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Market First

Our Dad and Grandpa always bought cattle cheap, and then upgraded them. This industry has always been about one segment trying to beat up on another one. We're trying to bridge that gap and build relationships with everyone, J.D. Anderson explains. With younger brother, Jason, the Andersons the fifth generation to ranch and farm in this Nebraska county have quietly gone about building more of these

“Our Dad and Grandpa always bought cattle cheap, and then upgraded them. This industry has always been about one segment trying to beat up on another one. We're trying to bridge that gap and build relationships with everyone,” J.D. Anderson explains.

With younger brother, Jason, the Andersons — the fifth generation to ranch and farm in this Nebraska county — have quietly gone about building more of these bridges than most know about.

Power Genetics Co.®® (PG), the Andersons' company based at Holbrook, NE, markets some 200,000 head of cattle annually into a supply-development agreement with Cargill Meat Solutions. All these cattle are verified for process, age and health, and all are individually ID'd and managed toward a specific product specification.

All flow through a system that became the first USDA-approved Process Verified Program from herd to rail in 2001. Most calves are the result of PG genetics — some 1,200-1,300 bulls marketed each year — and fed at one of 40 PG-licensed feedyards.

Though the sheer scope is impressive, the Andersons' story serves as an example of what's possible when you blend many of the industry concepts often chatted about but rarely embraced in an integrated way. These include proven and emerging technology, cooperation across industry segments, genetic design and individual animal management aimed at a specific end market, and winning by helping your customer become more profitable.

Focus on customer needs

“We begin with the end in mind.” That's the philosophy and corporate tag-line J.D. began with in the 1980s when he was in the seedstock business on his own. Between Meat Animal Research Center germplasm evaluation data and visits with the folks at PIC (the swine genetics pioneer that's developed its gilts in this part of the world for years), J.D. decided Angus-based hybrids offered the most opportunity from pasture to harvest. As J.D. says, they were composite long before composites were cool.

Beginning with the end in mind is also the core philosophy J.D. and Jason adopted when the two began PG as a company in 1991, marketing seedstock, and then working to buy back feeder cattle sired by their genetics. “It wasn't easy but having a negotiated value-based grid with Cargill Meat Solutions (CMS-Exel at that time) gave us security in an end market,” Jason says. They credit Marcine Moldenhauer at CMS with helping them identify and take advantage of supply-chain opportunity.

“When we started, the cattle that made the most money in the feedlot and on the rail were our own. The packer and feedlots wanted more of them, so that's what we did,” J.D. says.

Jason explains, “We didn't start with any big aspirations. We had one feedlot and sold about 100 bulls annually. We fed about 4,700 head the first year.”

The PG business model became a self-fulfilling prophecy. To create the increasing supply their packer customer wanted, PG needed more cattle and more feedlots to feed them. That meant they needed more bulls and more commercial producers using those bulls.

The Andersons began enrolling multiplier herds to grow bull supply with PG genetics; today there are about 60 across the U.S. To market the bulls to more folks, they continued their rigorous bull-development program (all are developed at their facility near Holbrook), continued to gather more data via electronic ID and kept growing the number of licensed feedlots bidding on calves sired by PG bulls.

“Using our bulls gives buyers a market for their calves, but they're not obligated to sell to us or our licensed feedlots,” J.D. explains.

Moreover, PG made a priority out of continuous communication with current and potential customers. “Letting people know about what Power Genetics is doing and why was critical and still is,” Jason explains. PG and CMS have put on more than 150 producer meetings in the last decade.

Early on, they decided to take the bulls to the customers to sell. “We felt customer convenience was key,” J.D. explains. “This also helps us better understand any specific health requirements they have in their area.” Pulmonary artery pressure (PAP) testing at high elevation is an example. Localized service also means PG has a solid handle on customer needs via 40 marketing specialists nationwide, who also help customers in their area market calves back into the system.

“Our customers have matched the cows to their environment. We help them match the bulls to their cows to maximize the number of feeder calves that will hit the market,” J.D. says.

The composite PG bulls yield calves that are ¼ to ⅜ Continental X Angus; the primary Continental component is Simmental.

So, the PG game plan is straightforward enough, though its standards and logistics are demanding.

For instance, the basic goal for fed cattle entering the supply chain is 70% Choice and higher grading, 70% Yield Grade 1 and 2 and no out cattle. To build such cattle, PG strives for bulls with ribeyes of at least 14 sq. in., 4% marbling (Ch), and a minimum average daily gain of 4 lbs.

The logistics of providing a steady supply year-round are inherently daunting, especially when, by design, you help your bull customers market their calves at higher prices.

Competition raises the bar

That challenge was magnified this past year when PG went from offering customer calves exclusively to licensed feedyards via what they called PG Stockyard — a closed Internet-based, bid-and-ask system — to offering those calves worldwide via the Big Blue Sale Barn. It's an Internet-based joint venture with Nebraska Livestock Sales based at Fremont, NE.

“It gives our customers more market exposure,” Jason says. “Our available supply has outgrown our feeding capacity, so we needed to find a way to expand marketing for our customers.”

Think for a minute about what that commitment to customers costs them. Now, they and the PG feedyards have lots more folks to bid against. As J.D. says, one of their challenges today is buying back PG calves because of the cost.

The counterbalance to this reality is that the more someone uses the bulls and looks at the feedlot and carcass data, the more that person is convinced to retain at least partial ownership in the calves.

Plus, PG multipliers often retain full or partial ownership in calves. “Obviously, some of our multipliers produce the best cattle we feed,” J.D. says. “We like our multipliers to retain some ownership in their calves so we can both develop more herd history.”

Keep in mind, PG multipliers must comply to stringent requirements themselves, including having and maintaining EPDs on their cows and using artificial insemination.

Teamwork and technology

“We wouldn't have been able to get where we are without technology and partnerships,” Jason emphasizes.

In addition to the multipliers, bull buyers, licensed yards and the aforementioned packer, the Andersons make a point of telling you who their allied business partners are and why.

For instance, Allflex has all of PG's electronic ID and visual ear tag business. Jason explains, “One of the reasons is they had the foresight to work with CMS to install electronic tag readers in their plans over a decade ago.

“Deciding which packer to work with was simple. We needed one who would embrace new technology, who would provide data back to us and our producers on an individual basis, people who understand the cattle business from ranch to rail. CMS met all those requirements.”

Igenity is their DNA partner, supplying tests for black color, polledness, parent verification and new opportunities to evaluate genetics.

For financing, it's U.S. Bank. ABS Global provides semen and genetic consulting, manages PG semen marketing and help find quality feeder cattle. For animal health products and health-based research, its Intervet. PG worked with them and Colorado State University on a three-year, ranch-to-rail study that J.D. says helped them gain more understanding about cattle morbidity.

“We grasped early on that all these partners add a lot of value to what we do,” Jason says.

In other words, these organizations aren't regarded as suppliers, but partners in accomplishing PG goals — just like PG assumes the responsibility of a partner in helping its customers achieve its goals.

Moreover, the Andersons believe in two minds being better than one, and the fact that no one person or outfit has all the expertise. Perhaps the most apt reflection of this commitment comes in knowing that PG staff doesn't include many relatives.

“We brought in key people with the necessary expertise instead of trying to rely on family,” Jason says. Along the way, PG also brought in co-owners with similar vision who also feed cattle. There isn't much staff turnover, either. All told, the Andersons credit PG's success to people, staff and partners.

These days, Jason explains PG is really three primary businesses: genetics, including multipliers and bull sales; a brokerage, including calf marketings and risk management; and supply-chain development, including fed-cattle marketing.

“At this point, supply-chain management is the engine driving our company,” Jason says.

What drives it in the future depends on demand, which is what's driven them since the beginning.

“In the early '90s, the industry was all about yield and fabrication yield. Then in about 2000, it shifted to marbling and branded programs like Sterling Silver and Certified Angus Beef®. Then CMS approached us with a global marketing idea that included specific requirements for marketing, source, age and health verification. The export market was one we'd never dreamed of a decade earlier,” Jason explains.

“Sometimes it seems as if the consumer keeps changing the target. The need to differentiate to create demand will not change. However, we firmly believe some targets, such as marbling, will always have a key role in the market place.

“The looming challenge is to stay focused and try to strategically determine what comes next. The concern we have is figuring out where demand is going, the changing consumer demand, and the cost to produce that desired product competitively.”

After all, PG is a business that has always begun with the end first.

“We find the end market and then create the supply for it,” Jason says.