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 IN THIS ISSUE...  November/December 2003

Upswing in Market Prices May Benefit Ohio Growers

Ohio soybean growers who managed to get their crop planted and weather the lashings Mother Nature gave their crop in the form of rain and diseases are reaping the benefits of record yields and high harvest prices.

Because of a national shortage of soybeans, due to a significant decline in production in the western states such as Nebraska, Missouri, and Iowa–coupled with continued consumer and export demands–harvest prices have rallied over the past several months from $5.50 a bushel to nearly $8.00 a bushel. According to the National Agricultural Statistics Service, market year average price is projected between $6.50 and $6.95 per bushel, up from $5.53 in 2002. With such promising soybean prices, Ohio growers, who are seeing projected record yields of 42 bushels per acre, are poised for a stellar grand finale.

"It's really an interesting reversal from last year. There was a short crop in Ohio, while growing conditions were nearly perfect out West. So while prices did increase, Ohio was not in a position to take advantage of that because we did not have large yields," said Matt Roberts, an Ohio State University agricultural economist. "But this year, the advantage of being in Ohio is not only do we have high prices, but we have pretty good yields unlike the western part of the country. So those farmers who could get their crops established and didn't have disease issues are producing an incredible soybean product this year."

And the good news for growers who have not sold off their beans yet is that the prices may continue to rise.

"Clearly we have fewer beans this year. We have a much higher price because of that which is meant to discourage the consumption and export of beans. But we are not seeing demand slow down," said Roberts. "That indicates that prices still do have room to move upwards. At the rate we are consuming and exporting soybeans, we will run out of soybeans long before next year's harvest. All of this, of course, is what is creating the confusion and uncertainty with the markets."

On the flip-side, the issue with corn production is much less exciting.

 The weather conditions that devastated the soybean crop out West did little to impact the corn crop. And although Ohio corn growers may also see projected record yields of 145 bushels per acre, consistent national production and average prices are generating a balanced market.

"It looks like we will consume about as much corn as we produced," said Roberts. "Corn prices have not moved significantly over the past three or four months." Corn prices are sitting at $2.40 a bushel. Market year average price is projected between $1.90 and $2.30 per bushel compared to $2.32 for last year's crop. Roberts said a few bright spots, however exist with U.S. corn production.

"So far corn exports have been solid. And the other big news is that ethanol demand continues to accelerate," he said. "This year about 900 million bushels of corn or roughly 8 percent of the harvest will go into ethanol, and analysts think that projection is short by a few million bushels."

Ethanol demand may push corn average prices up by another 10 cents or 15 cents, said Roberts. And the question remains how the market will react as ethanol demand increases in the future.

"In two year, we may be looking at 1.2 billion bushels going into ethanol; in another four years, 1.5 billion to 2 billion bushels of corn," said Roberts. Such continued profitability for corn even at $2.30 a bushel, is what continues to steer growers towards corn and away from soybeans.

"There's less global competition in corn, especially with South America continually expanding soybean production. Looking at the current projections, Brazil will produce 15 percent more soybeans with year than last year," said Roberts. "Maybe with the exception of China, no one has really expanded into corn production like that. For many American farmers, selling 200 bushels of corn at $2.20 a bushel sounds mare attractive than selling 80 bushels of soybeans at $5 a bushel. That's where we are seeing U.S. crop production going."

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Buckeye Meat Goat Newsletter
The Buckeye Meat Goat Newsletter is an Extension newsletter that will be published 3-4 times per year by the Ohio Meat Goat Task Force. This task force is comprised of Ohio State University Extension agents, and specialists, meat goat producers, OSU Animal Science Faculty, Ohio Cooperative Development Center, Somalia and East Africa Development and Economic Coordinators, and Heifer-International. The focus of this group is accessing market along with production and research. Many of the topics are relevant to sheep production and some folks are interested in both species.

The newsletter is available in both hard copy and electronically. Persons who would like to receive this newsletter can subscribe by contacting Jeff Fisher at the Pike County Extension Office at 740-947-2121 or by e-mail at fisher.7@osu.edu.

This winter we will be conducting a day-long workshop in Harrison County on meat goat production. The demand for meat goats in and around Ohio is very strong, and this enterprise may be a good source of additional income for livestock producers in our part of the state. Details on this workshop will appear in a future issue of this newsletter.

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Pesticide Recertification
If your private pesticide applicator's license expires in March 2004, you will soon receive a notice from the Ohio Department of Agriculture (if you haven't already) notifying you which categories you need to obtain recertification credits in. We have scheduled the dates listed below this winter to provide recertification in all necessary private categories.

-January 28, 2004, Jefferson JVS, 7-10 p.m.
-February 18,2004, Carrollton High School, 7-10 p.m.
-March 18, 2004, Scio Fire Hall, 1 - 4 p.m.

Unfortunately, due to budget cuts from the state legislature and local county commissioners, starting this year there will be a charge to participate . More specific information on this will be available January.

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Sheep Production Handbook
The 7th Edition of the Sheep Production Handbook is now available from the American Sheep Industry Association (ASI) www.sheepusa.org. The seventh edition contains revised information on major subjects such as breeding, forages, handling, health, management, marketing, nutrition, predator control, reproduction, and wool. New features include an extensive dairy chapter and a hardbound cover. The handbook is the primary text used to teach sheep production in universities around the country and it is written for the sheep producer.

The book sells for $49.95 each (plus shipping). To order, call ASI at 330-771-3500, ext 32, between the hours of 7 a.m. and 3 p.m. Mountain Standard Time.
 

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When Will the Party End?
USDA's announcement that live animal trade from Canada will not resume until January, 2004 (at the very earliest) suggests that the party-like atmosphere enjoyed by many US cattle producers will continue at least until January. While the $112/cwt prices for choice cattle observed in eastern Pennsylvania during mid-October will not return, choice cattle are likely to stay above the $90 mark for the rest of 2003. This announcement also guarantees that Canadian feeder cattle will not compete with US feeder cattle during November and December, when Canadian animals typically constitute about 3% of sales.

A key to projecting fed cattle prices over the next year is identifying how much of the post-Canada-BSE price spike is driven by simple supply issues and how much is driven by fundamental changes in demand. Since the closure of the Canadian border in May, US beef supplies have been affected in several ways. First, direct imports of Canadian processed beef stopped; this reduced US beef availability by about 4.5%. Second, imports of Canadian fed cattle for immediate slaughter stopped; this reduced US cattle slaughter by about 400,000 head or 3%. Third, imports of Canadian slaughter cows stopped; this reduced US cow slaughter by about 137,000 head or 6%. Fourth, US exports increased about 4% as our beef is reaching markets no longer open to Canada.

Adjusting for these factors still suggests that recent prices are about $14 higher than normal for the given level of supplies. For example, compare the third quarter of this year to the third quarter of 2001. In 2003, effective US supply (domestic production + imports - exports) was about the same as in 2001, but prices averaged $83 in 2003 and only $70 in 2001. At least part of this premium is attributable to a shortage in high quality (Choice) animals. Canadian beef and cattle supplies generally consist of a high percentage of Choice. Furthermore, in a rush to capture high prices, many US feedlot managers have marketed cattle earlier than normal with a consequence that fewer of these lighter cattle had enough time in the feedlot to develop a carcass worthy of a Choice grade. Indeed, during the last two months the number of Choice carcasses being slaughtered in the US was 15% below last year and much of the high market price was driven by $30 premiums for choice carcasses. Furthermore, this is unlikely to change soon as a key indicator of the ability of feedlots to market choice cattle, the percent of cattle on feed more than 120 days, is near an all time low (18%).

In my opinion, about $4 to $6 of the $14 abnormal price increase by be attributable to the change in quality, which will eventually go back to normal when Canadian product returns to the US. So does this $8 - $10 residual imply a permanent change in demand, or is this frenzy likely to die off as the Canadian situation gets resolved? Only time will tell. The futures market is predicting a gradual diminishment of the Canada BSE effect over the next year, with practically no remnants remaining by next summer. For choice cattle, this translates to low-$90's for the rest of 2003; mid-$80's for the first quarter of 2004; low-$80's for the second quarter; and the mid-$70's for the third quarter. Some upside is possible during the first quarter of 2004: if the Canada BSE issue lingers longer than expected, these prices could remain around the $90 mark, rather than in the mid-$80's as the futures market is currently predicting. Also, if there was a permanent shift in beef demand embedded in all the other madness of this market, next Summer's futures prices may be undervalued. The true test of demand, however, will come in the next month as retailers begin to raise beef prices to consumers in response to the recent increases in cattle prices.

The timing of the Canadian border opening will also be critical in the feeder cattle markets. Sales of feeder cattle have occurred earlier than usual this fall because of the incredibly high prices. Through October, 30% more feeder cattle have sold this fall than last fall in Kentucky and about 15% more nationally. The cow herd in the US hasn't expanded and the movement of heifers onto feedlots hasn't slowed. Hence, if Canadian feeder cattle aren't allowed over the border until much later (and the exact date isn't known, only that it will be later than January 5, 2004), there could be a serious shortage of feeder cattle during early 2004. If the border doesn't open until April or May, my models suggest a bump in heavier feeder cattle prices next March that would justify backgrounding lightweight feeder cattle this winter. However, the possibility of the border opening and higher corn prices will limit the upside of the feeder cattle markets. Hence, holding feeder cattle in the face of these strong prices is difficult and I would suggest it only for those who inherently like to play a long shot.
The Canadian border closure has widened regional feeder cattle price differences because most Canadian feeder cattle are shipped to western Plains states. For example, in late October, calves weighing 350 pounds sold for $103/cwt in Kentucky markets and for $144/cwt in Kansas markets; for 750 pound feeders the Kentucky and Kansas prices were $91 and $105, respectively. Accounting for an expected shrink of 8-10% for a trip to Kansas, it suggests that the price difference would justify transportation cost of up to $90/head for 250-pound calves and up to $46/head for 750-pound cattle. Depending on your transportation costs, there may be some incentive to ship feeder calves west this year or at least to understanding the value of this option when pricing calves locally.

On a final note, Japan discovered yet another case of mad cow disease in their domestic herd. Beyond the obvious downside (rattling consumer confidence in beef) this discovery was particularly troubling because the animal was only 23-months old - well below the 30-month age cutoff used by North American BSE risk monitoring and management systems. This finding could have long-term impacts on global beef demand and lead to more verbal assaults on the adequacy of the US food safety system.

-Brian Roe
 OSU Extension Livestock Economist
 

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Cost of Nutrients in Dairy Feedstuffs
The good news is that milk prices will show a substantial recovery this Fall. For how long is anybody's guess at this time. The bad news is that feed prices are high in historical terms and the markets are showing no sign of dropping anytime soon. Yet, there are many opportunities for dairy producers to significantly reduce feed cost without impacting negatively the health or production of their cows. Some byproducts are well-priced and are worth considering.
As of late summer, unit costs of rumen degradable protein (RDP) and non-effective NDF (ne-NDF) are down 2.9 and 1.6 units per pound, respectively. The cost per unit of net energy lactation remains very high, approaching 8.5 cents per megacalorie. Effective NDF (e-NDF) is also very pricey, at 8.5 cents per pound.

Table 1. Estimates of nutrient unit costs.
 
 

- A blank means that the nutrient unit cost is likely equal to zero.
 -~ means that the nutrient cost may be close to zero.
 -* means that the nutrient cost is unlikely to be equal to zero.
 -** means that the nutrient cost is most likely not equal to zero.

A good look at the ingredients used on your farm may reveal cost saving opportunities. Currently, the following feed ingredients are priced well-below what they are worth: bakery byproduct meal, ground shelled corn, corn silage, distillers dried grains, hydrolyzed feather meal (with strong reservation due to the considerable range in quality), hominy, roasted soybeans, wheat bran, and wheat middlings. There are also some feedstuffs that are overpriced: beet pulp, canola meal, porcine meat meal, molasses, soybean hulls, 44% and 48% soybean meal, blood meal, and fishmeal. Blood meal is actually priced correctly when the value of lysine (an important amino acid) is factored in our evaluation.

Fishmeal, however, is still considerably overpriced ($150 to $200/ton) even when methionine and lysine are factored in the evaluation. These lists should serve as guidelines. It may be justified to use an ingredient from the overpriced list to fit the specific conditions of a herd. In general, nutritionists should try to maximize the use of discounted feedstuffs and minimize the use of overpriced ones. As always, a properly balanced ration, based on sound nutrition must be used. But, the individual components (feedstuffs) making the ration can be changed (increased, decreased, or substituted) without impacting animal performance. What was a bargain a year ago (e.g. soyhulls) may no longer be a bargain.
 
 
 
 

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Sincerely,
 

Mike Hogan Extension Agent Agriculture & Natural Resources

Ken Simeral Extension Agent Agriculture & Natural Resources Community Development

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All educational programs conducted by Ohio State University Extension are available to clientele on a non-discriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.

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Visit Ohio State University Extension’s WWW site “Ohioline” at: hhtp:/www.ag.ohio-state.edu/~ohioline/
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Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Keith L. Smith, Director, Ohio State University Extension.
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