Seedstock 100: Consolidation set to continue

“If you thought the gap between the haves and have-nots was getting wide before, just wait until we go through this next part of the cattle cycle,” says Don Schiefelbein of Schiefelbein Farms at Kimball, Minn.

He’s talking about commercial producers, the genetics they use and the value realized in their market cattle and replacements. He’s also talking about the seedstock producers who provide the genetics.

“It’s becoming more difficult for part-time seedstock producers to fulfill the fulltime demands of progressive commercial customers,” Schiefelbein says.

In fact, Schiefelbein believes the shift in what customers expect from their genetics providers is significant enough to dissuade some smaller breeders from continuing in the seedstock business.

No matter the size and sway of full-service seedstock providers, expansion is fraught with challenges, including the economics and the ability to continue providing current customers the service and attention they expect, while branching out to add new customers.

Consequently, there is plenty of reason to believe the seedstock sector will consolidate further, though not necessarily concentrate.

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Consider that each operation that is part of this year’s BEEF Seedstock 100 markets a minimum of 200 bulls annually. Their combined offering of 52,161 bulls last year accounted for approximately 14.5% of the annual bull needs in the 25 states representing the lion’s share of the nation’s commercial cows.

“The biggest challenge I see for our program is the limitation on our ability to grow and produce more bulls,” says Donnell Brown of R.A. Brown Ranch at Throckmorton, Texas. “We need more bulls to sell so that we can continue to supply them at a wide range of price points in order to fit our customers.”

Typically, R.A. Brown Ranch sold all of their bulls—about 600 head—in an October bull sale. In 2015, they sold about 500 in October and plan to sell more than 100 head in their first spring bull sale scheduled for March 2016. In 2017, they plan to market 600 bulls in the fall and 300 in the spring.

“We are growing primarily through our cooperator program,” Brown explains. “We do all of the marketing, customer service and most of the genetic management. The great thing is that I have a super team committed to producing bulls that fit the needs of our customers. I see the industry trend moving more in this direction of large cooperative teams working together.”

Similarly, Ben Eggers, manager of Sydenstricker Genetics at Mexico, Mo., explains they started a program years ago by which customers using their genetics could ultimately market bulls and females beneath the Sydenstricker umbrella.

“That’s how we chose to expand our production,” Eggers explains. “I think that has been a plus to those customers, and I think it will grow in importance. It has worked well to be able to offer more bulls with our genetics, while also giving smaller breeders a toe-hold in the market.”

Schiefelbein Farms, on the other hand, is content to grow organically over time, reluctant to depend on folks beyond their sizable family to provide service to customers.

Cooperator considerations

In the meantime, the cooperator model offers opportunity for seedstock producers to grow their offering, while providing a potential value-added opportunity for smaller purebred breeders or progressive commercial producers. It’s not an easy fit, though.

“It’s not easy to find purebred breeders that are willing to do all of the work required to be a professional seedstock supplier,” Brown says. “Too many have unrealistic expectations.”

Some believe their cattle have more value to the market than what the market says they’re worth. Some can’t understand why a bull should be castrated. Others, Brown says, don’t understand that biology happens: genetics don’t meld as predicted, cattle get hurt, and all of the rest.

“I wish every seedstock producer had to own a commercial cowherd for five years before being able to own a registered animal,” Brown says.

Inadequate experience on a number of fronts makes some would-be cooperators a poor fit. Besides needing experience in cattle nutrition, health and management, the seedstock business means meticulous recordkeeping and being a stickler for details.

Finally, Brown says a challenge for some is that they want to sell what they want to raise rather than raise what customers want to buy.

“The best cooperators I have are the ones with experience raising commercial cattle for at least two years, then raising seedstock for at least two years and marketing their own bulls,” Brown says. “People who understand that biology happens.”

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