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Cattleman Says Trust Is Important

“It’s revolutionary,” says Rich Porter, of Porter Cattle Co., Reading, KS.

“The abundance of relatively cheap ethanol by-products has totally changed the game, not only for finishing cattle but for backgrounding.

Consider how Porter is using wet distillers grain (WDG) to supplement stockers on late-season native pasture, after early-season double-stocking.

“Using WDG as a supplement on late-season grass is essentially like using range cubes,” Porter explains. “The nutrition is similar to the Oklahoma Super Gold program but is dramatically more cost-effective.”

In both cases, a supplement high in protein, fed in low daily volumes, enables cattle to maintain or increase forage intake.

The way Porter employs WDG as a range supplement is by moving cattle from five native pastures into one at the end of July. “We’re able to utilize a resource that would be burned otherwise, while giving most of our pastures the opportunity to rest,” Porter says. “We’re trying to marry the best of both worlds, between a conventional cattle-feeding system and grazing cattle on a section of grass.

“Our system for calves is both the tight pen and grass trap. Once the feed bunks are empty, we move them back out to the grass traps where it’s drier and they’re more spread out, which helps reduce the spread of disease,” Porter says.

For the first 45 days, cattle are in 16 potload-size pens that open into grass traps of 10-15 acres. After that cattle move to six larger pens opening into 65-acre grass traps, or they move to native-grass pastures of 160-640 acres where they’re supplemented with distillers grain on the ground.

Until three years ago, calves arriving here received a dry starter pellet and long-stemmed hay for the first 30 days. Now, Porter explains, “we feed a distillers-based ration. On an as-fed basis, cattle receive a ration that is about half WDG, one-quarter long-stemmed hay and one-quarter corn.”

Along with significant cost savings, he explains the ration is more palatable to the cattle. There are also fewer digestive problems as calves make the transition to growing, then finishing, rations. You see, Porter also feeds out all the calves he stockers, in his own lots at home.

Just as significant as the change in ration for newly received calves is the health savings that Porter achieves by how he feeds the calves.

“If you would have told me three years ago that I’d be limit-feeding calves, I’d have said you were crazy,” Porter says. In basic terms, calves are fed the amount they can eat in three hours.

“We hold calves to consuming no more than 2.2% of their body weight for the first 30 days,” explains Robin Green, who has worked at Porter Cattle Co. for 16 years. “It keeps them hungry and aggressive. If something isn’t feeling good, they’ll stand out. It makes our job pulling cattle easier and our health costs are way down.”

What Green is referring to is “slick-bunk management.” More feed needs to be delivered if cattle clean the bunks too soon. Conversely, if there’s still feed in the bunk – after three hours in this case – less feed is called for.

Jeff Hale, head cowboy, explains: “With the kind of cattle we get, you start pulling based on appearance and you pull pretty deep.” Before limit-feeding, they’d pull cattle acting listless that weren’t sick, just over-full. Now they only pull the few not at the bunk eating.

Paying for use, not appearance

Keep in mind these are admittedly plain cattle. Porter buys only steers, the cuts and outs that don’t fit loads. His aim is to buy them at prices in back of the heifer market at the same weight. Weight variation in the loads is no problem. Calves will be swapped and sorted several times during growing and finishing. Except for color or the odd missing tail, Porter says, “these cattle finish with carcass performance at least equal to the pretty ones.”

He applies the same philosophy to buying tractors, feed trucks and the like. “Ugly is only skin deep,” Porter says. “One of our mainstays has been buying older, good equipment that’s still in good shape.”

Suffice it to say, a paint salesman would go hungry here. “I only buy equipment from people I totally trust,” Porter explains. “Thus, I don’t worry about how it works on arrival; I’m confident it will perform.”

Porter typically tries to buy calves at an average weight around 350 lbs. unless the pencil says otherwise. For instance, in mid-September, he was buying 450-lb. calves. that cost him $1.10 delivered.

Calves arrive year-round (about 8,000 head/year), except for the fourth quarter. Porter says it took him 17 years of records to admit that more than statistical anomalies were behind the fact that his worst months for cattle health every year came in the fourth quarter, especially November. By curtailing procurement then, all the calves will be on forage at some point in their production cycle and feeding pens won’t be overcrowded when no forage is available.

Porter has used the same two buyers for more than two decades – one in Georgia, the other in Kentucky. “I’ll give the buyers price guidance on what we’d like to pay at a certain weight, then if they need to move above or below that level, that’s their call,” Porter says.

Porter uses stocker-based software that enables him to track calf morbidity and mortality by sale barn, using the calf’s back tag, correlated to the ID number the calf is assigned once it arrives at Porter’s operation.

Though you can uncover sale barns running a higher percentage of trader cattle, Porter says there’s been less dramatic difference between markets than expected.
Calves receive the first round of vaccinations before being shipped to Porter. Aside from trying to get a head start on managing the bugs, Porter says it means he and his crew have the leeway to wait until Monday to process calves that arrive Saturday.

“Our employees are very skilled and high quality,” Porter emphasizes. “It’s incumbent on me to treat them right; one way I can do that is with a routine work week so they can make plans with their families.” He and his crew get every other weekend off; the weekend they’re on duty, they leave at noon both days.

Besides a long-standing emphasis on low-stress cattle handling, employees are the reason Porter installed two of the innovative Turret Gate™ systems three years ago.

The Turret Gate is a hydraulic gate system that virtually eliminates the need for anyone to be inside an alley, pen or tub to move cattle to and into the processing chute. Porter reckons the system has reduced exposure to people getting injured during processing by more than 90%. He adds that the system frees up labor resources and makes for less stress on the cattle.

He takes relationships with customers and suppliers just as seriously.

Win-win or don’t play

East-central Kansas is seldom considered a cattle-feeding Mecca, what with its share of humidity, moisture and mud. Until three years ago, though, Porter had a glaring comparative advantage: Tyson had a packing plant in his county seat, which is Emporia, KS.

It didn’t start out as an advantage. In the beginning, Tyson (then IBP) figured since he was so close, they needed to discount his cattle to put them on par with those that had to be freighted hundreds of miles. Fast forward: Rich sold Tyson a pen of cattle that ended up with a ghastly percentage of dark cutters. The packer buyer complained. Porter responded in a remarkable way; he wanted to know how much those dark cutters cost the packer and he immediately wrote them a check for the loss.

Imagine that. Porter has never understood the time-honored, zero-sum game of one sector profiting because another sector loses.

That check and the attitude behind it begat a cycle of trust that continues to benefit both parties.

“I’m more concerned than the packer is about wanting to know how my cattle perform for them,” Porter explains. “I value the trust the packer has in me and I’ll bend over backwards to maintain that trust.”

When the Emporia plant closed and Porter lost his geographic advantage, he considered selling his cattle at feeder weights. Keeping in mind their variation, buyers would discount the feeders more than Porter was willing to accept.

Plus, Porter couldn’t stomach the transaction cost. “I couldn’t come up with a way to market cattle that didn’t have a significant transaction cost, a minimum of about $20/head,” he says.

Hang around Porter long and the subject of transaction costs will come up more than once. It’s part of the enlarged pie available from what he terms “informal strategic alliances.”

These days Porter sells all his cattle to Tyson because he says nothing else can compete with the benefits of the relationship he’s developed with the packer. One of those benefits, according to Porter, is an additional $20/head in saved transaction costs that he and the packer share.

“Sure, the packer gets at least half of it, but I’m happy for them because I’m coming out ahead, too,” Porter says.

It’s an example of an informal strategic alliance. It’s based on trust, the knowledge by both parties involved that one can quit the other one whenever they choose, and the notion that the only reason to work together is if both sides come out ahead.
In Porter’s world, compromise is not a sign of negotiating weakness, it’s the gateway to increased revenue.

“An informal strategic alliance is where both sides want more than 100% of the original pie themselves (think here of the saved transaction cost cited above), and they achieve it by seeing that the other side gets more, too,” he says.

The concept isn’t new. As far back as the Bible, folks have learned the wisdom of treating others how they’d like to be treated. For that matter, Porter says these kind of informal alliances are so common that they often go unrecognized. What’s uncommon is recognizing them for the asset they are and trying to establish more of them.

Winter Cow Care

Winter management must start in the fall, before cold weather. This means carefully assessing body condition on pregnant cows when calves are weaned, and developing a plan to provide sufficient nutrition to allow cows to maintain moderate-to-good condition before their next calving.

James England, University of Idaho DVM, says cows must be in good condition (preferably a body condition score 6) to handle weather, calving and rebreeding. “With adequate condition at the start of winter and good maintenance throughout, most animals winter well. But, without adequate nutrition, anything else we do is set up for failure,” he says.

Stockmen often underestimate the importance of fall nutrition and body-condition scoring. In fact, Ron Skinner, a Hall, MT, DVM and seedstock producer, says about 70% of open cows in Montana each year are the result of inadequate fall nutrition.

An adequate, balanced diet may merely mean adding a trace-mineral supplement to native pasture, some good hay, a protein supplement if grass becomes too dry, or hay if the grass becomes depleted or snowed under. If a cow is deficient in protein or phosphorus through fall and winter, she won’t rebreed on time after calving. Plus, thin cows are unable to handle the stress of bad weather and lose more weight. And, it takes more feed to put weight back on a cow during cold weather.

If you manage pastures properly – without overgrazing or running out of grass – forage-efficient cows won’t lose much weight during fall or winter grazing; they generally gain weight after weaning calves and go into winter with fat reserves.

Many factors influence a winter-feeding program. These include climate and grass growth; whether pastures snow under and can’t be grazed; the available forage your climate or operational design (irrigated vs. nonirrigated pastures, forage varieties, crop aftermath, etc.) allows; and the type of cattle. It’s most profitable to match the cattle to your feed sources rather than try to feed cattle not fit to the environment.

To help cattle maintain health and body condition during winter, vaccinations should be up to date, parasite populations assessed, and cattle dewormed and deloused, if necessary.

“If lice are a winter problem, it’s best to delouse cattle in late fall/early winter, before lice start to increase in numbers,” says Jack Campbell, University of Nebraska professor emeritus. “Lice increase their reproductive rate in cold weather, so you get more generations in a shorter time span.” A good kill in early winter – before lice affect cattle performance – will generally keep cattle free of these parasites until spring.

Adjust feed for cold weather

How much hay or supplement a cow needs depends on weather conditions, cow age and body condition, available pasture or crop residue, and reproductive stage of the cow. Some herds do well through fall and winter on good native pasture with just a salt/mineral supplement, especially if cows aren’t nursing calves. But, if snow covers the grass deeply or weather gets quite cold, they may need hay.

In cold or stormy weather, cattle need more energy to maintain body heat. This can be adequately supplied by forages, since fermentation breakdown of roughage in the rumen produces heat. If cattle aren’t fed additional energy, they rob body fat to keep warm, and lose weight.

During extremely cold or windy weather, cows should be given all the hay they’ll clean up, or a protein supplement on dry pastures to encourage them to eat more. As long as protein is adequate, cows can process/ferment sufficient roughage to provide energy and body heat. Access to good windbreaks during severe weather is important to reduce cold cows’ stress and energy requirements, as well.

“Assuming cows have adequate energy from forage, the next important thing is mineral supplementation, which is critical for digestion of forage,” says Dick Fredrickson, DVM/nutritionist for Simplot, Grandview, ID.

Salt should always be provided, since this is the mineral most lacking in forages. Some geographic locations also are deficient in copper, selenium or zinc, so know the mineral content of your forages and provide supplements accordingly.

“The trace-mineral status of the cow affects all aspects of production and reproduction, as well as the future well-being of her calf,” England says.

Drought-stressed grass may be short on protein and phosphorus. As a general rule, range grasses hold their feed values better through winter than tame or irrigated pastures, or crop residues. These lose nutrient value once they dry up or freeze, and cattle generally need supplemental feed (hay, silage, grain or a protein supplement and mineral mix).

If pasture is depleted or snowed under and you’re feeding hay, managing cattle in groups is best. “You don’t want to waste hay by feeding better-quality feed than a group needs,” says Shannon Williams,

Lemhi County Extension, Salmon, ID. “Cows in early or mid-gestation don’t need your best hay; save it for later or feed it to heifers and two-year olds.” Of course, the only way to truly know the nutritional value of hay is a lab analysis, Williams adds.

Weaned calves need the highest-quality feed; next would be pregnant heifers and two-year-olds that just weaned off calves. This is a critical time for this latter group as these females are still growing and pregnant, and nursing calves may have pulled down their condition. Mature, dry cows can get by on lesser-quality forage, be it pasture or hay, until late gestation.

“Adequate protein is crucial during the last 60 days of pregnancy for development of the unborn calf, and for colostrum formulation,” Fredrickson says. “If scours is a problem in the herd, timely vaccination for scours needs to be administered at this time also,” he says.

Having cattle on pasture through winter is healthiest for both cows and their calves next spring. If you must feed hay, spread it out in large pastures and change feeding areas daily, rather than congregate cattle in small feeding areas, Skinner says.

Low-cost alternatives

Some stockmen reduce winter feed costs and labor by relying less on harvested forage. This strategy might include stockpiling pastures or windrowing forage for winter use, or bale grazing (leaving big bales in fields for cattle to eat).
“Grazing cows on stockpiled or windrowed forages as long as possible and then keeping harvested-forage feeding to a minimum is essential to a low-cost wintering program and profitable cow-calf operation,” says Jim Gerrish, a management-intensive-grazing expert, May, ID.

“Closely monitor cow body condition and use strategic supplementation to stretch out stockpiled pastures. Even with the relatively high cost of adding protein to the diet, using a supplement to enhance stockpiled pastures or rangeland is almost always a lower-cost option than full feeding hay,” he says.

With stockpiled or windrowed forage, cattle will trample/graze through relatively deep snow to get at it, unless snow is thickly crusted. And, utilizing electric fencing to move cattle gradually across a field can minimize waste. Gerrish says these methods can lengthen the grazing season but be sure to monitor cattle condition and ensure cattle have access to water and windbreaks.

The same is true with bale grazing. A calculated number of bales to provide a certain volume of hay/cow for a certain number of days can be placed in rows, with twines removed before wet, freezing weather makes that task difficult. Electric fence allows cattle access, using the next row as a handy place to insert “posts” (into the bale) rather drive them into frozen ground.

Some ranchers bale-graze young stock, too, letting weanlings/yearlings into each new section first, with dry cows following to clean up; both groups are moved when cows finish their section. This method spreads manure over fields uniformly.

But, probably the most important factor affecting winter cow management is matching cattle to the environment and your management style. Cows that need extra feed to maintain body condition and remain in the herd under “normal” conditions aren’t the kind of cattle you want. If pastures are managed properly, forage-efficient cows won’t lose weight during fall or winter grazing.

It’s most profitable to match the cattle to your feed sources rather than try to create a feeding program to fit cattle that won’t do well on their own in your environment.

Heather Smith Thomas is a Salmon, ID, rancher and a freelance writer and book author on cow-calf management.

USDA Looks At Another National Animal ID System

If the failed National Animal Identification System (NAIS) that aimed for animal trace-back within 48 hours was the newest Cadillac with all the buttons and whistles, then the Animal Disease Traceability (ADT) program, to its credit, is the sturdy, used Impala.

The eulogy for NAIS was proclaimed last February when USDA Secretary Tom Vilsack announced that a new, flexible framework for animal disease traceability was needed. You can find current details at http://www.aphis.usda.gov/
traceability
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Where NAIS revolved around comprehensive tracking of lifetime animal movement beginning with the ranch or farm of origin, ADT is a bookend system. It would identify all cattle traded through interstate commerce with official USDA tags (more later) and then collect those tags at harvest. The notion is that knowing the beginning and end (the bookends) allows for tracking in between more efficiently than today.

Rather than lean toward electronic ID, a voluntary system and a single federal database as NAIS did, ADT revolves around mandatory ID for cattle moving between states, using old, reliable, albeit slower technology: Brite tags (think here of those metal clip tags used for calfhood vaccinates); a paper trail of Interstate Certificates of Veterinary Inspection (ICVI); and state animal health databases. Currently USDA plans to provide latitude for other official tag types, but the brite tags are what USDA plans to provide producers free of charge.

What about cost?

Cost was a key sticking point to NAIS. It could be with ADT, too. Even with tags provided, other costs include the time and labor of tagging, as well as potential costs associated with the ICVI if accredited veterinarians are the only ones who can sign the papers.

Among other points to watch for in the proposed rule – USDA plans to publish it in April – is the timing. Participants at an August strategy forum, which was hosted by the U.S. Animal Health Association (USAHA) and the National Institute of Animal Agriculture (NIAA) to consider the ADT framework, recommended that USDA allow ADT to prove itself in the adult cattle population before requiring it for feeder cattle. You can find a white paper from the USAHA-NIAA meeting at http://www.animaldiseasetraceability.com.

One thing that hasn’t changed between NAIS and ADT is the need. The eradication programs for bovine tuberculosis and Brucellosis long served as the de facto national ID program for cattle. But the success of these programs means too few cattle are being identified and too many gaps exist in traceability. Yet, quick and accurate animal trace-back is key to containing a disease outbreak to the fewest cattle and the least impact on cattle commerce.

Among livestock species, cattle are the weak link when it comes to ID and traceability. Commercial dairy, pork and poultry producers already have adequate systems in place because of how they do business. And, the Scrapie eradication program continues to provide adequate ID and traceability for sheep and goat producers.
ADT, as it is being considered, is less comprehensive than NAIS was. It will take longer than 48 hours to track cattle as NAIS was designed to accomplish. But consensus at the USAHA-NIAA forum was that ADT is a starting point that is hard to argue with.

As one participant remarked, “This is basically the same thing as the ID portion of the Brucellosis program. If the industry can’t agree on this for ID and traceability, then the industry can’t agree on anything.”

Is Sustainability Part Of The Current Beef Industry Model?

Profound change usually occurs too slowly, across too many years to identify, until it seems to arrive out of nowhere in full bloom.

Maybe that’s why only recently, at least a pocket of folks have gotten serious about questioning the sustainability of the U.S. cattle and beef industries. That’s what this ongoing series will explore, by industry sector, during the coming months.

The impetus has been the continued liquidation of the nation’s beef cowherd, despite the type of prolonged increase in cattle prices that historically signaled herd expansion.

“Despite worldwide population demand for beef, the U.S. beef industry is contracting,” says Barry Dunn, dean of South Dakota State University’s College of Agricultural and Biological Sciences. “For the first time, we’re questioning the sustainability of the beef industry in the U.S.”

This year’s calf crop was the most paltry since 1953; the beef-cow population is the smallest in 57 years. According to USDA’s midyear cattle report, both beef-cow and beef replacement heifer populations declined 2% compared to the previous year. According to midyear baseline projections from the Food and Agricultural Policy Institute at the University of Missouri, another 800,000 or so cows will leave the industry by 2014 before herd expansion begins.

It’s the end again

Rumblings about producer attrition and the future of The Industry have been there for decades, of course.

In the early 1970s, it was the beef price freeze. In the 1980s, it was the agricultural crash spawned by too much leverage, super-inflation and nosebleed interest rates. In 1990, it was beef packer concentration doubling in a decade to 72%. And about that same time, it was all about declining domestic consumer beef demand that ultimately dropped about 1%/year for 20 consecutive years.

In the new century, it’s been everything from activist-group lamebrains, to the commodity bubble and locking the value of grain with that of oil. You get the idea.

Baby Boomers and those following them can be forgiven for taking for granted that all they’d known about The Industry since they’d been alive and worked in it was all that it had ever been. Consequently it’s easy to understand the assumption that The Industry would always be the same.

In the simplest terms, The Industry was defined largely by public policy and economic structures forged in the aftermath of World War II. That’s when the federal government got serious about ensuring domestic food security through the use of crop subsidies. Subsequently, cheap corn begat the modern cattle-feeding industry specifically and the broader industry overall that covets pounds of production above all else.

For cattle producers, everything since, from the advent of growth implants in the 1950s and ’60s, to the introduction of Continental breeds in the 1960s and 1970s, to improved vaccines, has been geared toward increasing both production and production efficiency. That’s what the market said to do. Through grit, creativity and perseverance, that’s what The Industry has done, with a vengeance.

Though last year’s harsh winter hammered feedlot performance, carcass weights are still higher on average this year than a year ago. Carcass weight grew to about 850 lbs. on average last year; it’s grown roughly 100 lbs. since 1989.

Fewer outfits, more production

Increased production in the name of reducing production costs continues changing the size and scope of agricultural and beef production in the U.S.

According to USDA’s Economic Research Service (ERS), 91% of U.S. farms are classified as small – defined as generating an annual gross farm cash income (GFCI) of $250,000 or less. Approximately 60% of those are classified as very small with a GFCI less than $10,000. Small farms account for 23% of agricultural production.

For perspective, farms with annual sales of $1 million or more represent just 2% of all U.S. farms, according to USDA, but about 53% of the value of annual production.

In “Small Farms in the U.S.: Persistence under Pressure,” ERS authors say: “U.S. farm production continues to shift to larger operations, while the number of small commercial farms and their share of farm sales continue a long-term decline. Larger farms have competitive advantages over smaller farms and commodities, reflecting economies of size in farming. Nevertheless, about 800,000 of the 2.2 million U.S. farms in 2007 were small commercial farm operations.”

The same type of concentration exists among beef-cattle operations. Last year, according to the National Agricultural Statistics Service, 20.6% (155,000) of operations with beef cows (herds of 50 cows or more) accounted for 71.7% of the nation’s beef cowherd.

“Because larger farms realize higher-than-average financial returns and because many operators of small commercial farms are over 65 years old – especially those with GFCI of less than $100,000 – competitive forces will likely continue to reduce the number of small commercial farms and shift production to larger farms,” say the USDA folks.

Keep in mind that virtually all farms in the U.S. are family farms, no matter the size.

There’s no bogeyman

In response to the symptoms of industry change, some folks continue to look for the culprit.
Surely, there must be some part of The Industry engine that can be tinkered with or rebuilt. That’s what
the Industry has always done. Sometimes the industry engine hummed, sometimes it sputtered, but it always ran. There may be fewer folks and cattle, but the engine will keep running; surely it must.

Could be. Hopefully it will be. But it may be within a different context than anyone is even now able to imagine.

The Berlin Wall came down all at once, but the geopolitical jackhammer was fracturing the foundation long before.
The smallest calf crop since 1953, the fewest beef cows in 57 years, just like that.

“We’ve lost a third of the cattle producers we had in 1980 and the infrastructure is eroding,” Dunn says.

“Many of our assumptions about the industry appear to have been naïve.”

Next month: A look at the current cow-calf model.

GIPSA Will Reduce Cattle Premiums

A beef wholesaler who wants high Choice and Prime ribeyes is willing to pay a premium for them. But if the premium amounts to an extra $40-$80/head, will the producer or feeder pocket any of it?

If the proposed Grain Inspection, Packers and Stockyards Admin-istration (GIPSA) changes published on June 22 are adopted, probably not. So say members of U.S. Premium Beef (USPB) and other value-based marketing programs established to generate above-market prices for higher-quality cattle.

The most controversial question that’s faced the beef industry in recent years has proponents and opponents of the GIPSA changes in an uproar, as witnessed by the estimated 1,500 attendees of a government hearing in late August. The war paint was glowing at the Fort Collins, CO, event, which saw some producers crying foul against alternative marketing arrangements (AMAs) between major packers, cattle-feeding companies and some alliances.

Slated as a workshop on competition by USDA and the U.S. Department of Justice (DOJ), the event gathered input on how much further the government should go in regulating and restricting the way producers do business with their customers. It brought out some big guns from the Obama administration, including Attorney General Eric Holder and USDA Secretary Tom Vilsack.

Opponents of the proposed changes testified that cutting AMAs, such as contracts between feedyards and packers for certain qualities of cattle, would slash premiums that producers of higher-quality calves receive over the cash market.

“It appears that proponents of the GIPSA proposal want to revert back to 30 years ago, with every animal worth the same price,” contends Jerry Bohn, manager of Pratt Feeders in Pratt, KS. He believes value-based markets provided by USPB, Certified Angus Beef LLC (CAB) and other programs that pay premiums for higher quality cattle will suffer, and that cow-calf producers will be the ultimate losers.

“We’ve made changes over the years to produce and buy higher quality cattle,” Bohn says. “That trend has been behind the improvement we’ve seen in consumer demand.”

He estimates that 35-40% of the cattle marketed from Pratt Feeders are sold on a grid to match quality with price. Most of those are on the USPB grid.

“Over 8 million head have been processed through USPB and there’s been an average premium of $21-$22/head for those cattle, with premiums in the $79-$80 range for the top 10-20% of those cattle,” he says. “Those are the numbers in jeopardy with these GIPSA proposals.”

Representatives of the National Cattlemen’s Beef Association, R-CALF and various state and regional cattle organizations were in attendance at the fiery workshop. Some, including Bohn, were part of panels made up of producers, feeders and seedstock operators.

James Herring, president of Friona Industries in Amarillo, TX, and an operator of several custom feedyards, was among those who testified. In a later interview with BEEF, he identified reasons why cow-calf producers would suffer if AMAs are put on trial.

“The GIPSA regulations will discourage the discovery of value in a particular animal,” Herring says, noting that his company eagerly pays premiums for higher-quality cattle. “About 82% of the cattle we buy go into some premium brand: mid-Choice, low-Choice, high-Select, etc.

“The fact that we can have those cattle available for the processor every day, 24/7, helps him know he will have those brands to deliver (to customers). The GIPSA rule takes all of that away.”

Rules are vague

Darrell Mark, University of Nebraska Extension livestock marketing economist, says the GIPSA rules are vague enough that many on both sides of the proposed changes aren’t positive how they’ll be impacted. “They likely will be decided in a court battle later on,” he says.

However, Mark says such uncertainty leaves some producers “in a state of limbo” if they have major investments in genetics and depend on AMA premiums to make their operations work.

“Producers of high-quality cattle and genetics could be potential losers under the new rule if, in fact, premiums for above-average cattle are lost,” Mark says. “And, that’s unfortunate. We’re in a situation where we all need to be building beef demand and making improvements in all the products we’re delivering to the table. The way to do that is to pay premiums for the qualities most desired by consumers.”

The added cost of identifying AMAs may be seen in higher transaction fees to document specific premiums paid for specific cattle, fees that could cut into final premiums or profits, Mark adds. “Whatever the costs of the transactions for record keeping on premiums or discounts (paid for cattle), they will probably reduce the amount of premiums paid,” he says.

Mark notes that the GIPSA situation could be akin to country-of-origin-labeling (COOL) costs. “At the time, some ranchers believed COOL wouldn’t require much for transaction record keeping,” he says.

“That might have been true on their ranch, but in a 50,000-head feedyard or a large packing plant, transaction costs are much higher.”

AMAs area big part of the industry

CAB President John Stika says an estimated half of all finished cattle now sell on AMAs. He suggests USDA and DOJ continue oversight to “see that any persons who want to participate in value-based marketing opportunities may soon take advantage of that ability to be paid for cattle according to consumer desires.”

However, he warns that the good intentions in seeking greater fairness can backfire. “We urge that great care be given to ensure that no one who’s worked to add value to their herd in an effort to meet consumer demands finds fewer marketing opportunities – even if that development is unintended,” Stika says.

Glynn Tonsor, Kansas State University livestock marketing specialist, says the proposed GIPSA rules could eventually give some consumers a bad taste for beef. “We run the risk of increasing the costs of producing and buying higher-quality cattle and hence increase the cost of supplying beef desired by consumers,” he says.
“We run the risk of going back in time to where there’s one price for cattle and beef. Consumers may receive an undesirable product, which leads to further reductions in beef demand, which hurts the entire beef industry,” Tonsor says.

Bohn says the GIPSA proposals will increase the threat of lawsuits against alleged unfair pricing by a packer. “This will cost producers, large and small,” he says. “We think small producers will be the ones who get hurt the worst. We’ll see more consolidation than ever before.

He adds that processors aren’t likely to risk the potential threat of litigation for a discounted set of cattle and the added cost of justifying every transaction where a premium is applied. “They’ll quickly revert back to a simplified marketing system; they’ll pay one price, then sort their own cattle. The packer will reap the benefit of any premium to be had,” he says.

Bill Rishel, an Angus seedstock operator and USPB member in North Platte, NE, says value-based marketing helped turn around a declining consumer demand.
“In the 1980s, some of us realized that if we were going to get paid for what higher-quality cattle were worth, we would have to sell for the above-the-average cash market,” he says, noting that CAB actually started the trend in the late 1970s.

Granted, there have been complaints that premiums haven’t been high enough, considering the money put into genetics, VAC 45-type weaning and preconditioning programs. Others complain that the fed-cattle cash market has been heavily jeopardized due to contracted cattle numbers. But there are still many programs that offer opportunities for producers to market calves at a premium, Rishel says.

“We have any number of customers in USPB that, with the kind of genetics they’re dealing with, see premiums in the $40/head range,” he says. “In many incidents, $60-$80/head over cash.”

Back to a commodity market?

Rishel and others involved with AMAs feel that can be lost if the new rules prevail as written. “My concern is that a lot of pressure applied by USDA, or an individual who feels like he’s been mistreated in marketing, will introduce trial lawyers into this system,” he says. “If processors feel too much risk, they may offer just one price, no matter what the quality of cattle.

“It won’t hurt the processors. It will hurt the little guys because 82% of USPB members deliver less than 500 cattle/year. Those with the largest return are those who deliver less than 250 head/year. They receive an average premium of $63/head over cash. We’re concerned about losing those values we’ve worked 25 years to
obtain.”

The deadline for public comment on the proposed GIPSA rules is Nov. 22. Submit comments at comments.
[email protected]; by mail to Tess Butler, GIPSA, USDA, 1400 Independence Avenue, SW, Room 1643-S, Washington, DC 20250-3604; or by fax to 202-690-2173.

Larry Stalcup is an Amarillo, TX-based freelance writer.

GIPSA's real impact

Over the past few months, several people have questioned us about our editorial stance regarding the proposed GIPSA rule currently being debated by the industry. Since the rule is far-reaching and vague, it’s impossible to dissect it completely here. However, here’s a general look at why we think the rule is a bad idea.

The net effect of the proposed GIPSA rule will be to force the industry back to a cash market. That has advantages and disadvantages. Given that a commodity market, which is what the cash market is, dictates that market participants are price takers rather than price makers means the advantages accrue largely to cattle feeders and packers. In fact, some cattle feeders in the Southern Plains, where the cash market for fed cattle developed, would probably prefer to go back to a cash market. That’s because they understand how to make a lot of money with it.

Buying in a cash market gives the buyer lots of incentive to pay the lowest possible price. This incentive exists regardless of the size of the packer or feedyard buying the cattle.

The cash market also doesn’t allow the marketplace to distinguish among the varying degrees of quality cattle. That’s a big disadvantage in a marketing system that needs to focus on the end zone; in our case, that’s the quality of the beef that somebody slaps down on their plate. The cash market encourages not only a lower price, but lower quality because buying on the cash market forces buyers to pay average price for all cattle. Thus, the sorry cattle get a de facto premium and the good ones get a discount in the live market. The packers can sort their coolers all day long.

Then there’s this economic reality: In a commodity market, average cash price and average breakeven will converge. This forces all market participants, including ranchers (or maybe especially ranchers) to be low-cost producers as they work to beat the average. One way to be a low-cost producer is to get bigger, to spread costs out more. That’s one of the main reasons that feedyards and packers got bigger in the ’70s and ’80s.

I’ve had people tell me that the market is never wrong, but I don’t entirely believe that. However, when the market is wrong, it corrects itself. The changes we’ve seen in how cattle are marketed over the last 20 years or so have been difficult, but I believe the market, via the consumers of our product, is telling us things that we need to pay attention to.

Having the government force the industry back to a marketing system that the market clearly thinks doesn’t work isn’t a solution. The marketing mechanisms that have arisen in the past 20 years or so certainly aren’t perfect. There are a lot of concerns with the marketplace, particularly for fed cattle.

However, the alternative marketing agreements that have come to the fore give the beef business more accurate pricing mechanisms, as well as incentive to produce a product that somebody might actually want to eat.

Thus, we think returning to the cash market will be detrimental to both ends of the spectrum – lower-quality beef for consumers and lower prices to producers. How that can be considered positive for the industry escapes us.

The market is self-cleansing, if it’s allowed to work. So it really comes down to two different philosophies: you either believe in economic reality and market fundamentals, or you subscribe to conspiracy theories. We’ll put our trust in the marketplace.

Burt Rutherford is senior editor for BEEF magazine. He is based in Amarillo, TX. Contact him at
[email protected].

Faster E. coli Identification

Infrared spectroscopy can detect E. coli faster than current testing methods and cut days off investigations of outbreaks, says Lisa Mauer, Purdue associate professor of food science.

Her process detects E. coli in ground beef in one hour using Fourier transform infrared spectroscopy. That compares to the 48 hours required for conventional plating technology, which requires lab culturing of cells. Mauer says spectroscopy could be done in the same labs, just in much less time.

She says the spectroscopy method also differentiates between strains of E. coli 0157:H7, meaning outbreaks could be tracked more effectively and quickly. Current tests are multistep and take almost one week to get results. Her findings were reported in the August issue of the Journal of Food Science.

25 Tips For Professional Speakers & Trainers

“Presentation Excellence: 25 Tricks, Tips and Techniques for Professional Speakers and Trainers” might be aimed at the pros but the clear and easy-to-follow hints are good for anyone who has to get up in front of a crowd. Mining nearly three decades of experience as a public speaker, presenter, trainer and trial attorney, Carlton C. Casler provides lessons for skill levels from novices to pros. Rather than chapters, the 160-page book is broken down into 25 tips for before, during and after a presentation. It’s available for $27.95 at amazon.com.

Beef Checkoff Debuts New Beef Cuts

The checkoff-funded Beef Innovations Group (BIG) has debuted six new cuts from the beef round, part of its effort to maximize yield, add versatility and increase profitability for producers.
“Past work on the chuck subprimal had yielded benefits to all segments of the industry, and the muscles of the round offer the next frontier of innovation and additional value,” says Jim Ethridge, BIG senior director.
The six new cuts are:

  • Santa Fe Cut – similar to a flank steak, perfect for fajitas, stir fry or for shredded beef.
  • Round Petite Tender – flavorful, best cut into medallion steaks, offers a restaurant-quality experience on a bed of pasta or a roast for two.
  • San Antonio Steak – a ½-in. lean steak, versatile and cooks fast, works well with a marinade.
  • Tucson Cut – the perfect lean cut for food-service operations looking for value.
  • Braison Cut – ideal for any braising application and makes a great osso buco or pot roast.
  • Merlot Cut – deep red color, lean and flavorful, ideal for a variety of ethnic dishes.

GE salmon coming

The U.S. Food and Drug Administration (FDA) may approve AquAdvantage® Salmon as the first genetically engineered (GE) animal intended for human consumption. According to www.aquabounty.com, its GE salmon reaches market size twice as fast as traditional salmon. An FDA analysis (www.fda.gov/downloads/) concluded food from the GE salmon is “as safe as food from conventional Atlantic salmon and that there is a reasonable certainty of no harm from the consumption of food from this animal.”