Editor’s note: BEEF magazine’s serialization of Kenneth Eng’s industry history and personal memoir, entitled “Started Small & Just Got Lucky,” continues this week with the consulting nutritionist’s recollections on the decade of 2000-2010. The book debuts next week at the Dr. Kenneth & Caroline McDonald Eng Foundation research symposium, set for Sept. 18-19 in San Antonio, TX. Click here for more information on the symposium and/or ordering the book.
Chapter 27 – 2000-2010: A new millennium and a new direction
Many expected widespread chaotic events to occur with the turn of the century to the year 2000 (Y2K). At our New Mexico ranch, numerous strangers from various areas drifted to the Gila Forest and Wilderness area prior to Y2K. I guess the fascination with the forest was the solitude and remoteness.
Nonetheless, Y2K came and went quietly, and I suppose you could say things returned to normal except normal didn’t last. In 2001, the Sept. 11 terrorist attacks occurred and forever changed our lives and American culture. Changes in homeland and airport security, government oversight of personal communications, etc., are now imposed on our lives; while it may be necessary, personal freedom has taken a hit.
The best of times and the worst of times occurred in 2003. In October 2003, fat cattle prices spiked to a high of $1.10-$1.20/lb. because of bovine spongiform encephalopathy (BSE) problems in other parts of world. Unfortunately, we then had a singular BSE cow occurrence in December 2003 that collapsed our market.
In retrospect, I suppose the government and other support groups did the best they could, but the overreaction to the BSE problem was a shameful, embarrassing spectacle. The word BSE still sends tremors through the marketplace, as witnessed by the impact of the supposed BSE dairy cow in California in 2010. In reality, this was a non-event, but it still sent the futures prices down the limit a couple of days. Unfortunately, we are an industry that can be guilty of both inaction and overreaction, and either can be devastating.
Perhaps my all-time favorite client story occurred in 2003 at Mark Adams’ A2 Feedyard. Mark sold his feedyard in 2012 for a very attractive price, but for the previous 35 years, he was a client of mine in Arizona and Texas. He is one of the smartest and best hands-on feedlot operators I have ever seen, as well as one of the few who made and kept a lot of money feeding cattle.
Back to the feedlot story, after we shipped the last of our pasture cattle in 2003, Caroline and I had a couple of loads of plain but low breakeven yearlings left. Mark did a good job of feeding and selling plainer cattle, so I contacted him to say I needed to send a few loads to his feedlot.
He said, “I’m full, and can’t take them.”
I suggested, “I’ll partner with you.”
But he replied, “I’m still full.”
To which I replied, “I’ll even finance them.”
Finally, he said, “Just send the damn cattle, and I’ll find a place for them – and I don’t want to partner.”
The cattle sold in October 2003, and made $525/head. This is an all-time personal record, and I quit feeding cattle for several years because I knew it would never be that good again. Mark and I still laugh about this. Although I’m glad he sold out while the timing was good, I miss him.
Expanding our cow operations
In the early 2000s, we had expanded our cow operations to California, New Mexico, Texas and Oklahoma. I was also in the market for additional land in Nebraska, which Caroline wasn’t thrilled about but she finally gave in. I was so intent on building our cowherd because I sensed the industry was going the other direction with cow numbers declining but land prices going up rapidly. The increased value in land and cows that occurred was truly breathtaking.
It was obvious the old 10-year cow cycle was dead. That 10-year cycle was usually made up of a couple of years of profit, 5-6 years of breaking even, and 2-3 years of losing your butt. That’s no way to sustain an industry.
Either by design or because of better alternatives, it’s obvious that ranchers have continued to liquidate cows. Some have converted pastureland to more profitable alternatives, and some took the money and ran. The relentless decrease in cow numbers and increase in land prices has been astounding the past 10 years. Some suggest that, like the sheep industry, cow numbers will decline past the point of critical mass to the point where they are not a major factor in the U.S. agricultural economy. I doubt it, but the love affair of cowmen for their cows, regardless of the economics, has disappeared.
The land cost per cow unit in many areas of the country has made profitable cow production impossible. In some areas, land prices range from $20,000 to $30,000 to $40,000, and even $50,000/cow unit. Even at today’s low interest rates, this makes it impossible to pay for a ranch with cattle.
If you believe the land will continue to appreciate because of recreation value, subdivision potential, or for other reasons, then it may still work. Some argue that this has always been true in the cattle business, and the only difference now is the number of zeroes involved.
In the 1970s, experts believed the world’s population would peak at 6 billion, and then gradually decline. However, we just passed 7 billion, and many are predicting we’ll reach 9 billion people by 2040. Should this be correct, who knows what land may be worth in the future?
The year 2008 will go down as a wreck in almost all parts of the U.S. economy. Certainly, it was a bad year for the feedlot industry, but the stock market and U.S. economy in general fared even worse. The bankruptcy of Lehman Brothers plus the collapse of the housing bubble were factors causing the economy and stock market to collapse. It was like what Joe Louis said about his opponents, “They can run, but they can’t hide.” There was no safe place to hide in that economy. I had a cattle business acquaintance who liquidated all of his cattle prior to the price collapse, investing the money in the stock market. Selling the cattle was a good move, but when the smoke had cleared, he had lost two-thirds of his stock market investment.
Breakthroughs in technology
The first decade of the new millennium was exciting, but also occasionally terrifying. There was one area where activity declined substantially – this was the introduction of new drugs and feed additives. This decline may be related to a more stringent FDA, and the reluctance of drug companies to make new research investments in a volatile industry where numbers are declining.
After years of research and FDA frustration, Elanco was able to clear its beta-agonist, ractopamine, in 2003. The length of time required for FDA approval was probably a record. I was at an Elanco roundtable research review when they first floated the idea in the mid-1980s. At that time, conventional wisdom told us it would be cleared in the early ’90s, which obviously didn’t happen. Intervet got its beta-agonist, Zilmax, approved the following year; and in 2007, Intervet also received a new clearance for a long-lasting combination implant called Revalor-XS, which has gained substantial market share.
I believe the most important research breakthrough of the decade has been the advent of the residual feed intake (RFI) system for measuring feed efficiency. RFI is the difference between actual and expected feed intake of animals based on their body weight and growth rate.
If you divide cattle into high, medium and low RFI groups, the low-intake (low RFI) group will often be more efficient because there is little difference in daily gain between groups. The ability to directly measure feed efficiency is a breakthrough because previously many assumed that high consumption and high gain animals were also the most efficient. The RFI system punches holes in that theory.
There is much speculation concerning the mechanics behind low RFI efficient animals. Perhaps it relates to methane production, lower maintenance requirements, and so forth. Apparently RFI is also a heritable characteristic, which means it may have a special role in our breeding programs.
A portion of the biofuels mandate of 2007 was a large increase in the cellulosic ethanol mandate of 13 billion gals. to be reached around 2020. I doubt this mandate will be reached because it’s difficult to break the lignin plant bond. Furthermore, cellulosic ethanol would not be as cheap as some think. Some have the misguided view that cellulose or roughage products are inexpensive, but on a nutrient density basis, the opposite is true. Furthermore, the amount of roughage used to meet the mandate could result in a severe roughage shortage for the cattle industry.
The biofuels or ethanol mandate in 2007 resulted in a large increase in distillers’ grains production. After the distillation process, about a third of the corn used for ethanol production remains as distillers’ grain, a byproduct that is an excellent feed when properly used. Add to that the availability of corn bran and corn steep resulting from the manufacture of fructose and starch from corn, and we have abundant byproducts available – especially in the Midwest. Because the dry matter feed value of these by-products is greater when they are fed on a wet or modified wet basis, feedlots near the source of production have a distinct freight advantage.
Some segments of the industry were slow to recognize the performance and health problems that high sulfur in gluten and distillers’ products may cause. Some mistakenly assumed that if polio or “brainer” problems did not occur, sulfur was not a problem. However, high sulfur can cause performance and subclinical health problems long before these symptoms occur.
In many areas of the country, sulfur levels have also increased in other ingredients. One of Newton’s laws of physics is that you can neither create nor destroy matter. When removing sulfur from products such as coal and petroleum, it has to go someplace. I routinely run sulfur assays on several ingredients, and we’re aware of some areas where the sulfur content of hay, for example, may be over 0.5%. Diets over 0.3%-0.4% sulfur can impact health and performance if proper measures aren’t taken.
Summarily, the major events of the decade were the relentless increase in agriculture land values and the decrease in beef cow numbers. Land prices have continued to accelerate and are at all-time record highs. Beef cow numbers are at their lowest in over 50 years, and thus cow prices are at record highs. Ironically, many of the larger landowners and cow owners are one in the same, and the transfer of wealth to that segment of the industry has been “breathtaking.”
Drylot cow-calf production
I had decided to switch our cattle business from predominately a yearling grazing program to a cow-calf program. We already had cows on the California and New Mexico ranches, and I bought a ranch in Oklahoma, plus I leased several Oklahoma pasture properties. We built a cowherd of approximately 2,000 head made up of a combination of black baldy heifers we had raised, plus a lot of cows we brought out of drought areas in Arizona, New Mexico and Texas.
My theory has always been that if the cows are priced right, buy them and find a place to run them later. Feed was relatively cheap in the early part of the decade, and we maintained many cows in dry lots for several months before moving them to pastures. Our timing was good, and the cows were profitable every year for the first decade.
This isn’t to say we didn’t have plenty of problems with drought, unexpected blizzards, theft, etc., but the market timing was good enough to overcome these events. Sometimes, I think droughts and blizzards follow wherever I may go. We had several very dry years in New Mexico, and late in the decade we had two years of record blizzards in Oklahoma. I’d rather have neither, but if push came to shove, I’d take a drought to a blizzard.
Because of the high price of land and droughts, we used dry lot cow production programs for several years. I kept quiet about it because we didn’t want competition buying cows. Also, I figured many would assume I was crazy.
Caroline preferred the cow business since her Dad had a ranch, and also he always had white Brahmans. Caroline loved Brahmans – preferably the white ones; regardless of their temperament, we always kept a few. One year we were at the Templeton California sale, and I remembered it was her birthday. I had forgotten to buy a present. They ran a poor Brahman cow with a sorry little Brahma calf into the ring, and I bought them. As we were leaving, I said, “Caroline, you’re birthday present in penned behind the sale barn,” and she couldn’t have been happier. She named the cow “Precious,” and that she was. She had 10 straight calves before retiring. I kept Precious until she died in January 2014.
In late 2009, we were trying to buy a ranch in Nebraska, in addition to keeping track of all of our cows. I told Caroline I needed to let the Lasley account at Stratford, TX, go. Walter Sr. and Jr. Lasley had been clients for over 20 years and Caroline loved them and their feedlot people. She got really mad at me but I convinced her I didn’t have time to do the job I should for them, and they would be better served by another consultant like Jim Simpson.
The first time I took Caroline to the Lasley Feedlot, Walter Sr. was still alive. When he was busy, he could be pretty abrupt. I warned Caroline he probably wouldn’t have much time for small talk, and she said “I hear that he and his son are big Aggie boosters, so I’ll bet we’ll get along.” It was amazing. She’d spend most of her time talking to either Walter Sr. or Jr. about Aggie football and politics. That was another advantage to our relationship because Caroline liked the people I did and they liked her.
That brings us to the end of the decade and perhaps this is a good place to discuss some of the special employees I’ve had. Like every company, even a small one like ours, you will occasionally have an employee who doesn’t work out and disappoints you. Fortunately, they were in the minority.
We had a manager for a short time at the California ranch that was capable, but had a drinking problem. We weren’t at the ranch much so he had limited supervision, and he started making a lot of 900 phone calls on our phone. When we got the monthly phone bill, it showed about $600 in charges for 900 calls. We contacted the phone company and said there must be a mistake, as we’d already asked our foreman and he denied the calls.
The phone company asked if we could identify his voice as they tape all 900 calls. They began playing them back and, sure enough, it was our foreman. He was calling Madam Cleo for advice on career, love, and whatever else, and I guess she told him what he wanted to hear. The worst part about the calls is that most of them occurred in the middle of the afternoon, so he was not only running up the phone bill, but he wasn’t working. Anyway, for any of you tempted to make 900 calls be forewarned, they may be recorded.
I’ve had a lot of good office staff. Working in our office requires everything from typing and filing to bookkeeping, banking, etc. We like our people to be flexible, easy to get along with, work hard and hopefully smart. In turn, we pay well and have flexible hours. Best of all, you won’t have to put up with negative people, at least not more than once or twice. My theory is that life is too short to drink cheap wine or associate with negative people you don’t like.
When I first started my own business, my then wife Pat was a one-girl office, and she was good. She had all the necessary office skills, and was probably smarter than me. However, she kept going to college after her original degree in microbiology and ended up with a couple of master’s degrees in education specializing in reading disabilities. She wanted to teach rather than be my office manager – I couldn’t blame her. Her students were the real winners.
My next office manager was also named Pat. She was not only good help, but became a close personal friend. Pat had a great sense of humor, and she and her lawyer husband had moved to Casa Grande, AZ, from Wyoming. I believe he was the Wyoming Attorney General, and he took over the city manager’s job in Casa Grande. He left a year or two later for private practice. I’ve come to appreciate lawyers later in my life, but at that time, Sam was one of the few lawyers I liked. He was a no-nonsense but fun fellow who had some interesting friends.
Wherever I’ve had an office, it’s always been built onto or part of my house and that was the setup in Arizona. Sam had one particular friend – Billy – who would come by and visit Pat. He was an exact replica of a young Ernest Hemmingway, and had a charming roguish personality. He was from Oklahoma, and didn’t seem to have a job, but had plenty of money. He made a big impression on the local ladies. When he arrived in Arizona, he and Sam had a habit of disappearing for a week or two. Pat thought they would go to Mexico and do whatever guys do. She thought Billy was a gambler and lived by his wits.
Pat, who was never ill, started feeling bad. She thought she had the flu, and just toughed it out. When she finally went to the doctor, they found cancer, and she was dead three weeks later. Everyone who knew Pat was heartbroken, and Billy, who was Sam’s best friend came for the funeral. I left a day later, but Billy stayed with Sam. About four days later, he called our house at 4 a.m. He got my wife on the phone and said, “Sam and I have had a big fight and I need a ride to the Phoenix airport right away, can Kenneth take me?” I wasn’t there but Pat got our two girls out of bed, loaded them in the car, picked up Billy and dropped him at the Phoenix airport about 6 a.m.
We were part owners in a travel agency at that time, and a few weeks later, the lady managing the travel agency said the FBI are here, and they want all of Sam’s airline travel records. I exclaimed, “What the hell is that all about?” I called Sam and he said it’s a misunderstanding but let the FBI see them.
To make a long story longer, it turned out Billy was on the FBI “Ten Most Wanted List” as a bank robber. Their modus operandi was to kidnap the bank president and his family, keep them overnight, then get into the bank early when the safe could be unlocked. They accused Sam of being part of the robbery ring, believing that he set up their “safe houses.”
Sam denied it, but about a month later, he killed himself with a .357 Magnum. I knew Sam pretty well, and I’ll never believe he committed suicide. If he was involved in the bank robbery group, I believe they thought he was the weak link, and they gave him an easy way out. I’m told Billy was later captured and sent to prison.
Occasionally, my daughters and I will tell their mother that when she took Billy to the Phoenix airport, he was probably on the way to rob a bank and she was therefore an accomplice. My daughters and I think this is pretty funny, but Pat fails to see the humor.
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My next office manager was Jess Shearer, and she was a real gem. Her strong suit was as a bookkeeper because she was meticulous, tenacious and honest. She was a great help. I again had my office in the house, which by then was a small condo in Casa Grande. We did a lot of dove hunting, quail hunting, etc., and I enjoy cooking so we had several neighborhood parties.
One evening my Phoenix lady banker was coming down for dinner. My crockpot was broken and I called Pat, my ex-wife by this time, and asked if I could borrow hers. She said “Sure, I’ll bring it over,” and she wanted to know what and who I was cooking for. When Pat left, Jess said, “Kenneth, you’re an idiot,” and it turns out she was correct. Pat just happened to stop by the condo later that night and it was embarrassing. The next morning Pat called to say, “I’m sorry. I was so stupid.” I said, “I’m sorry, too.” Then she asked if she could borrow my Blazer to move some books.
When she came by for the Blazer, I had several guns in the back from a dove hunt and we were carrying them back into the bedroom. I had a 12-ga. Browning automatic, and made sure it was unloaded, but apparently there was a shell stuck in the chamber. My procedure is to point the gun straight up in the air and pull the trigger. Instead of a click, there was a roar of a 12 gauge. I can tell you this, the sound of a 12 gauge in a small bedroom is deafening, and a big hole in the ceiling with insulation falling on your head is embarrassing. Pat was petrified, I felt stupid, and we forgot about Jess working in the next room. The next thing I heard was Jess asking, “Is everybody okay or should I call the police?” Fortunately, that wasn’t necessary but I told her I probably should be locked up for stupidity.
When I bought the New Mexico ranch, I vacated Arizona and built a nice office in what had been originally a Forest Ranger house. Caroline soon took over the duties there. She hated typing but was a great bookkeeper and banker. Furthermore, she had an opinion and wanted to be involved in every business aspect – which suited me just fine. The best thing she did was to hire Annie Powell who has worked for me for close to 20 years.
Annie and Caroline got along great, and when we left, Annie stayed there with the New Mexico office. Caroline and I moved to San Antonio because it had good plane connections, it was close to many clients, and also relatively close to her family in the Bryan-College Station area. We had a San Antonio office, but travelled so much that Annie did most of the office work. She and Caroline would communicate constantly by phone, fax, computer, etc. By then we had a pretty complicated multi-state business in research, consulting, cattle, land, and so on. Those two kept on top of it. Caroline and Annie were the true definition of 24/7 people. Even now, Annie often starts her workday at 3 or 4 a.m.
Because of the increase in land transactions and the fact that the Biolite® mining business was going well, she added two more staff at the New Mexico office – Fran and Sharon. They stay in New Mexico, but Annie spends about half her time in San Antonio, Mississippi or travelling with me. Violette is another good friend who is in charge of my wardrobe, the toughest job of all. She and Annie are best friends.
Perhaps this is a good time to mention my mining venture, which is built around a very unique calcium-clinoptilolite zeolite. Its trademark name is Biolite® and we’ve researched and marketed the material for about 20 years. I’ve conducted over 30 feeding and research trials on the product, and it is probably the best researched new feed ingredient on the market. Now used widely by a number of feedyards and nutrition consultants, Biolite® is also part of a Zeoponics media to grow plants in orbiting space stations, and has also been used to bind certain radioactive waste. There is limited economic significance to us, but it’s an interesting sideline.
Mark and Jodi Leslie managed the California ranch. They worked for us over 10 years and were great employees. They treated the ranch like their own whether it’s regular ranch work, elk hunting, or whatever, and we miss them.
Zeke Bricker worked for us several years in New Mexico, California and Oklahoma. He’s a confirmed bachelor, so he didn’t care where he hung is hat, as long as it wasn’t close to town. Zeke is the son of Ed and Mary Janet Bricker, and the baby brother of Ed Bricker, Jr. Ed and Mary Janet were from Arizona, and Ed managed the Hughes and Ganz feedyard in Arizona and later managed outside cattle for AzTx in the Texas Panhandle area until he retired.
Eddie now has a feedyard in Alfalfa County, OK, and just brought a ranch near Medicine Lodge, KS. Eddie Jr. and his wife, Manda, have two young daughters who are also going to make good hands. Eddie previously had a feedyard south of Chickasha, OK, and he and Zeke both worked for me at times.
Eddie and Zeke were great hands, and if you needed to gather cattle from rough country or brush, they could do it. Several years ago, I had about a 100 head of heifers on wheat pasture that I was going to breed. Eddie and Zeke went out one morning and found a large buffalo bull in the pasture. We have no idea where it came from; however, they roped it, drug it out and turned it loose. I forgot all about it until about nine months later. We’d pregnancy-tested the heifers, and had sent them over to Jeff Dees who was southwest of Chickasha to pasture them and calve out. He called me a couple of times with bad news saying we’d had some late-term abortions in the heifers.
He then called me a couple of days later to say, “Things are looking better, we have two live calves.” He also asked what kind of bulls I had used.
I said, “Just normal, small-frame Angus.”
Jeff mentioned the calves looked a little different. When Caroline and I looked at the heifers a couple of months later, one of the first things I saw was two beefalo calves.
I said, “Jeff, have you ever seen a beefalo?”
“No,” he answered.
I told him, “Yes, you have, you just don’t recognize them. There are two right in front of you.” Abortions are common in buffalo crosses.
One last comment on the first decade of the new millennium, while the cow-calf business and stocker business was consistently profitable, profits were infrequent for feedlots. Feed prices were erratic but trending up. Occasionally certain by-products were outstanding buys; as a result, if you could think outside the box, there were some occasional decent feedlot profits.
My Cows Aren’t Mad, But I’m Getting Aggravated
By K. S. Eng
Ever wonder why cows are happy?
Well now it’s plain to see
I know why they’re content
Cows never watch TV
Cows never read a paper
Or watch the TV crews
They just lay around the pastures
While we worry about the news
The news of a “bleeding heart”
Or an activist who is sad
Because we modified a soybean
Or one cow that may be mad
They forget the world’s hungry
Or starving children who may die
They question the farmer’s motives
And “bad mouth” our food supply
They fret about animal rights
And now we hear their cries
About a kid who is too fat
Because of his French fries
They ignore the hungry and homeless
They’d rather pick on a farm
That produces food they can overeat
That’s their idea of risk and harm
Even if odds are one in a billion
If it’s food, no risk is too rare
They like to cover the unimportant
If they can find someone to scare
They don’t report, they interpret news
They love to rave and rant
They love any headlines
They can give a negative slant
Food producers should take a vacation
And go to some retreat
Then news reporters could call
When they decide they want to eat
I’m swearing off TV and news
I think what I’ll do for now
Is find a peaceful pasture
And hug a happy cow
Next week: 2010-2012 – Only three years but it seemed like forever
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