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Knowing For Profit's Sake

Tracking individual cattle reveals the effect of genetics and management.

“Going to the feedlot and the rail the first time I retained ownership scared the hell out of me.”

Survival is a powerful motivator. His background being in ag economics, James Fuqua says he could see his Lazy U Ranch in Quanah, TX, would not be profitable into the future. Adding salt to this wound of reality was that the Lazy U was one of those multi-generation ranches that had been in the family for more than a century.

“I had to figure out where I was to see where I was going. I didn't feel like I'd be fulfilling my responsibility to the family ranch if I didn't give it 100 percent,” says Fuqua.

So, rather than keep trying to build a product and hoping the customers would come, Fuqua set about building what the customers wanted first. And, that required coloring outside the lines of tradition that had the Lazy U selling all of its cattle as calves or yearlings on the average market.

Until five years ago, Fuqua had never retained ownership in any of his cattle.

“To be honest, going to the feedlot and the rail with my cattle the first time scared the hell out of me,” remembers Fuqua. “I didn't have enough education to tell the right thing from the wrong thing and the margins were so slim that I couldn't afford to do the wrong thing.”

Like a lot of producers, Fuqua thought he had the kind of cattle that gain in the feedlot, then go on to grade and yield, but he wasn't sure.

To find out, Fuqua started by selling a load of calves to Bradley's B3R Country Meats and getting feedback about their feeding and carcass performance. “We put ear tags in our cows for the first time and started tracking individual cows,” says Fuqua.

Once he could accurately look at individual cow costs and revenues rather than at the group, Fuqua says the doors of economic opportunity flew open.

As an example, Fuqua says that by changing their management to match the environmental cycles on the ranch (calving and weaning seasons, specifically) he increased weaning weights by 100 lbs. and decreased cow costs by $50/head. “And, it didn't cost us a dime to do,” he adds.

Couple that with retaining ownership in his first set of calves — fed side by side with another pen of calves he sold to Cactus Feeders — and Fuqua began to see how he could build a product the consumer wanted and increase his profit potential.

“Since we've been doing this, we get a $7/cwt. premium up front, then the regular grid premiums on top of that, and it's strictly because what we say the cattle will do, they do,” says Fuqua.

Fuqua negotiated his own grid through Angus GeneNet. His calves are grading better than 90% Choice with no Yield Grade 4s or 5s.

“There are a zillion grids out there and you'd better stick them on a computer because what they giveth in one area they taketh away in another,” says Fuqua. “We can negotiate a grid with steeper premiums and discounts because our system allows us to know which cattle to send on the grid and which ones not to.”

Sharing The Power Of Information

By tracking individual cattle and discovering the effect of specific genetics and management strategies, Fuqua developed a system that serves up a predictable, profitable consumer-based product. It's so consistent that Fuqua established the U Lazy 2 Cattle Co. three years ago to help other producers take advantage of the upside.

U Lazy 2 blends the concepts of cooperatives with contract growing so producers can earn a premium on the front end and still share in the ultimate premiums of superior carcass performance. Here's how it works:

Producers lease bulls by the season (lease cost is 5% of the weaned lbs. produced by the bull multiplied by the price paid for the calves). Participating producers follow health and nutrition guidelines designed by the company. The cattle are electronically ID tagged so they can be tracked.

At weaning, U Lazy 2 buys the calves for up to $8 over the average price paid the week previously in the relevant regional market. The calves are purchased direct (no commission) with a 3% pencil shrink (see Table 1).

In addition, U Lazy 2 currently pays 35¢/lb. of gain for the weight gain during a 45-day (minimum) preconditioning period. If Fuqua had his druthers, he'd just as soon producers background them on to 700 lbs.

Rather than pay the entire premium up front, Fuqua ultimately plans to tie it to the carcass premium and discount on the other end.

“They just have to have the right kind of cattle, and for us the right kind of cattle are those that match the environment, number one,” says Fuqua. “The other thing is that we need something that has high eating quality ability. I'm sure there are others out there, but for our program Angus, Red Angus and Baldies are the cattle that will do that.”

At the same time, Fuqua is beginning to franchise other cattle operations to grow females for the system and line up other producers to add supply.

Table 1: U Lazy 2 payout vs. sale barn (683-lb. steers selling for $87/cwt.)
  Sale Barn U Lazy 2
Average Sale Price $594.21 $594.21
Normal Shrink (%) 9% 3%
Sale Price after Shrink $588.86 $592.43
Normal Commission $9.00 0
Insurance (per head) $0.15 0
Beef Checkoff $1.00 0
Bonus (per cwt.) 0 $8.00
Gross/head $578.71 $647.07
Source: U Lazy 2 Cattle Co.

Besides a heavier paycheck, Fuqua explains producers participating in the U Lazy 2 program have other opportunities. They can utilize proven genetics and management strategies, receive help with their records and management and the opportunity to purchase inputs such as feed and pharmaceuticals at bulk cost.

Regarding management, only two head of U Lazy 2 cattle have died in the feedlot, both accidentally. There's been zero morbidity. Fuqua attributes it to the health program and time spent devising handling practices that reduce cattle stress.

As for the consumer, Fuqua explains, “Our product is there cheaper and at a higher quality level, and it's safer because we track the cattle individually. We know what we did and who did what. And, it's better for less every time…. We know where we stand so we know when there is a problem and how we can go about fixing it.”

Although Fuqua says U Lazy 2 is still in its infancy, it is already helping some producers see where they stand relative to the future.

“I talked to a guy yesterday who told me that participating in this program saved his ranch,” says Fuqua. And, he has to agree. After all, his own Lazy U Ranch was the first cooperator in the program.

Bottom line, Fuqua explains, “We're doing it this way because we're in the food business now. We're not in the ranching business.”