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Wide-Angle Value

It was Valentines Day in 1994 when Wes and Carolyn Peterson of Breckenridge, MO, came to an unsettling realization as they watched their calves march through the auction ring."We were doing everything folks said you should do, then losing all control once they hit the auction ring. We realized we had to do something different. It was silly to plan the health and the genetics, then lose control of

It was Valentines Day in 1994 when Wes and Carolyn Peterson of Breckenridge, MO, came to an unsettling realization as they watched their calves march through the auction ring.

"We were doing everything folks said you should do, then losing all control once they hit the auction ring. We realized we had to do something different. It was silly to plan the health and the genetics, then lose control of what we were doing," says Carolyn.

Moreover, 24 years into the construction of Peterson Cattle Co., Wes explains, "I was embarrassed to think I was at a point where I was selling feeder calves and all I could tell anyone about them was that they sold well and sold to the same buyers. We're quickly approaching a time when cattle can't stand on that alone."

As the Petersons evaluated options, they came across the Gelbvieh Alliance offered by the American Gelbvieh Association (AGA). It included a pricing grid negotiated with Monfort that seemed to fit their crossbred Gelbvieh and Angus cattle, the opportunity to share risk with participating feedlots, and the chance to gather carcass data.

"Originally, I said the main thing that should come out of it is that we learn something about our cattle and get some meaningful data back that we could understand," explains Wes. "I thought even if we just broke even it would be good."

Selling 50% ownership in their calves to the feedlot, with a 2% pencil shrink at the ranch, the cattle have done more than balance the ledger.

"The pen last year left here as 638-lb. feeders priced at $78/cwt. We increased that value to a little over $83/cwt.," says Wes.

Since the Gelbvieh Alliance began in 1995, AGA executive director Don Schiefelbein says 165,000 head have earned an average premium of just over $9/head; the most valuable 25% of the cattle earned an average premium of about $30/head.

"This was a tool I thought would appeal to our customers, and if not draw them here, at least make the ones already feeding here more comfortable with what they were doing," says Tom Holtorf, manager of Schramm Feedyard at Yuma, CO. He began using the Gelbvieh Alliance four years ago. Today 90% of the cattle in his 16,000-head yard are marketed that way.

Building Opportunity Schiefelbein says offering producers more information and earning potential was the impetus behind the alliance.

"When it first started, there were very few alliances out there and about 100 percent of the fed cattle were trading on a cash basis," he says. Plus, AGA was looking for a way cattle feeders could receive a premium for the Gelbvieh crossbred calves they were paying more to own on the front end.

Building breed acceptance and premium opportunity is also why AGA opened the alliance to all cattle in 1996, not just those with Gelbvieh genetics.

"Whether you like it or not, the more cattle you have to offer a packer, the more apt you are to get the best pricing grid. And, the better the grid, the more apt you are to get more cattle," says Schiefelbein.

Besides, it helps Gelbvieh breeders find out how their genetics fit the industry.

"We wanted to know where we ranked relative to the competition," says Schiefelbein. "From a competitive standpoint, we feel like the more information you have, the better prepared you can be. We have such a strong focus on complementary crossbreeding with our breed that it made sense to see how our genetics compared to other cattle."

Along the way, the alliance's evolving data base is turning up a host of beneficial industry insights. By tracking the genetics, implant protocol, days on feed, along with the value of feedlot and carcass performance, AGA can document answers to some of the most vexing questions posed by commercial producers.

For instance, the Gelbvieh data base says the added value in the pasture adds up to an extra $173/head. In the feedlot, added value potential is $83. But, at carcass level today, $40 is the most a producer can hope for on average. Schiefelbein says the bottom line is that it helps producers understand they can't afford to chase carcass premiums at the cost of reproductive efficiency.

"The most obvious thing we have learned is something I think most commercial producers already know," says Schiefelbein. "As we evaluate the most effective breed combinations for the feedlot and the packing house, it boils down to cattle that are half English and half Continental."

In fact, about two-thirds of the top 25% of cattle in the Gelbvieh data base for total feedlot and carcass value are English X Continental halfblood; two-thirds of the least valuable are high percentage English and high percentage Continental.

Extra Value Today Currently, the Gelbvieh Alliance offers producers a conventional grid aimed at balanced grade and yield, and a grid slanted toward cattle with more marbling (Table 1).

Plus, Steve Munger of Eagle Pass Ranch at Highmore, SD, points out, "The nice thing about the Gelbvieh grid is that you get 52 cents/cwt. added to your base price up front, which is a pretty good stroke right there. You start out $4-5 per head ahead of the game."

Munger has used the Gelbvieh grid for several years, marketing 500-1,000 head across it each year. Eagle Pass is primarily a purebred operation, though, marketing 400 Gelbvieh and Angus bulls annually.

"This is the alliance we feel like we fit best. We don't have to specialize or worry about having source-verified cattle," says Holtorf. Besides the non-conformance allowance, he explains the Gelbvieh grids fit a wide variety of cattle. Plus, he says using the alliance is simple and economic.

In fact, participating in the Gelbvieh Alliance is as easy as picking up the phone a week before cattle are ready to ship and telling them you want to sell cattle on one of their grids. There are no genetic or management requirements. The cost is $1/head - 75 cents if the producer or feeder provides complete feedyard closeout information.

Besides access to the grid, that price nets producers individual grade and yield data and feeding performance if it is provided to the alliance. For another $1/head, data is matched to specific animals through tag transfer at the packing plant. For a total cost of $5/head, producers get comprehensive individual data, including ribeye size, fat thickness and marbling score.

"The cost of data and participation are things I think producers need to look at harder when they send cattle to these alliance programs. Often times, they spend all of their time comparing grids, but don't consider the true participation cost. When you factor that in, it can significantly change the value of various alliances," says Schiefelbein.

Added Value Tomorrow Like the data base itself, Schiefelbein says the lion's share of producer value in their alliance comes with having the information to make improvements.

"The bottom line to all of these alliances should be collecting data, proving sires and building a more consistent product," says Munger. Eagle Pass began collecting carcass data at the beginning of the decade.

"There were a lot of things we were assuming about some sire groups that proved to be untrue once we started carcass testing," says Munger. "We found that most of the bulls were in a big cluster on carcass performance, with a few that fell out on top and on the bottom. The information allows you to use more of those bulls on the top and to identify bulls you need to take out of your program. That's been the biggest advantage."

But, information must be understandable to be useful. "We decided we needed a solutions-oriented report rather than an information-oriented report," says Schiefelbein. "Too many times, the industry just confuses producers. We were as guilty as anyone until two years ago. In reality, getting all of that individual information can be like getting all your child's individual test scores at the end of the semester, rather than an overall grade that tells you how they are performing."

The Gelbvieh Alliance offers all of the individual data, but also offers easy-to-digest performance snapshots that indicate how the cattle did relative to the industry's target of 70% Choice and Prime cattle, 70% Yield Grade 1-2, and no outliers. They also provide a pen report card with an economic summary and overall letter grade for the value of dressing percent, quality grade, yield grade and ability to fit the packer's box.

"If you put things in terms of dollars and cents, people understand more quickly the difference between good and bad," says Schiefelbein. "Producers can quickly look and see that their cattle did well on quality grade, but poorly on yield grade and fitting the box, as example. So, when they buy bulls next time, they know they need to place added emphasis on muscling and leanness."

Munger sums it up this way: "The premium is there on the grid, and you might as well capture. If you don't, the packer will without paying for it."