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Analysts say loss of Zilmax may have little impact on market

Analysts weigh in on loss of Zilmax, a cattle feeding additive, now that the dust has settled on bans by Tyson and Cargill and suspension by Merck.
By Carol Ryan Dumas Capital Press

Published on September 2, 2013 10:50AM

With the dust settling somewhat on a ban by Tyson and Cargill on the use of Zilmax, an additive to increase lean muscle gain in cattle, and suspension of the beta-agonist by manufacturer Merck Animal Health, cattle industry analysts are weighing in on what impact it will have on beef production.

Fed in the final days of finishing cattle headed to the packer, Zilmax improves feed efficiency and can increase carcass weights by up to 21 pounds, according to Merck. Reports of lameness in cattle fed the additive led to the packer bans and the suspension.

Another beta agonist, Elanco’s Optaflexx, is still available to cattle feeders, and analysts seem to agree feedlots that used Zilmax will switch to Optaflexx, which doesn’t add as much weight as Zilmax, they say.

The loss of Zilmax use leaves the impression that carcasses are going to lose 20 to 25 pounds or half a billion pounds of beef (annually), but that’s not necessarily the case, said John Nalivka, owner of Sterling Marketing, a Vale, Ore., consulting firm for the red meat industry.

“I’m not convinced we’re going to have these losses,” he said.

Most Zilmax users will be switching to Optaflexx, not all feedlots use beta agonists and cattle weights were heavy even before the use of the additive. Greater efficiencies have increased cattle weights for the past 20 to 30 years, he said.

“Weights were going up even before beta agonists were in the pictures. Even with the lowest cattle inventories in 60 years, we’re still producing three times the beef,” he said.

A drop in cattle weights could happen and it would be extremely rare, given the historical direction of the industry, said Derrell Peel, livestock market economist with the University of Oklahoma.

Peel said the situation is dynamic at this point, and no one has a good handle on the impacts. Feedlots could switch to Optaflexx and lesson some of the impact, but that product contains ractopamine, which has presented a trade challenge for the pork industry for some years and more recently for the beef and poultry industries, he said.

Beta agonists have been heavily adopted by the cattle industry, with weights increasing significantly. A significant decrease in slaughter and beef production in the fourth quarter of 2013 is already expected. Suspended use of Zilmax could decrease beef production even more, he said.

Analysts are already predicting production will be down up to 6.5 percent compared to fourth quarter 2012. With Zilmax suspension in the mix, it could be down as much as 7.5 percent, and that’s a big decline, he said.

Even if weights hold steady year over year, production will be decreased due to tightening feeder cattle supplies, he said.

Analysts predict the suspension of Zilmax could reduce cumulative fed steer weights by 6 to 8 pounds per carcass and cumulative weights across all cattle slaughter by 3 to 4 pounds per carcass.

The real question in the suspensions and carcass weights will be the impact on wholesale and retail prices for beef. A significant impact has the potential to significantly increase packer prices, and no one knows just what the wholesale and retail markets will bear, Peel said.

Beef is already competing with an ample and growing supply of pork and poultry, he said.


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