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Alliance Shopping

A look at a list of current alliances in the beef industry can be overwhelming. There are a total of 39 in this issue's insert of The BEEF Alliance Yellow Pages. So, how do you go about choosing the program that's right for you and your cattle? I wanted an alliance that used mainstream cattle, says Evinston, FL, rancher Kay Richardson. I don't care for breed-specific alliances. It takes away the flexibility.

A look at a list of current alliances in the beef industry can be overwhelming. There are a total of 39 in this issue's insert of “The BEEF Alliance Yellow Pages.” So, how do you go about choosing the program that's right for you and your cattle?

“I wanted an alliance that used mainstream cattle,” says Evinston, FL, rancher Kay Richardson. “I don't care for breed-specific alliances. It takes away the flexibility.”

For the last nine years, Richardson has marketed his Angus-Hereford-Charolais cross calves through the Decatur Beef Alliance in Oberlin, KS.

“They're very mainstream. I didn't have to change my program,” Richards says. “They try their best to get the best net return for my calves through sorting. They have a marketing agreement with Excel and when the cattle are at their optimum endpoint, they get on the truck.”

He says his half-Charolais cattle work particularly well on the Decatur grid, which favors muscle. Decatur Beef Alliance's data is another strong factor.

“They offer an in-depth analysis. If you feed cattle with them, they will sit down with you and review the closeouts. Most producers don't have the experience to really analyze carcass data, but a good alliance will do that for you,” he says.

Still, for Richardson, it came down to the bottom line. “They do their dead-level best to keep you coming back year after year. The best way to do that is to make you money,” he says.

The Florida rancher has also sent his predominately Angus cattle through B3R Country Meats LP in Childress, TX.

“The beauty of their deal is they pay a premium for Angus genetics,” he says. “I feel like you get a better return than just getting paid occasionally for cattle that meet the Certified Angus Beef® requirements.”

He adds, “They gave me a lot of data and it helped me improve my cattle.”

Because B3R is an all-natural program, Richardson didn't implant his calves, which allowed more to grade Choice, he says.

On the down side, however, he says it was hard at times for the company to meet demand. As a result, they occasionally had to pull cattle forward into the supply chain before he felt they were finished.

“They have to schedule six months out and that's a tough job. That didn't always work to the grower's advantage,” he says.

That's a problem for almost all alliances, says Neal Odom, cattle procurement director for B3R's parent company, BC Natural Foods.

“I have to work 200 to 250 days ahead of the sales team. But we're a much larger company now. Those things start to be less of a problem with a bigger company,” he adds.

The Ramsey Farm

Kathleen Eubanks and her family's Ramsey Farm weren't ready to experiment with retained ownership, with or without an alliance. But Mother Nature, the market and a consultant convinced them to try both.

In 1997, Ramsey Farm sent half their calves to grazing in Texas through the Veterinary Ranch Management Association (VRMA), a Texas-based program Eubanks found through her local veterinarian, Wade Bulloch. “It was a good program. We got 20¢ gains,” says the Micanopy, FL, rancher.

After the calves grazed from February through May or June on native ryegrass, they were sold to a feedlot. Eubanks, her father and brother, Perry and Chip Ramsey, respectively, as well as her sister, Lisa Hamilton, backgrounded the rest of their calves through the summer at their ranch. Then, a participating feedlot in VRMA bought the rest of the calves.

“We were very pleased with what we got here for the calves and in Texas,” Eubanks comments.

The next year, Ramsey Farm sent its entire calf crop, minus replacement heifers, to Texas. The decision was partially due to the positive experience they had with VRMA the year before but also because north-central Florida flooding had most of the Ramsey operation under water.

But, by May and June, Texas was bone dry and the only thing flooded was the market. “We couldn't get buyers,” Eubanks recalls.

When Eubanks first started looking into retained ownership, she ran across the name of Bob Bliss. The Amarillo-based cattleman manages his clients' cattle on grass and in feedyards.

Bliss found grazing for the lighter-weight Ramsey cattle in Oklahoma. After looking at the Brangus-Angus cross calves, he felt they would do well in the Ranchers Renaissance (RR) alliance, so he placed the heavier calves in C-Bar Feedlot, a participating feeder with RR.

RR is a vertically integrated cooperative of ranchers, feeders and a processor (Excel). The cattle that fit the production and genetic specifications and achieve a quality grade of high Select to low Choice are eligible for RR's branded programs. These include Cattlemen's Collection (Kroger), Rancher's Reserve (Safeway), and Harris Teeter Rancher (Harris Teeter).

Bliss was right. The Ramsey cattle did fit. And those that didn't fit the RR specs went into another premium program.

Still, Eubanks says the move to a retained-ownership alliance was stressful for her family, emotionally and financially. She says, “We are very conservative, and we're also used to getting our money in July.”

That first year, C-Bar bought half interest in the cattle so they were able to go in the alliance on C-Bar's membership. That helped the cash flow. The next year, though, Ramsey Farm joined the RR cooperative. With Bliss's management help, they've continued to wean and precondition the cattle on their Florida ranch, then send them to grazing and C-Bar in Texas.

“With Ranchers Renaissance, we're getting paid for what we're producing,” Eubanks says.

John Butler, RR's CEO, adds: “The pricing structure within the cooperative has been very effective at removing the cyclical peaks and valleys of the cattle cycle. As a result, when prices are extremely high, ranchers share a portion of their profits with their partners in the feeding and processing sectors. On the flip side, when markets turn in the other direction, the sharing of margins allows ranchers to recoup significantly more dollars than if they weren't in the cooperative.”

Eubanks says there are more benefits to the program than the dollars they get after the closeouts.

“When we get the individual feedlot and carcass data, we can see where our individual strengths and weaknesses are. We've been able to make some improvements,” she says.

For instance, she says they found their cattle do well on the rail but were just average in feedlot performance.

“Now, through selection, our average daily gain and dry-matter feed conversion have improved, and our cattle have also continued to improve on the rail,” she adds.

Eubanks, who does most of the family's bull selection, jokes, “The first words my Daddy taught me were ‘how much does it cost?’ But, now that we can see the improvement, we have the incentive to buy better bulls.”

Questions, Questions, Questions

Alliance shopping is a dollars-and-cents issue but Kansas State farm management specialist Kevin Dhuyvetter says subjective decisions need to enter the process, too.

“First, what are your goals and objectives as a producer? If you don't like dealing with numbers, you probably don't belong in an alliance where one of its strengths is providing data,” Dhuyvetter says. “You have to want what they offer.”

He continues, “This one is a no-brainer, but most alliances target a specific kind of cattle. You have to have what they want.”

Kay Richardson, an Evinston, FL, rancher, adds that: “Most alliances have field men who will visit with you and tell you if your cattle fit the program.”

Dhuyvetter also recommends finding out who is involved in the program: “You need to know up front who you're dealing with. Are they made up of a feedlot and a packer along with a retailer or multiple feedlots, multiple packers and retailers?

“Is it a small or new alliance? We need both, but the risks are less with an older or larger alliance. Has the alliance been growing or going down? Do your homework and look into who you're getting into business with,” Dhuyvetter says.

“No matter who it is, look at their integrity,” adds Richardson.

Dan Dorn, supply development specialist at Decatur County Feedyard and Decatur Beef Alliance in Oberlin, KS, recommends those contimplating joining an alliance ask themselves: “Does my management style fit the alliance's management style?”

He suggests looking at the nuts-and-bolts of the alliance. Do they sort cattle? Do they market on a grid or cash?

“Look at the costs vs. rewards associated with participating,” advises Neal Odom, director of cattle procurement for B3R Country Meats LP.

Dhuyvetter says alliance prospects should check their willingness to make a long-term commitment. John Butler, CEO of Ranchers Renaissance (RR) agrees. For example, he says a producer may find he needs to improve his cattle's quality grade to get a better return in the RR system.

“We'll help him identify the seedstock changes that will help him improve his bottom line, but it will be three years before he sees the results of that genetic change,” Butler says.

Consider An Alliance

With feeder cattle prices off the charts, why consider a retained ownership alliance?

“There's more out there to be gained,” says Dan Dorn, supply development specialist for Decatur County Feedyard, Oberlin, KS. “Historically, in 18 out of 21 years, retained ownership steers have made a profit in the feedlot. With heifers, it's been more like 21 out of 21 years.”

John Butler, CEO of Ranchers Renaissance (RR), says that with its branded products, participants receive extra value “that helps justify pulling calves into the system, even when feeder prices are high.”

Butler says producers have the choice of retaining different levels of ownership on calves. A portion can be sold to take advantage of a strong calf market, while ownership is retained on the rest.

“For ranchers, five years ago, it was a matter of survival,” says Neal Odom, director of cattle procurement at B3R Country Meats LP. “But when prices are this good, a producer is not risking losing the ranch by retaining ownership.”

He adds, “We've expanded our marketing options. Producers can now lock in a price on their cattle or put down a floor price so they know their downside risks.”