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Q&A Feeder Leader

Gary D. Kaplan was recently named chief executive officer of Consolidated Beef Producers (CBP), a closed cooperative that includes 130 member feedyards in Texas, Oklahoma and Kansas. Members have committed to marketing 2.1 million head of fed cattle through CBP this year.

Kaplan, of Bend, OR, visited with BEEF contributing editor Wes Ishmael to discuss his goals for marketing fed cattle for CBP.

Q: Why was Consolidated Beef Producers (CBP) established? How will prices be negotiated?

A: CBP was established to maximize the return on cattle for our members by providing packers with the right cattle at the right place at the right time.

Prices will be negotiated with packers on a daily basis either live, in the beef or as the base price within grids. That's not significantly different than the way it has been; we'll be in the market offering cattle every day and negotiating the price.

And, if the packer receives an order and has immediate need for a specific type of cattle, we have the people who can search the data base of our 130 members' yards, try to find the cattle and price them.

Q: Do the majority of the cattle committed to CBP represent cattle that have typically traded in the cash market?

A: My guess is yes, but the reality is that we don't really know. Our members have the option to choose which cattle they offer us.

Q: Is the cash market dead, alive or somewhere in between? If the cash market is alive and well today, do you think it will be in the future?

A: I don't believe the cash market is dead. I believe it's alive, but it might be in between for some. I don't know what it will be in the future but I believe price discovery is important and that both cash and the Chicago Mercantile Exchange cattle futures markets need to play a significant role in keeping price discovery alive.

Q: What impact might CBP have on accelerating the industry move away from the cash market or the move toward strengthening it?

A: I don't know that we'll have any impact one way or another. We will be a part of the cash market every day, again trying to send the right cattle to the right place at the right time in order to maximize returns for members.

Q: What impact does increased cattle feeding consolidation have on the markets in general?

A: What we're trying to do is test the cash market and have a place we can go for true price discovery. Perhaps some of the marketing that has occurred which hasn't included a negotiated price has made the cash market less liquid, thinner.

Q: How does the transition toward more non-cash cattle change the lives of cattle feeders and their customers?

A: We must have a fair negotiated base price for the cattle trading in grids and formulas. How can you have true price discovery if the base price reflects the average of fewer cattle that aren't necessarily representative of what it is you're trying to value?

Q: As CBP and its members look at valuing fed cattle away from averages, will they also be developing value-added mechanisms for buying feeder cattle?

A: For many members, I'm assuming that as they see the results of these grids and tests they will look toward buying different types of cattle and learning how to market different types of cattle.

Q: Are we seeing a fragmentation of the industry into a collection of large but individual production and marketing systems?

A: Our industry is changing rapidly. Obviously, we're going through some transitions and eventually something will sift to the top that works. For those of us who have been in the business for a long time, who would have thought that we would be trading cattle with videos or over the Internet? Who would have thought all of these cowboys would spend their evenings on the Internet searching for better ways to care for and market their cattle?

Q: So, how can a feedlot and its customers best position themselves for this transition?

A: Remain open-minded and look at everything that is out there. Refuse to get stuck in a fixed way of doing things.

Putting Private Grazing Lands First

Ten years ago, John “Chip” Merrill expressed deep concern regarding the direction of private grazing lands conservation programs. His concern grew out of the Food Security Act of 1985, which mandated conservation compliance on private cropland.

To make sure farmers across the country met the deadline for conservation compliance, personnel from the Natural Resources Conservation Service (NRCS) — then the Soil Conservation Service — were reassigned from assisting ranchers with grazing lands conservation programs.

Along with across-the-board funding cuts, traditional conservation planning efforts slowed to a standstill. By 1990 only 2.2% of the NRCS budget was allocated to technical assistance directed to conservation on private grazing lands, Merrill says.

Speaking at a May 1991 grazing conference in Bozeman, MT, the Crowley, TX, rancher said he and other ranchers were concerned that “compliance” was the first step in a tendency toward federal control of private agricultural land. He pointed out that voluntary conservation efforts had established a remarkable track record stretching back to the days of the “Dirty 30s.”

Merrill also pointed out that regulation or “spying” for other federal land and wildlife agencies by NRCS personnel would not be tolerated.

“There is no way that NRCS can be both regulatory and work in a volunteer atmosphere,” he said. “The relationship with locally governed conservation districts would be totally destroyed.”

From that 1991 conference came a private-public partnership — the Grazing Lands Conservation Initiative (GLCI). It now includes 42 active state GLCI coalitions and a myriad of agricultural organizations and individuals across the nation.

Since its beginning, GLCI's top priority has been the restoration of voluntary technical assistance to the owners and managers of non-federal grazing lands through locally governed conservation districts, says Bob Drake, Davis, OK, national GLCI chair.

To help address the funding problem, conservation of private grazing land (CPGL) legislation was lobbied for and passed as a part of the 1996 Farm Bill. The intent was to provide up to $60 million for acceleration of NRCS technical assistance efforts. The bill passed Congress but hasn't been funded.

“We continue to see a decline in overall available field technical assistance from NRCS,” says Drake. “This is really hard to understand and even harder to accept when one considers that voluntary technical assistance is so cost-effective.”

GLCI will continue to press for an expanded federal commitment to voluntary technical assistance on grazing lands, says Drake.

A LARGER VISION

The national GLCI steering committee recently sponsored the first National Conference on Grazing Lands in Las Vegas. Nearly 900 men and women from around the country gathered to discuss federal funding of GLCI programs.

“This conference was not only timely but hopefully will influence the policy discussions concerning agriculture and the environment,” says Drake.

While conservation proponents want to be sure the next national farm legislation supports CPGL, Merrill has proposed an even larger vision for conservation of private grazing lands. In his keynote address at the Las Vegas conference, Merrill outlined a proposed “Conservation of Private Lands Act.” He believes this type of omnibus law, either in the next farm bill or as stand-alone legislation, has support in Congress. Merrill is calling for an effort to support such an initiative. Among other things, this legislation would provide:

  • Funding to restore NRCS technical assistance to pre-1985 levels.

  • Increased research funding for soil, water, plant and wildlife sciences.

  • Funding for conservation outreach efforts involving Extension agencies and universities.

  • Cost-share assistance for grazing lands conservation.

Merrill points out that massive funding has been appropriated in the name of conservation for the Environmental Protection Agency and other federal environmental and land management agencies. He says the time has come for the public and Congress to realize that private lands in private hands are the greatest renewable resource in the U.S.

“The vast majority of conservation work and costs have been borne by the owners and managers of private lands,” he says. “The most cost-effective means of continuing land and water conservation is adequate funding of voluntary technical assistance, research, education and incentives — not regulation.”

Merrill challenges conservation professionals to seriously consider the future of private grazing lands conservation efforts.

“If we don't enthusiastically defend and aggressively promote the grazing land resource, our profession and even ourselves, who will?” asks Merrill. “There will be a great ecological, economic, ethical and aesthetic loss to our nation if we don't.”

Fires Fuel Weeds

After last year's wildfires, expect more weeds on rangelands. Here are some strategies to cope.

Last year's wildfires in the West could fuel a healthy crop of weeds on those rangelands this growing season, says Steve Dewey, a Utah State University Extension weed specialist.

“Noxious weeds often invade and spread rapidly in response to the natural disturbance of fire,” Dewey says. In a recent study in central Utah, the amount of squarrose knapweed on rangeland nearly doubled within one year following a wildfire, Dewey reports.

Weeds to watch for after a fire include: yellow starthistle, knapweeds, medusahead, dyer's woad, toadflax, thistles, hoary cress, leafy spurge and many others.

On the bright side, fire can actually help control of some weeds, Dewey says.

His research indicates treating squarrose knapweed with herbicides soon after a wildfire resulted in excellent weed control. More importantly, the level of control was much higher than with herbicides alone.

“In other words, the combination of fire followed by a herbicide application resulted in much better squarrose knapweed control than if we sprayed and had no fire,” Dewey says.

In another study, knapweed control two to three seasons after a single herbicide application (Tordon + 2,4-D) averaged only 20% on non-burned land, compared to 86% on land where the application was preceded by burning, he adds.

In that same study, forage grass yields were five times greater on plots that were both burned and sprayed (2,307 lbs./acre) compared to 456 lbs./acre on plots that were just sprayed.

“Whether a wildfire will result in the improvement or worsening of your weed problem depends on what you do in the first few months,” Dewey says.

Dewey recommends land managers inspect burned areas for weeds soon after any fire. If a weed problem is noted, map where the infestations are and start control efforts promptly.

He says fall or spring applications of herbicides work well to control weeds. But, he adds, “For best results follow label instructions for the proper application timing on each weed species.”

“If nothing is done following a fire, the weed situation is almost certain to worsen. If fire is combined with timely weed control efforts, the results can be impressive,” Dewey says.

You Don't Have To Farm To Ranch

We need to treat our farming operations as a separate part of the business.

Somewhere along the line we've come to believe we have to farm in order to ranch. We work all summer putting up hay and work all winter feeding it to our cows. Many ranchers are discovering they don't have to farm and have found that eliminating farming may help increase profit.

Farming may be a profitable part of a ranch business. But to find out, we need to treat our farming operations as a separate part of the business — even if all of the products of our farming activities are fed to our livestock.

Take, for example, a rancher who grows hay. Hay that he produces and feeds to his livestock should be “sold” to the livestock enterprises at fair market value.

By deducting the direct costs (i.e., seed, fertilizer, herbicide), we can calculate the gross margin of the hay enterprise. We should then deduct all the equipment overheads that accompany our haying operation from the hay enterprise gross margin. This result is the profit (or loss) of the hay “division.”

In “Three Secrets For Improving Profits” (BEEF, June 2000, page 8), I described how to calculate the gross margin for a livestock enterprise. The hay fed to our livestock should be counted as a direct cost when you calculate the gross margin.

Few equipment overheads are usually related only to livestock. If you have some, like depreciation on a stock truck, they should be deducted from the total gross margin of the livestock division to determine its profitability.

When comparing the profitability of the livestock and farming divisions, some ranchers discover they would be more profitable if they started grazing their hay ground and purchased hay from other growers. In other words, let somebody else farm so you can ranch.

Growing Costs Vs. Feeding Costs

There are two issues here: the cost of growing hay and the cost of feeding hay.

Our cattle are nutritionally dependent on the hay we provide because the production cycle on most ranches is out of sync with nature's forage cycle. That's not to say we don't have to feed hay to cows in some environments (though it might be wise to question the profitability of raising cows in those environments), or that hay feeding is always unprofitable.

Sometimes it is a profitable practice, but sometimes it's not. The fact is, most of your neighbors have never put pencil to paper to challenge their management, so they really don't know.

Conventional wisdom says ranchers must feed hay, especially where there's snow. But, there are alternatives. One alternative practice touted by many, including some universities, is swath grazing.

With swath grazing, forage is cut and laid down in rows. The quality of forage in the swaths under the snow can be quite high. It's more efficient than grazing standing feed, especially when swaths are strip-grazed.

Swath grazing eliminates some of the costs of making and feeding hay. The problem with swath grazing is it doesn't eliminate all of those costs. We still have equipment and labor costs of cutting fields and moving the cows from swath to swath.

Stan Parsons once told me going halfway on something like this is a little like learning to water ski and telling the boat driver to “go slow.” We don't go the whole way because the idea of not farming in order to ranch is new to many of us. But to really benefit from the potential breakthrough, we need to go all the way.

Does this mean you shouldn't have any hay on hand? Even those ranchers who have eliminated hay feeding from their operation nine years out of 10, would be well advised to have a stockpile of old bales as an insurance policy for that one bad year.

Sadly, many ranchers structure their entire business in anticipation of that bad year. That strategy often burdens them with costly practices for nine years waiting for that one in which those practices are needed. That's the purpose of insurance.

The bottom line is that you don't have to farm to be ranching for profit.

David Pratt of Ranch Management Consultants teaches the Ranching for Profit School. For more information visit www.ranchmanagement.com, contact him at 707/429-2292, or e-mail [email protected].

A trailblazer speaks

Thank you to BEEF magazine for honoring me with your 2000 Trailblazer Award (November BEEF, page 14).

Food safety is at the top of the beef industry's list of priorities. It's imperative that we use all available tools to make beef one of the safest foods on the dinner table. I'm convinced irradiation, or cold pasteurization, will do for the beef industry what pasteurization has done for the dairy industry.

In 1997, Minnesota beef producers began a highly coordinated effort to educate consumers, meat processors, retailers, restaurateurs and producers about the benefits of irradiation. We served more than 150,000 samples of irradiated ground beef at fairs, expos, foodservice shows and consumer events. The response was overwhelmingly positive. Education was the key to this widespread acceptance.

On May 16, 2000, Huisken Meats, a third-generation, family-owned business in Chandler, MN, became the first company in the nation to market irradiated ground beef. By Memorial Day, distribution had risen to 800 stores. By the 4th of July, consumers in 20 states could purchase irradiated ground beef patties in more than 2,000 stores.

The product is also being aggressively marketed in 48 states through Schwan's home delivery system. Schwan's markets four different types of irradiated ground beef patties. Their beef sales have risen more than 20% as a result of these efforts.

I'd also like to thank Ron Eustice and the staff of the Minnesota Beef Council for working tirelessly with me on this project. I especially want to thank Minnesota's cattlemen and cattlewomen for their support and countless hours of volunteer work to serve samples and educate the public.

Now, I challenge the leadership of the U.S. beef industry to take a giant stride forward in our battle to eliminate the scourge of E. coli 0157:H7 by making irradiation of ground beef as commonplace as pasteurization of milk.

Sighted In

“Who, me?” That's the question being asked by cattle producers as they pick through the sweeping changes in Environmental Protection Agency (EPA) regulations governing livestock feeding operations.

“EPA has indicated that too many feedlots escape the permit process. It plans to tighten perceived loopholes by lowering the threshold for animal feeding operations,” says Greg Ruehle, executive vice president of the Nebraska Cattlemen.

The changes could even include cow/calf wintering areas or other facilities historically considered non-point sources and not regulated under the Clean Water Act, according to Ruehle.

EPA's overall national strategy to clean up the nation's waters includes measures requiring that all animal feeding operations (AFOs — see sidebar for definitions) implement site-specific plans to minimize their impact on water quality and public health. The agency has issued formal notice of revisions to regulations currently administered through the National Pollutant Discharge Elimination System (NPDES), specifically as related to “concentrated” animal feeding operations (CAFOs).

CAFOs are considered point sources of pollution and, therefore, are subject to the permitting process. Today, a CAFO is defined as having 1,000 or more cattle or comparable animal units of other livestock. But, that definition may change, and most U.S. cattle producers could find themselves walking a tightrope between AFO and CAFO regulations.

Two CAFO Proposals

On the surface, EPA's 404 pages of proposed changes appear to target the nation's largest poultry, pork and cattle feeding operations. It outlines two options for a new CAFO definition.

One would include AFOs with 500 or more cattle. The other would include AFOs with 1,000 head, or those with 300-1,000 cattle if they meet a complicated set of risk-based conditions.

Even an AFO with less than 300 head though could be designated a CAFO by the EPA if it's determined the operation is a significant polluter.

While EPA administrators say these changes are needed to update regulations that are more than 20 years old, Ruehle puts a different spin to EPA's motives.

“At least a portion of the proposed changes are part of a settlement for a lawsuit against EPA by their ‘friends’ at the Natural Resources Defense Council for failure to comply with the federal Clean Water Act,” explains Ruehle. The suit alleged that EPA failed to rewrite the “effluent limitation guidelines” for feedlots and other livestock operations.

“Whatever the motive, this rulemaking will be of tremendous importance to cattle producers across the country,” adds Ruehle, noting the formal comment period ends May 14.

He urges all cattle producers to take a close look at how the regulations will affect them and then work with local livestock groups to respond to the EPA before the end of the 120-day comment period (see “File Your Comments,” page 30).

Lowering The Bar

The proposals clearly lower the bar and include smaller operations, says Brice Lee, Hesperus, CO.

“This change would exponentially increase the number of animal feeding operations that are subject to permits,” says Lee, chairman of the National Cattlemen's Beef Association's (NCBA) property rights and environmental management committee.

EPA estimates the new requirements would apply to as many as 39,000 CAFOs across the country. An estimated 2,500 livestock operations currently have enforceable NPDES permits.

Lee says NCBA is poised to submit comments on the proposed regulations and urges a final rule that's based on sound science and also considers costs associated with compliance.

EPA has projected the total cost impact of the new regulations at $850-$940 million. That puts the average cost of compliance/operation at around $25,000/year. However, Bobbie Frank, Cheyenne, WY, executive director of the Wyoming Association of Conservation Districts (WACD) says the cost may be much higher.

For several years, WACD has worked through local conservation districts to help producers comply with the EPA's current AFO/CAFO regulations.

“CAFO producers have to provide for containment of all of their wastes,” Frank says. “With our projects, the initial cost to do this averages around $50,000. These new regulations will be expensive for producers — even many small cattle ranchers.”

As Frank and her crew travel around Wyoming, she says landowners are shocked when they discover they fall into the AFO definition under the existing regs. “They'll be appalled when they take a good close look at these new regs,” she says.

A Presumption Of Pollution

Virtually every cattle operator will have to prove whether or not they are an AFO — and then whether they fall into a CAFO designation, Frank says.

“There's a presumption by EPA that if you have a livestock facility you are polluting water — until you can demonstrate that you are not,” says Frank. “Every producer will have to certify that they are not a CAFO in order to avoid permitting requirements.”

Any runoff — from any set of corrals to surface waters or even from winter feeding and winter pasturing areas — could put a rancher into a CAFO designation. And, every piece of land you might put manure on might have to be part of the permit, she says.

Every producer will have to certify that they are not a CAFO in order to avoid permitting requirements. — Bobbie Frank

EPA says there will be no “shield from liability” for any operation that falsely certifies that it met the conditions to be excluded from regulation. Operations would be put on notice. If they have any doubts about their continued ability to meet the conditions for exclusion they should decline to “certify out” and should apply for a permit.

One of the biggest ambiguities of the proposed regulations is this business of range and pasture feeding.

Faith Burns, Washington, D.C., is NCBA's associate director for environmental issues. She says animals are not considered to be “confined” when they are in pastures and rangelands that sustain crops or forage growth during the entire time animals are present.

It's the ambiguity of this part of the regulations that bothers Burns the most.

“The EPA says it does not ‘intend’ to include pastures and grazing land under the regulations,” she explains. “However, if EPA intends to exclude pastures and rangelands, they need to write the rules differently.”

Burns says cow/calf producers may be required to establish whether or not a hydrologic connection exists between groundwater and surface water. Also, operators may need a permit if “pollutants” are discharged directly into waters of the U.S.

“If the hydrologic connection exists, you may be required to obtain a permit,” says Burns.

“There's no question there are problems that need to be addressed, and we have no problem telling producers that they shouldn't have a creek running through their corrals,” WACD's Frank adds. “At the same time though, when we see regs like these being proposed, we're going to fight like hell to see they get changed.”

AFO/CAFO Definitions

AFO — Animal Feeding Operation.

The term “animal feeding operation” or AFO is defined in EPA regulations as:

  • A lot or facility where animals are, have been or will be stabled or confined and fed or maintained for a total of 45 days or more in any 12-month period;

  • And, a place where crops, vegetation forage growth or post-harvest residues are not sustained in the normal growing season over any portion of the lot or facility.

Winter feeding of animals on pasture or rangeland is not normally considered an AFO.

Proposed Changes In The Definition:

  • A lot or facility where animals have been, are, or will be stabled or confined and fed or maintained for a total of 45 days or more in any 12-month period.

  • Animals are not considered to be stabled or confined when they are in areas such as pastures or rangeland that sustain crops of forage growth during the entire time that animals are present. Animal feeding operations include both the production area and land application area.

CAFO — Confined Animal Feeding Operation.

Under current law, a CAFO is defined as an animal feeding operation (AFO) with 1,000 or more cattle. No operation is a CAFO if it discharges only in the event of a 25-year, 24-hour storm.

An AFO that confines 300-1,000 head is a CAFO if it discharges pollutants through a manmade structure, or if pollutants are discharged to waterways that run through the facility or come into contact with confined animals.

The authority that issues NPDES permits also may designate any AFO, including those with fewer that 300 head, as a CAFO if it is a significant source of water pollution.

Proposed Changes In the Definition:

EPA is asking for comments on two alternative structures for defining CAFOs:

  • A three-tier structure in which an AFO is a CAFO if it has more than 1,000 head, or if it has 300-1,000 head and meets certain conditions; or, if the permit authority designates the facility. All facilities with 300-1,000 head must either certify that they do not meet the conditions for being defined as a CAFO or must apply for a permit.

  • A two-tier structure in which an AFO is a CAFO if it has 500 head or more. Facilities with fewer than 500 head may become CAFOs if designated by the permit authority.

File Your Comments

You can obtain a copy of the proposed revisions to the National Pollutant Discharge Elimination System (NPDES) regulations and effluent guidelines for CAFOs by contacting most state livestock associations. The regulations are also posted on the Environmental Protection Agency (EPA) Office of Wastewater Management's Web site at http://www.epa.gov/owm/afo, and the National Cattlemen's Beef Association at http://hill.beef.org.

Send your comments to EPA by e-mail to [email protected], or mail to Concentrated Animal Feeding Operation Proposed Rule, USEPA Office of Water, Engineering and Analysis Division (4303), 1200 Pennsylvania Ave., NW, Washington, D.C. 20460.

Submit any references cited in your comments. When mailing, submit an original and three copies of your written comments and enclosures. It is strongly suggested that you contact organizations of which you are a member to find out if the organizations are commenting on the proposed regulations.

You also can contact the CAFO Hotline at 202/564-0766.

Right Up Your Alley

The Rat-tail Riddle

A question at a loading chute last fall elicited some digging into why “rat-tail” calves are discounted by buyers.

Rat-tail calves have short, curly, malformed, sometimes sparse hair and lack tail switch development. They're usually a mouse-gray color. Research shows ranch and feedlot performance are usually lower for rat-tail cattle.

The syndrome is caused by crossing some Continental breeds that have the diluter gene (yellow in color) with cattle that are black in color, says Ron Torell, Nevada Extension livestock specialist.

Simmental × Angus and Simmental × Holstein are the most common crosses producing this congenital defect. To a lesser extent, there is also incidence in Gelbvieh and Charolais crosses.

In one study by Kansas State University and the U.S. Meat Animal Research Center, Clay Center, NE, the rat-tail condition had no effect on birth weight, weaning weight or gain from birth to weaning. However, rat-tail calves had significantly lower rates of gain during the winter months from weaning to yearling, resulting in significantly lighter yearling weight.

Steer gains from yearling to slaughter weren't significantly different, but rat-tail steers were lighter and older at slaughter than non-rat-tail steers.

To prevent rat-tails in a cross breeding program, identify and cull cows that have or have had rat-tail calves. Buy only bulls without the gene. Breed associations have worked hard to identify bulls that are diluter gene free.
— Nevada Extension Coffee Shop [email protected]

Targeting T-cells

USDA is betting that genetic research at Montana State University (MSU) will increase knowledge of bovine health relatively soon.

“We think we can make a lot of headway in a short time,” says Mark Jutila of MSU's veterinary molecular biology department.

He plans to target different immune cells than have been studied in the past. This work on a set of newly discovered “T-cells” should zero in on the genes needed to develop new vaccines or breed healthier cattle.

The three-year, $1.8 million research project was the largest animal genome project funded by the USDA competitive grants program this year. It includes the vet medicine programs at the University of Minnesota and Washington State University.

“Once we start to understand the genes that control the function of these cells, specific genetic traits that are important in resistance to infectious disease might be identified that could be followed in breeding,” says Jutila.

Up to 70% of the circulating T-cells in newborn cattle are the “gamma/delta” type, which are distinct from alpha/beta T-cells.

“We know very little about what the gamma/delta T-cell does. Maybe this is why we haven't been able to develop cattle vaccines any faster than we have,” says Jutila.
— Montana State University

Canuk Back Scratchers

Canadian cattle feeders are taking a new look at the effectiveness of back scratchers in cattle pens for controlling cattle lice.

“For most of the year, cattle can generally control lice populations themselves just by grooming,” explains Doug Colwell, Lethbridge, AB. The exception is in the winter when coats get very heavy.” In winter, providing animals with something to scratch on that can penetrate the thicker hair coat, can reduce louse populations.

The idea for a study on back scratchers came from a producer in Saskatchewan who designed and built them after noticing how feedlot pens provide limited access to scratching areas.

“He found that when commonly used insecticides like malathion are used with the back scratchers, louse populations disappeared within 10 days and didn't come back,” Colwell says. “It's an inexpensive way to provide additional control over and above the regular parasite control program.”
— Ag Canada

Compiled by Clint Peck, BEEF Associate Editor. Contributions welcome: 406/896-9068, 406/896-9069 (fax), [email protected].

Heterosis pays the bills

The quickest and cheapest way to add beef volume to your operation is to exploit heterosis and complimentary breed effects.

My entire life in breeding cattle has been spent gathering data and transferring information. As high school students, my brother Lee and I weighed our purebred Angus calves at weaning for a starting weight in determining the bulls' feedlot rate of gain.

Weaning weights ranged from 235 to 615 lbs. When we found that several of the flyweight calves were out of our “best” cows, the light went on and the race began. Through the years, we've kept abreast of the technology of the day. We progressed from recording weaning weights through a whole series of other measures that began with 140-day average daily gain to today's DNA markers.

It's been an exciting, wild ride. Getting information on your cattle is a lot like sex — it's hard to go back to holding hands once you've experienced it.

The Industry Has Changed

The beef industry is drastically changing the way it prices, procures, processes and promotes beef. Meanwhile, cow/calf producers are agonizing about selecting breeds and sires that will produce cattle that can grade, cut and hit the sweet spots on packer grids.

One thing that won't change is that the final value of a calf crop, pen of finished steers, box of beef or case-ready package will be based on “weight times the money.” And, the quickest and cheapest way to add beef volume to your operation is to exploit heterosis and complimentary breed effects.

Crop farmers and hog and poultry producers have used heterosis to increase yield and efficiency and build a higher quality end-product as a way to maximize profits. Meanwhile, many cow/calf producers have reverted to straightbred cattle, or they simply breed their cows to whatever breed or color the order buyer was bidding up the day they sold their calves.

Heterosis is free. Develop and adopt a breeding plan that will maximize your profit and minimize your problems. Composite bulls deliver heterosis, are easy to use and ensure your calf crop will be uniform and predictable.

It may sound old-fashioned to talk about gain, growth and performance, but these highly heritable traits come close to producing instant results. Select sires that will maximize the total tons of high-quality beef you can produce on your operation.

I've never heard a farmer complain about the extra costs of diesel or storage because his corn or soybeans yields were too big. Similarly, much of the talk about cow efficiency and adaptability is just talk.

It's usually limited to the topics of cow weight and perceived body type, and it always includes discussions about the higher costs of increased size in beef cows. It never, however, includes objective measures of feed efficiency for maintenance, milk and effect on end-product.

While everyone hates calving trouble, don't calving ease yourself out of business. The ideal birth weight of a calf is 1 lb. less than his mother can easily deliver. When you cash your cattle check, it always includes the calf's birth weight.

The money part (marketing) is where it gets complicated. This is a whole new ballgame. The percentage of profits made downstream continues to increase in the food business.

In 2000, food packaging costs averaged 12.5%, while the producer's share dropped to a little less than 12% of the final product's revenue. Even before you think about bulls, determine which consumer market you want to target. Last, but not least, think about who will buy your cattle and at what price.

Most Of Us Can't Do It Alone

Is your market target attainable? Is it viable? Is it growing, and will it still be there when it's time to sell your cattle?

Most beef producers aren't large enough to market cattle directly to consumers. You may have to give up some of your independence and flexibility. You'll likely have to join a marketing partnership with other producers, feeders, packers and retailers. It's the only way to get closer to the cash register and capture more of the added value for the beef you produce.

Genetic inputs will play an important role in which market you target. The days of cussing and discussing phenotypic attributes and the multiple EPDs of a bull and his dam are about at an end.

Now's the time to select your seedstock supplier based on their ability to deliver predictable genetics, sustainable breeding programs and sound marketing systems. Ask tough questions and analyze their ability and proven track record of adding real dollars to their customers' cattle.

Except for choosing your mate and schmoozing your banker, selecting the right seedstock supplier and value-added marketing program may be the most critical choice you'll make.

Dave Nichols is a partner in Nichols Farms, a family-owned seedstock operation in Bridgewater, IA. They sell more than 500 Angus, black Simmental and composite bulls/year, and they offer a number of other value-based service and information programs. For more information, visit their Web site at www.mddc.com/nicholsfarms, call 515/369-2829, or e-mail [email protected].

Zero Tolerance

For almost 30 years, the Environmental Protection Agency (EPA) has steadily ratcheted up control over discharges from feedyards and other confined livestock operations. In January, the agency gave the process a Herculean twist of the wrist.

Buried deep in EPA's newly announced set of proposed regulations is language that goes far beyond anything seen to date. The package could compound the impact that concentrated animal feeding operation (CAFO) regulations have on feedyards, feedyard clients and possibly even consultants. Here's what's at stake:

Who Must Apply For A Permit?

An interesting twist is evident in this category. If an operation needs a permit, the owner, and anyone else who exercises “substantial operational control” over the CAFO, will be required to obtain a permit to operate the CAFO.

“Whether a person exercises ‘substantial operational control’ depends on a number of factors,” says Faith Burns, associate director of environmental issues for the National Cattlemen's Beef Association.

Someone who directs the activity of persons working at the CAFO, either through a contract or direct supervision of activities at the facility, may have to obtain a National Pollutant Discharge Elimination System (NPDES) permit.

“In other words, if you own animals at a CAFO (e.g., feedyard), you may be required to apply for a permit even if you do not own the CAFO,” Burns points out. “If you direct how the animals are medicated, for example, you may be required to apply for a permit.”

General Permits

There are provisions in the proposed regulations for “general permits” covering CAFOs. These permits, however, are typically “noticed” for public comment and contain the conditions that must be followed by the CAFO operator.

“The permitting authority may or may not determine your operation is appropriate for coverage under a general permit,” Burns says.

Nutrient Management

CAFO owners and operators must also comply with the terms of Permit Nutrient Plans (PNP). A PNP is a permit that will establish requirements for applying manure or wastewater to crops and pastureland.

The very strict guidelines covering the land application of manure include a protocol for keeping records documenting manure application.

Effluent Limitations

Effluent provisions apply to process wastewater discharges resulting from CAFOs, including production and raw materials storage areas of the CAFO. This includes any water used directly or indirectly in the operation of the CAFO for cleaning facilities, dust control or certain other uses at the CAFO, Burns says.

There must also be routine visual inspections of the CAFO production areas to check for things like:

  • Roof gutters to be sure they are free of debris so they properly divert clean stormwater.

  • Water line breaks to be sure leaking water does not cause dry manure to become too wet.

  • That all impoundments have depth markers that clearly indicate available freeboard.

Strict New Controls

In addition to stricter permitting requirements, the new CAFO proposals includes several new strict controls that:

  • Eliminate potential exemptions from permits currently used in some states. As a result, EPA expects that all “large” livestock operations will now have to acquire permits.

  • The EPA and the states will issue co-permits for corporations and contract growers to ensure financial resources exist to meet environmental requirements.

Larger feeding facilities need to take note of another important change in the proposed regulations. EPA would like to eliminate the 25-year, 24-hour event exemption from the CAFO definition, thereby requiring any operation that meets the definition of a CAFO either to apply for a permit or to establish that it has no potential to discharge.

EPA believes that many of the larger feeding operations that have relied on this exclusion may have misinterpreted this last provision.

EPA has not previously sought to categorically adopt a “duty to apply” for a permit for all facilities within a particular industrial sector. The agency is proposing to now do so for reasons that involve the unique characteristics of CAFOs and the zero discharge regulatory approach that applies to them.

EPA will take public comment until May 14 and will hold public meetings around the country on this proposal. Additional information is available on EPA's Office of Water Web site at: http://www.epa.gov/owm/afo.htm.

A deal you can't turn down

My last two articles introduced a basic profit equation for beef cow producers. I suggested the three key components of profit in a beef cowherd are hundredweights (cwt.) of calf produced, market price of calves sold and the unit cost of producing (UCOP) a cwt. calf. This is the profit equation: Profit = Cwts.(Price - UCOP)

This article focuses on the UCOP in this profit equation.

Even though most ranchers don't measure cost of production, my Integrated Resource Management (IRM) analyses suggest the cost of producing a cwt. of calf is all-critical in determining profits. My data also suggests weaning weight explains only 20% of the herd-to-herd variation in profits.

Cost of production, when linked to the level of production, goes a long way in explaining the remaining 80% of the herd-to-herd variation in profits. This link is best made through the UCOP ratio. If cattlemen will adopt the UCOP ratio and follow it during these times of high prices, the high profits will become even higher.

What is UCOP?

Unit cost of production (UCOP) = herd's total cost/total lbs. produced

UCOP is a ratio of all production costs associated with operating a beef cowherd placed in the numerator position, while the total pounds of calf produced is placed in the denominator (see tinted box below). This ratio gives the unit dollar cost of producing a cwt. of calf. Anything that you want to talk about is included either in the numerator or in the denominator.

Let's go one step further with this UCOP concept. Producers should always express their costs of production in the same unit that they sell their production.

To say it cost Northern Plains beef cow producers an average of $322 to run a cow in 1999, tells you nothing about the production level of those cows. A herd with the highest per-cow cost may, due to its higher production, have the highest profits. This is why I dislike seeing costs reported on a per-cow basis.

If I told you it cost Northern Plains beef cow producers an average of $62/cwt. of calf produced in 1999, what would you know? You now know something about their costs relative to their production.

By comparing this $62 UCOP with the $90 average Northern Plains' calf price in October 1999, we immediately know that these producers averaged a net return of $28/cwt. of calf raised. This figure is the return Northern Plains producers earned in exchange for their resources of unpaid family and operator labor, management and equity capital.

The beauty of UCOP comes in comparing it to the market price to generate a profit estimate for your herd. For instance, if you compare a $62 UCOP with my current $102 price projection for 2001 calves, Northern Plains herds could net $200/cow from their 2001 calves.

A Path To Cost Reduction

Cost identification leads to cost reduction. A producer who routinely thinks about his herd's UCOP tends to lower his costs through management actions. A producer who's unaware of his costs tends to increase his UCOP through his management actions.

The National Cattlemen's Beef Association launched a major educational program on production costs in the late 1980s. The centerpiece was the IRM Standardized Performance Analysis (IRM-SPA) Program. Many states have since formed state-level IRM-SPA educational programs focused on implementing the IRM-SPA Guidelines.

In the early 1990s, North Dakota Extension integrated the guidelines and North Dakota's Cow Herd Analysis Performance System (CHAPS) herd performance records into an IRM Herd Analyzer. The rest of that decade, Northern Plains beef cowherds were analyzed one herd at a time.

Even in retirement I am still analyzing herds. If you're interested, contact me at 701/238-9607 or [email protected].

Figure 1 summarizes the annual average UCOP for my Northern Plains IRM Cooperator herds for 1993-1999. It's clear that average UCOP changed as these producers went through the last cattle cycle.

Calf prices peaked in 1993 and worked dramatically lower into 1996. Fig. 1 illustrates that producers reduced costs as times got tougher. I had some cooperators who cut out all preventive medicine, while others cut bull expenditures in half during this time.

My biggest concern during the last cycle downturn was that producers would cut costs too far. Could a producer cut $1 in costs and reduce income by $2 with the net result of lowering net revenue even more?

My IRM data confirmed this was the case. In 1996, the year of the lowest calf prices, these IRM Cooperators experienced a UCOP increase. As the market price turned upward in 1997 and relieved some of the input pressure, 1997 also saw another increase.

UCOP turned down again in 1998 and 1999. I'm projecting that the increased heifer retention reported in the January 2001 USDA All-Cattle Inventory will increase UCOP on 2001 calves.

Institute cost control programs in the good times, not the bad, then annually measure your herd's UCOP and diligently control costs. Cattlemen who implement a UCOP ratio for their herds in times of high prices will reap a huge economic reward during these good times.

Others, without their herd's UCOP data, will try to convince me that production costs, in general, are continuing their ever-upward trend. That's something my data just does not support.

Harlan Hughes is a Professor Emeritus at North Dakota State University. Retired last spring, he is now based in Mankato, MN. Contact him at 701/238-9607 or [email protected].

Evaluating Market Alternatives For 2000 Calves

These planning price projections (Table 1) are based on both the futures market price and Western North Dakota sale barn prices for the current week. The price projections in Table 1 were used to evaluate five marketing alternatives for year 2000 calves shown in Table 2.

The “buy/sell margin” in Table 2 is the buying price of animals going into a lot subtracted from the selling price of animals coming out of the lot. Since selling price is normally less than purchase price, the buy/sell margin is normally negative. The negative buy/sell margin represents the marketing loss/cwt. on the purchase weight of the animals. The cost of gain (COG) represents the cost of the added weight while in the lot. Profit/head represents the combined marketing losses and profits from gain.

Table 1. Suggested planning prices
Lbs. Fall 00 Wk Jan 05 Mar 01* Spring 01* Fall 01*
400 $119 $132 $134 $134 $135
500 $105 $114 $116 $116 $116
600 $96 $100 $102 $102 $102
700 $90 $89 $92 $91 $92
800 $88 $83 $85 $85 $85
900 $89 $81 $83 $83 $83
Slaughter steers $78 $77 $78 $73
*Projected
Table 2. Traditional marketing alternatives
Marketing strategy Buy/Sell COG Profit/Hd
1. Sell at weaning N/A $0.70 $149
2. Bck high ADG -$15 $0.49 -$0
3. Fin bckg. steer -$15 $0.46 $19
4. Grow & finish -$12 $0.42 $63
5. Steers on grass -$13 $0.50 -$21
The five marketing alternatives evaluated here are: 1) selling 565 lb. calves at weaning, 2) backgrounding 565 to 800 lbs. sold after first of the year, 3) finishing backgrounded steers 800 to 1,200 lbs., 4) growing and finishing 565 to 1,175 lbs., and 5) steers on grass 625-800 lbs.