Beef Magazine is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Sitemap


Articles from 2000 In May


EPDs: sorting beef from bull

Every year, commercial cow-calf producers are bombarded with sales pitches and advertisements regarding their potential bull purchases. In fact, the sheer volume of information tossed around - thanks to a myriad of technological advances in genetic evaluation and performance testing - can leave producers scratching their heads and wondering which traits they should even make a priority for selection pressure.

Technology has made genetic predictions (EPDs) possible on traits that animal breeders and scientists could only once dream about. But, a beef producer can never focus on the "EPD of the year," jumping from fad to fad.

Likewise, producers should never lose sight of basic breeding principles that include a primary focus on the entire genetic puzzle, not just a piece of it. This holistic approach means genetic progress for individual traits will be slower than selecting for single traits. But, multi-trait selection allows producers to avoid the extremes and negative financial consequences that often accompany a walk on the edge of naturally occurring biologic limits.

The Blue Collar Approach Once breeding goals are established and breeds selected, evaluate the potential seedstock suppliers. As an example, assign each one a score for integrity and another for their commitment to keeping accurate records. After all, accurately reporting birth weight, calving ease and growth performance in unbiased contemporary groups is essential to genetic evaluation.

Think of the contemporary groups and resulting performance ratios as the cornerstone and bricks to building accurate genetic parameters (EPDs). Honest reporting is the mortar that holds it all together. Bottom line, EPDs for the various traits can be only as accurate as the data that has been recorded.

So, get to know seedstock suppliers and their management practices. Ask to see their ratios, the size of their contemporary groups (the effective progeny number, or how much competition an individual beat to earn his superior numbers).

Also, ask to see the lifetime dam production records for the bulls you're interested in. Be sure the seedstock producers you're dealing with are as interested in your bottom line as their own.

Once you start sorting individual bulls, comparing a bull's percentile ranking within a breed for a given trait can be more useful than comparing the actual numeric EPDs. The numeric EPD of an individual changes as more performance data on his progeny are reported, reflecting "real-time" genetic evaluation. But, that number doesn't tell the prospective buyer anything about how the bull ranks genetically within the respective breed compared to other bulls.

With that in mind, rather than selecting bulls based on their specific numeric EPD - for instance, a +65-lb. yearling growth - switch the focus to bulls that are in the upper 25% of the breed for yearling growth, and let the numeric EPDs fall where they may. Common sense suggests using breeds or composites known to excel in the traits you're seeking to improve, and to select bulls that are in the top quartile (upper 25% or higher) of that respective gene pool.

In fact, when you start thinking in terms of percentile rankings rather than the numeric EPDs, you can easily construct a useful multiple-trait selection index, a power index of sorts. Just take the sum total of the percentile ranks for each trait on a given bull and divide by the number of traits.

For easy illustration, a bull in the top quartile of his breed for birth, weaning, yearling and milking ability would have a combined power index of 25 [(25+25+25+25)#4]. A bull that only ranked in the top half of the breed in each trait would have a power index of 50. A bull with a power index of 25 or less is genetically excellent in multiple traits.

Across-Breed EPDs Across-breed EPDs are helpful in assessing the comparative strengths and weaknesses of different breeds. But, caution must be used in comparing the numeric EPDs of different breeds unless proper conversion tables are used, or the EPDs are generated by a multi-breed statistical model like that used by the American Simmental Association.

Next, keep your environmental resources and marketing options in mind. For instance, if you're raising and selling bred replacement females, your selection criteria will be far different than your neighbor who is using the same breed ingredients, but is involved in a terminal breeding program. Select genetics that meet your production goals relative to your available labor, management and feed resources.

Finally, keep the destination in mind. Today, marketing grids and alliances are as plentiful as EPDs. These information and marketing systems offer producers an opportunity to exploit the value of their genetics. But to do so, you have to know what you have to start with, what you're selecting for, and how valuable that is compared to the available opportunity.

Tom Hook and his family operate Hook Farms, a Simmental seedstock operation in Tracy, MN. For more information about Hook Farms, call 507/629-4946.

The effect of mandatory reporting

When mandatory price reporting spreads its wings - supposedly by the end of this summer - odds are it will fall short of the expectations of both hand-wringing doomsayers and silver-bullet purveyors. Odds are also better than even that the most likely beneficiaries of the new system won't be the producers who clamored for the legislation to begin with.

"Producers want this, but do they understand what its impact might be?" wonders Don Wilms, vice-president of procurement for ConAgra Beef Co., one of the nation's Big Three packers. "Conceivably, mandatory reporting might help the packer more than the producer."

First, Wilms explains there are enough price transactions reported to discover price in today's voluntary system. Monfort, he says, has always reported all of its spot trades. Chuck Lambert, chief economist for the National Cattlemen's Beef Association (NCBA) says 70-80% of all transactions are currently reported. So, Wilms doesn't anticipate increased price discovery.

Besides, Wilms points out, "The market is the market as determined by supply and demand factors, and the fact that we're required by law to report prices doesn't change the value of the cattle we're buying."

A Disincentive To Premiums? If anything, he says mandatory reporting provides packers with a disincentive to offer premiums on cattle. Fact of the matter is, some packers pay added premiums on some cattle today but don't report the prices because as soon as everyone hears that someone got another buck, everyone thinks they are entitled to it even if their cattle don't merit the extra jingle.

Next, when it comes to the grid and formula cattle the legislation seeks to uncover, Wilms explains, "Basically there is a lack of information concerning what the competition is paying relative to grid premiums and discounts and base price. Once this mandatory reporting is implemented, we'll know more about what our competition is doing."

If packers can ferret out specific values they're all paying for the same cattle, it's reasonable to think that ultimately each one could start paying the same base, same premiums and same discounts. This sounds eerily similar to the average-based system already in existence.

But, the safest money of all, and the most bitter pill, may be the cost implications.

"It doesn't make the beef any more valuable. And, if it adds cost to the system, which it will, it will probably cause a slight reduction in price to the producer," says Wilms. "It will add cost to the system in a day when everyone is trying to remove cost from the system."

That, just as cow/calf producers are beginning to reap the spoils of cyclically declining cow numbers in tandem with apparently increasing consumer demand. If packers wind up passing along the cost of mandatory reporting to fed cattle, presumably calves and feeders will command less than they would otherwise.

Increased Costs Are A Given Moreover, Tim Schiefelbein, Monfort's manager of value-added procurement, worries the initial impact of mandatory reporting could stall the industry's progress toward value-added vertical cooperation. He explains, "The industry has worked through alliances - producers, feeders and packers working together - to reduce cost and improve the product. This increases cost but doesn't improve the product."

Keep in mind that Monfort, along with other major packers helped NCBA craft the legislation that was signed into law last October. That doesn't mean they necessarily believe it's beneficial, but Wilms says, "We're in favor of helping the producer make an informed decision. If this is information they feel like they need, then we support it."

Bottom line, Paul Hitch, chairman and president of Hitch Enterprises, one of the nation's largest cattle feeders, explains, "I personally was not in favor of mandatory price reporting because I'm concerned that the packers have greater ability to crunch the numbers than an individual feedlot." Moreover, he's hard-pressed to understand how the new system adds to price or value discovery.

Briefly, mandatory reporting requires packers to report all live, carcass, grid, formula and boxed beef trades to USDA. Depending on the volume and number of packers reporting various categories, however, reported prices may in fact not be reported to the public.

"It will provide a broader range of information from which producers can make business decisions," explains Lambert. "I think this will provide equal access to market information." Whether or not producers exploit that access equally is another question.

Still, in theory at least, Lambert says the wider price distribution mandatory price reporting is expected to reveal - and hoped for retail price data - could serve as added benchmarks for value. They also might offer producers more confidence to price their offering beyond the packing house rail. In reality, however, Lambert says, "If anyone thinks this will add $2 or $5/cwt. to the price of cattle, they're fooling themselves... It probably won't be the panacea its proponents had hoped for or represent the doomsday opponents thought it would be."

Is demand really improving?

The cattle market finally recorded some solid strength during March. Choice slaughter cattle in the Amarillo feedlot area rose about $3 before the end of the month and started April in the low $70s. Feeder cattle and calves weakened early in the month but then showed strength in the final days of March with MF #1, 600- to 700-lb. feeder steers recording prices in the low $90 range.

Cattle and calves on feed for the U.S. slaughter market in feedlots with capacities of 1,000 head or more totaled 11.33 million head on March 1. This is up 9% from the 10.42 million on feed a year ago. The major gains were recorded in Kansas, Texas and Nebraska, which accounted for 73% of the increase.

Fed cattle marketings in February were 2.05 million head, a 12% gain over last February. The largest increases were in Kansas, Nebraska and Texas, with the Kansas gain being three times as much.

Placements of cattle and calves into feedlots in February amounted to 1.88 million head. Only two states, Kansas and Texas, showed more placements than a year ago and they were small gains. Even though the total figure was up 4%, only the lightest and the heaviest placed on feed weight groups were larger than a year ago.

Is Beef Demand Up? It bothers me to see so much emphasis recently on the "improved beef demand picture." Those who do such analyses know that to measure demand, it takes two things - per capita consumption and retail prices. Unfortunately, it is easy to misuse these figures unless you know exactly how they are collected and what they really mean.

Per capita beef consumption is computed by taking beef production, adjusting for imports and exports, and dividing by the population. An increase in production then, as we have recently had because of more cattle feeding, simply means more total beef is being produced. If more beef consumption is sold at higher prices, this means demand is improving.

These demand analyses, however, are traditionally done, not with total beef, but rather with USDA Choice grade beef. Unfortunately, the amount of Choice beef produced has not been increasing.

In 1990, about 90% of all beef graded reached the Choice grade. Now, the figure is below 50%. On top of that, more of our exported beef is of the higher grades, usually Choice. This indicates Americans may be consuming less Choice beef each year.

Retail beef prices used to measure demand have always been those for the Choice grade, collected from large retail chain supermarkets. Due to difficulties in obtaining such beef in recent years, many retailers have shifted to handling "Select" or "no roll" beef. It is now hard to find Choice beef prices. While we do have an "all beef" retail price being reported, the data has not been available for years as has the other.

Since, we must compare Choice beef consumption with good Choice beef retail prices for any true demand analysis to be done - it may be hard to do. It would be nice if we could say - beef demand is rising. All we can really say now is - it may be.

What's Ahead? The fed cattle market appears to be heading upwards slightly for at least another month or so. As late summer approaches, however, the large feedlot placements recorded over the last several months will materialize and bring forth some substantial feedlot marketings. It will be hard to maintain a very firm market under these circumstances.

Adding to the problem will be larger competing supplies of pork and broilers. At this point, it also seems reasonable to expect a slowdown in the nation's economic growth, particularly as we move through the second half of 2000.

The feeder cattle and calf market still looks good through the summer and into the fall. Some weakness may occur as fed prices slack off but the degree may be quite minor. A combination of this year's great returns, on top of last year's, should convince many ranchers to expand their breeding herds.

In the short run, that could mean even less available feeders for feedlots during this and next year as heifers are held back for breeding.

Farm To Fork--Direct marketing benefits producers and consumers

Like most folks who raise livestock, Glen and Tammy Haag and her parents Dave and Kathy Rupprecht aren't strangers to risk. But last year they took a different kind of risk with their 500-head cattle operation in Lewiston, MN.

They bought a truck, a trailer, a walk-in freezer and a sign that reads "Chosen Acres Premium Beef." Then, they started asking people in their community to buy beef directly from them.

"It's a different kind of risk when you get more involved with the consumer and the farm-to-table process. It also requires different skills," says Peter Reese, a sales and marketing consultant who teaches a four-part seminar series for producers as part of Branding Your Beliefs (BYB), a program that helps livestock producers aggressively market their products directly to consumers.

"It requires that (producers) get busy and get in touch with the market rather than just get angry about... the disparity between stockyard prices and consumer prices," Reese adds.

Kathy Horgan, a senior project officer for Land O' Lakes International Development Division, one of four sponsors of the BYB program, agrees.

"For a lot of farmers, (direct marketing) is the place where they need to come to... not just producing commodities, but adding value to their own product and starting to think about the consumer and how to bridge that gap," says Horgan.

After a year or two of looking for something to add value to their product, the Haags and Rupprechts came across the BYB program and decided to try it. Direct marketing training was one of many steps the two families took in starting Chosen Acres Premium Beef.

Pricing products, developing a logo, designing fliers and ordering boxes were a few details they had to address. They also worked with the Minnesota Department of Agriculture to get a food handling license, and with the small business development center in Rochester, MN, for help with other business aspects.

"It's added a lot of labor, but it's been positive in that we're getting more for our steers," says Tammy.

Besides boxed assortments of steaks, roasts, kabob meat, ground beef and hamburger patties, Chosen Acres sells quarters, halves and whole beef. They offer some hormone-free beef, too.

For quarters, halves and whole beef, the consumer pays for the processing and Chosen Acres charges from $1.20/lb. to $1.35/lb. hanging weight. That's approximately 20-35 cents more than what the packer pays them per pound of hanging weight.

Though most of Chosen Acres' cattle go to the packer, the two families direct market one steer per month and say consumers are really happy with the product. Right now, ground beef and steaks are the most popular, Tammy says.

The first year overhead costs kept the direct marketing from being profitable. But as word-of-mouth advertising grows, they hope to direct market as many as 100 steers a year five years from now, Tammy says.

Direct marketing is a challenge. Product differentiation isn't easy, Tammy says. Some people want to know where their meat comes from, but most think meat is meat. Plus, it's often more convenient to shop for meat at the grocery store than to place a meat order for later pickup.

Tammy credits their success so far to the quality product they sell. "All the training in the world won't help if you don't have a quality product to sell in the first place," she says.

Quality also is key for Mike Dean. He and wife Jeanne operate Moon Creek Farms, Cannon Falls, MN. They will direct market 20 head of cattle and more than 1,000 chickens this year.

The Deans started raising livestock to process for themselves because they wanted an implant-free product. Requests from friends, co-workers and relatives also interested in a natural product soon grew the venture into a part-time business.

While product quality is essential, Dean says getting it to the customer is where training and outside help become necessary. He credits the BYB program for this help.

The BYB curriculum promotes a team approach and identifies seven roles for family members, friends and paid advisers to carry out:

* Vision and planning,

* Organization and administration,

* Production and management,

* Sales management and customer relations,

* Advertising and public relations,

* Financial management and

* Regulatory compliance.

"They don't have to go it alone. Ranchers are notoriously independent people. Part of the challenge here is to work with others, get their support, but not feel that you've let go of control of your operation," Reese says.

For both Moon Creek Farms and Chosen Acres, some of that strategic help comes from BYB initiators Lorentz Meats and Deli in Cannon Falls, MN. Brothers Mike and Rob Lorentz operate the small, family-owned meat processing business and were the idea people behind BYB. They brought the direct marketing model to Land O'Lakes, who helped them source funding for the program.

Although a processor in nearby Winona, MN, processes Chosen Acres' meat, Lorentz Meats helped them get started, says Tammy. "They were always there if we had a question," she adds.

Recruiting and advising producer participants for the program has been beneficial for Lorentz Meats, a 30-year processor. They realize their success depends on the success of local producers.

Mike credits BYB for a 40% increase in business. In fact, this summer they're moving into a new 10,000-sq.-foot facility compliant with Hazard Analysis and Critical Control Point (HACCP) regulations.

Mike encourages small processors and livestock producers to realize the potential in their community.

Per capita U.S. spending on beef was $180.37 in 1999, and per capita beef consumption was 69.2 lbs., according to Cattle-Fax estimates. Pairing those numbers with available population information, Mike concludes that consumers within a 90-mile radius of Lorentz Meats spend more than $500 million a year on beef products. That's a lot of opportunity for beef producers and meat processors, Mike says.

The Deans of Moon Creek Farms concur with that potential. "At times, I get the feeling I couldn't raise enough out here. I don't have a big enough place," Mike says. "If every community had a few people doing what I'm doing, the big outfits couldn't dominate our food choices," he adds.

It's the farm to retail disparity that largely drives the direct marketing movement. But, the growth of the segment also has made it tougher to compete. Tammy advises beginners take it slow.

"These people are farmers first. You can get buried if you jump in with both feet. Take it slow and as your time and finances allow. Be patient," she adds.

Reese agrees. He doesn't think direct marketing is for every producer, but he does preach diversification. Such diversification allows producers to better ride out the cycle valleys.

Besides Lorentz Meats and Land O'Lakes, the Sustainable Farming Association (SFA) and the University of Minnesota and Wisconsin are also BYB sponsors.

For more information about direct marketing resources available by state, log on to the Agricultural Marketing Service's Web site at www.ams.usda. gov/directmarketing.

For more information about BYB, contact Mike Lorentz at 800/535-6382 or e-mail [email protected]

Before you take on any value-added endeavor, Erlin Weness, University of Minnesota Extension farm management educator, recommends you ask yourself:

* Does the product already exist? If so, will your product be competitive?

* Does your company have only one product, or is it diversified to lessen risk?

* Are profit and return projections realistic and positive?

* What added financial or liability risk will this add to your business?

* Does the company have contracts signed with buyers?

* Did an independent consultant with an excellent track record study the feasibility?

* Do you completely understand the business organizational structure and its tax and legal implications?

* If you want out of the venture, is it clearly stated how this may be done? * Are legal contracts and agreements you sign clear and comprehensively written so all parties understand their commitments?

* What's the worst-case scenario? Can you afford it?

Water - the overlooked nutrient

Good water could be a concern this year. Low snow pack and above average temperatures have produced a lowered water table and reduced the flow of water from some wells, springs and streams.

With a reduced flow, water quality can become a problem. Pollutants that may enter a stream can be in a greater concentration than normal due to the lowered volume of water to dilute them.

Good water quality should be a concern for all producers, not just those with noticeable animal problems or highly visible water quality problems. Begin planning now in anticipation of a short water supply or a possible severe drought. Start by testing your water source to identify any potential problems.

Consider the importance of water:

* Regarding body composition, a cow's body is 72%, a newborn calf is 83%. Water is required to maintain stable body temperature, adequate blood circulation, cellular metabolism and kidney and bowel function.

* Water contains varying levels of phosphorus, calcium, potassium, sodium and chloride. It can also be a carrier for undesirable elements such as nitrates, bacteria, herbicides and pesticides.

The basic amount of water requirement for an 1,100-lb. cow is 10-12 gals./day. But, the amount an animal will drink is influenced by such factors as environmental temperature, wet vs. dry feed, milk production, salt consumption, and water temperature and quality.

One of the most commonly voiced problems associated with water is high saline content - the salts dissolved in water. It's measured as total dissolved solids (TDS) expressed in parts per million (ppm).

As the TDS level of the water increases, so does water intake until a threshold point in salinity is reached. Water consumption then drops. Decreased water intake is also reflected in decreased feed intake.

Alkalinity or acidity of water is measured by pH - 7 is neutral, less than 7 is acidic and greater than 7 is alkaline. Highly alkaline water may cause digestive upsets, diarrhea, poor feed conversion, and reduced water and feed intake.

Nitrates are a common problem, especially near high concentrations of livestock where runoff may be a problem. It's also a concern where heavy use of fertilizer has leached through the soil into subsurface water.

Nitrate levels in water are seldom toxic. But, when consumed in conjunction with feeds high in nitrates or NPN, problems may arise even though individually they may be at safe, recommended levels.

Sources of nitrates in water include nitrogen fertilizer, animal manure, decomposing organic matter (crop residues) and human and industrial waste. Shallow wells generally have higher nitrate levels than deeper wells. Sulfates make water bitter and often give it an objectionable odor. Animals can adapt to high levels, but it's best that high-sulfate water be diluted with known clean water.

High iron levels may be a problem in some areas and can cause decreased water consumption. They may also tie up other nutrients.

In some high mountain areas, high molybdenum levels in water can be serious for grazing cattle. Just 1 part of molybdenum will tie up 5 parts of copper. Low copper levels in the animal will show up physically as a reddish tinge in black-haired cattle. Metabolically, it shows up as a depressed immune system. Many cattle coming off these ranges turn into wrecks in the feedlot.

Most water sources have many microorganisms, but most are harmless in low concentrations. Certain types may be harmful, however. Some blue-green algae are toxic, but there is no good method to determine which type is or is not potentially toxic. Copper sulfate has been used for many years to kill algae in water tanks.

Coliform levels below 50/ml generally are considered safe for all cattle. Other contaminates may include coccidiae, staph, lepto, some viruses and streptococci.

Herbicides and pesticides contaminate some water sources and can cause problems at certain levels. No accurate maximum recommended levels of pesticides have been established for cattle. Use the guidelines established for human consumption.

The Alliance Generator

Certified Angus Beef has done more than stamp the industry with value-added reality. It has created its own market category.

When Phil Knight and his buddies started making running shoes, then selling them from the trunk of a car at track meets, they were trying to fill a void in the commodity tennis shoe business. They created shoes they as competitive runners would want to wear themselves.

As the new shoes picked up demand, retailers started offering them because of their reliability. Soon enough, Knight's brand - Nike - became its own market category, the benchmark to which other manufacturers aspired.

Like it or not, the Certified Angus Beef (CAB) Program is doing the same thing for the cattle business.

"The exciting thing is the potential for beef if you market the right kind of product," explains Larry Corah, CAB assistant executive director. "If you market what the consumer wants, there is no question in my mind that beef can be king."

Indeed, since a single vote by the American Angus Association (AAA) board of directors saved the CAB Program from the scrap pile soon after it began in 1978, CAB has grown into a branded beef juggernaut. Last year, 493.1 million lb. - 1.9 million head of cattle - were marketed as CAB product through 4,000 licensed restaurants and 4,000 licensed retailers in 46 countries. Keep in mind, rocketing CAB growth occurred at exactly the same time the beef industry overall was losing demand at the rate of 1% every year.

Corah says approximately 6.5-7.0% of all fed cattle in the U.S. currently end up wearing the CAB trademark. What's more, those cattle are adding dollars to the total beef system.

As an example, coming out of the feedlot, Corah says premiums for Prime grading cattle run $6-10/cwt. in most grids today, on top of the Choice/Select spread. Meanwhile, carcasses qualifying for CAB receive $3-5/cwt. on top of Choice premiums.

Moreover, Steve Suther, CAB director of industry information, points out CAB carcass premiums are beginning to trickle down to cow-calf producers. For instance, in an ongoing study including 10 auction markets across the nation that sell more than 1 million head annually, Suther says Angus- influenced calves (500 lb.) brought an average of $2-3/cwt. premium more than other similar weight calves last fall. He points out producers offering their calves with proven health and prior feedlot and carcass data can receive substantially more.

Given genetic variation within breed and the fact that so many breeds have taken to painting themselves black, Suther has this to say: "I don't know that anyone deserves more just for having Angus-sired calves that they know nothing about... If a person is sure his calves are worth more, then he needs to take some responsibility in proving that."

Milking Value From Information Ron Kramer, customer service representative for Irsik and Doll Co., Cimarron, KS, understands the value of proof.

"In the traditional way of doing business, cattle lose their identity. A guy can make all the promises he wants, but to make those claims, he has to develop a trusting relationship both ways... We're trying to build that bridge, fill that gap by going directly to the producer as much as we can so he can make changes to his genetics if he needs to," says Kramer.

Kramer explains the value of carcass data is one reason Irsik and Doll decided to become a licensed CAB feeding operation in 1998. All told, Irsik and Doll's five Kansas feedyards comprise a one-time capacity of 170,000 head.

"The only way we think we can keep our yards full is by offering customers a service they can't get somewhere else. We think that's something CAB offers us," says Kramer. "The CAB program doesn't guarantee a premium, but it does guarantee carcass data."

With that in mind, Suther says everything from consumer demand for source verification to growing price spreads between commodity and specification products is adding incentive for producers to define their production.

"It's folly to think the numbers in the cattle cycle are on our side right now, so why worry about it," explains Suther. "One thing that should drive producers to these alliances and to these licensed feedlots is so they can find out what they are producing so they don't get left behind in this information revolution when the cycle turns."

Building A New Mousetrap Really, understanding CAB is to appreciate the vision of its founders. After all, CAB is not an alliance that owns or controls product. It's more of a conduit of industry connectivity that has spawned a number of formal industry alliances by virtue of a fairly straight-forward set of carcass specifications that have withstood the test of time and consumer preference.

"The trademark is what we own and license. We try to really drive this product through the whole chain," explains Corah.

* Until the mid-1990s, CAB grew supply primarily by licensing more packers to utilize its trademark. Currently, more than 80% of all packers are licensed CAB suppliers.

* Moreover, feeding, harvesting or selling CAB beef isn't as simple as signing a piece of paper. Since the beginning, licensed packers, feedlots, restaurants and retailers have had to undergo extensive product training and agree to specific rules of the game. More than one licensee found out how serious CAB was about quality control when their licenses were revoked.

* These days, CAB has really become its own quality grade. If you doubt that, look at about any grid out there that pays for quality: Prime, CAB, Choice.

In a nutshell, cattle that qualify visually by breed type and color must grade in the upper two-thirds of USDA Choice - and meet seven other carcass specifications - to be eligible for CAB's stamp on the rail. Although some in the industry decry marbling as a poor indicator of palatability, Corah points out research indicates consumer acceptance decreases as marbling declines (Table 1). Bottom line, CAB identified early on a quality barometer that consistently serves their customers and Angus cattle.

Currently, about 19% of all the cattle that qualify for CAB visually meet carcass certification standards. Corah says the goal is to increase acceptance rates to 30%, while increasing the percentage of the total fed cattle supply qualifying for CAB to 25-30%.

If that sounds like pie in the sky, according to AAA surveys, 54% of all commercial producers report that Angus or Angus crossbreds are the central genetic components of their cow herds. AAA is shooting to push that percentage to 80% by 2007.

But, Suther points out, "It's not as easy as just getting more product. We have to show producers how to produce the product we need at a profit to them." That's one reason CAB started licensing feedyards in 1998.

"Feedlot licensing is where we will start and end in the production sector," says Corah. He explains targeting feedlots allows them to focus on the segment of the industry where most cattle end up before harvest. Besides, feedlots represent the primary opportunity to influence the management that impacts CAB acceptance. So far, about 50 feeding operations that collectively market 1 million head each year are licensed by CAB.

With supply and quality control in mind, AAA used CAB funds for a DNA research project at the Ohio State University (OSU) four years ago. Recently, they announced this research has served up an accurate measure of tenderness and marbling; OSU has applied for the patent and will license the technology exclusively to AAA.

Basically, the process works like this. A blood sample is pulled at any time in an animal's life. The test indicates how tough or how tender that animal's is and how much marbling it has. The potential is staggering.

Francis Fluharty, the OSU research scientist who worked with OSU molecular biologist Daral Jackwood to discover the process, says, "Coming into the feedlot, I can see where this test has immediate applications."

He explains cattle could be tested upon receiving, then sorted into outcome groups. They could then be fed and managed to their genetic potential rather than an average where some are underfed and some are overfed.

Before the feedlot, the test would also allow cow-calf producers to document the genetic ability of their cattle for marketing. For that matter, testing the calves should offer a genetic snapshot of carcass tenderness and marbling that isn't clouded by subsequent management. Plans call for making the test available for field study within a year.

"Whether or not it's this test, another one, or combined technology, I'm hanging my hat on total information and the speed at which we're receiving it," says Fluharty. "From an overall perspective, we have so many good people in so many different areas working on this that we're no longer in the realm of thinking the commodity cattle business won't change. We're within two or three years of potentially dramatic change."

No matter how the industry changes or how fast, Corah says, "The upside potential for beef is incredible, but it's not going to be business as usual... Independent of CAB, I think that's the real challenge for the beef industry.

"We talk about lots of things relative to the production of beef, but ultimately we are in the food business," Corah says. "We need to look at each production factor relative to how it impacts the consumer."

Feeders On The Web

Want to keep producers informed about what the weather is doing at the feedlot where their cattle are being fed? Need to introduce the staff to your feeding clients? Looking for ways to promote your feedyard to potential customers?

Instead of communicating via mail or over the phone, a growing number of feeders are providing customer service through their own homepage on the Internet. It's just one more way of keeping customers in the know in the 21st century.

One of the premiere feedyard Web sites is that of AzTx Cattle Co., Hereford, TX. The address is www.aztx.com. The site was launched more than three years ago, according to AzTx president John Josserand, who says they put the homepage on the Web on faith.

"We wanted to be at the forefront of the industry, but we really didn't know if people would visit the site," he says.

Today, Josserand says he knows customers are visiting AzTx online, and his goal is to continue to offer those customers interactive services on the Internet.

"You can't put a demographic to who is using the site because it's a variety of age groups and customers with varying needs," Josserand says.

The AzTx site currently offers weather information specific to its five feedyards, a locator map, links to other beef industry sites and the opportunity for customers to give feedback. Most recently, AzTx has added staff photos and job descriptions to their site so customers can put a name with a face or see who to contact for a specific question.

Bejot Feed Lots at Ainsworth, NE, also serves customers on-line at their site www.bejot feedlots.com. Tom Bejot put the site together himself 11/2 years ago. His primary goal was to build awareness of their cattle feeding operation.

He reports that they get several inquiries from cattle buyers and commercial producers who are looking at different feedyards on line. To help send traffic to his site, Bejot registered with several search engines and has gotten free listings on commercial sites that compile feedlot directories.

An Education Tool Jason Hitch of Hitch Enterprises, Guymon, OK, has found their homepage at www.hitchok.com is a useful teaching tool for customers.

Hitch says they launched their site in 1997 as another method of advertising their feedlot operations. But, the site also has been a good way to provide customers and the general public with information on retained ownership, cattle feeding in general, shipping and receiving methods and other basic information, he says.

"It's surprising to us that many people that raise cattle haven't fed cattle, and therefore may not know a lot about feeding cattle," Hitch says. "By putting general information on our Web site, we hope we can help them learn in the privacy of their own home or office."

Hitch says they hope to continue adding educational information to their site, as well as add regular news features to keep the site current.

An Interactive Future For many, the challenge is to keep their Internet presence alive. For Josserand, that means making the site more interactive in the future.

Currently, the only interactive portion of the AzTx site is a mileage finder, which allows producers to calculate freight charges from their location to the feedyard.

"Our future goal is to do all paperwork - feed bills, animal performance, etc. - over the Internet," he says.

Bejot and Hitch have similar goals. Both hope to eventually transfer livestock and billing data to customers weekly through password-protected access for each client. Bejot's even considering some e-commerce options that would allow opportunities for outside investors.

"I really see everyone doing business over the Internet," Josserand says. He realizes there are still people who don't like computers and don't use them, but he also knows computers aren't going to go away.

Hitch says, particularly in the competitive feeding industry, he sees Web sites as an integral part of feeders' future. "With the amount of feeding capacity available and fewer customers over the past few years, we have to communicate better with our customers," he says.

Kathy Cornett, president of McCormick Advertising, Amarillo, TX, agrees. Cornett, who was one of the driving forces in helping AzTx launch their site, says she thinks everyone will have a Web site in the future.

"At this point, there's a lot of inquiry from feeders about having a Web site. But feeders also are concerned as to whether or not their customers are online and have access," Cornett says.

Cornett says most feedyard sites are currently electronic brochures to communicate with current and prospective customers. But, she has a vision that the future offers much more potential.

"We even dream about having a camera mounted on the feed truck so producers can watch their cattle being fed," Josserand says. That's too expensive to do right now, he adds, but there's always the possibility.

To get a sample of feeders on the Web, visit these sites: www.aztx.com www.tcfa.org/feedyard.html www.bejotfeedlots.com www.hitchok.com

Building A Business That Works For You

How many ranch businesses do you know that could pay cash rent for the land, borrow all the money for livestock and machinery, pay a decent wage and still make a profit?

The fact is most North American ranches only stay in business because they're subsidized. They're subsidized by inherited wealth, appreciating land values, off-farm income, working for less than it would cost to hire someone else to do the job, or by some other activity not related to livestock (i.e. recreation, timber, etc.).

Most ranch businesses earn a very low rate of return on the assets invested. We accept that as normal. But can you imagine a grocery, a bank or a hotel staying in business if it could not pay rent on the building it uses, cannot pay a competitive wage to the people it employs, and expects to get less than bank rate on the money invested in its inventory?

That's precisely what we consider normal in ranching. We don't expect ranching to be as profitable as other businesses. After all, we hear time and again that ranching is a "lifestyle" business.

Some lifestyle. Of course, there's the home on the range, wide-open spaces, working for oneself, etc. But, what of the economic and financial stress, the stress of uncertain prices and drought and the personal pressures from parents, children, siblings, our spouse and ourselves?

Statistics show that depression, divorce and suicide rates are highest in rural areas, and higher for farm and ranch families than other segments of the population. Wide-open spaces and independence don't go very far when you take medication for your ulcers, your banker is knocking at your door and no one in your family talks to one another anymore. A lifestyle business?

The title of Stan Parson's new book "If You Want To Be A Cowboy, Get A Job" sums it up pretty well. Stan's right when he writes, "If you want to ranch and be a cowboy - disaster beckons. The two just don't go together."

When you're a cowboy, your business is just a place to go to work. You invest years of hard work supporting the business. But, you're not supposed to be supporting your business, your business is supposed to support you. If it's not, you need to spend less time working in your business and more time working on your business.

Stephen R. Covey defines insanity as doing the same thing over and over and expecting different results. Not only do we do the same things, we do more and more of them. Our answer to poor profit, eroding range health and personal stress has been to work harder.

But, when you discover you're in a hole the last thing you ought to do is dig faster. What makes us think that continuing to work harder in our businesses to increase production efficiency will increase profit and strengthen our businesses? It hasn't worked in the past. It won't work in the future.

Working On Your Business In his book "The E Myth," management consultant Michael Gerber reports that a staggering proportion of start-up companies fail in their first few years. According to the statistics, 40% don't survive to see their first anniversary. Another 40% fail by the fifth year; 80% of the rest fail by the 10th year.

Ranching isn't exempt. Similar trends in agriculture have been masked by the internal subsidies described earlier. Due to subsidies, farm and ranch businesses take about 25 years to use up the accumulated net worth before they perish.

We blame factors beyond our control like the weather, low prices and high costs for these failures. But, if the prices or the weather really determine profit, why do some businesses survive, even thrive, in these conditions while others fail?

Depressed markets are a crisis for some but a profitable opportunity for others. It's not the situation but the way we position our business and the decisions we make that determine success or failure.

While the vast majority of start-up businesses fail, Gerber reports that franchise businesses have a 10-year survival rate of 97%. Why the difference? Simply put, franchise businesses have a clear-cut blueprint on how to run a business. The franchiser has worked on the business to build a business that actually works.

We are so busy working in our businesses (doing $5 to $10/hour jobs) we often don't ever get around to working on our businesses (the $100+/hour work). This is the work that determines the winners and the losers in any business, including yours.

It's critical to understand the difference between working in the business (WITB) and working on the business (WOTB). The technician works in the business, the businessman works on the business.

Most ranchers do a lot of WITB and very little WOTB. We're very good technicians. When it comes to roping a steer, vaccinating a cow, pulling a calf or seeding a pasture, we do a great job. The problem is that we may not do the right job.

Most of us are more comfortable doing the cowboy's work than the businessman's work. The primary reason for the failure of most small businesses, including most farm and ranch businesses, is inadequate WOTB.

Most producers I talk to recognize their business would be better off if they spent more time on WOTB. There are several reasons they don't.

* "I don't have time. I'm so busy working in my business that I don't have time to work on it." If we do get around to it, it's usually late at night and we're so tired from a day of WITB ($5/hour work) we may not be awake enough to do WOTB ($100/hour work) effectively.

* "I don't like the WOTB as much as the WITB." We tend to feel more of a sense of accomplishment after pounding fence posts all day than researching and developing a marketing plan. But, if you just want to be a cowboy, you'd better get a job with someone who gets the WOTB work done.

* "I don't know how to do it." That shouldn't be surprising. Your father probably taught you how to drive a tractor or dehorn a cow, but did he ever teach you how to create goals for the business or build a plan to achieve those goals? Every ag college has courses on animal husbandry, range management and business, but none teach you how to make and implement the strategic decisions that will determine the future of your business.

WOTB Meetings One of the keys is to hold regular WOTB meetings. Most of us have held staff meetings or family meetings where we lay out the work that needs to get done in the coming days or weeks (mostly WITB work). Sometimes, we even tackle some of the WOTB issues at these meetings, but the outcome rarely results in definitive action.

In contrast, WOTB meetings concentrate on strategy and the result is always a specific plan of action.

If you haven't held WOTB meetings before, your first meeting should focus on what you and the others involved in the business want personally. Next, focus on what the business will need to look like to meet those needs.

Once you have a well-defined vision for the business, WOTB meetings should be used to develop the strategic plan to achieve the vision. Once the plan is in place, you'll use your WOTB meetings to monitor your progress and tackle new issues.

In most family-run ranch businesses, WOTB meetings should be held once a month.When developing a strategic plan for the business, WOTB sessions may need to be held more frequently for a defined period.

Once you've decided how frequently to hold your WOTB meetings, the key is regularity. Don't allow operational crises or excuses to get in the way of planned WOTB meetings. Everyone in a decision-making position should attend WOTB meetings. In a small business it may be the whole staff.

The owner/president should prepare an agenda, which should be distributed prior to the meeting. He should also chair the meetings, making sure that they start and end on time. This usually means allocating time to each agenda item to ensure everything gets covered.

Structure and some formal procedures are important. The first item on the agenda is always the same - read the vision statement and goals. Read it aloud and take turns around the table. It's amazing what a powerful effect this has in keeping everyone focused.

Spend the bulk of the meeting discussing strategic issues. Don't put more than three issues on the agenda. Conclude the discussion of each issue by creating a written plan of action.

The plan should list the specific actions that will be taken, who is responsible to take each action and a deadline. For major projects, (i.e. the estate plan) break the project into smaller tasks and assign a deadline for each one.

Close the meeting with two final agenda items: "Worry Areas" and "Commitments." Worry areas are things that are bothering you. They may be big strategic issues or small WITB concerns. Ask each attendee to list their worry areas. Input from every attendee often brings quick solutions.

End the meeting by reviewing the commitments agreed to in the action plan. Each person should state what he/she has committed to do, and their deadlines. The person's name, commitment and the time frame are all recorded in the minutes of the WOTB meeting.

At the beginning of the next WOTB meeting, after reading the vision statement, take a few minutes for everyone to give an update on their progress.

Effective WOTB takes discipline and practice. But, it is the most important step toward increasing profit in any business, including yours. When a ranch is structured and run as a "for profit" business, ranching can be a great lifestyle. You may even be able to afford to be a cowboy now and then.

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

Breeding season is on

March was cold and windy with several snowstorms, but the wind dried things out as quickly as we received the moisture. We vaccinated cows and branded and vaccinated the calves the second week in March, and felt lucky to have two days without stormy weather.

In mid-March we sorted the cows into breeding groups and dispersed most of them to larger fields.

We turned the bulls out April 3, which will make the official start of next calving season Jan. 10. We put several bulls with the bigger groups, since those cows are spread over large areas. It might be difficult for one bull to cover it all. The bulls in those groups are half-brothers or brothers, so we have a good idea of the genetics of the calves being sired.

In the smaller groups, we depend on just one bull, so we always watch those closely to make sure the cows are being bred.

We've already had a problem in one group. The bull we bought last fall to provide us with a new bloodline only bred four cows (the first two days of breeding season), then became lame with foot rot.

We brought his group in from the field to sort, so we could take that bull out and put in another. We hope the lame bull recovers before the end of the breeding season.

We have a very short breeding and calving season, leaving the bulls with the cows only 32 to 35 days. We observe them closely to make sure bulls are getting every cow bred. Checking them morning and evening at feeding time is a good opportunity to monitor the breeding groups, get breeding dates on the cows and monitor for problems.

Construction Projects Last week, we hired a Cat to work over several ditches. Lynn has been cleaning them every spring with tractor and blade, but it's been more than 20 years since we've done any major ditch work.

Some are overgrown with willows and some have eroded deeply on our steeper fields, creating chasms that are difficult for getting the water out. They're also dangerous for the cattle when they graze the hay fields in late fall. It was time to fill in those ditches, clear the willows and start over.

While we have the Cat here, we are also leveling and smoothing a place by Michael and Carolyn's house for a calving barn on our upper place. Beginning next year, they'll calve their cows separate from ours and have a facility close to their house.

We don't want to continue to concentrate all the cattle here on the lower place during winter, especially if Michael and Carolyn expand their cow herd in the future. It puts too many cattle in a small area - which makes for more sickness and more impact on the barns, pens and water system, as well as the land and creek.

The spot we've chosen to build the barn and pens near their house is up a draw, a little out of the wind and well away from the fields and creek. There will never be any runoff from the pens and holding areas into the creek.

A lot of people perceive cattle as a problem with stream pollution, but this is highly debatable and can depend upon circumstances. This may be an issue many of us will face in the future. We think it's wise to plan ahead, so that we won't be forced to make changes when we are ill-prepared to do so.

We already have many of our winter-spring pastures fenced off from the creek. We did that 32 years ago, not as a means to protect the riparian area but as a safety measure for our baby calves. We didn't want calves falling through the ice, being drowned in high water or eating dirt and gravel along the creek banks.

The only thing that might now be perceived as a problem would be the high numbers of cattle concentrated in this small area during calving season. But with a separate calving facility on the upper place for our son and daughter-in-law's herd, this will never be a problem.