The rewards for adding value are there, for both large and small producers.
Electronic identification can give small producers the same leverage of uniform load lots as larger producers.
Marty Maher of Imogene, IA, is a cattle business lifer. Until 1990, he and his family added value to some of their grain crop by feeding it to the calves they raised. But, things changed. Fed cattle buyers lost interest in dropping by the Maher''s farmer-feeder lot when they could shop longer show lists at larger commercial yards.
So, Maher started carting his weaned calves to the auction barn. There, he discovered that the genetics and health program he labored over in his program commanded the same money as every other calf with four hooves and a heartbeat.
“There''s nothing more frustrating than taking your cattle to the sale, hearing the auctioneer say to the crowd, ‘Man, these are some good calves,’ then getting a mediocre price,” says Maher. “All the accolades in the world won''t pay the banker.”
Truth be told, Maher became so discouraged with his inability to retrieve rewards from the value he knew he was adding to his cattle that he seriously considered hoisting the white flag.
But it all became fun again when his longtime bull supplier offered Maher and his other customers a way to make more money with the same calves they''d been raising.
The Power Of Value
Maher began marketing his calves through the Nichols Farms Genetic Source feeder calf sales five years ago. These sales exploit the added value of single-source genetic consistency and documented health and process verification, along with the market uniformity borne out of sorting and commingling. Plus, cattle flowing through these sales are eligible to enter a specific added-value branded beef program.
Cattle in this sale must be sired by Nichols-bred bulls or be out of Nichols-bred females. Eligibility requires that each calf be weaned and preconditioned using specific health and nutrition guidelines.
Every head wears an electronic identification (EID) tag so that source and management can be verified for the buyers. The EID also makes it possible for the cattle to be commingled and sorted into uniform load lots with no more than 75 lbs. separating the heaviest and lightest cattle in each draft.
Plus, by teaming up with Merial, Ltd., Nichols Farms offers a limited health warranty on all of the calves: Merial pays for all diagnostics and treatment for any calf that turns up with a respiratory problem within 21 days of the sale. So far, they''ve only had to make good on one head.
“These calves have been bringing $42 to $83 more per head than if our customers had sold them at the regular sale here (Creston Livestock Auction in Creston, IA) two days later,” says Dave Nichols, managing partner of Nichols Farms at Bridgewater, IA. His firm markets about 500 bulls every year.
Maher believes he netted at least $5/cwt. more by selling his calves through the Nichols sale this year. “When you can get paid for the health and quality you put in, what more can you expect?” wonders Maher. One could argue that $5 isn''t enough, but it sure beats average.
Nichols explains the genesis of his program this way: “I will compete against anyone in the world selling bulls, but I can''t sell bulls to people who don''t have cows. We felt we had to do something to help keep these guys in business.
“We have to help them get paid for the genetics and the health they bring,” says Nichols. “We all talk about providing service, but when payday comes we seedstock suppliers, feed and pharmaceutical salesmen and veterinarians aren''t around.”
Leveraging The Value Points
Market leverage associated with uniform load lots is nothing new. Figuring out how to help all producers utilize this leverage — a few head from this producer and a few head from that one — certainly is.
“At the average sale I would take my cattle to, they''d sort a few head off the heavy end and a few off the light end and discount those odd lots,” says Maher. Now, the commingling and sorting made possible by EID eliminates this.
“This sale eliminates the odd-lot discounts. Even if the average price here was no better than the average price at a regular sale, you still gain from it financially,” Maher says.
Buyers like Lans and Evelyn Gibbs of the Gibbs Farm Partnership at Greenfield, IA, are willing to pay for verified health.
“When someone takes cattle to the sale barn and says they''re preconditioned, it''s buyer beware,” explains Evelyn. “When you go to a Nichols sale, it''s vet-certified and everyone has used the same products.”
The Gibbses pay more for calves from the Nichols sale because they serve up less morbidity and mortality. That also means less labor. The Gibbses prefer preconditioned cattle and pay more for the calves.
Besides farming and feeding, the Gibbses also run a cow/calf operation and have a ranch in Western Nebraska. They buy calves at the Nichols sale to run as yearlings then take them to the feedlot. But, they also sell their own calves through the sale that are too heavy to take to grass. Each is preconditioned.
“Direct costs for the vaccinations are less than $12/head and I think it pays dividends many times over that,” says Lans.
Then, there''s that genetic thing everyone talks about.
“We hear all of the time that consistency is what beef has lacked for the consumer, and I think that''s one thing that single-source genetics can do,” says Brad Sobolik of Hallock, MN. He''s purchased bulls from Nichols for almost 20 years — every producer mentioned in this article has as well — and sold calves through his sale for the first time.
In fact, Sobolik was willing to haul his cattle 680 miles — from within 10 miles of the Canadian border — to have the opportunity.
Paying More To Get More
“We believe in trying to differentiate what we believe are superior genetics, not just short-term, but putting our cattle in a system that will have more recognition over time,” says Sobolik. “We think the future won''t be in having a commodity but in supplying a specific product in a specific way.”
Moreover, Sobolik says, “One of the goals, too, is we''re trying to limit the peaks and valleys of the commodity market and be more in tune with the retail product which doesn''t fluctuate in price as much.”
With that in mind, Sobolik explains the consumer focus of the sale as well as the Nichols program is the primary reason he was willing to burn so much gas to get here.
All of the calves that sell through the sale are eligible to be fed for and marketed to The Machine Shed Restaurants, a Midwest chain that serves more than 12,000 consumers each day. Recently, a couple of the restaurants began using Nichols branded beef exclusively. Plans call to make the branded product exclusive chain-wide in the near future.
Besides the yield and eating quality of the product itself, folks at The Machine Shed say they signed up with the Nichols program because they can trace every box of beef back to individual feedlots and cow/calf producers, something that appeals to their customers.
Conversely, with the direct link to consumers, Nichols'' bull customers can track their product all of the way forward.
“We get the individual information back on the fed cattle, which of course is a help back in the cowherd in selecting bulls,” says Lans Gibbs. “It all boils down to what you can do to add value to what you do. That''s why we''re at the Nichols sale today.”
Nichols describes his family''s program this way: “We''ve evolved from selling bulls to selling a program to where we are now partners in a profit-sharing relationship.” And, he sees such programs as the future of the industry.
“We have to tie the industry segments together efficiently and fairly and get past this John Wayne syndrome we have about wanting to just ride off into the sunset on the ranch grandpa left me,” he says.