Quality & Profit

Beef producer Dave Devore thinks he has a ticket to increased profitability. One of 150 producers affiliated with ProBeef Co., the Dawson, ND, rancher averaged more than $100/head above traditional marketing channels on the cattle he sold this year."In the past, we backgrounded our Saler/Simmental-cross calves and sold through the sale barn in mid-winter. This year, we put them into the ProBeef program

Beef producer Dave Devore thinks he has a ticket to increased profitability. One of 150 producers affiliated with ProBeef Co., the Dawson, ND, rancher averaged more than $100/head above traditional marketing channels on the cattle he sold this year.

"In the past, we backgrounded our Saler/Simmental-cross calves and sold through the sale barn in mid-winter. This year, we put them into the ProBeef program and went through the feedlot. It made a pretty good profit," he says.

To be exact, Devore made $140/head above traditional marketing channels on his first 58 head. Another 78 head earned $100. He gives credit to his Pro Beef involvement.

ProBeef began in early 1998. It's the exclusive supply arm - providing 22,000 head of cattle annually - to PM Beef Group, a Kansas City, MO-based company that supplies quality beef to two select retail chains with more than 40 supermarkets. The beef is then branded by the stores that sell it.

Rather than focus on dubious quality indicators such as hide color, ProBeef uses proven science to benefit producers and consumers. The program is not breed specific, but is cattle-type specific, says president/CEO Nita Effertz, Mandan, ND. PM Beef specifies that cattle be relatively lean and well muscled.

"Cattle that return a high cutability and have Select or better marbling are desired," Effertz says.

Effertz initiated the ProBeef program after working as a market analyst for the failed Northern Plains Premium Beef Cooperative. "I saw an opportunity to provide PM Beef with northern cattle," she says.

The ProBeef program encourages, assists and rewards long-term genetic improvement. "That is the only way we can improve the beef product," Effertz says.

"This is not something producers can shop around to do or give a try," Effertz says. She is adamant that ProBeef is not an alliance. "As an alliance all you are is a gathering point for cattle, and you shop them around and see which grid they work best on. This (ProBeef) is all advanced planning.

"ProBeef is not a revolving door," Effertz says. "Cattle have to be part of the system - from the beginning - and producers must be dedicated to producing cattle for a certain retail specification."

Year-Round Supply ProBeef moves on a wheel principle: seedstock hubs with commercial producer spokes. Twelve seedstock hubs are located in Montana, North Dakota, South Dakota, Colorado, Wyoming, Kansas, Virginia and California. The coastal hubs help provide a year-round cattle supply.

Of ProBeef's marketing slots, 80% are filled by seedstock hub customers. Commercial producers who work directly with ProBeef fill the other 20%.

Seedstock hubs were chosen based on location, proximity to other hubs, cattle quality, cattle breed(s), operation size, variation in marketing times, customer service, interested customer base, genetic improvement plans and long-term commitment.

"We didn't want all our hubs in the same breed and we had a minimum hub size," Effertz says. "We also wanted hubs willing to work with other hubs of similar breeds to reduce genetic variation ... at least within breed groups."

Of the commercial producers, Effertz says, "As long as their cattle out-perform cattle in the hubs, we don't require them to go through a seedstock hub."

While most ProBeef producers retain ownership, some seedstock hubs buy their customer's calves. Retained ownership is preferred, Effertz says, because the returned value is an incentive for operators to change their herds.

Figure 4 Cattle Co., Somerset, CO, is a ProBeef seedstock hub that produces Saler and Saler/Angus composites. Owner Gary Volk says it captured his interest "because it gives the producer a little more share of the consumer dollar." In 1998, Volk earned $169/head above what he would have received through traditional marketing channels.

"They've got a good quality grid if you've got the right kind of cattle," Volk says. "The premium gives you a reason to improve your cattle," he adds.

Feedlot And Grid Specs ProBeef cattle are fed at one of nine PM Beef-certified feedyards in South Dakota, Nebraska, Minnesota and Iowa. The PM Beef-owned Caldwell Pack is located in Windom, MN.

Feedyards must adhere to requirements regarding time on feed, ration megacalories and Vitamin E feeding schedules. For example, to enhance flavor and tenderness, Vitamin E is fed at 1,000 IUs/day for 100 days, and cattle are fed a high megacal requirement for 110 days. In addition, a minimum 14-day aging after processing is required before the product is packaged for consumers.

PM Beef's carcass formula is based on carcass traits that best indicate differences at the checkout counter. The company claim is 97% accuracy in predicting those differences.

The ProBeef base price is a premium to the futures market and producers can lock in a price anytime between when the cattle go on feed and when they're ready to kill. The Quality Grade target is high Select to low Choice with low Select as a minimum.

"Beyond that, we're looking for red meat yield," Effertz says, noting that PM Beef delivers a boxed retail yield that is up to 9% above other boxed beef products.

Grid specifications include a hot carcass weight of 600-950 lbs., rib eye area of 11-17 in., and fat thickness under 0.7 in. Premiums are paid for carcasses weighing 750-875 lbs., a rib eye area of 12.25-16.75 in., fat thickness less than 0.4 in. and a rib eye area above 1.8 in./carcass cwt.

"Grid specs will always stay the same," Effertz says. "Over time, they might put more premiums in the center of the grid and more discounts on the end to target the cattle better. But, right now we're only running about six percent outs, which are valued on the commodity market."

Feedback Is The Key To ProBeef advisory chairman Jack Dahl, Gackle, ND, it's clear the PM Beef process works. "It's quality control from producer to consumer. They love the tender, tasty beef presented as a branded product from the retailer," he says. Dahl adds that "ProBeef is measuring carcasses and getting the data back to the producer. By improving genetics over time, we're making positive changes as far as the consumer is concerned."

In the system, 100% of carcass value differences are passed back to the producer. From April to July 1999, producers within the system returned an average of $36/head above the commodity market.

In addition to marketing and carcass data, ProBeef can assist producers with risk management, nutritional and animal health guidance in cooperation with a producer's veterinarian, replacement heifer packages, discounts/rebates on animal health, implant and semen packages, and financing for retained ownership.

Producers are currently standing in line to get involved. Program growth may create room for more producers.

"We will pursue opportunities to provide process-verified beef to other markets that are willing to return the true value of the cattle back to the producer," Effertz says. "There is so much opportunity right in our own herds if we can just get the feedback in a system that actually rewards producers for making improvements."

"I think it's a fabulous product," Tom Heinen says of PM Beef. Heinen is co-owner of Heinen's Fine Foods, a 13-supermarket chain in greater Cleveland, OH, which has offered its customers PM Beef since January 1998.

Initially, Heinen was not an easy sell for PM Beef. "I did not embrace this at all," he says. "I had seen too many branded beef programs in which you overpaid for a name that didn't deliver (the quality, flavor or tenderness desired)."

He says PM Beef is different. "It is extremely consistent in flavor and tenderness." With the PM product in his stores, he says, "beef is leading a resurgence in our meat cases in the last six to 12 months." Since offering PM Beef to its 120,000 customers per week, Heinen's has had no returns due to the quality of the beef.

Heinen decided to try PM Beef based on the company earning USDA's ranch-to-retail "Process Verified" package stamp in January 1998.

"Source-verification is an important element. We trade in middle to middle-upper income markets. Our customers sincerely care where their food comes from and they like to know that we know where their food comes from," Heinen says.

Heinen believes ProBeef producers share his commitment to satisfying the customer.

"There are people associated with PM Beef Group that are absolutely way ahead of the rest of the beef industry based on their ability to understand growing an animal using science to benefit the customer," he says.

There's no question, he adds, that his stores' affiliation with PM Beef has enhanced its beef image and given its customers what they believe is a superior product.

"We could get good product under the commodity system, but it was not a guarantee," Heinen says.