Kleist Comments

CLOSING AGS 8/14/13
CLOSING AGS 8/14/13

LIVESTOCK

Cattle: Cash cattle last week $121.00-123.00; boxed beef strongly higher on good movement; futures consolidate new swing highs after beef performed better than expected.

OF NOTE: ‘TIS BULLISH IN A WAY………………….

By Leslie Patton, Bloomberg NewsBloomberg

11:20 p.m. CDT, August 13, 2013After years of touting naturally raised meat, Chipotle Mexican Grill is changing its standards to allow beef treated with antibiotics into its restaurants amid a supply shortage.

The burrito seller will use meat from cattle treated with antibiotics because of an illness, which previously wasn’t permitted to be sold in its restaurants, Chris Arnold, a spokesman for Denver-based Chipotle, said in an email. The company still won’t use beef from animals that had been given antibiotics to prevent disease and promote weight gain, he said.

The change in Chipotle’s practices comes as U.S. beef production is projected to plunge to a 21-year low next year, threatening higher costs and making it tougher for the restaurant chain to obtain enough meat.

“The change was really rooted in the belief that it’s not the use of antibiotics for the treatment of illness that is the problem,” Arnold said later in an interview. “The problem is the copious amount of antibiotics that are used to promote growth.”

While Arnold said the motivation for the change isn’t to increase its supply of steak, Chipotle hasn’t been able to get enough naturally raised beef to meet customer demand. This year, about 80 percent to 85 percent of the beef sold at Chipotle’s more than 1,500 stores has been naturally raised, compared with almost 100 percent last year, Arnold said.

“Every year we need 20 to 25 percent more of everything than we did the year before, and the beef supply isn’t keeping up as well,” he said.

Chipotle is trying to find new cattle suppliers and also is considering using different cuts of meat for its steak and barbacoa shredded beef burritos, he said. The chain also sells naturally raised grilled steak in rice bowls and salads at its new Asian-themed store, ShopHouse.

Allowing sick animals treated with antibiotics to remain in Chipotle’s supply chain will increase the amount of beef available to the company, said John Nalivka, a former U.S. Department of Agriculture economist and president of commodity researcher Sterling Marketing Inc. in Vale, Ore.

“That opens up their supply quite a bit,” he said. Chipotle will be able to buy cattle outside the USDA’s Never Ever 3 program, which says cattle may never be given antibiotics, growth promotants or fed anything with animal byproducts.

“That’s really the piece that will add the greatest supply if you take that stipulation away,” said Nalivka, who says supply is dwindling.

Some Chipotle diners may be worried about the company’s decision to sell beef treated with antibiotics, said Bryan Elliott, an analyst at Raymond James Financial Inc.

“There would seem to be a risk that a portion of their customer base would be concerned about this,” he said. “And a portion of that portion could be very upset.”

Hogs: Interior hogs sharply lower west, east unquoted; pork midday cut outs higher early; futures sharply higher as October takes over from the expired August‘s premium. Seasonal (autumn) considerations also an upside limiting feature however. Cool temps. friendly pork consumption.

GRAINS & OILSEEDS:

Corn: Lack luster day but had some meaning in that after yesterday’s late pounding price were able to hold those lows. Oversold? $4.50 roughly a value area? Soybean meal, if bottomed with the beans, will provide some support as well. Also, talk of increasing Asian import demand noted.

Soybeans: November beans held into our nearby chart support area early as the ‘game changer’ from Monday’s USDA report remains in play. Also noted some concern from Asia that U.S. production could fall even further with several weeks left, low maturity and freeze damage potential.

Wheat: Modest gains as the market gets light support from the corn rally, though corn/wheat spreading capped gains. Mixed news out of the Black Sea region as mentioned offset each other.

Kleist Comments

This is John Kleist, of Kleist Ag Consulting.
Questions? Email me: johnwkleist@sbcglobal.net

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