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Last Updated on Thursday, 07 August 2008 07:21

Written by Jennifer Womack

Cheyenne – Assistant Deputy Attorney General Liz Gagen confirmed June 2 that the Wyoming Attorney General’s Office has joined counterparts from across the nation to take a look at the pending merger between JBS-Swift, National Beef Packing Co., Smithfield Beef Group and Fiver Rivers Ranch Cattle Feeding.
    Unsure on the exact number of AG offices involved, Gagen said, “As of last week it was approximately 20.” Of the reasoning behind their decision to become involved she said, “We were just interested. It sounded like a lot of people were concerned.”
    Gagen was unsure if her agency would have access to the same information now being reviewed by the U.S. Department of Justice (DOJ), but referred the Roundup to the National Association of Attorneys General. Unfamiliar with this particular case, Emily Myers from the association said a process established 15 years ago allows parties to sign off on what’s called “pre-merger disclosure.” If the parties don’t agree Myers said discovery has to occur through a compulsory process, the courts direct discovery. Generally speaking, Myers said the information submitted to the DOJ is completely confidential, even from the attorneys general.
    JBS-Swift spokesman Chandler Keys told the Roundup June 3 that he wasn’t aware of the DOJ or the state AGs contacting them for release of materials that have thus far been provided to the DOJ. Of the AGs involvement he said, “The vast majority get involved, they write a letter to DOJ and that’s about the end of it.”
     Other attorneys general from across the nation have been making headlines in recent weeks with their intentions to review the merger. Oklahoma AG Drew Edmondson called the additional consolidation in the packing sector a “mega merger” and said it could have harmful effects on his state’s livestock producers. According to the Livestock Marketing Association, Edmondson said his state could be particularly impacted by the acquisition by JBS of Smithfield Beef Group’s Five Rivers Ranch Cattle Feeding, LLC, considered the world’s largest cattle feeding operation. That’s because Five Rivers operates five feedlots in southwest Kansas, and the Oklahoma and Texas panhandles. If the merger goes through, Edmondson wrote U.S. Attorney General Michael Mukasey, “Oklahoma producers could see a packing market with fewer buyers, and one of these buyers may have a limited need to buy cattle because it owns the feedlots.”
    North Dakota AG Wayne Stenehjem is also among those expressing concern noting the merger’s potential to reduce competition and in turn prices received for cattle.
    According to R-CALF USA Vice President and Wheatland cattle feeder Randy Stevenson, state AGs can challenge the mergers if it’s approved by the DOJ.
    Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .

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Last Updated on Monday, 21 April 2008 04:05

Written by Jennifer Womack

Hughes says know your unit cost of production, benchmark to find strengths & weaknesses

Wheatland – A year ago corn prices were the talk of the cattle industry. The same is true today, but there’s an accompanying question – What are we going to do about it?
    Producers who’ve before relied on the cattle cycle for decision-making are going to need a new plan, according to North Dakota State University Professor Emeritus Harlan Hughes. He predicts corn prices will stay high at least through this decade and probably longer. Like some other economists he also says the cattle cycle is broken. “Those past waves in the cattle cycle, that’s not going to happen again for a while,” says Hughes.
    Breaking at an optimum time, he says, “If we’re going to break the cattle cycle, break it at the bottom because prices are high and numbers are low. Ranchers are in the driver’s seat.”
     While feeders and packers are losing money, Hughes says, “I’m still predicting profit in the cow-calf sector.” He quickly adds a disclaimer noting the statement applies to those who closely watch their Unit Cost of Production, a term Hughes is known for. UCOP is what it costs to produce a hundred pounds of beef. For ranchers it equates to their “break-even” point.
    “Remember the difference between ‘demand driven’ and ‘supply driven,’” advises Hughes. “We need to understand there is a different reason behind this run-up in corn prices. It’s due to increased demand, not short supply.” Of producers who contact him asking when corn prices are going to go back down and if cow prices are to follow, he laughs, “They get a long reply e-mail.”
    “This is a different ball game than we’ve ever experienced,” says Hughes. “Some of our past experiences are not going to guide us real well.”
    Looking back to 1996 when corn prices spiked in the wake of a crop failure, Hughes says when the new corn crop came in back in 1997 cattle prices recovered. There’s no corrective counterpart waiting in the wings for today’s cattle industry. Depending on which segment of the agricultural industry one’s in, conditions may even get tighter.
    “I think we’re going to see cattle numbers slowly go down as the farmer ranchers east of here get out of the cow business,” says Harlan of pasture lands being converted to fuel crops. “Farmers are going to farm fencerow to fencerow.”
    “I think we’re one short corn crop away from a crop failure. We have no corn reserves. Most of you have operated most or all of your ranching life in an era where we’ve had corn reserves,” says Hughes. “We always knew that if corn prices got too high we’d pull it out of storage.” Today there is no corn in storage, private or federally held. He believes, because of lacking protections, the cattle industry will feel the economic ramifications of a corn shortage before the corn farmers feel it.
    “Last year we averaged $92 in the fed market for the year,” says Hughes, noting he believes prices could reach $93-94 over the course of the year to come. “There’s some debate about what’s going to happen this year. As of January of this year feedlots were losing about $150 a head in the feedlot. We can’t keep that kind of performance up.”
    “The processing sector, which we have to have, is going through an economic struggle,” says Hughes. “Obviously, the packing sector is going to increase concentration. That’s the wrong direction as to what we as an industry have wanted it to do, but economics are dictating it.”
    “The feedlot sector has probably got to consolidate,” he predicts. “It’s probably going to be the low cost, most efficient big feedlots that are going to make it. The smaller, inefficient lots probably aren’t going to make it. The smaller, efficient lot can probably continue to compete, although it’s less clear on this last statement.”
    Making money in the cow-calf sector, according to Hughes, will hinge on being the low cost producer. “There’s a huge difference between the low and high cost producers,” he comments. He says when people call him and ask him how the industry is doing he asks them if they want to know about the low cost producers, the high cost producers or the average.
    “Beyond the ranch gate we’ve got excess capacity. To fill that capacity they’re going to overbid at the ranch gate as long as they have equity capital,” says Hughes.
    “I’m still showing profits in the beef cow sector if you sell at weaning,” says Hughes. “I am not showing any profits beyond weaning for 2007 and 2008. I am not a supporter of retained ownership on the majority of ranches. I just go by what the numbers tell me.”
    “I think intensively managed herds are going to continue to make a profit in this new biofuels era and they’ll do that through herd performance records and profit center accounting,” says Hughes. That means know what it costs you to produce a pound of beef, know how that compares to the region’s best ranchers and set goals to reduce your own costs.
    Profit center accounting involves keeping the economics of a cow-calf operation separate from, for example, a stocker operation. Hughes says it allows one to better evaluate where they’re making money and where they’re losing money. “I wonder how often we have the wrong numbers for a profit center and make decisions on them?” he asks.
    “To manage it you have to measure it,” says Hughes. “If you don’t measure it, don’t try and tell me you’re managing for it. If you don’t know which way costs are going, how do you know how to manage them?”
    “The kinds of actions you take from now on to adjust to the biofuel era depend on if you’re a low, medium or high cost producer,” says Hughes. Low cost producers he advises to re-stock when grass becomes available. For high cost producers, he says, “Get better before you get bigger. If you’re losing money on the first hundred cows you have, you’re probably going to lose money on the second hundred cows you have.”
    A computer CD video of Hughes’ “Managing In A Changing Corn Environment” is available for $25 by sending a check to Western Edge Consulting, 30 Ramble A Road, Laramie, WY 82070. He can be e-mailed at This email address is being protected from spambots. You need JavaScript enabled to view it. . Jennifer Womack is editor of the Wyoming Livestock Roundup. Send comments on this article to This email address is being protected from spambots. You need JavaScript enabled to view it. .

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Last Updated on Wednesday, 09 April 2008 08:55

Written by Christy Hemken

    On March 5, Brazil’s JBS, which last May bought Colorado’s Swift & Co., once again made headlines by bringing 80 percent of U.S. cattle trade down from the control of four corporations to three.
    JBS, already the largest beef processor in the world, now only competes with Tyson Foods and Cargill Meat Solutions after its purchase of National Beef Packing Co.
    The sale will combine all of National Beef’s operations and facilities, including National Carriers Inc. and its ownership in Kansas City Steak Company LLC, with JBS Swift’s beef operations.
    The purchase price was $465 million cash and $95 million in JBS common stock. JBS assumed National Beef’s debt of an estimated $425 million. The deal’s total value is about $1 billion, while last spring’s Swift purchase totaled $1.4 billion.
    In addition to is National Beef Packing purchase, JBS also announced March 4 its purchase of the beef processing and cattle-feeding portion of Smithfield Foods – Smithfield Beef - for $565 million cash.
    Also, it bought Australia’s Tasman Group for $150 million cash. Tasman operates six plants – three in Victoria and three in Tasmania.
    The total cash and stock portion of the three purchases is valued at $1.3 billion.
Five Rivers Feeding
    The Smithfield Beef sale to JBS will include 100 percent of Five Rivers Ranch Cattle Feeding LLC, currently held by Smithfield Beef in a 50/50 joint venture with Continental Grain Company. The two have agreed that before the closing of the JBS transaction Smithfield Beef will buy from CGC its 50 percent of Five Rivers for 2.167 million shares of Smithfield common stock.
    The transaction excludes substantially all live cattle inventories held by Smithfield Beef and Five Rivers as of the closing date, together with associated debt. Live cattle currently owned by Five Rivers will be transferred to a new 50/50 joint venture between Smithfield Foods and CGC, while live cattle currently owned by Smithfield Beef will be transferred to another subsidiary of Smithfield Foods.
    Smithfield believes most of the live cattle will be sold within six months after closing with almost all sold within 12 months. Proceeds from the sale of Smithfield Beef’s live cattle, together with Smithfield’s 50 percent interest in Five Rivers’ cattle, net of associated debt, are expected to exceed $200 million.
    Smithfield Beef processes approximately 1.5 billion pounds of fresh beef annually and its processing capacity is 7,600 cattle per day. Five Rivers is the largest cattle feedlot operation in the U.S. with a one-time feeding capacity of 811,000 head.
Running the numbers
    Smithfield, ranked first in the nation in pork production and fifth in beef production, plus National Beef Packing, the nation’s fourth largest meat packer, makes JBS the largest U.S. meat packer, ahead of Cargill Meat solutions, reported the Wall Street Journal.
    In 2007, Smithfield Beef of Green Bay, Wisc., reported sales of $2.6 billion. National Beef has operations based in California, Pennsylvania and Georgia and in 2007 had sales of $5.6 billion and processed 3.9 million head of cattle.
    Previously JBS had $12 billion in annual revenue from operations around the world, including 23 plants in Brazil and six in Argentina; it processed about nine million head of cattle last year.
Wall street responds
    In response to the JBS purchases, stocks of meat processors rose sharply on Wall Street March 5. Tyson Foods shares rose more than six percent to $15.86 on the New York Stock Exchange (NYSE). Cargill Meat Solutions is privately held.
    Smithfield Foods shares rose more than five percent to $29.29 on the NYSE March 5.
    JP Morgan analyst Pablo Zuanic wrote in a note to investors that selling its beef business allows Smithfield to focus on its pork operations and overseas pork expansion plans.
Reduced capacity needed
    “What the cattle industry really needs is reduced processing capacity for its outlook to improve,” says Lisa Keefe of Meatingplace.com.
    Although Tyson Foods shut Emporia, Kan. beef processing operations in January 2008, CattleFax analyst Kevin Good says there’s still excess capacity in the market. Experts estimate there is an overcapacity in the beef industry of between 10,000 and 14,000 head of cattle per day.
    “I don’t know who it will be, but this is enough to force someone else to make adjustments sooner or later,” Oklahoma State University livestock analyst Derrell Peel says of the purchase’s potential to pressure other market players to downsize.
    “For us to turn more positive, the industry would have to further rationalize capacity by two to three plants, the cattle cycle would have to start expanding again and the Asian markets would have to ease their restrictions on U.S. beef,” wrote Zuanic in a note to investors in February.
Regulatory approval
    The JBS purchase will require regulatory approval, although analysts don’t anticipate there will be a problem. Estimates put JBS market capacity after the purchase at around 30 percent, while Tyson and Cargill Meat Solutions are each somewhere just above 20 percent.
    Approval is expected, in part, because the U.S. beef industry is becoming increasingly global. “It’s the way of the world, especially for packers. There are going to be fewer and bigger entities, and it’s going to be a more global industry,” says Good.
R-CALF response
    “Time and time again, cattle producers have had to watch helplessly as the multinational meatpackers manipulate the cattle market for their own benefit, and additional concentration among the packers likely will reduce even more the number of cattle operations in the United States,” says R-CALF USA Region II Director/Vice President Randy Stevenson, who represents Wyoming, Colorado, Utah and New Mexico.
    “R-CALF USA is again calling on Congress to immediately amend the Packers and Stockyards Act (PSA) to prohibit the anti-competitive practice of packer ownership of livestock by the largest meatpackers, and we are strongly encouraging the Department of Justice to block JBS’ efforts to further consolidate the U.S. meatpacking industry,” he continues.
    “There are some countries that allow certain medicines and hormones to be used on their cattle that are outright banned here in the United States,” he points out. “It is imperative that the U.S. cattle herd maintain its distinct identity because of the high quality and safety of domestically produced cattle.”
    “The last thing the U.S. cattle herd needs is to be lumped into a North American herd, what with Canada’s BSE (bovine spongiform encephalopathy) problems and Mexico’s persistent problems with bovine tuberculosis,” asserts Stevenson.
    This article compiled by Christy Hemken, assistant editor of the Wyoming Livestock Roundup, from sources including meatingplace.com and the Livestock Marketing Association. Send comments on this article to This email address is being protected from spambots. You need JavaScript enabled to view it. .

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Last Updated on Friday, 06 August 2010 14:17

Written by Heather Hamilton

Cheyenne – Cattle Country Video held its inaugural sale July 1 and 2 in Cheyenne at Little America, where 38,000 yearlings sold July 1 and 13,000 calves sold July 2 for a total of 51,000 head of Rocky Mountain and Northern Plains region cattle marketed through the auction.
“We have the best cattle in the U.S. to offer for sale in the Rocky Mountain and Northern Plains regions. We started this to take care of our customers and to focus on the high quality cattle they produce,” explains Cattle Country Video owner and auctioneer Lex Madden. “Buyers said they were tired of four- to six-day sales and could not physically sit on the phone or in front of the computer for that amount of time. They were supportive of our idea of a one- or two- or three-day sale with a focus on good cattle.”
“I felt the sale was very representative of the local Wyoming and Nebraska cattle. It’s certainly a lot more personal being involved in a regional sale. I feel cattle on the Western Video Auction and now Cattle Country Video bring more than they do with Superior because they receive more personal representation,” says Niobrara County cattle producer Shannon Bruegger, who sold both calves and yearlings on the auction.
Buyers and sellers alike responded to the regional emphasis of Cattle Country Video. Of the 300 lots offered, 296 sold. On July 1 approximately 350 people were fed lunch at Little America and roughly 250 were in attendance July 2.
“We are very excited and feel blessed at the response and amount of support we received,” says Madden. The sale was originally scheduled to run for one day, but when consignment numbers more than doubled original estimates an additional day was added.
“In two days our website had 920 people log on to watch. The technology is there today and things are changing. We’ve received a lot of positive buyer and seller feedback in regard to watching the sale online,” notes Madden.
Breed representatives from the Angus, Red Angus, Charolais, Saler, Hereford and Limousin breeds were also in attendance to provide information to buyers, sellers and representatives. Madden says if there is an opportunity to make a few extra dollars per head through a breed supported program, producers should be aware of it.
“We have people who want to buy for those programs, so I wanted the people from the breeds there telling us to be involved in them,” he explains.
A very active market was seen both days of the auction despite a high corn market. “Considering the economy, I thought they did a good job selling the cattle. My calves sold really well, while my yearlings were toward the end of the sale and the market softened a little by then. The cattle that sold early on Friday were certainly at the very top of the market. Overall, I thought it was well run and everything went very similar to any video sale I’ve ever been on,” notes Bruegger.
Cattle Country Video will host their second sale Aug. 12 and 13 in Gering, Neb. The filming deadline for that sale is July 28.
For more information visit cattlecountryvideo.com or call 1-888-3-CATTLE. Heather Hamilton is editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .