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Kansas cuts funding for market reporting

According to the Kansas Department of Agriculture, as of July 1, there will no longer be state-funded market reports of feeder cattle, bred cows, slaughter cows and bulls in the state.

Currently, KDA reports the livestock sales at Pratt Livestock Auction, Pratt, and Farmers and Ranchers Livestock, Salina. As of July 1, those markets will no longer have state-funded reporters.

Glenda Shepler, KDA Statistics director, explained the discontinuation of the Pratt and Salina market reports is a budgetary issue. The Kansas Legislature required KDA to submit budget cut proposals for each department, and these cuts would save the department a little more than $10,000 per year. The overall budget from the State General Fund for the Kansas Department of Agriculture, as recently passed by the Legislature and approved by the governor, amounts to a little more than $10.45 million for fiscal year 2010. While there has been no public announcement of the budget cuts, as of press time, High Plains Journal confirmed this decision with KDA.

The general fund allocation for KDA for FY 2010 was reduced by 15 percent from FY 2009, and an additional 3 percent in funding cuts will be necessary due to unfunded mandates from the Legislature. Potential cuts to agency programs were discussed throughout the 2009 legislative session, according to KDA, but they were not solidified until the week of June 15. A total of $88,841 will be cut from the state ag statistics program, according to KDA officials. The state of Kansas faces a $328 million budget shortfall as fiscal year 2009 closes June 30, and cuts to the 2010 budget are likely to change if state revenue continues to come in under projection, according to KDA.

"Like all state agencies, the Kansas Department of Agriculture has had its state funding cut considerably in the last two years," Kansas Secretary of Agriculture Adrian Polansky said in a statement. "Our challenge has been to find where to apply those cuts where they are least likely to disrupt the duties we are required to perform by law and the services we provide our customers."

At issue is how cutting these markets will affect Kansas' position on the Chicago Mercantile Exchange Feeder Cattle Index. Paul Peterson, director of Commodity Research and Product Development for CME, explained CME takes the average of feeder steer sales reported via state or federal reporters in a 12-state area and calculates an average price. "We use a combination of auction reports and direct trade reports and reports from video/Internet auctions," Peterson said. CME only uses weighted average reports for the Feeder Cattle Index, and only for beef steers weighing 650 to 849 pounds in Medium and Large frame 1 and 1-2 categories with no qualifiers. The goal is to track a typical feeder steer animal, to provide a reference price for the futures market. The index uses federal or state reports to be transparent in its calculations so that anyone can duplicate the results.

Kansas' state-reported auctions in Pratt and Salina, and its lone federally reported auction in Dodge City, as well as direct trade reports from within the state, represent 12 to 13 percent of the total volume of the CME Feeder Cattle Index. Together, the reports from Pratt and Salina account for 33 percent of that figure, and about 4.5 percent of the total index. Without those unbiased reports, there is a potential for a regional shift in the overall index.

"We are limited in what we use to what is available so if it isn't there, we can't report it," Peterson said. "We can't make it up and we can't get it from another source. If the Kansas numbers go down, everyone else goes up proportionally. The concept behind this and all publicly reported market information is that we want it to be as broad of a representation as possible."

John Donnelly, assistant council of the Kansas Livestock Association, said the organization has been in meetings with KDA staff to discuss the issue. "We've made them aware of the implications this has to the Feeder Cattle Index," he said. The goal of the organization in these talks is to figure out some way to keep these reports funded without missing a week because of the leadership Kansas has in the nation's beef industry. According to KDA's own reports, Kansas is second in the nation in cattle and calves on farms and third in cattle and calves on grain feed, and more than 22 percent of all U.S. beef originates from Kansas beef processing facilities.

Some of the funding methods that have been discussed include asking USDA to pick up the tab. Other states in the same budget situation pool funds from the livestock auction barns in a state fund, which is then used to hire unbiased market reporters. "Bottom line, we need to have reports issued by some sort of government agency, whether that's federal or state," Peterson said. "That's our quality control process so everyone is reported in the same way."

Besides use by CME, these cattle auction reports are used by financial lenders, insurance companies, feedyard managers, order buyers, packer buyers, as well as Kansas farmers and ranchers. "We appreciate how highly valued the state-funded livestock market reports are, which is why we are exploring every available option for their continuation," Polansky added. "We hope that by this time next week we will have more promising news."

KDA began reporting cattle auctions in October 1989 and since then 9.3 million head of cattle have been sold through state-reported markets. Several years ago, KDA cut funding of reporting auctions at Syracuse Livestock Auction, Syracuse, and J.C. Livestock, Inc., Junction City, because of budget concerns.

Jennifer M. Latzke can be reached by phone at 620-227-1807, or by e-mail at jlatzke@hpj.com. To find contact information for your local representatives, visit hpj.com.

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