In a year of so much farm financial concern, brood cows will show nice profits. The mid-year Cattle inventory report shows that the number of cattle in the nation's herd continues to edge lower. At 106.8 million head the total inventory is down 1% from last year and 2% from two years ago.

The declining population has been led by another drop in the beef cow herd to 34 million head, a decrease of 1% from last July. The beef cow herd reached a recent peak in 1995 and has declined 6% since that time. The continued decline has been stimulated by poor returns and discouragement among cattle producers. For the future, it looks like additional reductions in the breeding herd are planned by producers as the number of beef heifers being retained for replacements in herds is down 4%, a rate which is not sufficient to keep cow numbers at an steady
level.

Dairy cow numbers also decreased about 1%. Record high milk prices in the fall of 1998 however stimulated more heifers to be retained for addition to the milk cow herd. Those numbers are up 3% and will likely lead to a potential increase in the number of milk cows by 2000.

Slaughter supplies of steers and heifers will be little changed in the last-half of 1999 compared with the same period in 1998. The number of heifers which are not being retained for replacement is unchanged from last year, and the number of steers is only down 1%. Steer and heifer supplies for 2000 will be down only modestly as the current number of calves under 500 pounds is unchanged from last year, and the expected 1999 calf crop is down a little less than 1%.

Interestingly, the 1999 calf crop is expected to be the smallest since 1952. Of course the period from the 1950's to the mid-1970s saw cattle numbers increasing dramatically when per capita beef consumption reached its peak of 94 pounds in 1976. In the year 2000 consumption per capita is estimated to drop to about 65 pounds. While the number of people in the U.S. has also increased, marketing weights have increased, thus reducing the number of head required.

One of the major questions regarding slaughter supplies will be the number of cows that are sent to market. With general expectations of improved cattle prices in the year ahead, a lower rate of cow liquidation can be anticipated, which will help to further reduce slaughter supplies. The number of cattle on-feed on July 1 stood at 9.6 million head which was up 4% from last year. Placements were up 14% and marketings in June were up 5%. Cheap feed and prospects for higher fed cattle prices have
stimulated the movement of cattle into feedlots this spring and summer.

Not only are more cattle going on-feed, but they are moving to feedlots at a younger age. As an example, the number of calves under 600 pounds placed in June were up 12%. There has been much anticipation that beef supplies would be dropping in the last-half of 1999 and especially the year 2000. A drop in supplies will depend on two important factors. First as already mentioned, a decline in the rate of cow slaughter. This now appears more
likely with both some increase in the fed cattle prices, but especially because of very strong calf prices. Higher calf prices have been more stimulated by cheap feed than by higher fed prices. In addition, pasture conditions have been more favorable this summer which will help to keep forced liquidations lower. Cattle weights however, will be higher in the coming year as a result of low priced feed. For the 1999 year-to-date, cattle weights have been up 1.2% over the same period in 1998. In the
next year, a 1% to 2% decline in slaughter will largely be offset by a similar increase in weights. This means that beef supplies will only be down modestly.

Modest reductions in beef supplies can still help prices since population growth will continue to be a positive demand factor. However, record total supplies of meat protein in 1999 and 2000 will keep competitive pressure on beef. Total meat and poultry supplies are expected to reach 217 pounds per person this year, and with cheap feed, be exceeded in 2000. Prices of calves are expected to remain strong this fall. With a small reduction in the number of calves and a strong demand due to cheap feed 400 to 500 pound steer calves calf prices in the eastern corn belt are expected to average in the very high $80s and $90s this fall. This will be up sharply from prices in the $70s a year-ago. Fed prices may still weaken modestly by the end of summer, but improvement is expected for the fall, with prices moving back into the $66 to $68 range. Some further strength can be expected in the winter with high $60s prices. Spring highs could reach modestly above $70s.

Brood cow operations will show very strong returns for their 1999 calves due to higher calf prices, largely as a result of low grain prices. Returns to cattle feeding look more marginal with high calf prices, higher interest rates, and only modestly stronger fed cattle prices.

By Harlan Hughes

This is the season for beef educational meetings. These meetings provide a key opportunity for producers to learn about trends and developments in the industry that can impact their operations.
I spent this last week participating in three educational programs in
four different states: the Bovine Connection for Profit in Sidney,
Mont., the South Dakota Cattlemen's Association Annual Convention in
Pierre, S.D., and the Minnesota State Cattlemen's Association Annual
Convention in Bloomington, Minn. One major benefit of participating is
that I learn right along with the producers. In this Market Advisor,
I'll highlight three of the presentations given at the Bovine Connection
program in Sidney. Bob Bellows, a USDA Agricultural Research Service scientist at the Fort Keogh Lab in Miles City, Mont., outlined how research during the last 30 years has benefitted the livestock industry. Some highlights that I felt were of specific note included research showing the merits of semen sexing, development of pregnancy testing with ultrasound and nutrition research designed to reduce the amount of harvested feeds fed.

Bellows defined genetics as fitting cows to the environment and pointed out how expected progeny differences (EPDs) have advanced the management of genetics. He went on to indicate that research suggests that as birth weight goes above 82-85 pounds, calving problems start increasing at an increasing rate. He also shared with the group that beef cow producers can influence the number of cows that calve in the daytime through feed timing. He also noted that calves born from cows with short calving labor periods grew better than calves born from cows with longer calving labor periods. Nutrition does impact a cow's labor period.

I was next on the program and discussed the last 10 years of Integrated Resource Management (IRM). I reviewed how the IRM Standardized Performance Analysis (IRM-SPA) came into being through the National Cattlemen's Beef Association. In this last10 years with IRM we have seen some good times and some tough times in the cattle industry. As promised, we have practiced IRM in North Dakota for one full 10-year cattle cycle.

During this period, we learned that if beef producers want to know where money is earned in the farm or ranch business, they need to divide the farm or ranch into profit centers and treat each profit center as a stand-alone business. We learned how to separate and calculate economic returns, costs and cash flows associated with the beef cow profit center.

We learned that ranchers have to weigh calves to measure herd
performance. Ranchers need to count cows on bull turn-out date and on Jan. 1 of each year to measure inventory change. We learned that beef farmers and ranchers have to measure production costs to actually manage production costs.

We learned that to manage production costs a manager needs to measure costs by hundredweight of calf produced and not by cow. We learned that you budget your inputs on a per-cow basis and measure results on a per-hundredweight-of-calf basis.

We also learned that comparing your herd's production and economic
factors against a set of benchmark herds is the single most powerful
ranch management tool available, bar none! A copy of my full paper entitled "Some Things that North Dakota Learned from a Decade of Integrated Resource Management" is available from my secretary Paulann at 701-231-7393
button.

Jane Boles, assistant professor of animal range science at Montana State University, shared some of her considerable experiences with beef production systems in some competing countries. Boles has worked in Australia, New Zealand and Canada. Boles indicated that Canadian cattle production is very similar to that in the United States. Growing practices are very similar, making the beef raised in Canada very, very close to that raised in the United States. The Canadian cattle herd is approximately 12. 6 million head (verses a 99.5 million U.S. herd). The average Canadian beef cow herd is 45 head with many small cattle herds. Canada feeds 3.2 million cattle each year, producing 3 billion pounds of beef. Canada has 1.3 percent of
the world's cattle inventory and produces 2 percent of the world's beef
supply. Canada exports 53 percent of their total beef produced with the largest proportion (89 percent) going to the United States. The United States is Canada's largest beef customer, and Canada is the third largest beef customer for U.S. beef.

The main difference between the new Canadian and U.S. grading systems is the name used. In 1998, Canadian Prime was added to allow for competition with the higher quality U.S. beef.

Turning to New Zealand, Boles noted that the beef industry there is
based on a national herd of about 5 million cattle. Beef cattle
production systems are pasture based, and the steers and bulls are all
grass fed. Most steers are slaughtered at 27 to 34 months of age at an
average 1250 pound live weight. The dairy industry contributes 53
percent of the beef produced. Approximately 85 percent of New Zealand's beef is exported and accounts for 7 to 8 percent of the world's beef exports. North America is the main destination for three fourths of all production. Beef exports to North America are usually manufacturing beef in frozen form.

Australian cattle numbers total almost 25 million head with the majority of the cattle raised and fattened on natural pastures. Grass-fed beef is lean and is favored by some Australian consumers because it is seen as healthy, low in fat and more flavorful. In Australia, the grain fed beef market is more of a specialty market. Animals are fed a high-energy ration for 70 days or less for the local market. Cattle are fed a high-energy ration for 400 days for the Japanese market.

Australia has 2.6 percent of the world's cattle and supplies 20 percent
of the world's beef exports. Australian beef is exported to over 100
countries making Australia the largest and most successful red meat
exporter in the world.

Boles offers an interesting note on country of origin labeling. She says
that there is a perception that the inconsistency in the U.S. meat
supply is caused by imported product. This theory might be accurate if
the imported product was being used for table cuts; however, it is not.
The majority of beef imported from countries like New Zealand and
Australia is used in the United States for processing. Imports are
necessary to get the lean trim necessary in the manufacturing of
processed meat products. Boles suggests that countries like New Zealand and Australia would like to label their products in the U.S. market. Producers there believe in the quality and consistency of their product and would like to see country-of-origin labels. Boles' complete paper is available from Paulann, my secretary, at 701-231-7393.

Future Market Advisors will discuss other presentations. Stay tuned.

MANHATTAN, Kan.- Pork purchases by Russia have helped lift pork belly and trimmings prices, in particular, and reinforced cash hog prices this fall, said K-State Research and Extension agricultural economist JamesmMintert.

The pork purchases were part of a larger food aid package for Russia
first announced in November, 1998 under USDA’s PL480 program. It
included a combination of donations and concessional credit sales of
grains, meats, oilseeds, and other U.S. farm and food commodities,
according to the USDA’s Foreign Agricultural Service.

USDA reported that as of Nov. 3, all 50,000 metric tons (tonnes) of U.S.
pork that had been designated to be sold to Russia under the pact had
been purchased, and 637 tonnes had actually been exported.
A spokesman for the National Pork Producers Council (NPPC) said the
remaining product is being shipped to Russia. The U.S. and Russia are currently discussing another food aid package, said Nick Jiordano, NPPC’s International Trade Counsel. "Pork was not in the original request," Jiordano said of the latest food aid discussions. "However, the Russians have come back and said there is interest there.   "Moscow last month also asked the USDA to redistribute the PL480 money in the current U.S. food aid package for Russia so that it could buy more grains and poultry with low-interest, long-term loans and less beef than the original agreement specified.

Russia faces a shortfall of 2.5 million tonnes of food grains, 5.5
million tonnes of feed grains, 500,000 tonnes of protein meal and
250,000 tonnes of meat over the next year, according to a U.S. report
issued last month.

K-State Research and Extension is a short name for the Kansas State
University Agricultural Experiment Station and Cooperative Extension
Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus in Manhattan.

Mary Lou Peter
Communications Specialist
K-State Research & Extension News
James Mintert is at 785-532-1518
Rodney Jones is at 785-532-1957

He explained that a ruminant animal -- a cow, sheep or goat -- has four stomachs to ferment and digest plant materials that other animals can't eat. What makes ruminant animals unique is their ability to digest the cellulose and hemicellulous that make up 85 percent of all carbohydrates on earth. Animals with gastric stomachs, including humans, pigs and chickens, can digest only 15 percent of the energy produced by plants.

The ability to eat forage helps make beef animals the number-one
agricultural enterprise in Missouri. The state produces a lot of grass that could not be used otherwise, the grazing school faculty explains Jim Gerrish, MU research agronomist and head of the school, said that participants in the school are at the stage where they want to learn more about the science of grazing. The aim is to improve the efficiency of the process. Explaining cow spit, Olson said a small set of glands located around the cow's jaws generates up to 30 gallons of juice, or saliva and mucous, that helps moisten and lubricate the forage so it can be swallowed and digested. "The salivary glands allows a beef animal to take in a huge amount of dry matter every day," Olson said.

The rumen holds a barrel full of feed and fluids, from 55 to 70 gallons in a mature cow. The fluids, including that cow spit, help break down the fiber in a process that takes up to 96 hours. To increase grazing efficiency, the cow takes in a large amount of forage quickly. She swallows her food whole. Later, usually while lying down, she belches up a cud of grass to re-chew leisurely. The cud chewing grinds fiber into particles small enough to digest. A cow roughly divides her time into 8 hours of eating, eight hours of cud chewing, and eight hours of resting.  She doesn't do those jobs all at once but breaks them up into short spans, Olson said. That keeps an even flow of feed going into her fermentation tank or the rumen that is one of four extra stomachs.
If Olson gets excited about cow spit and cud chewing, he really is in awe of the process inside of the rumen where "millions and millions" of microbes go to work on the fine forage particles. This gets into biochemistry. The microbes, including bacteria, protozoa, fungus, and viruses, break down plant materials into usable components such as volatile fatty acids, amino acids, peptides, ammonia and other elements.

And, that soon gets into methane gas -- and belching, burping, and other gas emissions.
Maybe you just have to be there.
Source: K. C. Olson (573) 882-7289

        Helps Your Beef Cow Herd Run Smoother

Harlan Hughes
Extension Livestock Marketing Specialist
North Dakota State University

A leading rancher came up to me recently and said, "Once I solved my heifer replacement problems, it seemed like my whole herd performed to my expectations."
I have heard this from other ranchers. Management of replacement heifers, whether raised or purchased, can have a major impact on the overall profit of the beef cow herd. Apparently, executing a well-thought-out heifer development program is key to running a profitable beef cow herd.

University of Missouri's Beef Focus Team members Vern Pierce and Dave Patterson also point out the importance of a heifer development program.   They say, "The selection of the best female replacement strategy has arguably one of the greatest long-term effects on profits as any other decision made by the cow-calf producer. Selection and development of cow herd replacements is extremely important to the overall management of
the cow herd. A decision on replacements this fall will have an impact on the profitability of the cow herd for at least the next 10 years."

Apparently, the general beef cow industry does not agree with these assessments on the importance of heifer development programs to overall profits. For example, while research clearly points out that heifers have some special nutritional needs, a recent National Animal Health Management Survey (NAHMS) survey concluded that only 32.8 percent of U.S. beef cow producers feed their heifers separately.Apparently, the other two-thirds of the nation's beef cow producers don't appreciate the
difference in nutritional needs between heifers and mature cows.
Ranchers frequently tell me they don't have any separate feeding
facilities for heifers. Feeding replacement heifers along with the
mature cows is a sure recipe for nutritionally stressed replacement heifers.

   Nutritional stress is a sure recipe for 3-year-olds that don't breed back or breed back late. The females most difficult to breed back are the growing, milking 2-year-old females. Even when the nutritionally stressed heifers do get pregnant, this stress can easily lead to a calving interval extending beyond 365 days. This is the primary reason why management consultants
recommend that heifers be bred to calve ahead of mature cows. That way they can have a calving interval that is greater than 365 days in producing their second calf and still calve in the first 60 days of the mature herd's calving period. Yet, according to the NAHMS survey, only 12.7 percent of the nation's cow calf producers breed heifers prior to the mature cow herd.

 
   The primary result of not breeding heifers ahead of the mature cows is that more young cows are culled early in their productive lives for being late breeders. North Dakota's CHAPS herd performance data confirms that a high percentage of cull cows are 3-, 4-, and 5-year-olds. Once a cow gets to be 6 years old, the late breeders are gone and the remaining 6-year-olds generally stay in the herd for several years.

As an economist, I can assure you that one of the quickest ways to increase the unit cost of producing a hundredweight of calf in a beef cow herd is to cull 3-, 4-, and 5-year-old cows and replace them with expensive replacement heifers. As a general guideline, my data suggest that it costs $600 to $700 to bring in a raised replacement heifer. Longevity is an absolute must for replacement heifers to generate a profit. My current economics analysis suggest that it takes the net income from the first six calves to pay for the initial cost of a replacement heifer. The only profit that would be generated for producing six calves would be the salvage value of the cull cow. Profit from a replacement heifer comes from the net income generated after her first six calves plus her cull cow value. One can not help but wonder what the profits in the beef industry would be if recommended heifer development practices were adopted by U.S. producers.

   According to the recent NAHMS survey, only 3 percent of U.S. producers pelvic check heifers. Even fewer (1.2 percent) calculate reproductive tract scores. Only 3 percent synchronize estrus, and only 3.3 percent use artificial insemination. Only 4.6 percent assign body condition scores to their heifers. Only 7.9 percent weigh heifers, and only 15.9 pregnancy check or palpate heifers. Clearly, most producers do not follow the recommended heifer development practices.

I think it would be appropriate at this time to make some general
comments on the cost of producing a replacement heifer in the fall of 1999. First we have to start with the market value of a weaned 1998 heifer calf. A 500-pound 1998 heifer calf that could have been sold for $69 per hundredweight has a beginning opportunity cost of $345. My budgets suggest that it will take $150 to go from weaning to breeding.   Wintering costs include feed costs ($83), lot cost ($18), interest ($23), vet and medicine ($3) and death loss ($6) for a total cost of $133 per head. Costs from pasture turnout to breeding are pasture ($8), feed grain ($3), and interest on previous investment ($6), for a total winter to breeding cost of $150. Costs from breeding to pregnancy check include pasture costs ($41), breeding costs ($20), and interest on investment ($28). The total costs of producing a bred heifer in November
1999 is projected to be $584.

Not all heifers will be pregnant. Adjusting this $584 cost for an 80
percent pregnancy rate brings the cost of producing a pregnant
replacement heifer to $730 per head. After adjusting for the value of cull open heifers sales (one out of every five heifers weighing 950 pounds and sold at $60 per hundredweight) each bred heifer has an open-heifer credit of $114. This reduces the cost of a bred heifer to $616 per head. Let me summarize all of this by suggesting that it costs from $600 to $700 to produce a replacement heifer.

My last several Market Advisor columns presented a procedure for determining the economic value of a bred heifer checked pregnant this fall and demonstrated the impact that the current beef price cycle has on today's economic value of a bred heifer. My projected economic value for a bred heifer was a little more than $800 for a pregnancy checked heifer in November 1999. This projected $100 to $200 value added to 1998 heifer calves converted to pregnancy checked heifers is the highest projected value added for any heifers born during the current beef price
cycle.

The economic value of bred heifers was prepared annually for the years 1979 through 2004 and charted. Two points standout on this chart. First, the highestcalculated value of a bred heifer was for a heifer calf born in 1985 that was checked pregnant with her first calf in 1987. This heifer produced her seven consecutive calves during the six high-priced years of 1988 through 1993 with her final calf produced in the lower prices of 1994. The second key point in the chart is the projected peak in the economic value of a heifer in the 1990s is lower than the peak in the 1980s.

Clearly, my data on the economic values of bred heifers suggests that the cost-price squeeze of the 1990s will continue for beef cow producers. My IRM herd analyses indicate that high-profit herds distinguish themselves by what they do with the females in their herds. Heifer development seems to make a big difference.