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Baxter Black: I Should’a Brought a Raincoat

As Noah said when he went out on the deck to check the windshield wipers, "I should'a brought a raincoat."

Paul's day started out with a drumroll. Every morning for months as he went into the machine shed he noticed the rusty gate hinge on the door jam. It was shoulder high and stuck out like a rhino horn. 'Could be dangerous,' he often thought.

That morning he was in a hurry and listed just enough to starboard to catch his shirt sleeve on the hinge. It jerked him hard to the right! As he swung around he stepped on the weed hoe. It stood smartly to attention and saluted him across the eyebrow!

He stumbled across the grain room holding his eye and stepped into the cat's dish. It slid out from under him. He did the splits and straddled the door jam into the big shed. Looking up from the floor he noticed his tractor leaning, like it had its foot off the curb. On closer inspection he found the lean was the result of a flat tire.

Back at the house to get a Band Aid he discovered they had no water. The well pump was out. Well houses in this part of Iowa are usually circular, concrete, twelve feet in the ground and have a lip not much above the ground level.

Paul loaded up the dog and went to town for parts. Backing out in front of the hardware store, he stuck his elbow out the open window. The protruding door lock slipped up under his sleeve. When he leaned out looking back he mashed the door lock down and pinched a thumbful of skin! He reacted by stomping the gas and nearly blindsiding pore ol' Bud who was on his way to the sale barn in Moville.

When Paul finally got home he saw that his cows were out. Probably in search of water. With the dog's help he managed to get the migrating cattle back into the barn lot. He headed for the well.

'At least I'll get it fixed before lunch,' he thought as he lifted the plywood cover and descended the ladder into the well. There was just room enough for one man to stand up, what with the pressure tank, the pump and pipes.

He knelt down to check the points and leaned a little to let the noon day sun shine light on the subject. Then he felt a stream of water cascading over his head and down the side of his face. It was warm.

Paul considered turning and shouting up at the dog who was apparently marking the well as his territory, but thought better of it. He leaned as far as he could to avoid the shower, which just allowed the stream to soak his shirt and pant leg.

"Yup," he said, wiping the side of his face, "I should'a brought a raincoat."

John Nalivka: A Few Thoughts – on beef demand – strong but how strong is it?

There is no debate that exports have become critical to the red meat industry as production has expanded to record levels. Consequently, the tariffs are the hot topic. While I don't intend to add further commentary to the tariff discussion at this point, I do firmly believe that much of the analysis is wading into unchartered waters. Much of the discussion on tariffs really falls under the heading of political economics with trade a complex topic with a lot of moving parts.

Starting at the intersection of supply and demand where prices are determined, there is no shortage of analysis and discussion on the supply side of the equation. Supply analysis is definitely driven by numbers while demand is more difficult to quantify and thus, tends to be more qualitative. But, we draw conclusions about demand from an estimate of consumer expenditures using monthly production data coupled with retail prices. While this calculated value may not necessarily be the absolute go-to-the-bank value, it does provide a good comparison on what consumers are generally spending on beef, pork, and chicken, between those different meats as well as month-to-month and year-over-year.

So, let's take a look at red meat and poultry production and expenditures for January – July of this year. Beef and pork production were both up 4 percent over the prior year from while chicken production was up 2 percent. Total red meat and poultry production was 3 percent higher than a year earlier. I have said repeatedly that given that production, prices have performed relatively well. That can only be attributed to demand. Rather than building an index to quantify demand, I think consumer expenditures provide a pretty good picture and that number is simple to calculate and understand.

Adding U.S. imports and subtracting exports from the production figure leaves beef, pork, and poultry that was consumed by U.S. consumers here at home. During January – July, there was 1.8 billion pounds of beef imported (unchanged from a year ago) into the U.S. and 1.8 billion pounds exported, a 15 percent increase over the prior year. This left 3 percent more beef consumed in the U.S. for that period than during the same period a year ago.

Using USDA's All Fresh retail beef prices, 15.4 billion pounds of beef discussed above that was purchased by consumers in the supermarket generates a total value of $61.4 billion, a 3 percent increase over the prior year. I do realize part of that production was consumed in restaurants, but for simplification, I value entire quantity using retail beef prices. The All Fresh retail beef price was up 1 percent over a year ago. Adjusting expenditures for inflation, the figure would show a 1 percent increase over the prior year.

So, yes while U.S. beef exports are strong this year and contributed toward higher prices across the complex, U.S. consumer demand representing the largest share of consumption is also making a strong showing and supporting the market.

Correction

Tri-State Livestock News' coverage of the Central States Fair pen of three show included two errors. The Amdahl family's heavy weight (not light weight) pen of bulls earned the champion pen of three bull honors. Also, JD Amdahl was pictured, not TJ Amdahl. We apologize for our mistakes.

Looking into it: R-CALF USA asks feds to investigate trading activity

R-CALF USA asked the Commodity Futures Tradition Commission last week to look into multiple instances of anomalies in the relationship between the cattle futures, cash market and wholesale beef prices over recent years. The organization wants to find out if packers were trading on the Chicago Mercantile Exchange on the dates in question.

According to the group's CEO, Bill Bullard, their members contacted the him last spring when the futures market acted exactly opposite of what market fundamentals suggested it should – crashing at a time when cash fed cattle prices and wholesale prices were on the rise.

"Something was suddenly and abruptly pulling the cattle futures down," he said – adding that the unexpected downward movement of the futures market drug the cash market down with it.

"The marketing committee met and said 'this isn't the only time this has happened, we should go back five years and trace the cattle futures market and compare it to the other values – the cash cattle price and the wholesale values.'" Bullard said he charted each of those values on a daily basis starting in 2013 and found numerous instances where the cattle futures were falling while the other two were on the rise.

"It appeared that the cattle futures market led the cash cattle market in a downward spiral in those instances," he said.

"So we filed a request for an investigation for all of the specific dates we found in the cattle futures market when it abruptly collapsed. We asked the CFTC to look at whether the packers or someone representing the packers was engaged in trading activities on those days."

Bullard said the group told the CFTC in 2016 that it appeared the futures market had become thin enough – like the cash market itself – that it appeared dominant traders could move the market with a couple of hundred contracts.

"If they shorted the market, or sold their contracts in large volumes, then the cattle futures market would collapse – you'd have a selling spree. So we suspect the packers or their representatives were shorting the market to drive the price downward, sending a signal to everyone in the futures market that cattle prices are going down so they would unload." This activity would pull down the cash market simultaneously.

Jim Fryer, who buys grain and trades futures for a large central Montana feedlot and serves as the Montana Stockgrowers Association representative on the National Cattlemen's Beef Association Live Cattle Marketing Committee said he, too has seen a lot of market volatility in recent years.

"The NCBA Livestock Marketing Committee took issues to Washington, DC and the CFTC and the CME about market volatility recently," he said. Fryer is not representing MSGA or NCBA for the purposes of this article.

The futures market moves both up and down dramatically within hours sometimes, Fryer said.

"The volatility is a major concern. It's a concern we took to the CFTC and CME in October of 2015." Fryer said he pointed out during the meeting with the CFTC and CME that he sometimes witnesses spoofing. According to Fryer, spoofing, or entering false orders is illegal. Fryer describes spoofing as "market participants entering orders they don't intend to fill or execute."

The CFTC and CME have increased enforcement of spoofing by more often penalizing the offenders

In his research, Bullard said he discovered that packer margins widened substantially following the December 2015 repeal of mandatory country of origin labeling.

The research revealed a change in the marketplace beginning with the date that COOL was repealed. "From that day forward, there was a fundamental shift in the marketplace," Bullard said.

Packer margins from Jan. 1, 2013 until Dec. 21, 2015 (the date of the COOL repeal) averaged $146 per head. From the date of the COOL repeal until April of 2018, packer margins increased 84 percent to average $269 per head.

"While we were specifically looking at the cattle futures market, it now looks very certain that something has triggered the packers' ability to leverage cattle prices down so that they can capture a greater share of the producers' value of cattle, leaving them with record profit."

But Fryer said the increase in packer profit margins is due to oversupply of protein as a whole – chicken, beef and pork. "We went from a shortage to a surplus" of meat, said Fryer, saying that domestic cattle numbers have not necessarily grown but the quantity of retail beef available for purchase has increased.

Bullard said that in 2013 and 2014, historically tight cattle supplies required the packers to compete for available product. "Even the breaks in the cattle futures market were not sufficient to overcome the competition." Since 2015, market analysts have said that plentiful supplies of cattle are driving the price down, but Bullard believes that this added supply also gives the packers or their buyers the ability to work together rather than bidding against one another.

"We had record imports in 2014 and 2015. We believe a lot of those imports went into cold storage and when COOL was repealed, the packers could begin selling that stockpile and could place a USA label on it," he said.

Fryer said he has seen massive fundamental shifts in the past five to six years, but without seeing the data he doesn't know if he agrees with R-CALF's assessment.

"We've lost packing capacity in Plainview, Texas, we've expanded capacity with Tyson, we went through an extreme shortage of beef in 2014 and a glut in 2016-2018," he said. The price of crude oil diving from $120 per barrel to $25 per barrel cannot be overlooked either, he said.

Fryer hasn't seen R-CALF's data so he can't comment on whether or not activity in the futures market was affecting the cash cattle market on the days in question, but he does believe that it creates volatility in the market.

R-CALF USA believes that COOL had restrained the packers' ability to market substitute imported beef product for domestically-raised beef, keeping the cash cattle price strong. The loss of COOL and cattle futures trading were tools that packers used to cause the marketplace shift.

When Bullard recognized what he thought was a major change on the chart after December of 2015 versus before that date, he asked an economist with the Coalition for a Prosperous America to review the data. "He found that it was statistically significant. That means there was an outside force causing a change in the market place. The COOL repeal is most likely that outside source."

The organization also submitted to the CFTC a 2011 study conducted by the University of Wisconsin that found that meatpackers are still forced to compete for cattle when short term supplies are tight – as evidenced by 2014 cattle prices, Bullard said.

"But when short term supplies are plentiful, the packer conduct shifts from competition to cooperation," he said.

Blue Dog Coalition releases rural agenda

The Blue Dog Coalition, which was once a powerhouse in Congress but has seen its numbers reduced by the decline of Democrats in rural areas, on Thursday released a rural agenda entitled "A Strong Rural America: The Path to Prosperity and Restoring the American Dream in Rural Communities."

The report was released by Rep. Tom O'Halleran, D-Ariz., chairman of the Blue Dog Coalition's Special Task Force on Rural America.

In the report, O'Halleran said, "Our agenda, 'A Strong Rural America', focuses on growing our rural economy, increasing access to affordable health care, empowering the next generation of workers, connecting businesses to global markets, and honoring our promises to rural veterans."

In a call to reporters, O'Halleran did not discuss any detailed policy proposals, but said it is important that whatever policies are developed they must be "stable out into the future" so that rural America can continue to produce the energy products, food and water on which urban American depends.

–The Hagstrom Report

Lagoon spills, livestock deaths growing in N.C.

The impact of Hurricane Florence on North Carolina's livestock industry appears to be worse than earlier reports, according to news stories in the last two days.

"Twice as many livestock have died in North Carolina due to Hurricane Florence as perished in Hurricane Matthew two years ago, and more manure lagoons have been damaged or flooded, state agencies said on Wednesday," the Food & Environment Reporting Network said.

Preliminary estimates by the North Carolina Department of Agriculture put livestock losses at 3.4 million poultry and 5,500 hogs, FERN added.

"Pig poop" is a "disgusting side effect of Florence," USA Today reported Thursday.

–The Hagstrom Report

FAS: Argentina makes Ag subcabinet agency, imposes taxes

In a dramatic development for a country in which in which agriculture has always been the most important industry, the Argentine government announced a plan to bring the Ministry of Agroindustry under the Ministry of Production, the Agriculture Department's Foreign Agricultural Service said in a report released Thursday.

The plan is part of Argentina's move to cut the number of ministries in half, and would make the agriculture ministry a sub-secretariat, FAS said.

"Furthermore, the government will begin imposing variable export taxes on all products and suspend the gradual reduction of the export tax for soybeans amidst a difficult fiscal situation," FAS added.

Argentina's agriculture minister is Luis Miguel Etchevehere, a farmer from Entre Ríos province in the vast Pampas grains belt and former head of the Argentine Rural Society, the country's most prominent agriculture organization.

Argentine farm leaders have been big supporters of President Mauricio Macri. Producer groups said that the new taxes "are a 'terrible mistake' and that the farm sector already bears an inordinately heavy cost in supporting the national economy, adding that such a move discriminates against a sector that brings in U.S. dollars, and furthermore that this policy has not worked in the past," FAS said.

Argentina's economy "cratered" in the second quarter, partly because a severe drought reduced agricultural exports, Markets Insider reported.

The country's gross domestic product contracted 4.2 percent in the second quarter of 2018 from the same period last year and 3.9 percent from the prior quarter, government statistics agency Indec said on Wednesday, Reuters reported.

–The Hagstrom Report

Outtagrass Cattle Co. cartoon by Jan Swan Wood

Outtagrass Cattle Co. cartoon by Jan Swan Wood for the Sept. 22, 2018, edition of Tri-State Livestock News

Tariffs: Producers want trade over aid

Tariff: a tax or duty to be paid on a particular class of imports or exports.

In an effort to level the U. S. trading field, President Trump has levied tariffs on some trading partners, most notably Canada, Mexico and China.

How will this affect producers, especially beef producers, at the grass-roots level?

“I will qualify I may be in a camp of few people,” John Nalivka said, “but I’ve never been overly concerned.” Nalivka has 35 years’ experience in U. S. trade, including working for the United States Department of Agriculture in Washington, D.C. He is also a cattle rancher.

“I think we will get these trade deficits fixed. Rule number one on China trade is, it’s a communist country and they can’t have people hungry, so regardless (of what they have to do) they’ll make sure people aren’t hungry.

“China is already coming back on (buying) soybeans. They’ve bought about all they can from somewhere else. China has been a communist country for six decades,” Nalivka said. Food is leverage for communist countries, so China will make sure it keeps a good supply.

“Trade in itself is demand,” Nalika said. “All buyers look for the best price, but the currency exchange rate gives the final cost. There is the absolute price, the exchange price, and the tariff price.”

Nalivka said multi-level trade deals are bad. Bilateral trade deals are best, he said.

“I was in a meeting in Washington where they presented the Trans-Pacific Partnership. It was 10,000 pages. I asked those guys ‘what’s in it?’ and they talked a lot of trade jargon, but I never got an answer.

“Trade talks are usually so complex no one can understand, but Trump talks in the average person’s language. And he understands the exchange rate.

“I was at the USDA in Washington for the 1984 deal with Japan on beef and orange juice. That was a good deal.” Nalivka said. "Make no mistake, the beef in the USA is the most efficiently produced and the highest quality in the world."

He said the scare that there will be a tariff ripple effect which is passed on to consumers is bunk. “That excuse might be used for a price increase.”

Nalivka said trade negotiation with Mexico and Canada is good, with deals close to being finalized, and China can’t stay out.

“Non-tariff trade barriers are awful for the livestock industry and should be shut down.”

Many agriculture leaders, farmers and ranchers are supportive of the tariffs, and although aid has been marked for some producers, they agree what is needed is trade.

Ag economics professor Brad Lubben from the University of Nebraska at Lincoln is less optimistic.

“The economic analysis doesn’t support tariffs,” Lubben said. But he said existing trade agreements have drawn much criticism from producers, “So if trade is good we need more agreements,” and Trump is trying to get them. Lubben said Trump’s strategy is confrontational and aggressive, but his strategy is to ride the losses in the short run to get good trade and prices in the long run. “Of course there is an old adage that when you get to the long run everyone is dead,” Lubben said.

Lubben said although the damage from the trade war may take time to feel, “commodities will be affected across the board. Hogs missed some China trade. Pressure on total demand may cause some roll-over and substitution effects.”

Lubben said once a buyer turns to another source or switches to another commodity, it is difficult to recover that buyer. “If there’s not a direct loss then there are foregone effects,” Lubben said. “In general we see loss across the board. We don’t win back that market overnight.”

Lubben said no trade policy changes without approval of the World Trade Organization. “WTO is a time consuming process to get a country to change practices.” Lubben said imposing tariffs for unfair practices without adhering to WTO guidelines is fruitless.

“So we’re between a rock and a hard place,” Lubben said. “We hope for short-term pain, but the gains should be worth the pain.”

Lubben said the governments aid package is helpful, and the $12 million compensation package will help some, but total farm production is $350 to $400 million. For instance, money earmarked for the USDA to buy more beef may not be big enough to offset lost beef export opportunities.

Reaction from farmers and farm groups has been the same, what is they want is trade – not aid.

“While we’re grateful and commend the administration for its action to help us, what pork producers really want is to export more pork, and that means ending these trade disputes soon,” said National Pork Producers Council president Jim Heimerl.

“Farmers want predictability of export markets over aid. The announcement on a preliminary agreement with Mexico is a critical step in the right direction,” said senator Pat Roberts (R-KS), chairman of the Senate Agriculture Committee.

President Trump’s plan promises a better economy for farmers and ranchers once other countries agree to U. S. plans.

Dairymen are skeptical the government aid package will cover their loss. “The dairy-specific financial assistance package provided by USDA, centered on an estimated $127 million in direct payments, represents less than 10 percent of American dairy farmers’ losses caused by the retaliatory tariffs imposed by both Mexico and China,” said National Milk Producer Federation President Jim Mulhern.

In July, USDA has announced $4.7 billion will be distributed to corn, cotton, dairy, hog, sorghum, soybean and wheat producers now, with a total planned package of $12 billion.

On August 4, the USDA restated initial aid in its emergency plan to help farmers and ranchers impacted by retaliatory tariffs will consist of $4.7 billion in payments. The federal government said it will purchase up to $1.2 billion in commodities unfairly targeted by unjustified retaliation. A third part of the aid will consist of up to $200 million in spending to help develop foreign markets for agricultural production.

Soybean farmers will receive the most money from tariff aid. According to Ag Web, soybeans dropped 20 percent as a result of tariff scares.

“After careful analysis by our team at USDA,” Agriculture secretary Sonny Perdue told the Business Insider on Aug. 27, “we have formulated our strategy to mitigate the trade damages sustained by our farmers.” That same day, the U. S. and Mexico struck a trade deal paving the way to replace the North American Free Trade Agreement. The new deal will be called the United States Mexico Trade Agreement. President Trump has said repeatedly that NAFTA is bad for the U. S. Mexico has promised to buy as many U. S. farm products as possible.

By Sept. 4, according to the USDA information site, Agriculture Secretary Perdue had launched a trade mitigation package for producers damaged by unjustified trade retaliation from foreign governments. This one has some help for beef producers.

The Agricultural Marketing Service will administer a food purchase and distribution program to purchase up to $1.2 billion in commodities to redistribute through programs such as the Emergency Food Assistance Program and child nutrition.

Beef will be purchased through AMS each quarter for four quarters beginning Oct. 1. Since beef is already purchased for nutrition assistance programs, it is one of the commodities which will be purchased first as qualified USDA suppliers and specifications already exist for meat. By purchasing known commodities first, AMS can procure commodities that have been sourced in the past for maximum speed and impact. The target purchase amount to beef in the first quarter is $14.8 million. AMS will issue pre-solicitation notices through GovDelivery for targeted commodities, including beef.

Direct payments will be made through the Market Facilitation Program for corn, cotton, dairy, hogs, sorghum and wheat. Sign up for MFP is now open at http://www.farmers.gov/mfp. Payments will be issued on 50 percent of a producer’s total production.

“These programs will allow President Trump time to strike long-term trade deals to benefit our entire economy, including the agricultural sector, in the long run,” Perdue said. “Farmers will tell you that they would always prefer to sell a good crop at a fair price, rather than receive government aid, and that’s what long-term trade deals will accomplish. But in the meantime, President Trump has promised that he will not allow American agriculture to bear the brunt of the unjustified retaliation from foreign nations. Today, we are putting the president’s promise into action.”

Producers are riding out the storm, hoping for more trade – not aid.

Riehl earns Honorary Local Brand Inspector Award

The North Dakota Stockmen's Association (NDSA) recognized long-time local brand inspector and Raleigh, N.D., cattleman Roy Riehl with the NDSA's Honorary Local Brand Inspector Award at a special awards banquet during its annual convention in Bismarck, N.D., tonight.

Riehl began brand inspecting in 1973 and continues to provide inspection service to many livestock producers in southwestern North Dakota. Last year alone, he conducted 130 inspections on 16,366 head of cattle.

"I love brand inspecting," said Riehl. "I absolutely love going to different peoples' ranches and visiting with them."

"Roy is a great brand inspector," said NDSA Chief Brand Inspector Blaine Northrop. "He is thorough and has been doing brand inspections for many years."

Riehl has lived and ranched south of Raleigh, N.D., his entire life. He took over the family ranch after he married his wife Arlene. In 2002, he retired from running about 300 head of beef cows and started running yearlings. Today, he continues to ranch, but rents out his farmland, which gives him and his wife more time to make rope art together and attend Pride of Dakota shows. Together, the couple has four children, Russell (Mari), Stacey (Scott), Ryan (Trudy) and Dayna (Jeremy), and 12 grandchildren.

–North Dakota Stockmen's Association