Make way for BEIFF, a small Iowa cooperative challenging the market clout of the big boys.
Strategic alliances, branded products and niche markets are now news flashes as the trend in the cattle business rushes like a hurricane toward fewer feedlots, fewer packers and more vertical integration.
A unique beef cooperative called BEIFF (Benton and Eastern Iowa Farm Feeders) is trying to change that. "Our goal is to give Iowa feeders the ability to compete with larger feedlots," a quote in the BEIFF brochure says. "We want local farm businesses to find profit in producing beef. This means help in purchasing, accounting and sale of cattle projects."
In 1987, a group from Benton County, IA, concerned about Iowa's economy, conceived the idea. Cattle feeder Wayne Newton was part of that group.
"We knew we (Iowa feeders) were feeding a high quality animal, because packers told us so," Newton tells BEEF. "Still, the state had dropped from first to fifth or sixth in fed-cattle numbers."
In 1988, 16 members organized BEIFF Cooperative and named Newton general manager. Since then, the membership has grown to 240 with each member paying a one-time fee of $500 to join. Though $5 corn and lower cattle prices slowed growth numbers a year ago, 25,000-35,000 cattle move through the system each year.
Power In Numbers "These numbers give BEIFF enough clout to buy cattle through credible sources, hire trucks on a volume basis and contact packers," Newton says.
BEIFF is unique because it owns no cattle and doesn't sell anything but service. "We become the third set of eyes to see that feeding projects are carried out in a profitable fashion," Newton explains.
Members are mainly farmer-feeders located in Iowa and adjoining states with lot capacities of 500 or less. A few are customer feeders like BEIFF president Randy Rigdon, who operates a 350-head lot east of Dunkerton, IA.
"I background calves and yearlings for one investor, and finish cattle for the rest," says Rigdon. "I get cattle from Montana and the Dakotas to southern Iowa and Missouri, and have gotten quite a few from West Virginia and the Carolinas."
His sources of supply are about the same as other beef coop members. Most investors want to retain ownership through slaughter. They may feed their own, purchase cattle to feed through a lot or partner with another investor.
For members like Rigdon, the BEIFF coop is a lifesaver. "As a contract feeder member, BEIFF is a go-between for me and the owner of the cattle," he explains.
"I use the BEIFF Coop to find investors, keep records and provide feedback on how to change rations to best meet the nutritional needs of the cattle."
The five-person BEIFF staff is located in a small farmhouse near Blairstown, IA, the future site of a new $10 million alcohol plant. In addition, a $2 million state-of-the-art 5,000-head feedlot will be built to utilize the stillage from the ethanol plant.
Here's a closer look at the services the beef cooperative performs:
* Helps with purchasing, accounting, recordkeeping and sale of cattle for cattle owners, investors or feedlot operators.
"The $6.50/head fee to operate the BEIFF Coop is built into the cost of gain that comes out when the cattle sell," explains office manager Pam Behounek. "Any profits are distributed as dividends at the end of the year to members."
* Provides a place where an investor can trade ideas and information with other coop members, stay on top of trends and learn successful feeding strategies related to purchasing, accounting and sales.
* Helps locate opportunities for reduced interest rates and investment capital by matching cattle feeders with investors.
* Utilizes futures, options and forward pricing programs to increase profits for owner and feeder alike. BEIFF has taken a different approach in this area. In April, 1996, Newton hired Steve Thompson to perform these tasks rather than use an outside brokerage company.
"What's neat about Steve is that he sees the producer's side," says Newton. "He's on the technical side, yet is a coop member who feeds his own cattle with his brother Scott."
Last September, Thompson developed a new software spreadsheet program tailored to the specific needs of the diversified cattle operation so common in the Corn Belt.
"The spreadsheet tells the number of contracts, dates, options and strike price, bought or sold," says Thompson. "It changes every time the market changes. Once you buy or sell a contract, it marks in a profit or loss and running total."
A unique part of the BEIFF program is that it guarantees cost of gain. "That raises a lot of eyebrows," Newton says. "But the fact is that if a feeder or investor stays with the budget and we have good descriptions on the cattle, we won't miss that cost objective by a penny a pound. As a result, we price cattle differently for different producers. We know what kind of cattle he or she deals with."
Say you compare performance of a set of put-together cattle from Kentucky and a set of five-weights from South Dakota. "You could see disastrous results if they are priced the same," he says.
Extra Opportunities Newton believes that because of BEIFF's history and reputation, members and feeders have lots of opportunities they wouldn't otherwise have. "Custom feeders now have cattle scattered throughout the system, in addition to their own holdings," he says.
Younger feeders short of capital get a chance to feed through the program, too. "I have one who didn't have any cattle until the past year," Newton says. "Now he's expanding financially into the market with a new knowledge of risk management."
BEIFF is a voluntary cooperative open to anyone who pays the one-time membership fee. "The $500 fee can be paid up front or taken out in monthly billings," says Behounek. "We usually have them come in for a visit or our field man Russ Brandt looks over their facilities."
Rigdon is optimistic about BEIFF's future. He gives credit for its success to the staff's leadership and dedication.
Regardless, Rigdon believes the outlook for the BEIFF Coop is very favorable. He also doesn't believe the industry will see a year like 1996 very soon with its $5/bu. corn and poor cattle prices. "The limiting factor is the cattle industry itself," he says.
For more information about BEIFF, contact BEIFF at 2174 78th St., Box 301, Blairstown, IA 52209 or phone 800/472-0675.
An investor calls BEIFF and has a load of cattle he wants to put in a feedlot. What happens?
* Office Manager Pam Behounek asks for the weight, sex, breed, condition, frame size of the animal and origin (farm or salebarn).
* Someone on the BEIFF staff inputs information into the computer, including price of corn, location of cattle and calculates breakevens and cost of gain. From this data, the program matches the cattle to a specific feeder/feedlot. A contract is drafted and signed by the owner of the cattle and the feeder.
* When cattle arrive at the lot, they're vaccinated, wormed, poured and implanted. Each week, fieldman Russ Brandt visits the yard, picks up feed records and checks the cattle. This data is entered into the computer and projected rations are calculated. Then, recommendations are made so cattle move on at optimum performance.
* When cattle are ready for market, Behounek calls packer buyers and tells the owner what wasbid, based on either live or hot carcass weight. The decision is then made on when to sell. UWhen the pen goes to market, the cattle are weighed at the lot and payweights taken at the packing plant.
* The packer then issues the check made in the name of the BEIFF Coop with owner/feeder identification. All data goes to the owner and feeder of the cattle.
Plans are on track for Sunrise Energy's new 5-8 million gallon alcohol plant and a 5,000-head feedlot to be built on the BEIFF property southeast of Blairstown, IA, according to General Manager Wayne Newton.
The Sunrise Energy cooperative has approximately 220 members who must be members of either BEIFF or IPC (Iowa Producers Cooperative).
The First National Bank of Omaha is the primary lender while FmHA (Farmers Home Administration) provides the loan guarantee, says Newton. The last feasibility study for the guarantee is being completed. Construction will follow with completion targeted for June, 1998.
"BEIFF will be under contract to manage the feedlot and will share equipment and personnel with Sunrise Energy," says Newton, chairman of Kirkwood Community College's board of directors. "We're confident the alcohol plant is sound. People realize that ethanol is here to stay and is the fuel of the future."
The new facility will be a dry mill that grinds corn into meal, adds water, ferments and distills the entire mash into ethanol and dried distillers' grains with solubles which can be fed to livestock.
Silver Creek Feeders, Council Bluffs, IA, feeds condensed distillers' solubles obtained in tank trucks from Manildra Energy at Hamburg, IA, and wet corn gluten feed with 45% moisture from Cargill's plant in Eddyville, IA.
The gluten feed is fed year round, with condensed solubles fed from April to October. Condensed solubles make up 15% of the dry hay and corn ration. "We are looking for something to pick up the fines and hold the ration together," says president and manager Roger Chambers. "We don't feed solubles in the winter because it freezes," says Chambers.
South Dakota State University researchers have found that when condensed distillers' solubles replaced soybean meal, corn and molasses in growing diets, gains were similar, intakes lower and feeding efficiency improved.
Three trials at Iowa State University (ISU) with steers and heifers confirmed the high energy values of wet distillers' grains relative to cracked corn. Condensed solubles made up 6.5% of diet dry matter and wet distillers' grains at 16, 28 and 40%.
ISU nutritionist Allen Trenkle believes the dry mill concept planned by Sunrise Energy offers tremendous opportunities. "You can coordinate corn production and utilization by cattle of the by-product into a total system program," he says.