According to Dr. Cynthia Gaskill, Dr. Ray Smith and Krista Lea, the UK Horse Pasture Evaluation program has observed ergot bodies in headed out tall fescue pastures and hay fields in the last two weeks on several central Kentucky farms.
Claviceps fungal spores are found in the soil of much of the U.S. and can infect the seeds of many grasses, particularly when there is frequent and heavy rainfall during seedhead development. This infection results in the growth of sclerotia – also called ergot bodies – instead of a healthy seed. Sclerotia looks similar to mouse droppings.
The sclerotia contain concentrated levels of many ergot alkaloids, a number of which are similar to the major toxin found in endophyte-infected tall fescue and cause symptoms similar to fescue toxicosis in livestock. Since ergot bodies are not associated with endophyte infected fescue, they can be found in endophyte free and novel endophyte tall fescue varieties.
To reduce the risk of ergot poisoning by grazing animals, keep pastures clipped to remove seedheads. Check tall fescue hay and bedding for presence of ergot bodies. Because of the raking and baling process, ergot bodies in hay or bedding are rare, but can occur.
KENTUCKY BEEF CATTLE MARKET UPDATE. According to Dr. Kenny Burdine, UK Extension livestock marketing specialist, this summer has once again shown us how brutal markets can be.
In April, fall CME8 feeder cattle futures were in the upper $150s and he was surprised calf prices weren’t higher given the profit potential of summer stocker operations. Two months later, those same contracts are down over $20 per cwt and many producers are wishing they had done something to protect those fall sale prices. He believes the two largest reasons for the decrease are uncertainty created by trade issues and continued delay in corn planting.
Kentucky calf prices really did seem to hold on as long as they could, but finally broke hard through May and early June. After putting in their highs in April just under $160 per cwt, 550 lbs M/L 1 to 2 steers had moved into the mid-$140s by the second week of June.
Honestly, this is less of a drop than would be expected given the $20-plus drop in the futures market. It’s as though our calf market didn’t completely buy into the inflated spring market and currently isn’t buying into the deflated summer market.
LIVESTOCK MARKETING INFORMATION CENTER, AUTHOR CALCULATIONS. A market such as this one also is a good reminder to me of what should be expected of an extension economist. The decrease in futures from April to June translates into an expected decrease in value for heavy feeders this fall of more than $150 per head.
For 2019, this is about what he was estimating profit to be for a stocker operation this spring. In a normal year, this would be more than enough to turn modest returns into modest losses.
While producers often want an extension economist to predict prices and make estimates for returns looking ahead, there simply is no reason to think that an extension economist can do this any better than the futures market. Our role should be more about risk management strategies than price prediction.
Previous research has suggested futures are as accurate a predictor of markets as we have available, but there certainly is plenty of evidence to show they aren’t perfect. Still, one can’t deny fall futures in the upper $150s this spring provided us a pricing opportunity. It’s easy to say that now, but pulling the trigger back in April was difficult for many as the market seemed to be invincible.
It’s important to remember there is nothing countercyclical about the futures market. They only allow us to capitalize on expectations of prices in the future. As those expectations change, the futures market will change and the best we can do is price based on those newer expectations.
We always gets lots of questions about risk management after a year such as this one, but by that time it simply is too late. Futures’ markets don’t allow us to resurrect good prices.
Everyone has their own philosophy on risk management and that is perfectly fine. But, some producers are in better financial position to absorb markets swings, such as the one we saw this summer. Some grain producers use a strategy of pricing their grain as they incur their expenses for inputs. In other words, by the time they have priced half of their inputs for the year – rent, seed, fertilizer – they like to have half of their grain priced for sale. It’s interesting to think about how this might apply to a stocker operation.
Given that stocker operations tend to be relatively low-input, 75 percent to 85 percent of total expenses can be incurred on the day the stocker calves are placed. And, if one really thinks about it, more expenses are committed on that same day such as health costs, transportation and commission. If one wanted to apply this proportional pricing approach to a stocker operation, they would be very aggressive pricing cattle at placement B perhaps pricing them all from the start.
The most important suggestion an economist could make to someone about a marketing strategy simply is to have one. Think about risk management from the very start and include your lender in this discussion.
The second suggestion is that one should not make risk management decisions in real time. I have witnessed this countless times over the years as producers see the market move upward or downward. We tend to have analysis paralysis, get caught up in the emotion, and can’t make a decision quick enough.
I typically recommends having a predetermined strategy, with pricing targets and dates, that one can move on as soon as they are reached. In a sense, you are taking the emotion out of the decision and automating the implementation of your plan.