What started as a dream of turning cattle into value-added products is now reality at U.S. Premium Beef (USPB). The Missouri-based closed cooperative began stumping for members 111/42 years ago, hoping to get producers and feeders to commit at least 1.2 million head of cattle. The objective is now complete. USPB's stock offering closed Jan. 23, 1998.
"We've been encouraged by the willingness producers have shown to invest in a company that will add value to the beef they produce," says Steve Hunt, USPB chief executive officer.
A major piece of the marketing puzzle, similar to many alliances, was processing. All along, USPB's goal has been to partner with a packer, not build a stand-alone plant. On Dec. 1, 1997, USPB officially partnered with Farmland Industries and now jointly owns Farmland National Beef Packing Company.
Starting that first week of December, USPB delivered 9,000 head of cattle to the plants. Since, they've averaged 8,000-9,000 head a week.
Grid Demands High Quality - Cattle are sold on a grid system designed jointly by Farmland National Packing Company and USPB. The grid, says Hunt, is non-breed specific, but pays a $3.50/cwt. carcass weight premium if cattle meet Certified Angus Beef specs. It's designed, he adds, to target Choice, Yield Grade 1 and 2 carcasses.
A unique feature, Hunt explains, is that the grid can be adjusted with equal input from USPB and Farmland National Packing.
"So far, and the returns are early, a majority of the cattle selling on USPB's grid are earning a premium over the cash market," Hunt says. "In fact, the top 25 percent of cattle delivered through the middle of January earned about a $20 per head premium over the cash price."
Lifetime membership to USPB is $500; a one-year membership is $100.
Producers who did not purchase stock can still participate in USPB. "We have a number of stockholders, primarily feedyards, who purchased stock with the intention of leasing it to their customers," Hunt explains. "They typically are charging $10 per share per year to lease stock which gives the producer all the benefits of ownership except appreciation of stock value."
Members Learn Quickly - "Some members are now sorting cattle and using ultrasound to help hit the targets," says Hunt. "And, some of the feeders are already building data bases on their cattle to analyze which cattle perform best on USPB's grid.
In a nutshell, here's USPB's plan:
* To operate as a fully integrated beef company in which producer/members buy the right and obligation to deliver finished cattle.
* Producers will receive individual carcass data and a financial incentive to improve their genetics by getting paid on the quality and value of each animal at the time of delivery.
* Producer/members will be involved in a beef processing system which will operate more efficiently because of a systematic supply of cattle. This supply will be higher quality which will enable the company to expand consumer markets with value-added products.
Already, Hunt says, USPB stockholders are benefiting from their Farmland partnership. "For example, Farmland National Beef recently bought Kansas City Steaks. Because USPB stockholders own a portion of Farmland National Beef, they now also own a further processing company which adds value to the beef they produce.
"We're trying to develop a system that rewards beef producers for developing and producing high-quality animals," says Hunt. "We also want to provide them the opportunity to move to a vertically-integrated system that can control the quality of beef from conception to consumption."
For more information about USPB, call Steve Hunt at 816/891-2300 or Bill Miller, chief marketing officer, at 316/767-7041.