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Articles from 2016 In October


Questions arise about beef cattle herd expansion

Oklahoma State University Extension livestock marketing specialist Derrell Peel said the unexpectedly rapid and harsh adjustment in feeder cattle prices in 2016 has raised many questions about the status of the beef cattle herd expansion late in the year and beyond. Have changes in producer expectations altered herd expansion in 2016 and, more importantly, for 2017 and beyond?

On Jan. 1, 2015, the inventory of replacement heifers was a record 20.8% of the beef cow inventory, and beef cow slaughter in 2015 was a record low level of 7.6% of the beef cow herd inventory.  The combination of large replacement heifer inventories and low cow slaughter facilitated the 3.5% year-over-year jump in beef cow inventories in 2015, Peel explained.

On Jan. 1, 2016, the inventory of beef replacement heifers was 20.7% of the herd inventory, nearly as large a percentage as the record 2015 level. With large replacement heifer inventories available, the beef cow herd was poised to continue strong herd expansion in 2016, Peel said. However, the U.S. Department of Agriculture did not provide a July cattle report, so a midyear update of herd expansion was unavailable.

Peel noted that quarterly cattle on feed inventories showed that the number of heifers in feedlots increased year over year in April and have been higher by a consistent amount of roughly 4.5% year over year in the July and October quarters as well. The Oct. 1 heifer on feed inventory was still 8.5% below the previous five-year average for that date. Heifer slaughter was below year-earlier levels into early June and has shown year-over-year increases so far in the second half of the year.  Weekly heifer slaughter has averaged year-over-year increases of 11.7% since July. The result is that year-to-date heifer slaughter is up 2.5% from 2015, with continued year-over-year increases for the remainder of the year projected to finish with an annual total up roughly 3.5% on the year.

“Beef cow slaughter started 2016 with the low levels from 2015 but quickly changed to year-over-year increases by the end of the first quarter,” Peel noted. “The second and third quarters showed even stronger year-over-year increases, resulting in a year-to-date increase in beef cow slaughter of 12.1% compared to last year.”

Strong beef cow culling through the rest of the year is projected to bring the 2016 annual beef cow slaughter to a roughly 13% year-over-year increase. Peel said more beef cow slaughter is expected because last year’s net culling was unsustainably low, and the 1 million-head increase in cow numbers last year inevitably means more cow culling. However, the projected rate of 2016 beef cow slaughter would represent a net beef herd culling rate of less than 8.5% of the herd, well below the average level of nearly 10%.

“In other words, beef cow culling has not returned to normal levels, and the 2016 beef cow slaughter level is consistent with continued modest herd expansion this year,” he said.

As such, Peel said the rate of beef cow slaughter and modest year-over-year increases in feedlot heifer inventories since April do not yet indicate herd liquidation but may point to little or no additional herd expansion in 2017.

The ratio of steer to heifer slaughter increases during herd expansion and typically peaks and begins declining several months to more than a year ahead of the cyclical peak in cow inventories. The ratio of steer to heifer slaughter (12-month moving average) peaked most recently in July — at the highest level since February 1975 — and declined slightly in August and September. This most likely suggests a herd inventory peak at the end of 2017, but it will depend on how fast the ratio changes in the coming months, Peel said.

Crop markets recover from last week's FBI email news: Podcast

Corn, soybeans and wheat were higher near midday Monday as they recovered from Friday’s tumble that followed news then that the Federal Bureau of Investigation (FBI) was launching a new probe into Hillary Clinton’s emails. Market jitters from that announcement have subsided, and soybeans have been getting support from a new sale to China and larger-than-expected weekly export inspections.

Corn and wheat inspections were up from a week ago and matched trade forecasts. 

Bob Burgdorfer of Farm Futures reporting. Farm Futures is a sister publication of Feedstuffs.

 

WEEKLY GRAIN MOVEMENT: Farmers sell corn, hold onto soybeans

Midwest farmers continue to sell corn as it comes out of the field, but they are holding onto soybeans hoping for even more gains in those prices, grain dealers said on Monday.

“We have seen corn sales pick up a little bit. In soybeans, the rally got them to pull back a little bit,” an Illinois dealer said.

Dry weather during the weekend allowed harvest to advance in most areas. In western Iowa, grain storage is filling up, and dealers there said corn may soon be piled on the ground.

Big yields continue to be reported in most areas, with corn at 200 bu. per acre or more and soybeans at 50-60 bu. per acre. The crops remain in good condition and lack disease pressure, dealers said.

Farm Futures expects the U.S. Department of Agriculture's progress report later today to show the corn harvest at 78% completed and soybeans at 87%. Those numbers are similar to averages in a broader industry poll.

Truckloads of corn are still being brought to the river, even though cash bids are about 15 cents/bu. under those of local processors. Big yields have farmers looking for any place that will take it, according to a Quad Cities shipper on the Mississippi River. Also, despite their higher bids, some corn processors are full or are operating half-days, which has forced farmers to find other outlets for the grain.

Corn at the Gulf of Mexico was bid about 50 cents over December for November shipment, compared with 47.5 cents a week ago.

Soybeans in Illinois and Iowa are largely going to local processors, but Gulf bids improved about 4 cents in the past week to about 51 cents over January for November shipment.

Barge rates may ease

The incoming supply of harvested crops has maintained demand for barges to ship them downstream to export elevators. While barge rates rose in the latest week, they may plateau or come down soon as fluid river navigation has empty barges quickly moving upstream to dilute some of the upward pressure on rates, river shippers said.

Mid-Mississippi barge rates for shipment next week were about 450-475% of tariff, compared with 400-425% a week ago. The 50-point rise translates to about a 5 cents/bu. increase in shipping costs for corn and soybeans.

USDA’s latest weekly grain inspections for corn of 31.2 million bu. were up from a week ago and matched trade forecasts but were under the weekly pace needed to meet USDA’s annual export forecast. Soybean shipments of 105.4 million bu. were up from a week ago, beat trade forecasts by a large margin and easily topped USDA’s projected weekly rate. Wheat shipments of 12 million bu. were up from a week ago and matched trade forecasts but were under the weekly rate needed to meet USDA’s annual projection.

Shipments

USDA said barge grain shipments during the week ended Oct. 22 were 959,730 tons, up 6% from the prior week and up 0.2% from a year ago.

In the rail sector, grain car loadings totaled 27,300 for the week ended Oct. 15, up 2% from the prior week and up 8% from a year ago, USDA’s grain transportation report said.

For truckers, the U.S. average diesel fuel price was unchanged in the latest week to $2.48/gal., down 2 cents from the same week last year.

Ag export surge boosts GDP growth

The latest report on gross domestic product (GDP) growth revealed that economic growth increased 2.9% in the third quarter of 2016 as a direct result of the gains made in export sales. Exports reached 10% growth in the quarter — the highest since 2013 — with agricultural exports contributing disproportionately to the gains.

Agriculture Secretary Tom Vilsack said it is “further affirmation that America’s agriculture sector remains a shining star in our nation’s ability to seize export opportunities. Although a strong U.S. dollar and lower commodity prices have created headwinds for America's farmers and ranchers, this report demonstrates their ability to remain resilient and to seize opportunities to sell U.S. food, fiber and fuel to markets around the world.”

In its October "World Economic Outlook," the International Monetary Fund (IMF) revised its forecast of global growth downward for the four quarters of 2016, removing an expected pickup in growth from 2015 to 2016. IMF currently projects global growth to pick up in 2017, suggesting less downward pressure on export growth going forward.

“Nevertheless, real export growth in the third quarter was substantially faster than in recent quarters due, in part, to a large increase in agricultural exports,” Jason Furman, chairman of the White House Council of Economic Advisers, said in a blog post.

Furman and Vilsack both used the report as another opportunity to encourage passage of the Trans-Pacific Partnership (TPP) and to point out the sensitivity of U.S. exports to foreign demand.

"In order to continue this momentum, we can and should do more to expand global markets. U.S. farmers are facing unprecedented competition amid a slowing global economy and appreciating dollar. That's why it is important for Congress to approve the Trans-Pacific Partnership,” Vilsack said.

Exports are responsible for 20% of U.S. farm income, also driving rural economic activity and supporting more than 1 million American jobs on and off the farm.

The American Farm Bureau Federation has found that ratifying the TPP agreement will boost annual net farm income in the U.S. by $4.4 billion — an increase that would directly boost out economic prosperity.

“As the agriculture sector expands, U.S. real income will increase by $57.3 billion, and 66% of GDP growth from TPP would go to American workers through increased wages and job opportunities,” Vilsack pointed out.

"Today's announcement shows the capability of America's agricultural sector to increase overall growth and prosperity across the country. American agriculture needs the good deal laid out in the TPP agreement to bolster its position in the world economy," he added.

Vilsack noted that U.S. farmers and ranchers have also helped maintain a consistent agricultural trade surplus year after year since the 1960s, which he called “a remarkable feat in our global marketplace.”

OIG finds BLM mismanaging wild horse, burro program

A report from the U.S. Department of the Interior's Office of Inspector General (OIG) found that the Bureau of Land Management’s (BLM) wild horse and burro program does not maximize efficiencies and is not compliant with federal regulation.

“Specifically, BLM's contracts do not ensure best value for services, BLM does not maximize the use of its pastures and BLM has no strategic plan to manage wild horse and burro populations. We also found that some of BLM's cooperative agreements with correctional institutions do not comply with federal laws and regulations,” deputy inspector general Mary Kendall wrote to BLM director Neil Kornze.

Public Lands Council president and Utah rancher Dave Eliason said this report confirms what public lands ranchers have long known to be true.

“The fact is that wild horse and burro populations are growing at unsustainable rates on our nation’s public lands,” Eliason said. “The unchecked growth of these populations threatens the productivity of public grasslands and the health and welfare of the wild horse and burro populations. The BLM’s solution has been to move more of these wild horses and burros off the range and into short-term holding facilities — (with) some horses being held in those facilities for an average of five years — rather than transporting horses to the underutilized long-term holding facilities. The OIG report points out that this solution is not financially sustainable or efficient.”

The Wild Free-Roaming Horse & Burros Act of 1971 charged BLM with managing and protecting the nation’s wild horses and burros. Under BLM’s management, horse and burro populations have exponentially exceeded the appropriate management levels and continue to grow at a rate of 20% per year. Additionally, 45,000 horses and burros remain in long-term holding facilities — at a cost to taxpayers of $50,000 per animal.

“It is clear that we must manage our wild horse and burro population to ensure we meet sustainable appropriate management levels,” Eliason said. “Earlier this year, the BLM’s own Wild Horse & Burro Advisory Board recommended selling horses to private owners and euthanizing animals that cannot be sold. Wild horses and burros are a part of our nation’s heritage, but no one wins when these populations outgrow the resources available.”

OIG recommended that BLM develop and implement policy to use appropriate rate determinations and adjustments for wild horse and burro populations and a plan for sustainable on- and off-range population management. The report says implementing these strategies and maximizing the transition to long-term facilities would save taxpayers $3.7 million.

The Public Lands Council urged BLM to allow for the sale of wild horses and restore a thriving ecological balance.

Acquisition allows New Holland to expand product offering

New Holland Agriculture said it will expand its offering with new implement product lines as a result of CNH Industrial’s agreement to acquire the agricultural Grass & Soil business of Kongskilde Industries, part of the Danish Group Dansk Landbrugs Grovvareselskab (DLG A.m.b.A.). New Holland is a brand of CNH Industrial N.V.

This business develops, manufactures and sells solutions for agricultural applications in the tillage and hay and forage segments under various brands, including Kongskilde, Överum and JF. Kongskilde will continue to operate through its current sales organization and its dealer network to ensure continuity in its customer support.

This acquisition will create a major extension and enhancement of New Holland’s offering with the addition of a key product portfolio. New Holland has a long history of leadership in hay tools dating back to 1940, when it made a major breakthrough in hay harvesting with the introduction of the first self-tying automatic pickup baler to American farmers. Throughout the years, it has been motivated by its forward-thinking commitment to respond to its customers’ requirements and has developed a complete product offering of hay equipment for cutting, tedding, raking, baling and stacking. Today, New Holland is a leading global brand and an industry leader in North America in hay tools and agricultural equipment markets.

The agreement is an important element in New Holland’s global strategy to provide customers around the world with innovative and complete solutions to their farming needs by adding tillage equipment to its product portfolio and extending its hay and forage offering. New Holland will leverage its worldwide strength in the agriculture industry and the expertise of the Kongskilde organization and dealer network to grow the brand and its business.

“The acquisition of the tillage and hay and forage activities of Kongskilde adds a key product range that will further broaden New Holland Agriculture’s product offering within the agricultural machinery sector," said Carlo Lambro, brand president of New Holland Agriculture. "In the meantime, the Kongskilde dealer and importer network will remain the reference point for their customers. This agreement will provide growth opportunities and create a strong platform to develop the Kongskilde business and its brands, and we will also gradually integrate their products into the New Holland portfolio.”

The acquisition comprises a transfer of assets related to the tillage and hay/forage activities of Kongskilde Industries. The manufacturing footprint of this business includes two plants in Europe, located in Poland and Sweden, and other facilities in the Europe/Middle East/Africa, Asian Pacific and North American regions. The transaction is subject to various closing conditions, including regulatory approvals.

“We are proud to welcome the well-established products and brands of Kongskilde, Överum and JF into the CNH Industrial Group. It is our intention to build upon these proud heritages and significantly increase their market access as part of our worldwide distribution network,” Richard Tobin, chief executive officer of CNH Industrial, said.

HATCH donates more than 290,000 eggs, kicks off Kroger match

HATCH for Hunger announced today that is has donated 293,760 eggs to 17 different food banks across the Midwest to help nourish the food insecure. Additionally, HATCH and Kroger Co. announced that all donations made at the Kroger checkout, online or via text-to-donate from now through the end of 2016 will be matched by Kroger.

“HATCH is innovation and collaboration at its best,” said Carmen Cumberland, executive director of Community Harvest Food Bank of Northeast Indiana. “Eggs are one of our most requested items, and we are always in short supply. HATCH is a new way that brings together the egg farmer, grocery stores and consumers to find ways to fund and supply the quality nutrition we want to provide our families in need.”

HATCH is an organization seeking to help consumers provide high-quality nutrition and protein — through the package of an egg — to undernourished people. HATCH is made possible by partnering with grocery stores, farmers and local food banks. Kroger, Rose Acre Farms and Elanco Animal Health launched HATCH in April 2015 in 65 Kroger stores in Indianapolis, Inc. The program has since spread and is serving more than 17 food banks across all of Indiana and parts of Michigan, Illinois, Missouri and Ohio.

“As of today, HATCH is just shy of donating 1 million eggs to food banks since it began in spring of last year,” said Eric Halvorson, manager of public affairs for Kroger’s Central Division. “Kroger is proud to sponsor HATCH and offer a dollar-for-dollar match from now through the end of the year for any donations made to HATCH. That includes in-store donations, online and text-to-donate.”

Halverson said Kroger shoppers just need to tell the cashier at checkout that they would like to donate to HATCH. Every time the donation bar code is scanned, a family in need receives 1 doz. eggs. The list of participating stores is posted at hatchforhunger.com.

Donations made in November and December will specifically go towards helping families in need receive eggs for the holiday season.

“We are proud to be the egg farmers who supply HATCH eggs to food banks,” said Greg Hinton with Rose Acre Farms. “Eggs are packed with 13 essential vitamins and minerals for the body, including much-needed quality protein that helps with cognitive and physical development for children. We hope to continue to expand the HATCH program with Kroger and Elanco in order to serve more food banks this much-needed product and create more food-secure communities.”

Online donations can be made at www.hatchforhunger.com or by texting HATCH to 52000.

Names in the News

Names in the News
NUTRIAD INC., Hampshire, Ill. — Guilherme Bromfman has joined the company as director of business and product development. Bromfman will lead certain product development efforts and support business development initiatives in digestive performance and mycotoxin management across the Americas.
 

RABOBANK NORTH AMERICA, New York, N.Y. — Mark Abrams has been appointed head of the wholesale office in San Francisco, Cal. Abrams will provide clients with value-added product expertise. He was most recently head of mergers and acquisitions, South America.

Stefan Behrens has been promoted to global sector head-consumer foods. Behrens will be responsible for setting and executing the sector's overall strategy and strengthening relationships with major consumer food clients around the world. He was most recently head of the loan product group in Asia.

Ross Colbert has been promoted to global sector head-beverages. Colbert will be responsible for setting and executing the sector's overall strategy and strengthening relationships with major beverage clients around the world. He was most recently head of Food & Agribusiness Research-North America and global strategist-beverages.

Gregg Fatzinger has joined the company as managing director, mergers and acquisitions. Fatziner will work with sector experts to bring new ideas to clients. He was previously with Nomura International.

Manuel Gonzalez has been appointed head of startup innovation. Gonzalez will work with partners in the North America corporate clients franchise and globally to drive outreach efforts in the food and agribusiness. He was most recently head of the San Francisco, Cal., office.

Stephen Rannekleiv has been appointed global sector strategist, beverages. Rannekleiv will lead the beverage research team and work to develop ideas and analytics that could be useful to beverage clients. He was most recently senior analyst in alcoholic beverages.

Pablo Sherwell has been promoted to head of Food & Agribusiness Research. Sherwell will promote research that adds value to clients. He was most recently with Rabobank Mexico.
 

TRANSAGRA INTERNATIONAL, Storm Lake, Iowa — Dr. Rebecca Quesnell has joined the company as product and market development director. Quesnell will focus on researching industry development, new product potential and emerging markets. She will also work with the sales team to develop relationships across the industry. She was previously with Pfizer Animal Health.

EU launches in-depth probe into ChemChina, Syngenta merger

The European Commission announced Oct. 28 that it has launched an in-depth probe to assess whether the proposed acquisition of Syngenta by ChemChina is in line with the European Union's merger regulation.

The announcement came after ChemChina missed the Oct. 21 deadline for submitting so-called remedies in the EU’s early-stage review of the deal. The commission will assess whether the deal may reduce competition in crop protection products and the supply of certain input chemicals.

"This deal would lead to the combination of a leading crop protection company with one of its main generic competitors. Therefore, we need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers,” said commissioner Margrethe Vestager, who is in charge of competition policy.

The proposed merger would combine Switzerland-based Syngenta, one of the main global seeds and crop protection companies, and China-based ChemChina, which controls Adama, the largest supplier of generic crop protection products in Europe. The transaction would take place in an industry that is already relatively concentrated.

Preliminary concerns

Syngenta and ChemChina, through Adama, each have strong partially overlapping portfolios of crop protection products, including herbicides, insecticides, fungicides and plant growth regulators. These products are used for the cultivation of several of the main crops grown in Europe, including cereals, cotton, corn, fruits, vegetables, oilseed rape, soybeans, sugarbeets and sunflowers.

The European Commission's initial investigation identified preliminary concerns in a number of these crop protection markets. It suggested that the parties have relatively high combined market shares in many of those markets and that at least some of each party's products may compete directly with the other company's products.

Additionally, the commission said Adama may be an important generic competitor of Syngenta in many of these markets since it focuses on generic crop protection products. As such, the commission expressed preliminary concerns that the proposed merger could reduce competition on these markets and that this, in turn, could have an impact on price and choices for farmers.

As well as looking into crop protection markets, the in-depth investigation will also verify whether the merger may negatively affect Syngenta's and ChemChina's supply of active ingredients, the key chemical inputs other manufacturers use to make crop protection products.

The European Commission was notified of the transaction on Sept. 23. The commission has 90 working days — until March 15, 2017 — to make a decision, but it said the opening of an in-depth inquiry does not prejudge the final result of the investigation.

Given the worldwide scope of Syngenta's and ChemChina's activities, the European Commission said it is cooperating closely with other competition authorities, notably with the Federal Trade Commission in the U.S. and the antitrust authorities of Brazil and Canada.

Restaurant operators remain uncertain about future business

Restaurant operators remain uncertain about future business

Driven by an overall increase in operators' current situation, the National Restaurant Assn.’s (NRA) Restaurant Performance Index (RPI) advanced in September to 100.8, up 1.2% from August.

“September’s RPI uptick was aided by gains in the current situation indicators, which have been soft in recent months,” said Hudson Riehle, NRA senior vice president of research. “Meanwhile, the forward-looking indicators are becoming more muted. Operators are decreasingly optimistic looking toward the months ahead. In fact, three in 10 operators say they expect economic conditions to worsen in the next six months.”

The RPI consists of two components – the Current Situation Index (measuring current trends) and the Expectations Index (measuring restaurant operators' six-month outlook) – and tracks the health of and outlook for the U.S. restaurant industry. Index values above 100 indicate that key industry indicators are in a period of expansion, while index values below 100 represent a period of contraction for key industry indicators.

The Current Situation Index stood at 101.0 in September – up 2.5% from a level of 98.6 in August. September’s reading of current situation indicators was the highest level since April and lifted the index back into expansion territory above 100. Restaurant operators showed the strongest same-store sales results since April, with 49% reporting a same-store sales increase between September 2015 and September 2016. Similarly, they also reported stronger customer traffic levels, though results were still mixed overall. Forty percent of restaurant operators reported an increase in customer traffic, while 39% reported a decline in traffic.

Despite this, operators maintained relatively steady capital spending levels. Sixty-two percent of restaurant operators say they made a capital expenditure for equipment, expansion or remodeling during the last three months, which marked the 24th consecutive month in which a majority of operators reported making an expenditure.

The Expectations Index stood at 100.6 in September – unchanged from August. Although the Expectations Index was still above the 100 level in expansion territory, it remained below 101 for the fourth consecutive month – the first such occurrence since 2012.

Twenty-eight percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), down from 33% last month and the lowest level since January. Seventeen percent expect their sales volume in six months to be lower than it was during the same period in the previous year.

Additionally, only 14% of operators say they expect economic conditions to improve in six months, while 29% say they expect conditions to worsen. This represents the 11th consecutive month in which restaurant operators had a net negative outlook for the economy.

Despite the dampened expectations for business conditions, restaurant operators are continuing to plan for capital expenditures, NRA noted.Sixty-four percent of restaurant operators say they plan to make a capital expenditure for equipment, expansion or remodeling in the next six months.