The next few years will define the feedyard industry. Consider these points:
The beef industry is heading into the cattle cycle's rebuilding phase. Thus, feeder cattle will be in shorter supply as heifers are retained to build herd numbers.
Meanwhile, the feedyard segment has increased feeding capacity the past several years. That increased pen space will place greater buying pressure on a decreased feeder cattle supply.
In addition, the risk of buying and owning cattle on feed will increase unless the feedyards have programmed those cattle toward a market from the time of purchase.
At the same time, retailers are driving branded beef programs. Because that entails a higher level of liability for the beef that carries their name, retailers will demand a supply chain they can trust.
Feedyards are the last management point in the production scheme before the retailer. Thus, they'll be asked to perform a number of functions in the supply chain. These include:
Feedyards will be asked to fix the uniformity and consistency problems that undisciplined breeding programs have created. The feedyards will do this through purchasing programs that discriminate between feeder cattle that fit the template of the end-users and those that don't.
The old debates about sorting in the feedyard are over. Sorting is and will be a way of life for feedyards that wish to stay full every day.
The sorting of incoming cattle and finished cattle are necessary to hit retailers' demanding targets for uniformity. The sorting may be by weight, eyeball appraisal or instrumentation, but it will be used to help produce a narrow range of cut sizes for branded programs.
Because of the increased liability generated by branded programs, feedyards will be required to provide documentation of such quality assurance areas as drugs, implants, chemicals and possible microbial contamination. Thus, feedyards will operate a hazard analysis critical control points (HACCP) program — subject to audit at any time — for their end users. As a result, feedyards will require similar HACCP programs of their suppliers in order to guarantee food safety and quality.
Feedyards will also be asked to document the source of their calves. This documentation can take many forms. It may extend only to the auction barn of origin. Or, it may include the ranch of origin.
The decision on source verification will depend on the objectives of the branded program and the buying programs of the feedyard. The company that brands a beef product will not put its name and reputation on the line and then use anonymous calves with no known history.
Thus, the required recordkeeping will be more sophisticated than before and may include individual animal identification.
Feedyards will be under increasing pressure to choose a marketing program rather than trying to sell to all possible outlets.
The specifications will be exacting and different among various programs. This will prompt feedyards to establish their program and stick with it. The lack of competitive bidding each week will concern feedyards and cause them to approach this process with caution.
Once they've chosen a program, feedyards will find the tradeoff is that they have a market of constant size every week and cattle can be more accurately programmed to a marketing date. The net result is that instead of fluctuation in numbers, the feedyard will have a more constant, year-round occupancy rate.
The feedyard's challenge will be to educate their retained ownership customers to the changes and uniformity necessary to meet the demands of the new branded programs. This will require more collaboration between feeder and rancher than we've had before.
In the past, feedyards have tried to help ranchers with marketing advice, then fed those ranchers' cattle and sold them in the cash market. Now, feeders will become sources of carcass data and will be asked to give advice on breeding and genetics in order to hit the program targets.
The Bottom Line
In summary, feedyards will need to align themselves with companies that are producing a branded beef product. This will allow the feedyards a more constant demand for their cattle and thus a more consistent occupancy rate.
It also will allow the feedyards to function in a time when competition for calves will be high and margins narrow to nonexistent. The new programs, however, will demand more of the feedyards in terms of documentation and HACCP control.
The feedyards that can see the future coming at them and prepare for it will survive and prosper. Others may only survive.
Bill Mies, PhD, is supply systems manager for Future Beef Operations and a former feedyard manager and Texas A&M University faculty member.