The history of the modern American cattle industry has been one of good times and tough times. It's well accepted that a succession of 10-year cycles based on cow-calf producers' response to periodic profitability — coupled with the timetable of bovine reproduction — has driven the industry since the early 1900s.
That element of the cattle business seems to be changing though.
The inventory peak during the 1979-1990 cattle cycle was the first time the cycle failed to establish record high cattle numbers. In addition, the 1990 cattle inventory estimate marked the first time an inventory trough fell below the previous cycle's trough. We saw this trend surface again over the past few years as cyclical numbers are generated.
So, what's happening? Could it be that the industry's shift from producing beef as a commodity to beef “products” is taking some of the volatility out of producer prices and handing the industry a more settled future?
“The cycles will be less volatile from a numbers standpoint and the resulting changes in beef production will be less prominent than in previous cycles,” says Randy Blach, Denver, CO. The executive vice president of Cattle-Fax adds that “Stability in numbers are partially due to marketing programs, increased partnerships and alliances within the industry.”
He notes that the contraction in numbers also has a lot to do with the physical size of today's slaughter cattle — a result of increased productivity in the areas of genetics, reproduction, health and nutrition.
Blach warns though, that price changes could continue to be volatile because of the global nature of beef markets. And, while “coordinated marketing” is here to stay, the ultimate driving force in stabilizing the beef industry is consumer demand.
“The development of coordinated beef marketing systems is a slow and tedious process,” he says. “But, they do end up pulling product through the system as opposed to pushing it through marketing channels.”
As long as America can sustain domestic and international demand growth, cattle cycles and the resulting price cycles will “flatten out.” That will give cow-calf producers the opportunity to stay profitable, he explains.Changing Price Structures
Blach says today only about 12-15% of the beef marketed in the U.S. flows through “true” alliances. But, when coordinated marketing is defined in a broader context — placing grids, formulas and value-based marketing agreements into the picture — that level expands dramatically.
He says it's hard though to put a finger on the share of total cattle tied to coordinated marketing programs.
“Put it this way,” Blach explains, “more than 50% of the cattle sold today do not trade on the cash market.”
This erosion of the traditional cash pricing structure is one of the downsides many producers see in the proliferation of coordinated marketing programs.
“With a diminishing cash market, how do we set a value on our cattle?” asks Ben Eggers, Mexico, MO, manager of Sydenstricker Angus Farms. “Owning cattle all the way to the kill floor is still a big step for a lot of ranchers unless they see a value put in front of them.”
Eggers says he can see where it makes sense for some cattlemen to become part of an alliance — and the industry has progressed significantly in terms of its awareness about how markets work.
He also says that with improved production information flow back to commercial breeders — and to their seed stock suppliers — coordinated marketing systems can help cow-calf producers make progress in several “directions” at once. And, while sometimes the layers of information can be overwhelming, Eggers says producers today are better equipped to manage that information for optimum genetics as well as optimum economics.
“We're getting past the days when cattle trading simply came down to how cheap you could buy cattle for — and how much it cost you to get them to the next phase,” he says. “I suppose when you get enough people selling through alliances, the laws of supply and demand will work better and the ups and downs in the market will level out.”Capital, Leverage and Control
Myron Williams, Wall, SD, is a cattle buyer and grow yard operator. He says a lot of cow-calf producers he deals with are still weaning in October and selling on the cash markets through order buyers or action barns.
“Obviously,” he says, “it's where they feel they're getting the best money for their calves.”
Williams says the banking industry can be blamed to some degree for keeping ranchers from trying new marketing approaches.
“When your note is due on Nov. 1, it's kind of hard to venture into anything very creative,” he explains. “And, after what we saw with Future Beef (the former Future Beef Operations, Parker, CO), there's been a lot of caution on the part of venture capitalists to do much more than buy up ranches for recreational land.”
Still, Williams believes there are better days ahead for most ranchers who have stuck it out this long. And he recognizes that coordinated marketing programs will be a part of better times.
“We're starting to build some equity back in the feeding business and that's good for the cattle industry in general,” says Williams. With increased equity comes the wherewithal for feeders to partner-up with ranchers and share some of the risks, he adds.
“The overall economy is going to get better, too, and consumers will have more money to spend on beef,” he predicts.
Beef alliances may certainly bring cow-calf producers a little more leverage, says Ernie Davis, College Station, TX, an agricultural economist with Texas A&M University.
“If you're into an alliance, you're extending ownership of the calf throughout the system and you can go from a loss center to a profit center,” Davis concludes. “It could be the other way around, too, but you know there are certain risks attached anytime you're in business.”
Presently, many cow-calf producers lack control because they are so far removed from the consumer. They have a young animal that's still probably a year away from being finished and ready to go to the packer, Davis explains.
“Alliances are usually coordinated efforts to cross different sectors of the beef industry,” he says. “This extended ownership can often help cow-calf producers gain a little more control of their markets.”
Whatever size ranching operation you have though, once you sell the calf, you've lost control of the market, he warns.
That's how Childress, TX, rancher Minnie Lou Bradley felt 17 years ago when she and her family formed Bradley Premium Beef.
“I felt I wasn't getting the real value for my cattle,” Bradley says. Even though the family owned a purebred cattle operation, we still sold some calves to feeders to be finished as beef.
“I started selling beef off my porch to get a little more value for my cattle,” she adds. “But, it didn't take long before we saw our cooperators improve their cattle, saw them improve their bottom line, and we improved our own bottom line.”
|Alliance Web address||Contact||Year estab.||Cattle in alliance in 2002||Average premium paid/head||Cost||Minimum head||Grids geared to QG, YG or both (see key)||Par point on grid||Carcass weight on grid||Harvest states||Required genetics||Practices required S, W, P, N (see key)||Electronic ID capable||Retained ownership required||Aligned with specific feeders, packers or retailers||Cow-calf producer post-harvest premium|
| Angus America |
|Mark Nelson |
|1996||159,000||$13.41/hd||$2-$6/hd||35||QG||Choice YG3||550-949 lbs.||NE, CO, KS||> 50% Red or Black Angus No Bos indicus||None||Y||N||Packer - Excel Corp.||N/A|
| Angus Gene Net |
|Ken Conway |
|1998||100,000||$20.24/hd||$3/hd||20||Both||Choice YG3||535-950 lbs.||NE, CO, TX||None||None||Y||N||Packer - Swift & Co.||Y, it is possible|
| B3R Country Meats |
|James Henderson/Neal Odom |
|1986||33,000||$60/hd||None||40||Both||Choice YG2||650-850 lbs.||TX||50% British, 50% Continental, No Bos indicus||S, W, P, N||Y||Y||Retailers - confidential Feeders - McLean Feedyard, Heritage Feeders LLP Packer - B3R Country Meats||N|
| Beef Advantage |
|Darrell Ailshie |
931/388-7872 ext. 2235
or Keith Harrison, 615/793-8585
|2001||N/A||Regular sale commissions/location of sale||$1 participation fee to TFC||N/A||N/A||N/A||N/A||N/A||N/A||Contact for health and feeding requirements||N/A||N/A||N/A||N/A|
| Blue Ox Farms |
|Michael or Jeanine McDermott |
|1993||Few||Beef sold from |
on-farm sales @ $3/lb
|None||None||N/A||Choice or higher||550-750 lbs.||N/A||Highland 50%||N||N||No, but it's the usual practice||N||N|
| Brangus Gene Net |
|Ken Conway |
|1999||100,000||$20.24/hd||$3/hd||20||Both||Choice YG3||535-950 lbs.||NE, CO, TX||> 25% Brangus||None||Y||N||Packer - Swift & Co.||Y, it is possible|
|Caprock Cattle Feeders |
Sharing Total Added Value
|Ben Brophy |
|2000||50,000||$20/hd||None||120 hd, one sex||Both||Choice YG3||600-900 lbs.||TX, KS||> 50% British, 0-50% Continental |
|P||Y||N||Feeder - Caprock Industries |
Packer - Excel Corp.
Retailer - Kroger
| Certified Angus Beef, LLC |
|Steve Suther |
|1978||196,903||Ch/Se + $4/cwt||None||1||Both||Vary with packer||Vary with packer||All U.S. Alberta & Ontario||>50% Angus||None||Y||Vary with feedlot||80 feeders, 26 packers, 4,000 retailers 4,000 restaurants and international distributors||N/A|
| Certified Hereford Beef |
|Jim Williams |
|1995||140,005||$10-$12/hd||None||N/A||Both||Choice YG4 or less Select or Choice||600-1,000 lbs.||NE, TX||100% British||Corn feeding||N||N||Swift & Co. and its feeders Greater Omaha Packing and its feeders||Y|
| Charolais Gene Net |
|Ken Conway |
|2001||100,000||$20.24/hd||$3/hd||20||Both||Base-Choice YG3||535-950 lbs.||NE, CO, TX||> 25% Charolais||None||Y||N||Packer - Swift & Co.||Y, it is possible|
| Coleman Natural Products |
|Jim or Scott Coakley |
|1979||66,000+||N/A||None||1||Both||Depends on grid||600-900 lbs. steer 600-850 lbs. heifer||Midwest and Western States||> 50% Angus||S, P, N||N||N||Feeders - small feeders throughout West and Midwest||N|
| ConAgra Better Beef LLC |
|Al Perez |
|1995||250,000||N/A||No cost group data, $1-3 individual data||Load lots of same sex||Both||Choice YG3||536-999 lbs.||CO, NE, TX||British cross and Continental × British feeder cattle||S, P||Y||N||Feeders - ConAgra Feedlots Packer - ConAgra||N|
| Consolidated Beef Producers Inc. |
|Lanny Binger |
|2000||1,000,000||N/A||$3,000 one-time membership fee, $1/hd marketed||N/A||Both||Choice YG3||650-900 lbs.||TX, NM, OK, KS, CO, NE, WY||N/A||N/A||N/A||N||Cooperative owned by member feedyards||N/A|
| Country Natural Beef |
|Doc & Connie Hatfield |
|1986||15,000||Cost of production/return on investment||Responsibilities of being member of co-op 11 days/year||N/A||Both||High Select low Choice YG1 &2||600-775 lbs.||WA||Cattle selected by biological type||S, N, food alliance certification||N||Y||Retailer - Natural Food Stores Packer - Washington Beef Feeder - Beef Northwest||Cost of production/return on investment|
| Decatur Beef Alliance |
|Warren Weibert |
|1994||40,000||Confidential||App. $12/hd||Load lots of same sex||Both||Choice YG3||550-950 lbs.||KS||< 25% Bos indicus||S, pre-weaning||Y||50%||Packer - Excel||N/A|
| Five-State Beef Initiative |
|Ron Lemenager |
|1998||7,500||N/A||EID tag + data management fee||1||Both||N/A||650-850 lbs.||Midwest||Yes||S, W, P||Y||N||N||N|
| Gelbvieh Alliance |
|Dennis Fennewald |
|1995||15,809||$9.69/hd||$1/hd||1||Both||Regional averages||535-1,000 lbs.||NE, CO, TX||None, 50% Angus, 50% Continental tend to do well on either grid||None||Y||N||Packer - Swift||Y|
| Glacier Beef Inc. |
|Bill Nice |
|1999||9,800||$20/hd||$5/hd + 25% of premium||250 - all steers||Both||Select YG3, Choice must have 45%||700-900 lbs.||MN||50% English, 50% Continental||S, process verification||Y||N||Feeder Packer - PM Beef Retailer||Y, with retained ownership|
| Iowa Quality Beef Supply Coop |
|Phil Core |
|1999||125,000||Boxed beef-based pricing||Must own or lease shares||30||Both||Choice YG3A||550-950 lbs.||N/A||None||None||Y||N||Packer - Excel||N|
|Lean Limousin Beef Co.||Carlton Noyes |
| Maverick Ranch Natural Meats |
|Bob Rolston |
|1985||50,000||N/A||None||Load lots||Both||Choice YG1 & 2||700-1,000 lbs.||CO||50% British, 50% Continental||N||N/A||N||Packer - Double J Meats Selected producers, selected feeders||N/A|
| Montana Range Piedmontese Beef |
|Ralph R. Peterson |
|1999||5,000||$0.05-$0.10 HCW||$1/eartag||N/A||Flat premiums Both||N/A||750 lbs.||N/A||Piedmontese sired||S, W, P, N||N/A||N||N/A||Y|
| Nebraska Corn-Fed Beef Inc. |
|Jo McElwain |
|1997||32,000||$14/hd||$4/hd||1||Both||Choice YG3||600-1,000 lbs.||NE||No Bos indicus||S, W, P, BQA guidelines||Y||N||Feeder - Nebraska Corn-Fed Beef feedyard Packer - Swift & Co.||N|
| Nolan Ryan's Tender Aged Beef |
|Coy Meyring |
|2000||Confidential||N/A||None||1||N/A||Select, YG1 & 2||600-899 lbs.||TX||None, prefer Bos indicus||N||Y||N||Feeder, packer, retailer||N|
| Painted Hills Natural Beef |
|Mehrten or Glenda Homer |
|1996||8,000||$50-$60/hd||None||25||QG||Choice YG2||700-850 lbs.||OR||100% British||S, N||N||N||Packer - Washington Beef||N/A|
|Performance Plus-Retained Ownership||Don Cain Jr. |
|1993||Confidential||$29.49/hd||$7.50/hd||1||Both||N/A||500-975 lbs.||IA, KS, NE, CO, MO, SD||50-75% British, 25-50% Continental||MSI scanned||Y||Y||N||N|
|Performance Plus-Sale Barn||Don Cain Jr. |
|1993||Confidential||$22.33/hd||$8/hd||1||Both||N/A||500-975 lbs.||IA, KS, NE, CO, MO, SD||50-75% British, 25-50% Continental||MSI scanned||Y||Y||N||N|
| PM Beef's Ranch to Retail™ |
|Jim Norwood or Leann Saunders |
[email protected] or [email protected]om
|1991||36,000||$30/hd||None||None||Both, primarily YG||N/A||600-950 lbs.||MN||No Bos indicus or dairy breeding||S||Y||N||Packer - Windom, MN Feeders - PM Certified Feedlots||Y, must meet carcass specifications|
| Power Genetics |
|Jason Anderson or Mark Tracy |
|1993||Confidential||Confidential||None||35||Both||Confidential||Confidential||Confidential||>50% Power Genetics||S, W, P||Y||N||Confidential||Y|
| Premium Gold Angus Beef |
|Ron Vanderboon |
|1993||100,000||$20-$30/hd||None||No minimum||Both||Choice YG3||700-950 lbs.||NE, CA||50% Angus||N/A||Y||N||Packers - Manning and Tyson||Y, with PGA approved bulls|
| Ranchers Renaissance |
|John Butler |
|1997||100,000+||Confidential||Confidential||100||Paid based on value created||N/A||Confidential||TX, CO, Canada||50% British, 50% Continental||W, P Process verification||Y||Optional||Feeder, packer, retailer||Y|
| Red Angus Feeder Calf Certification Program |
|Ann Holsinger or Blake Angell |
|1995||100,000||Depends on location||$1.19/hd||1||QG||Choice YG3||550-950 lbs.||CO, NE, KS||50% Red Angus, calves must have one registered Red Angus parent||S||N/A||N||Packer - Excel Corp.||N|
| U.S. Premium Beef Ltd. |
|Tracy Thomas |
|1996||700,000||Over $22/hd average top 25% = $46/hd avg.||Membership and share access||20||Both||50% Choice YG3||575-1,000 lbs.||KS||Breeds with high-quality grade carcass traits||None||Y||N||Packer - Farmland National Beef||Y|
|Western Beef Alliance||Terry O'Neill |
|1994||2,220||$58/hd||$0-7/hd||40||Both||YG2.8 and Choice - Select +||600-900 lbs.||MN||3/8 British, 5/8 Continental||S, W, P, N||Y||N||Packers - PM Beef, Swift & Co. Future Beef FBO, Laura's Lean Beef||Y, under certain conditions|
|Western Grasslands Beef||Carolyn Carey |
|2002||N/A||$250/hd||$3/hd||1||N/A||N/A||1,100 lbs. live weight||CA||70% Black or Red Angus||S, W, P, N||N||Y||Packer - Sierra Meats||N|
|WRB All Natural Premium Beef||Carolyn Carey |