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New Stocker Calf Futures Contract

Bruce Bainbridge
Extension Livestock Marketing Specialist

The Chicago Mercantile Exchange has added a stocker calf contract to complement the existing live cattle and feeder cattle contracts. The contract months are January, February, March, October, November, and December. There are other features of the contract that may make it useful to North Dakota producers. The contract is for 25,000 pounds. That makes a semi load of calves equivalent to two stocker calf contracts. The contract is traded in the CME trading pits along with live and feeder cattle contracts. The contract is cash settled in the same fashion as the feeder cattle futures contract. There are no deliveries. Although producers may trade the contract in the pit and liquidate their hedge position at any time, all outstanding contracts at the close of trading on the last contract trading day will be closed at the CME Stocker Cattle Index Value.

The CME Stocker Index is calculated as a weighted average of the price of 500 to 600 lb stocker steers at major markets in the cow-calf producing region of the United States. All medium and medium/large framed steers that have a #1 muscle score (USDA Feeder Calf Grading System) are included in the calculation. The calculation is a seven-day moving average of the moving average of all steers that meet the USDA medium and medium/large framed steer grades. Two weight categories are included in the calculation. One is for cattle weighing from 500 to 549 lbs, the other is for those weighing 500 to 599 lbs.

North Dakota markets are included in the index calculation. These include Mandan, West Fargo, and satellite sales.

This particular futures contract should be attractive to cow-calf producers who wish to hedge their production. Spring and summer calves can be contracted with the fall or winter contracts. The major issue of the estimated basis (cash-futures) relationship is being evaluated and will be reported as soon as possible. I believe that the contracts' index value should offer reasonable price relationships to North Dakota markets. Our prices may be higher or lower than the CME index price, depending on local suppliers and prices versus the supplies and prices across the country.

Example 1: A North Dakota producer decides to hedge the 1999 calf crop. Twenty-five thousand pounds of calves are hedged with the CME stocker calf contract for $85/cwt in the November contract month. Once November rolls around, the producer can buy the futures position back. If futures prices are above $85, the producer would have paid margin money to his broker and had a loss on the futures side of his contract. The cattle would also be sold in the November cash market, also for a price near what the futures contract was covered. Sell cash for more than planned this spring and buy futures back for more than the original sales price, but lock in a general price level that was acceptable prior to calving.

Example 2: A North Dakota producer anticipates needing calves for winter feeding, perhaps holding them for grazing during the summer of 2000. This producer would buy a fall or winter stocker contract, locking in a general price level now in anticipation of the price being higher when it is time to buy calves.

In either case, neither buyer or seller should not offset their contract prior to the last day of trading; their contract will be cash settled at the value of the seven-day weighted average stocker calf price. This is the same process used in the CME feeder cattle contract.

This contract offers market risk management alternatives to cow-calf producers, summer stocker operations, and cattle feeders. It provides a means to protect the value of calves produced or in inventory or to protect purchase prices in anticipation of general cattle price improvement.

Currently, the spring contracts are trading in the high $70's and very low $80's/cwt levels. These price levels are not likely to attract many North Dakota sell hedges, but may offer some attractive buying opportunities. Expectations are for slaughter cattle to reach the low to mid $70's/cwt range late this year. Feeder calves will likely be at least $7 to $10/cwt above slaughter cattle. With 700 to 800 lb cattle trading in the high $70's to mid $80's/cwt, producers should expect that 500 to 600 lb steer calves across the west should average in the low $90's to perhaps as high as $100/cwt by late fall. Therefore, the first beneficiaries of this new stocker calf contract will likely be the long hedgers who buy the fall contracts (if prices recover as expected).

Tips on Calving Management

Greg Lardy

Feeding Time (Konefal Calving Method)

The time of day that cows are fed during the calving season can influence the time when calves are born. Cows fed at night tend to calve during the daylight hours (when you have an opportunity to watch them more closely). This method of management was developed by a Manitoba Hereford breeder named Gus Konefal. The system involves feeding twice daily, once at 11 a.m. to noon and again at 9:30 to 10 p.m. This practice should be started about one month before the first calf is born and continue for the duration of the calving season. Mr. Konefal reported that when he used this regime, 80% of his cows calved between 7 a.m. and 7 p.m. Iowa State University research indicated similar results. Scientists at USDA-ARS, Miles City, also conducted a three-year study on feeding time. Their results were not as dramatic. However, the percentage of cows calving from 10 p.m. to 6 a.m. was consistently 10 to 20% lower for late-fed cows compared to the early-fed cows. Similar research at the Brandon, Manitoba, research station indicated a 13.5% reduction in the number of cows calving between midnight and 7 a.m. However, research conducted in Indiana with dairy cows showed no particular benefit to night feeding (Pennington and Albright, 1985). Research conducted in Florida also showed no advantage to feeding supplements either at 8 a.m. or 4 p.m. In the Florida study only the supplements were fed at prescribed times. Cows had access to hay at all times. Also, their "night" feeding treatment was actually in late afternoon. It appears that producers should follow Mr. Konefal's time patterns fairly closely if they expect to benefit from the method.

Effect of Age of Dam on Calf Losses

Dr. Bob Bellows at USDA-ARS, Miles City, Montana, summarized calf losses at the research station over a number of years and found that calves born to first-calf heifers account for the majority of calf death losses (Table 1). This should not surprise most producers, but does emphasize the need to give first calf heifers more attention than the mature cow herd when planning calving labor needs.

Table 1. Calf losses by age of dam (adapted from Bellows, 1984).

Effect of Pre-Calving Nutrition on Calf and Dam Behavior

Kroker and Cummins (1979) investigated the effects of pre-calving nutrition level on calf and dam behavior immediately following calving (Table 2). Calves born to dams on a low plane of nutrition took significantly longer to nurse than calves born to dams on a maintenance or high plane of nutrition. Odde (1997) also reported that calves born to cows in BCS 3 or 4 had lower serum immunoglobulin levels than calves whose dams had a higher BCS. The amount and quality of colostrum a calf receives influences its ability to stay healthy following calving.

Table 2. Effect of pre-calving nutrition on calf and dam behavior (adapted from Kroker and Cummins, 1979).

Bellows, R.A. 1984. Calving management. Theriogenology Annual Fall Meeting Proceedings. pp. 145-157.

Kroker, G.A. and L.J. Cummins. 1979. The effect of nutritional restriction on Hereford heifers in late pregnancy. Aust. Vet. J. 55:467.

Odde, K.G. 1997. Reproductive efficiency: pre-calving nutrition and improving calf survival. Proc. Bovine Connection. pp. 86-92.

Pennington, J.A. and J.L. Albright. 1985. Effect of feeding time, behavior, and environmental factors on the time of calving in dairy cattle. J. Dairy Sci. 68:2746-2750.

Multi-Species Versus Single Species Grazing on Rangelands Infested with Leafy Spurge
(A Three-Year Summary)

Jack D. Dahl, Kevin K. Sedivec, Timothy C. Faller, and Lyndon Johnson

This project was conducted by the NDSU Animal and Range Sciences Dept. and NDSU Hettinger Experiment Center. Other cooperators were: Jim Karn, USDA-ARS, Mandan; Jerrold Dodd, NDSU Animal and Range Sciences Dept.; and Paul Nyren, NDSU Central Grasslands Research Center.

Introduction

Grazing animals can help control leafy spurge by increasing the competitiveness of desirable plants through time of grazing and selective removal of foliage. Sheep have been shown to be a good tool in controlling leafy spurge; however, disagreements exist over the degree to which sheep consume it. The aversive chemical components found in the latex of leafy spurge have been reported to be an irritant, emetic, and purgative.

Studies conducted at Camp Grafton South showed grazing cattle, in combination with goats, increased grass and grass-like species use by cattle, reduced leafy spurge stem densities, and reduced overall leafy spurge production after two years of grazing, compared with single species grazing of cattle. Since these findings showed a significant benefit with multi-species grazing using cattle and goats, and since both goats and sheep graze leafy spurge, great potential exists for sheep to be a viable tool to better manage leafy spurge-infested rangelands. No reports have documented the use of sheep and cattle together to improve graminoid species use, increase plant species richness, and control leafy spurge.

The study objectives were to determine if multi-species grazing with cattle and sheep on leafy spurge-infested rangeland will reduce spurge density compared to single class grazing and determine if grazing leafy spurge-infested rangeland with both cattle and sheep together improves grazing efficiency and livestock performance compared with a single class grazing program. The study is designed to be conducted for 10 years, ending in 2005. This three-year summary will complete phase 1 of the project. See the Hettinger Research and Extension Center 1999 Sheep Day report for further details.

Study Area

This study was conducted on North Dakota State Correctional Center land and Northern Great Plains Research Laboratory land found approximately three miles south and west of Mandan. Vegetation in this region is typical of northern mixed grass prairie and classified as a wheatgrass-grama-needle grass (Agropyron, Bouteloua, Stipa) plant community.

Grazing treatments were multi-species and single species grazing on three replicated 20 acre blocks. Replicates one and two were in the ND State Correctional Center land and replicate three on the Northern Great Plains Research Center. Each of the replicates were subdivided into four five-acre plots and treated with either a cattle only treatment (CO), sheep only treatment (SO), cattle and sheep treatment (CS), and a non use control (NU).

Sheep were placed on treatments approximately May 15 when leafy spurge was ready for grazing and cattle on June 1 when native cool season grass species reached grazing readiness (3-4 leaf stage). Livestock was removed when degree of graminoid use reached 50 to 60% or on September 15.

Each 20 acre research block had one five acre plot grazed by two yearling steers (CO), one grazed by ten mature ewes (SO), and one grazed by one yearling steer and five mature ewes (CS). Stocking rates were 1.5 AUMs/acre for the CO, SO, and CS treatments, respectively. Stocking rates for this trial were designed for 3.5 months of grazing for the steers and 4.0 months of grazing for the ewes.

Results and Discussion

A significant (P<0.05) reduction in leafy spurge stems occurred after two grazing seasons on the SO treatment. Leafy spurge was reduced from 10.4 stems/11 in2 in 1996 to 6.7 stems in 1997 and 2.5 stems in 1998, a reduction of 36% after one year (P>0.05) and 75% after two years (P<0.05). There was no significant (P>0.05) change in stem density on CS, CO, and NU treatments after two years (Table 1).

The leafy spurge stem density changes found in this study are very similar to results found in other multi-species studies on the use of angora goats with and without cattle conducted by NDSU. They showed that after one grazing season leafy spurge stem density was reduced by 31% on the goat only treatment; however, they found a reduction of 23% on the cattle and goat treatment. They also found that there was no change (P>0.05) in leafy spurge stem densities after one grazing season, but a significant reduction after two years on the goat only trial.

Herbage production was similar (P>0.05) for all growing seasons in 1996, 1997, and 1998 (Table 2). Results would indicate that after three growing seasons leafy spurge has not effected the production of grass and grass-like plants, forbs, and shrub species production. Leafy spurge production also has not changed (P>0.05) during the three growing seasons.

Leafy spurge degree of disappearance increased on all treatments from 1996 to 1998 (Table 3). The SO treatment went from 76% to 98% leafy spurge disappearance from 1996 to 1998, and the CS treatment went from 62% to 88% from 1996 to 1998. There was an increase (P<0.05) in leafy spurge disappearance in the CO treatment with 23% disappearance in 1996 compared to 50% in 1997 and 1998. These results in leafy spurge disappearance on the CO treatment would indicate that steers were consuming leafy spurge; however, due to the design and location of watering facilities, the leafy spurge disappearance was more likely due to a trampling effect. As graminoid disappearance increased on CO treatment, so did leafy spurge disappearance, indicating with more use of the graminoids, more grazing and trampling occurred (Table 3). Grass and grass-like degree of disappearance (P>0.05) was similar throughout the grazing seasons within and among grazing treatments.

Steer average daily gain (ADG) was not different (P>0.05) between treatments (CO and CS) for any of the years of the study (Table 4). There was no change (P>0.05) in steer ADG between years on the CS treatment. However, there was a decrease (P<0.05) in ADG between years 1996 and 1998 on the CO treatment. Ewe ADG was not different (P>0.05) between treatments (SO and CS) for any of the years of the study, similar to the steer performance results. There was a decrease (P<0.05) in ewe ADG between years 1996 and 1998 on both SO and CS treatments (Table 4).

These results would indicate multi-species grazing improved the performance of the steers; however, had no negative or positive impact on sheep performance compared to single species grazing.

In these three years, this improvement in steer performance was seen by having a less negative impact on performance versus the reduction in performance as seen on the CO treatment between years.

Table 1. Leafy spurge stem densities (# of stems/11 inch2 quadrat) on the cattle only (CO), sheep only (SO), cattle and sheep (CS), and control (NU) treatments for 1996-1998. (Standard error appears in parentheses.)

Table 2. Herbage production (lbs/acre) on the non use treatment in 1996-1998. (Standard error appears in parentheses.)

Table 3. Degree of herbage disappearance (percent of use) on the cattle only (CO), sheep only (SO), and cattle and sheep (CS) treatments for the grazing season of 1996-1998.

Table 4. Livestock average daily gains (lbs/day) for individual livestock classes on the (CO) cattle only, (SO) sheep only, and (CS) cattle and sheep treatments for 1996-1998. (Standard error appears in parentheses.)

Treatment & Livestock Class1	19962	19972	19982
CO Steer	1.76 (0.07)a	1.61 (0.13)ab	1.23 (0.06)bx
CS Steer	1.53 (0.32)a	1.12 (0.16)a	0.96 (0.13)ax
SO Ewe	0.16 (0.02)y	0.07 (0.02)yz	0.04 (0.02)z
CS Ewe	0.16 (0.02)y	0.09 (0.03)yz	0.07 (0.02)z
1 Years with the same letter within each treatment are not significantly different (P>0.05). 2 Treatments with the same letter within each livestock class are not significantly different (P>0.05).

Pork Industry Update

Bruce Bainbridge

The nation's pork industry continues to suffer from record low prices. December, 1998, prices dropped to historical lows that had not been witnessed since World War II. The primary issue is excess slaughter supply, with weekly slaughter exceeding 2.1 million head on a regular basis. The extreme financial hardship of such low prices has prompted the pork industry to appeal to Congress and the USDA for assistance. School lunch program purchases of pork have been increased, along with increased percentages of pork offered in food aid packages, particularly to Russia. More importantly, on Friday, January 8, Vice President Al Gore announced to Iowa producers that a $130 million aid package to the nation's pork producers will be offered.

Fifty million dollars of this will be in the form of direct cash payments. Although details have not been announced at this time, the rumor is that producers will receive $5 per head for each hog in inventory on a particular date. This payment may be restricted to medium and small scale producers (less than 1,000 head).

The USDA will also distribute an additional $80 million to assist in the voluntary pseudo-rabies eradication program. This indemnity program is intended to compensate farmers for the slaughter of 1.7 million U.S. hogs infected with the pseudorabies virus.


Although pseudorabies infected animals offer no health risk for human consumption, infected animals will be slaughtered in rendering facilities. This will relieve some of the excessive supplies offered to pork packers and help avert any price depressing action brought on by whole herd liquidations. Producers will receive fair market value for their infected herds as they are depopulated.
There are an estimated 1,100 swine herds that have been identified with pseudorabies. This is down from over 8,000 herds originally identified. Eradication efforts are expected to suffer as producers do not have the financial ability to continue vaccination programs.

Producers are encouraged to contact their local Farm Service Association for details. Unfortunately, the details of both programs were not available at press time for this publication.