Loud and Clear

So far, plenty of cow/calf producers feel like frustrated wallflowers at the industry's ballyhooed value-added bash.Even when they build the kind of cattle that reap rewards on value grids, they must watch the economic opportunity waltz away unless they retain at least partial ownership in their calves. Or, if they do retain ownership but don't match them to the correct market, the cost of admission

So far, plenty of cow/calf producers feel like frustrated wallflowers at the industry's ballyhooed value-added bash.

Even when they build the kind of cattle that reap rewards on value grids, they must watch the economic opportunity waltz away unless they retain at least partial ownership in their calves. Or, if they do retain ownership but don't match them to the correct market, the cost of admission can make them wish they'd stayed home.

Just ask Bill Stoner of Stoner Farms, Miami, OK. He runs about 700 cows - 1/2- and 3/4-blood Limousin bred back to Limousin. He backgrounds all the calves and feeds out any he doesn't keep as replacements.

"For the most part, I always sold on the rail in the meat and was getting a couple of dollars over market. But as I kept more heifers back and the Limousin percentage went up, they weren't grading as well. I decided I would have to get some Angus bulls or go some other route," says Stoner.

The opportunity Stoner discovered was Laura's Lean Beef (LLB) of Lexington, KY. The fast-growing, all-natural beef company covets the kind of heavy muscle and leanness that Stoner's cattle bring to the party. In fact, LLB pays more for Select and Standard grade (as long as rib eyes are larger than USDA specifications for the respective carcass weight) than they pay for Choice. That has everything to do with the customers they serve.

"Our customers generally say their first concern is a lean, all-natural product," says Charlie Peters, LLB regional procurement director. He explains 80% of LLB customers are folks who eat primarily pork and poultry, or hardly any meat at all.

The other 20% are what LLB terms prescription beef eaters - they love beef, but for medical reasons they look for an ultra-lean product.

"Probably the thing that brings our customers back is the fact they don't get any surprises," Peters says.

"They're getting what they want on a consistent basis."

Specifically, LLB customers are getting product from source-verified, individually identified cattle, pre-conditioned and weaned at least 45 days before heading to the feedlot; cattle that are managed without growth hormones or antibiotics from cradle to grave.

Peters explains they can tell you how every head is managed throughout its life.

In fact, part of the consumer confidence that's fueled 40% average annual growth for the privately held company - $50 million total sales in 1998 - stems from a strict USDA certification program. It requires any producer marketing cattle to LLB to be a pre-approved supplier before the cattle are born.

Rewarding Value "I think it pays," says Stoner, who marketed about 600 head to LLB last year. "It's not a get-rich-quick thing at all, especially with the way the markets have been, but I think Laura's is the best alternative."

Likewise, Jim Dyer of Rancho Espuela Cattle Co., Fort Davis, TX, says, "We started with Laura's about three years ago. We were already feeding Limousin cattle and marketing some on the rail and in different grids.

"But, I didn't feel like we were getting paid for the red meat yield Limousin produce. I didn't feel we were getting a fair shake." The Dyers marketed about 1,500 head to LLB last year.

The reason producers who have at least 3/4-blood Continental cattle, which thrive on the LLB grid, are finding LLB so attractive is that the company believes in rewarding producers every step of the way.

"Owning cows and calves is by and large a by-product of land ownership, so you have a problem getting producers to produce for a specific market," says Laura Freeman, LLB president and CEO who founded the company in 1985.

A Bid For Sustainability Moreover, Freeman says, "Quality not quantity is they key to economic survival for America's family farms." In fact, Freeman - a seventh-generation Kentucky cattle producer - founded the company, in part, searching for a way to make her own family's farm sustainable for the next generation.

First, LLB pays up to $5/cwt. over the top of the cash market for calves and yearlings that have the muscle and leanness to fit their program; again cattle that have received no growth hormones (Table 1). Premiums are even higher for the fall-born calves every branded beef program covets in the name of maintaining year-round supply.

Next, LLB is willing to pay stout premiums for cattle that hit the targets that allow them to serve their unique consumers (Table 2).

On both counts, Don Knore, LLB vice-president of cattle procurement, explains the goal is to reward producers for the performance they bring and for the performance they miss because of LLB's management guidelines.

"We pay for all of those things that make cattle sell at the top of the market - quality, uniformity, weaning, vaccinations, deworming and dehorning. Then, we try to buy those calves as if they were implanted," says Knore.

So, the calf and yearling premiums are designed to offset pounds lost by not using implants. And, the carcass premium helps cover the higher cost of gains associated with leaving the implants on the shelf.

Stoner admits he finishes lighter cattle in the LLB program. "Although the cost of gain is higher without the implants, the overall dollars I put into each head is less than it was because they're not fed as long," he says.

But LLB doesn't stop there. They offer a revolutionary cow/calf bonus that rewards cow/calf producers for building cattle that exceed the average carcass performance of the company's value-grid. As long as producers send at least a truckload, individually or as part of a marketing pool, they receive the bonus, whether or not they retain ownership.

"Some producers get a check for $500 and some get a check for $5,000. Along with the carcass data they receive, it makes them feel like they're more a part of the program," says Knore.

Specifically, cow/calf producers share in 35% of the total carcass premium. For instance, if a steer earns a $10 premium, the cow/calf bonus would be $3.50. If the cow/calf producer retained ownership of this steer in the feedlot, the total premium paid would be $13.50.

Of course, many consider receiving individual carcass data free of charge to be a bonus in itself.

"In our program, the individuals we sort out that won't work cost a lot of money. There is more reason than ever before to manage them individually," says Peters.

Joe Neill of Neill Cattle Co., Welch, OK, feeds Stoner's cattle. "It won't work for everyone, but I do think it offers customers a premium for a narrow window of cattle," explains Neill.

Plus, Neill says the fact LLB will negotiate a base carcass price before cattle ever get to the feedlot can be an advantage for some customers. He explains, "Last fall, one Laura's customer had some cattle in here that he had contracted the previous January when the calves were still on the cow. He was selling those finished cattle for the live equivalent of $80/cwt. when conventional cattle were bringing $58/cwt."

There's Still Negotiation Of course, it can work the other way, too. And, Neill points out, "Like everyone else, they'll work to get the best base price they can and will negotiate each price." He says that poses an extra challenge to feedlot managers dealing with several Laura's customers who each have negotiated a different price.

But Bob Sims of Tri-State Feeders, Hereford, TX, where Dyer feeds his cattle, explains, "It's always an advantage to sell to a packer when he needs them or when he thinks he needs them." Although the cost of gain runs higher without implants, he believes the LLB program allows folks with lean, heavy-muscled cattle to get rewarded rather than discounted. In fact, he told Dyer he would partner with him on all of the cattle they could find that would fit the program and make economic sense.

In this case, the only cattle that do make sense are those with lots of lean and muscle. "What we found out the hard way is not to try pushing light- and medium-muscled cattle through the program, thinking just because they're a high percentage Continental breed that they'll work," says Dyer.

As with other value-added opportunities, Stoner says, "Basically, the genetics have to be there. They'll give hefty bonuses on the carcasses that work, but they'll also give hefty discounts on the ones that don't. What you're trying to market has to be based on what they're paying bonuses for."

Knore says LLB is trying to create a win-win situation for everyone. "One of the main things we do is bridge the gap between the cow/calf producer, the feedlot and the consumer. We touch each phase of the industry."

For more information about Laura's Lean Beef, call 606/299-6625, ext. 229.