When Jerry Wulf talks about how the feeder cattle market is changing, he speaks from experience. Wulf Cattle Company, Morris. Minn., has ranches in Minnesota, South Dakota and Nebraska, as well as a feedyard that markets nearly 55,000 fed cattle each year. Many of the feeder cattle come from their own genetics, Wulf says; they purchase many of their bull customer’s calves so they can follow them through the feedyard.
The Wulfs jumped into the value-added cattle business early on, starting about 20 years ago. More recently, they have added an all-natural program, and six years ago, a NHTC (non-hormone treated cattle) program for the European Union market. Although producing cattle for this many different markets may seem complicated, Wulf has good reasons for taking it on.
“We have found that if we can influence and control the genetic component of the animal we are feeding, we can get more margin by pursuing the value-added market. It has brought us closer to our customer, and taught us how to listen to them,” he explains. In 2007, Wulf says Tyson approached them about the all-natural program, and becoming a producer of NHTC. “They wanted us to be a supplier of this type of beef,” he says.
“We are now the largest supplier of Tyson's value-added cattle program. We deliver cattle to Lexington (Neb.) every week for both the natural and NHTC programs. We meet with Tyson quarterly, and we have the opportunity to meet with their customers. By listening to them, we find out what they want, and what the consumers want. Then we go back up the supply chain, and build those value-added cattle,” he says. “We strive to listen to them, and go back and build the cattle they are happy with, keeping efficiency and production in mind.”
During their quarterly meetings with Tyson, they discuss the demand for that type of beef, where they think the market for this program is headed and if it will keep going, he says. “We have been amazed that even through the high cattle prices, the demand for this program has been sustained, and even grown for these value-added products. They want cattle that are guaranteed humanely-raised. They are even starting to talk about how to raise beef without GMO corn. Tyson has implemented its own initiatives beyond the all-natural program,” he says.
Nebraska seedstock producer Loren Berger sees big changes coming down the pipe in feeder cattle pricing. “I think there will be a major change in the next 10-15 years in how feeder cattle will be priced. Right now, price is based on averages, but in the future, companies may start looking at the true value of feeder cattle and how they are raised, and price them based more on what they are really worth.”
There are data that suggests the difference between an average pen of cattle in the feedlot and a superior pen of cattle is over $200 a head. “If we can measure those differences prior to going to the feedlot in terms of how they were managed, preconditioning and genetic potential, by far the most valuable will be the history of those cattle in previous years,” Berger explains.
“If you have data to show that my cattle have performed a certain way in the feedlot for a number of years, that is probably the most convincing data you have to put a value on those cattle. If they are superior, they should demand a premium because they are worth more than the average,” he notes.
In their own operation, Wulf says they are integrated from genetics to slaughter, which makes them totally transparent. “The only way to do that is to assume a share of the risk,” Wulf says. “All our cattle are either sold on the grid, or we are required to meet certain specifications. As long as we do that, Tyson has been good about sharing information and feedback.”
Wulf shares the information he gets back from Tyson with the ranchers who supply feeder cattle. “This information helps us find out if the calves performed good or bad. Someday, we hope that allows us to pay our calf suppliers more. But we won't do that until we get a complete history on how they perform. Clearly, we need a health score card, including morbidity and mortality, as well as feedlot performance data.”
Whitman, Neb. seedstock rancher Jerry Connealy also sees value-added and end-product merits becoming more important, and discounts getting bigger as fed cattle marketing changes. “A lot of our customers wean and sell their calves, but there are more all the time who are retaining ownership, backgrounding and selling to the feedyards. We even have quite a few taking them through finish,” he says.
“No matter what they do, they are getting feedback in some way. If they sell them, those calves go to a feedyard and get data back. Based on that data, they either show up in the seats to buy those calves next year, or they don't. If those calves are taken all the way to finish, the producer will get data back from the feeder and the packer,” he says.
“Based on that, (that rancher) will be back at my sale next year buying bulls again, or he will change his criteria on what pressure he wants to place on marbling, ribeye and backfat based on the failings on the report from the packer,” he explains.
Gayle Smith is a freelance writer from Potter, Neb.
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