbers.
Let’s consider beef trade and the impact it might be having on prices. Total beef and veal imports into the U.S. are down about 13 percent relative to last year. That tends to reduce the overall supply of beef that the U.S. consumer sees at the market place. Beef and veal imports are actually down 35 percent relative to the previous five-year average. Total U.S. beef and veal exports are up almost 30 percent over last year through July. Again, if we are exporting more beef out of the country, then that tends to reduce the domestic supply available to U.S. consumers. Beef trade has been a very positive in the last few years. Our exports are up over 200 percent over the prior five year-average and we are now back near pre-BSE trade ban export levels.
So, as we consider the actual supply of beef available to U.S. consumers, accounting for domestic production, imports and exports, rather than having a supply increase this year over last year, there has been a slight decrease in supply. This would be supportive of slightly higher beef prices and be supportive of slightly higher fed cattle prices. However, I don’t think it would be supportive of 22 percent higher fed steer prices.
What about beef demand? How has beef demand held up in what seems to be a struggling national economy? It turns out that beef demand has increased this year over last year. Economists estimate that beef demand was up 4 percent in the first quarter of this year and up another 1.5 percent in the second quarter. I won’t try to explain all the details that economists use to come up with these estimates, but I will point out the two main components – which are the price of beef and the supply of beef. Retail beef prices have been up about 10 percent over last year’s prices. So, why do we not say that beef demand is up 10 percent? From the prior paragraph, I documented that the total beef supply available to U.S. consumers was actually lower this year when trade is considered. A lower supply would lead to higher prices, if everything else was unchanged. Therefore, in the current situation some of the 10 percent increase in beef prices in attributable to a decrease in supply, and the remainder is attributable to an increase in domestic beef demand.
What does an increase in beef demand really mean? It essentially means that at least some U.S. consumers are willing to pay more for the same amount of beef they consumed last year, or perhaps some are actually consuming more beef and at higher prices. That is a simplified description, but hopefully you get the point.
I don’t know how it is in your neighborhood, but in many locations the steak restaurant chains are struggling a little in this economy. If that is the case, how is beef demand stronger? It turns out that except for a few people who buy locker beef, most U.S. consumers don’t have a demand for beef, but they have a demand for various beef products: steaks, ribs, roasts, ground beef, etc. Is the demand for each of these beef products the same? The short answer to that question is no. If you consider that we really have not changed how we cut up a beef in the last year, then the relative proportions of cuts should be about equal from last year to this year. However, prices for different beef cuts have been significantly different from year to year.
If we use the price for ribeye to represent the high value cuts from beef, we can see that prices this year for ribeye have been about equal to last year and about 5 percent lower than the previous five-year average. That does not sound like an increase in demand for beef steaks. However, looking at the prices for chuck, round and boneless trim; those prices have been up almost 20 percent over the prior year. That sounds like an increase in demand for lower value beef cuts.
So, what it appears that consumers are doing in this struggling economy is rather than buying a cheaper protein source, such as chicken, to substitute for steak, they are buying cheaper value cuts of beef and more ground beef. This is really a good sign for the beef industry. It appears that consumers are remaining loyal to their beef purchases.
Now going back to the original question – why are fed steer prices 22 percent higher this year than last year? I would say the two main reasons are a very positive beef trade (more exports, fewer imports) and a strong U.S. beef demand. That beef demand is particularly strong for lower-valued beef cuts, which actually make up the largest share of the beef carcass.


JBS falls into red, after wrong bet on US cattle

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JBS’s expansion into the US turned sour when a wrong bet on cattle prices in America, and losses in chicken operations, overpowered a firm performance in South America to drag the group into a surprise loss.

Brazil-based JBS, the world’s biggest beef group, reported an after-tax loss of R$180.8m ($114m) for the April-to-June quarter, compared with earnings of R$3.71m a year before.

The loss was equivalent to about 7 centavos a share – compared with analysts’ expectations of earnings of 7 centavos a share.

While investors had been prepared for "underperformance" at US-based Pilgrim’s Pride, the JBS-controlled chicken producer which last month unveiled a quarterly loss, the Brazilian group also unveiled a hit from being caught out by the southern US drought.

‘Depreciated significantly’

The drought, covering areas home to about one-third of the US herd, caused many ranchers to reverse plans to rebuild stocks, which on a national level are at their lowest since at least the 1970s.

Indeed, rather than keeping animals for breeding, they sold them for slaughter or for fattening, prompting a surprisingly strong rate of placements of animals on feedlots.

For JBS, the unexpected increase in supplies left the group with a mark-to-market hit on cattle hedges "which depreciated significantly in the quarter due to the drought that hit the southern US and the resulting increase in the supply of cattle for slaughter".

The group also highlighted the impact on its Australian beef operations of a strong Aussie dollar, which made exports less competitive, and a rise in labour costs "without any corresponding increase in productivity".

Debt impact

The US beef division, which also includes the Australian operations, reported earnings before interest, tax, depreciation and amortisation (ebitda) of $44.7m for the quarter, a fall of 77% year on year, on revenues up 19.1% at $3.96bn.

The unit’s "underperformance" also left its mark on JBS’s borrowings profile, being blamed for increase to 3.2 times, from 2.9 times, in the ratio of the group’s net debt to ebitda as of the end of June.

Including part-owned Pilgrim’s Pride, total debts were R$12.1bn, equivalent to 3.6 times ebitda.

JBS revealed last week that BNDES, Brazil’s national development bank, had converted loans with a face value of R$3.48bn into shares, resulting in a jump to 30.4%, from 17%, in its stake in the beef group.

The stake of JBS’s ruling Batista family has fallen to 47% from nearly 55%.

The results statement also revealed that ebitda in US pork jumped 72% to $83.6m, boosted by "significant demand from the export market", while in the group’s historic South America beef operations, ebitda rose 28% to R$427.9m ($269m).

Nonetheless, JBS shares closed 3.3% lower at R$4.12 in San Paolo.


Beef prices hit record but farmers still wary


BEEF prices have hit an all-time high and “cautious optimism” is the outlook, according to EBLEX.

But only a few months ago, beef farmers were in despair – and some are not convinced they will not be back there soon.

EBLEX, the government body which gets the levies on farmers’ sales of beef and lamb sales, said in a summary of its latest half-yearly report: “With finished cattle prices reaching an all-time high of comfortably over 300p/kg deadweight this summer and the cull cow trade showing similarly unparalleled strength, cautious optimism is the tone of the latest market outlook.”

Debbie Butcher, senior market analyst for EBLEX, said a number of factors were likely to mean there would be no boom in supply to meet the new prices and added: “With no additional supplies anticipated from Ireland or South America, imported beef volumes are expected to be below 2010 levels in both 2011 and 2012. Equally, continuing firm demand from the continent for manufacturing beef, in particular, is predicted to markedly raise export levels, compensating for any slowing of domestic consumer demand as a result of current austerity measures and inflation levels.”

Richard Tasker, speaking for auctioneers Stephenson & Son at York Mart, said: “It is true we are seeing records tumble on almost a weekly basis. But whether that means the farmers are now making a profit I don’t know, because the whole livestock industry has a problem with feed costs.”

He said the shake-out in dairy had had an effect, by cutting the supply of cheap bull calves available for fattening. And culling for TB, in the south and west, was another significant factor in the squeezing of supply.

He said the 300p a kilo deadweight figure from EBLEX had already been well overtaken.

Tony Thompson, auctioneer at Thirsk, agreed. He said he had just seen heavy heifers selling for 201.6p/kg liveweight – the equivalent of 336p/kg deadweight. And good animals were selling for considerably more.

One factor, he understood, was that abattoirs were getting money for hides and offal which were worthless a year ago.

Farmer and abattoir owner John Penny of Rawdon, near Leeds, said the prices of the “fifth quarter” were irrelevant … “The reason for better meat prices is farmers driven out of business by imports and low prices in the past.”

But Kim Haywood, director of the National Beef Association, said there was a new export market for hides and offal but the money was being used to subsidise supermarket prices rather than being returned to the farmer.

She said: “Even at £3 a kilo deadweight you are 50p short of the cost of rearing.”

A small producer of ‘traditional beef’ said: “With diesel up 40 per cent and other inputs coming close to that, I doubt if anybody is suddenly making more money. We are just turning over more for the same margin per head. And I worry about where it is all going. Beef and lamb are now ridiculously dear.”


BANK caution is squeezing production, says the National Beef Association. Director Kim Haywood said: “Banks appear either not to understand the urgent need for beef farmers to secure credit that reflects recent leaps in the value of store and breeding stock or their priority continues to be focused on the restoration of their balance sheet reserves instead of constructive lending.

“Turnover on a cattle farm is 20-30 per cent higher than it was but regular borrowing limits have not been raised to match it.”


Scotland’s beef farmers handed funding lifeline

yourfile Scotland’s most vulnerable beef farmers will continue to receive financial aid as part of an interim government scheme to replace current support payments.

The €30m Scottish Beef Scheme will target payments towards small farms in hills and other less favoured areas where conditions are deemed as very poor.

The scheme, which will come into force from January 1 2012, replaces the Scottish Beef Cattle Scheme, which was introduced in 2005 in a bid to enhance the environment by supporting cattle grazing – particularly in remote areas.

Under Common Agricultural Policy legislation, the SBCS must come to an end next year and a new scheme that targets specific disadvantages must be introduced.

Scotland’s rural affairs minister Richard Lochhead said it was vital beef producers in the Scottish hills were given support, as many of them struggled to make a profit.

"The new Scottish Beef Scheme allows us to target funding towards smaller herds through reweighted payment levels, so that the first 10 eligible calves receive three times the payment rate for any subsequent calf," he said.

"This will benefit the majority of claimants and is in line with the recommendations of the Pack Inquiry.

"To avoid unnecessary burdens on producers we are making the minimum changes needed to ensure the new scheme complies with EU requirements," he added.

"Importantly, we have ensured that funding continues at current levels until new CAP regulations come into force."

NFU Scotland’s president Nigel Miller said the interim announcement guaranteed the country’s beef industry would be supported until a new CAP package was put in place.

"That removes any uncertainty that beef producers may have had on the immediate future and crucially buys some time for Scotland and stakeholders to continue to develop their thinking on how best to support extensive livestock under any new CAP regime," he said.

"A solution is important as more than 422,000 beef calves born in Scotland last year qualified for the SBCS payment, underpinning Scotland’s important beef industry."

Mr Lochhead said the decision to target funding towards the most vulnerable producers would make a huge difference to crofters, small farmers and new entrants.

"For them, the economics of keeping cows, particularly in more remote areas, is dependent on ongoing support," he added.

"For larger beef farmers, where returns from the SBCS are a smaller part of their overall turnover, it is important that any dip in support is more than compensated for by more meaningful returns being generated from the marketplace for their cattle. "These producers are the engine room of Scotland’s world-renowned beef industry and it is important that consumers, retailers and processors give them suitable encouragement to continue to grow their beef enterprises."


Interim beef calf scheme for Scotland

tải xuống (1) AN interim replacement for the Scottish Beef Calf Scheme, which can no longer continue under CAP legislation, is being put in place from the beginning of next year.

It is designed to ensure support payments to the beef sector until new Common Agricultural Policy regulations come into force.

Rural affairs secretary Richard Lochhead said the scheme would help some of Scotland’s most vulnerable beef producers by targeting payments towards small farms in hills and other less favoured areas.

The new scheme allows target funding towards smaller herds through re-weighted payment

levels, so the first 10 eligible calves receive three times the payment rate for any subsequent calf. It is in line with the recommendations of the Pack Inquiry.


Grains futures soar, beef and pork prices mixed

tải xuống (13) CHICAGO (AP) Grains futures jumped Tuesday on the Chicago Board of Trade after the U.S. Agriculture Department said hot weather in several of the country’s biggest farm states was stressing crops. A smaller crop could drive up prices.
wheat for September delivery soared 41.5 cents to $7.18 a bushel; December Corn shot up 30 cents to $7.1575 a bushel; December oats rose 7 cents to $3.65 a bushel; while November Soybeans climbed 17.75 cents to $13.7975 a bushel.
Meanwhile, beef and Pork futures traded mixed on the Chicago Mercantile Exchange.
October live cattle rose 0.25 cent to $1.1805 a pound; September feeder cattle slid 2.12 cents to $1.3660 a pound; and October lean hogs shed 0.33 cent to 92.67 cents a pound.


Beef tour registration deadline is August 8

9cb23f0e622b249a The Alabama Farmers Federation’s annual beef tour, Sept. 11-17, includes some of the top cattle farms in New York’s famous Finger Lakes region. The deadline for tour registration is Aug. 8.

In addition to seeing commercial cattle farms, tour participants will enjoy stops at Cornell University and Niagara Falls.

The tour is limited to 80 participants. For information, contact Federation Beef Division Director Nate Jaeger at njaeger@alfafarmers.org or (334) 613-4221. For travel and registration questions, contact Lynn Cook at (334) 613-4080 or lcook@alfains.com.