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Articles from 2000 In September

Defining Demand

Knowing the factors that can influence beef demand are important to sorting out the debate.

There's an easy way to get into a fight in beef country. Just walk into any coffee shop and start talking about beef demand - what is it and what it means to a rancher, feeder or packer. You're bound to stir some emotions and provoke a wide range of theory and analysis.

Now that we've all heard about "the turnaround" - that last year, for the first time in more than 20 years, beef demand increased more than the previous year - the debate over demand takes on a whole new tone. Few will argue that for the long-term health of the industry, beef demand must continue to improve. But, everyone might get along a little better if there were some agreement over what determines demand and what causes demand to shift over time.

"One of the problems is confusion over terminology," says Ted Schroeder, professor of agricultural economics at Kansas State University (KSU). "It's important to differentiate between two related but distinctly different terms - quantity demanded and demand."

Quantity demanded refers to the amount of beef consumers will purchase at a given price, holding everything else (like quality and convenience) constant, according to Schroeder and his KSU colleagues Tom Marsh and Jim Mintert.

"Demand should be thought of as the amount of beef consumers will purchase over a range of beef prices," explains Schroeder. "A shift in beef demand occurs when the entire beef demand curve increases or decreases."

Changes in beef price or the quantity of beef consumed do not cause the beef demand curve to shift.

"Rather, changes in other factors, such as prices of competing meats, demographics or health and safety concerns cause the beef demand curve to shift," adds Marsh.

When beef demand increases, say due to an increase in retail poultry prices that causes consumers to substitute beef for chicken, the result is higher beef prices at any level of consumption than prior to the demand shift.

What Beef Demand Is Not Because of this confusion surrounding demand, the KSU economists sometime find it easier to explain what beef demand is not. First, beef demand is not per capita consumption.

"Per capita consumption is beef production divided by population," says Mintert. "Data on per capita consumption without considering price says little about beef demand."

The economists define beef production as the net changes in cold storage, import and exports.

Beef demand also is not beef's relative share of total meat consumption. This simply reflects production of beef relative to production of competing meats and does not include information regarding prices, Mintert says.

Finally, beef demand is not the share of consumer income spent on beef. Consumer income affects beef demand, but changes in income spent on beef does not tell us whether beef demand is changing.

"Changes in income alone can cause changes in the share of consumer income spent on beef, even if beef demand remains unchanged," explains Mintert.

Since many of the beef demand factors, as well as production, change at the same time, it's difficult to assign relative demand shifts to individual factors, says Schroeder. "But, often this happens with casual observation of trends and beef demand shifts," he says.

A Look At The Economics Over the past 20 years, a more-than-casual observation shows beef demand has been relatively inelastic (i.e., quantity demanded is less responsive to price changes) and the economics of the industry indicate pork and poultry are weak substitutes for beef.

"Relative prices matter to the consumer; however, per capita consumption is not highly responsive to changes in pork and poultry prices," says Schroeder. "Also, beef expenditures represent a progressively smaller portion of total consumer expenditures, and beef demand will become even more inelastic in the future."

Still, beef demand is highly responsive to changes in consumer expenditures on all goods. Consumer willingness to spend (rather than save) a larger piece of a larger income pie has been an important source of economic growth for all segments of the U.S. economy - pulling the beef industry along.

Consumer expenditures for all goods rose from less than 90% of disposable income in the early 1980s to near 98% by 1999. And beef demand increases 0.9% for each 1% increase in total per capita expenditures.

"This means beef demand was a major beneficiary of increasing consumer expenditures during this period," says Schroeder. "But, if consumers choose to increase savings in lieu of consumption, or if disposable income declines, there could be a negative impact on beef demand."

Keeping The Curve Climbing Because beef demand is so closely tied to consumer expenditures, Schroeder, Marsh and Mintert list several suggestions based on extensive beef demand modeling for the beef industry to keep the demand curve shifting upward.

- Consideration should be given to developing an objective quality - especially tenderness - measurement. "This would make it easier for consumers to select the quality product they are seeking," says Schroeder.

- The industry cannot afford to be passive and react to food safety problems. The beef industry needs a proactive safety program to minimize how negatively food safety recalls impact beef demand.

- The industry must strive to produce healthy, nutritious beef products. For example, research and education should focus on dietary guidelines for consumers on cholesterol-restricted diets that include beef.

- The industry must broadly recognize how much consumers value their time. Declining time available for food preparation has had a negative effect on beef demand. This gives added credence to the easy-to-prepare movement, as well as the attention the beef industry must give to away-from-home consumption.

When arguing about beef demand, Schroeder asks producers to remember that the 1999 increase in beef demand was a modest one. But, it came at a time when most economic fundamentals suggested beef demand would have declined from 1998-1999. Pork prices, poultry prices, the health information index and female labor force data all predicted a downward shift in beef demand.

"Total consumer expenditures increased in 1999, and that provided a catalyst for beef demand to increase," says Schroeder.

So, in the next argument over beef demand, this illustration of price as a very critical factor in determining demand might help get your point across. Then, you can bring up the supply part of the equation.

NCBA Summer Roundup

NCBA approves amendments to strengthen grass roots involvement.

Key amendments approved by the National Cattlemen's Beef Association (NCBA) board of directors will give U.S. cow/calf producers more member input into NCBA policy development.

This progress was made by cattle producers to strengthen "grass roots" representation in the cattle industry's major organization during the Cattle Industry Summer Conference held in Denver in August.

The proposed NCBA bylaws allow the NCBA cow/calf, seedstock and feeder councils to propose and consider NCBA policy that will proceed on to either an NCBA committee or the board of directors. Once the NCBA board acts on the proposed new or amended policy, members can still raise the policy for a vote of NCBA members at large.

One amendment will allow more member participation by making NCBA state affiliate representation the same size on both the board and committees - the original proposed bylaws would have reduced the committee size by one-half.

The second amendment allows a simple majority vote for policy approval at the NCBA stakeholder meeting. Proposed bylaws would have required a two-thirds majority.

Representatives from NCBA affiliates in Montana and Kansas worked together this summer to produce agreements giving individual members a stronger voice in developing NCBA policy.

The compromise is a very good balance of weighted voting based on members' dues and simple majority member voting, according to Keith Bales, president of the Montana Stockgrowers Association.

The NCBA board also approved a recommendation addressing "state of origin" dues.

Under the recommendation, cow/calf producers who retain ownership of their cattle can specify that NCBA dues assessed on their cattle by the feedlot be credited to the animals' state of origin. The cattle must be ranch-raised, the producer must be a member of NCBA, and the state of origin must be an NCBA affiliate.

"These kinds of changes to give individual members more say in NCBA simply would not have happened without affiliated states establishing priority issues and working together to achieve those priorities," says Bales.

All NCBA members will receive a copy of the proposed changes this fall and can then vote on them at the NCBA 2001 Annual Convention in San Antonio next February.

Yield still drives carcass dollars

Step up to the plate of value-based marketing grids without swinging for adequate red meat yield, and you can knock one over the fence without scoring.

For all the banter and hand wringing about the historic widening of the Choice-Select spread ($11/cwt. at press time), cattle can quality grade like a house of fire and still be money suckers.

Compare two pens of cattle that were marketed recently through the Gelbvieh Alliance (Table 1). Look at Pen A. With almost 89% grading Choice, you figure they could be worth a sizeable jingle, even if they were duds for yield grade. After all, across the industry today, quality premiums are worth about twice as much as those offered for yield grade.

Now, peek at Pen B. The yield grade was better than Pen A, but still nothing to write home about. And, only about half mustered a Choice grade. At first blush, plenty of folks would take Pen A and give you points. But, look again.

In an industry that hovers around 64% for average dressing percent - basically the carcass weight divided by the live weight - Pen B dressed at 65.85%, while Pen A dribbled out at 60.71%. That was the difference between Pen B turning an average $13.56/head premium on a live basis, while Pen A netted an average loss of $2.57.

"Dressing percent is worth twice as much as anything else because of the pounds it impacts," says Don Schiefelbein, executive director of the American Gelbvieh Association (AGA). In fact, he adds, "Under normal circumstances 45 percent of the value of a carcass in today's grids comes from dressing percent."

Likewise, Michael Bezner, manager of Bezner Beef, Texline, TX, explains, "When you look at grids, basically you've got dressing percent, quality grade, yield grade and out cattle (non-conformers) to consider. Certainly, dressing percent has the majority of the impact in the equation."

Obviously, folks can play with dressing percent, shrinking cattle or feeding on extra dress to extend the fat cutability. But, hold the shrink and fat endpoints constant, and the only way to increase yield is with muscle.

Unfortunately, the yield grade barometer the U.S. Department of Agriculture (USDA) uses to gauge carcass cutability (carcass yield) appears to be giving more credit to excess fat than dollar-worthy red meat, according to an AGA study.

In this study spanning four years, four packing plants and about 10,000 head of Gelbvieh Alliance cattle, AGA collected the yield grade components - ribeye size, fat thickness and the like - calculated the actual yield grades for the cattle, and then compared those to the yield grades assigned by USDA. According to Schiefelbein, graders called Yield Grade 1 cattle correctly 72% of the time, Yield Grade 2 right 65% of the time and Yield Grade 3 accurately only 56% of the time.

"When graders underestimated the carcass cutability, it was usually because the carcass had a larger than average ribeye," says Schiefelbein. "When graders overestimated red meat yield, it was typically because the carcass had a smaller than average ribeye."

None of this makes a case for how effective or ineffective the current USDA grading system may be. It does seem obvious, however, that the heavier muscled cattle in this study - those that brought more dollars across the scale - were discounted, while the lighter muscled cattle were actually rewarded.

Moreover, this is certainly not an indictment of the graders themselves. They can't be expected to account for every yield grade component and a detailed calculation of them in the 10 seconds or less they have to ogle carcasses coming down the line.

Instead, this study underscores the value of carcass yield and the need to consider it in selection. At the producer level, within the current system or a future one in which packers assign an instrument-derived cutability score to carcasses, it also emphasizes the sense of plowing toward the carcass center rather than the thorny extremes of quality or yield.

"It's difficult to make the high percentage English cattle yield, and it's difficult to make the high percentage Continental cattle grade," says Bezner. "So, we try to buy a middle of the road animal." Specifically, he spends more and more procurement energy trying to find English X Continental cattle that offer him a carcass hedge no matter where the spread is, who is grading them or what tomorrow might bring.

"It's not a simple business as this industry evolves from taking zero responsibility and weighing up fed cattle to taking full responsibility for the meat hanging on the rail," says Bezner. "Producers have to select seedstock that complement their production program in their environment, but those cattle must have value to someone beyond their ownership."

Agriculturally Insane

Recently, I was asked if it was possible to lower production costs and reduce the capital-intensive nature of ranching. My answer? Sure. The examples are all around the world, and individuals all across the U.S. have been doing it for years.

They are usually pretty easy to recognize. They probably drive a Toyota into town instead of a dual-axle, 1-ton. They understand why they shouldn't borrow money when their banker thinks they should. They tend to have smaller cows than their neighbors. And, they probably understand how endangered species and things like wolf re-introduction can be a boon to their businesses. Their neighbors think they're nuts.

If we take conventional wisdom as the definition of sanity, they are nuts. But, conventional wisdom says that ranching isn't profitable. Stephen R. Covey defines insanity as doing the same things over and over and expecting different results.

So, who's more nuts? Is it the rancher who does everything right (according to conventional wisdom) and expects things to come around, or the guy who's doing everything "wrong" and making money?

Why then do so many ranchers adhere to conventional wisdom?

One reason is that the U.S. livestock industry is not a for-profit industry. Of the 1 million people who own beef cattle, 950,000 own fewer than 50 cows. They produce nearly 40% of the nation's beef, but very few depend on cattle for their livelihood. For many, it's more a hobby than a business.

But, profitability is not the driving motivation for many larger scale ranchers, either. If it were, they'd have sold their herds and land and invested in something with more than the 11/42-1% financial return on assets that most ranchers earn.

In fact, most livestock businesses operate at an economic loss, surviving only because they're subsidized. I'm not talking government subsidies here, but the internal subsidies provided by ourselves in the form of off-farm income, inherited wealth, living off appreciating land values or working for less than it would cost to replace yourself. These are all forms of subsidies, and without them, most U.S. farms and ranches would fail.

At the Ranching for Profit School, we usually work with the minority of producers to whom profit is a critical issue. Our target audience is those in livestock agriculture trying to make a living from the land. Our market research shows that fewer than 20,000 businesses are meeting that definition in the U.S. and Canada.

These people are smart, honest and hard working. They are, for the most part, very productive but very unprofitable.

Albert Einstein could have been talking about the livestock business when he said, "The significant problems we face today can not be overcome with the same level of thinking which caused the problem."

Our thinking has become very limited about what ranching really is.

The return to assets ratio is very low in ranching, about 11/42-1% on average. There are two ways to improve this ratio:

- First, we can increase our return. We've done that by trying to increase production and cut costs.

- But, we also can increase the return to assets ratio by reducing our investment in assets. Most ranchers have never considered this possibility.

While a tractor shows up on the "asset" side of the balance sheet, we'd be better off viewing it as a liability. Sure, we could sell the tractor and recoup whatever value hasn't depreciated away, but until we sell it, that tractor is more of a liability than an asset. It's a liability because we must pay for fuel, repairs, insurance, interest, someone to drive it and a place to store it when it's not in use.

What is a rancher's biggest asset? The land. Ranchers who own their land are in the livestock business and the land business. Where did we ever get the idea that we had to buy the land we graze or that we have to own the cows that occupy our ranches? Today, we see more than we used to of custom grazing and ranchers leasing the lands on which they run cattle. But, these trends only scratch the surface of what's possible.

There is no one-size-fits-all recipe, but more than one client has taken this idea to heart. I met with one recently who built a grazing business in which he did not own the land or the livestock. In fact, he gets paid by the landowner to graze. He's making a healthy profit. Of course, his neighbors think he's crazy.

Feeder Research

Xylanase Boosts Intake And Feedlot Growth Performance Physical chemical interactions and pH are the two most limiting factors affecting the rate of fiber digestion in the rumen. Rumen bacteria do not grow when the pH level is below 6.0. When the level is between 6.5 and 6.0, bacteria growth rate declines 14% per hour with each 0.1 decrease in pH. Optimal growth is achieved when pH is above 6.5.

A deficiency of fibrolytic enzymes in the rumen that break down the fiber can be partially overcome by enzyme supplementation. A study at the University of California's Desert Research & Extension Center evaluated the effectiveness of Fibrozyme (xylanase) in increasing rumen fiber digestion and boosting feed intake.

A group of 96 crossbred steer calves was used in a 64-day receiving trial with 16 pens of six head each. At the start of the trial the steers were implanted with Synovex-S. Half of the group served as controls, and the remainder of the calves received 7.5g of Fibrozyme top dressed on the ration at the twice-daily feeding.

At the end of the trial the supplemented steers had increased final weight 3%, average daily gain (ADG) 6% and dry matter intake 4.5% over the controls, according to Richard Zinn, who headed the research project. However, the Fibrozyme had no influence on the net energy value of the diet composed of 65% steam-flaked corn, 17% sudangrass hay, 5% alfalfa hay, 6% cane molasses, 4% yellow grease, trace mineralized salt, urea and limestone.

In analyzing the trial data, Zinn concluded xylanse will enhance runminal fiber digestion and dry matter intake and growth performance.

For more information contact Richard Zinn, University of California, at 760/356-3068 or e-mail [email protected]

There is a new product on the feedlot horizon that in feeding trials boosted average daily gain (ADG) and feed efficiency by 28% during the last six weeks of the feeding period. The best estimate is that it may be cleared and available for use by next year.

In a joint research project in Mexicali, Mexico, conducted by the University of California and a Mexican university, 140 crossbred steers averaging 820 lbs. were placed on a steam-rolled, wheat-based finishing ration. Half of the 14 pens of 10 head each were controls, and the other pens received 6 mg./kg., on an as-fed basis, of zilpaterol during the last six weeks of the finishing period.

Based on net energy intake, the control steers had an ADG of 99% of what was expected. The zilpaterol supplemented steers had an ADG 29% greater than expected. Steers receiving zilpaterol had an increase in average daily gain of 27% at 1.42 vs. 1.94 kg./day (3.13 vs. 4.28 lbs./day) and feed efficiency was 28% greater (6.08 vs. 4.37). However, there was no influence on dry matter intake for the supplemented steers.

The zilpaterol increased carcass weight by 4.5%, dressing percentage by 3.6% and the longissimus muscle area by 2.7%.There was no influence on kidney, heart or pelvic fat, fat thickness or marbling score. When adjusted to a constant carcass weight, zilpaterol increased gross primal cuts 1.7%, boneless closely trimmed primal cuts 2.9% and boneless closely trimmed retail cuts 3.2%.

The conclusion is that zilpaterol supplementation can have a marked beneficial effect on growth performance and carcass yield of feedlot steers. University of California's Richard Zinn, who helped conduct the study, points out enhanced growth performance accounts for 55% of the net economic value of zilpaterol supplementation that benefits the feeder. Meanwhile, increased carcass cutability accounts for 45% of the net value that benefits the meat packer and retailer.

Since up to one-third of the increase in weight gain is attributable to increased carcass yield, cattle finished on zilpaterol should be marketed on a grade and yield basis, Zinn says.

Zilpaterol chlorhydrate is a member of the family of compounds known as B-2-agonists. They enhance growth efficiency by stimulation of B-adrenergic receptors on cell surfaces. In muscle tissue they promote protein synthesis.

1. Words suggesting age bias.

2. Language noting employee gender.

3. Unbalanced work force.

4. Binding language.

5. Unmonitored employment agency work.

6. Omission of "equal employment opportunity employer."

7. Lack of internal approval controls.

Eye dentification

Retinal imaging may someday replace ear notching and branding.

Someday, processing newborn calves and pigs may entail more than just vaccinating and clipping teeth. A livestock producer also may wave a hand-held reader across an animal's eye to permanently identify it to the world. Honing in on a satellite, the reader also will note location and time.

The retinal image will become the animal's unique identification code, which will follow it through production to processing. Packers will then verify the animal's identity by scanning its eye prior to slaughter.

Retinal imaging sounds farfetched to industries relying on branding and ear notching. But, modern times and the desire for accountability through the food system force change. Incidents like mad cow disease in Great Britain highlight the need for foolproof ways to identify animals. And, if the U.S. wants to export beef and pork around the world, animal identification may become a requirement for doing global business.

A retinal image is a photograph of the pattern of blood vessels on the retina at the back of the eye. Each eye's blood vessel pattern is unique and doesn't change throughout life, much like fingerprints and DNA coding.

A Colorado company called OptiBrand is bringing this technology to the cattle yard and hog pen. OptiBrand uses a portable reader to capture the retinal images of animals in the field. Tied to a global positioning satellite, the reader encrypts the images with time, date and location.

Images from the reader are downloaded into a computer and perhaps over the Internet to OptiBrand. Each image is converted to a bar code for easy computer storage. A producer takes a retinal scan during major changes in the animal's life, such as weaning. These images are compared to archived images and the animal's identity is verified. Producers would still need conventional ear tags for daily management, however.

Technology Is Well Tested "Retinal imaging has been tested in the field on several thousand head of cattle and several thousand hogs," reports John Shadduck, OptiBrand. "It works fine, but is not something we can hand to the cowboys in the feedlot yet." The company plans to continue field testing with sturdier prototypes and then move into commercial production in about a year.

Surprisingly, cost of the equipment should be similar to that of radio frequency identification (RFID) equipment used in the industry. RFID ear tags contain electronic chips to communicate with hand-held readers.

"We think, based on our current models, we can manufacture the reader for under $1,000," Shadduck says.

Retinal images are captured in three to five seconds. "You can wave [the reader] an inch or so in front of the animal's eye," Shadduck says. "It is like a bar code scanner in a grocery store."

OptiBrand plans to provide a database service for storing retinal images of scanned animals. Producers may scan their animals, download the images to OptiBrand and receive identity verification within seconds, Shadduck claims.

Retinal imaging provides producers and processors with accountability and traceability.

"If you are a packer and want branded beef products in the marketplace, you can impose requirements on the producer and pay a premium for meeting expectations like no hormones, implants or antibiotics," Shadduck explains. "If something goes wrong, you know the cow-calf person, backgrounder and feeder.

"The imaging also gives farmers a way to verify that they are doing what they are being asked to," he adds.

Retinal imaging cuts the opportunity for fraud and equipment failure that can occur with other animal identification systems. Ear tags and implants can be lost, removed or recoded. Implants also may become covered with fibrous tissue and can't be read. And, blood tests for DNA can be lost or switched, Shadduck says.

Europe is interested in retinal imaging to halt a $400 million to $450 million cheating problem, according to Shadduck. "Instead of price supports, they have a per-head animal subsidy," he says. "Farmers get together and pool animals when an inspector comes to the farm." Retinal imaging would stop this problem.

Bruce Golden, a Colorado State University researcher, originally tested the technology on livestock and created OptiBrand to bring it to the marketplace.

Argentine Beef Exports Halted

Due to a Foot and Mouth Disease (FMD) situation in Argentina, U.S. Department of Agriculture's (USDA) Animal and Plant Health Inspection Service (APHIS) is placing a temporary hold on all meat and meat products from Argentina.

According to Joseph Annelli, an APHIS veterinarian, a small number of cattle were illegally imported into Argentina from Paraguay. The cattle were vaccinated in Paraguay, but the Argentinean government considers the cattle to have been exposed to FMD because Paraguay is not FMD free.

As a result, the illegally imported animals, and all cattle that came into contact with them (approximately 3,000 head in all), were depopulated. Annelli says APHIS found no clinical signs of FMD in any of the cattle depopulated.

Argentina has closed its borders with Paraguay. Brazil also closed its Paraguyaan borders.

In a statement on the U.S. ban on Argentinean beef imports, the National Cattlemen's Beef Association says it supports the USDA decision to stop U.S. imports of beef from Argentina until the disease incident is more widely understood. USDA's quick response in halting Argentine beef imports and the notification Argentina provided to the U.S. shows the Argentines are cooperating, says NCBA.

Canada also has halted imports of beef from Argentina, and Argentina has agreed to voluntarily halt exports to other Western Hemisphere countries.

Argentina has been eligible to ship fresh, chilled and frozen beef to the U.S. from regions declared free of FMD since 1997.

The U.S. has set Argentina's import quota at 20,000 metric tons. So far this year, the country has filled about half the quota. Before this incident, the country was expected to fill the quota.

Ryan's guaranteed tender beef I enjoyed your July issue article about Nolan Ryan's Tender Aged Beef ("More Than A Name," page 28). The article by Doug Perkins was timely, factual and well presented.

Someone finally has realized that our grading system does not reflect the consumer's preference. It never was intended to do so, but it certainly has been promoted as such. The article also demonstrates that the right kind of American Brahman influence in not a handicap, but an asset.

A rancher letter to urban transplants

What the Western wildfires should teach you.

Maybe you're a movie star, maybe one of the newly rich e-commerce cadre, or just a member of the transient elite who drifts from trend to trend.

You've moved to a pristine mountain valley in western Montana, leaving your home in Dallas for the pastoral life offered by the West's wide-open spaces - sheltered from the masses in your new earth-tone home.

As bluebirds flitter to their little houses and a grizzly prowls in the distance, you vow this splendid scene will remain yours forever. You're used to taking control. You crowd out a rancher and import a wolf, buy a mountain bike and close a road, and teach your 2.2 kids that trees have feelings, too.

Now that your life is centered around preserving the resources you think you've adopted, you ask how everyone else can be such terrible managers. Your answer is to let nature take its course - and let it go back to the way it was.

Well, pal, there isn't anything natural about what's happening in the West this summer. You've preserved and sanctified and saved and guarded to the point where you can't see the forest for the trees.

Timberlands have become crowded jungles of stunted trees and deadfall that sap every molecule of water from the sky and soil. Ungrazed forest meadows have built huge loads of tinder-dry grass, brush and weeds. Roads have been closed or abandoned, leaving no access for any purpose.

You've allowed the creation of monuments - literally and figuratively - that deprive people of the opportunity to build livelihoods from resilient and renewable resources. With your good intentions, you have added fuel to one of the nation's biggest tinderboxes and set the stage for what's happening today.

I'll just be kind and say that you're not stupid, you're just ignorant.

Now we have before us an unconscionable waste of property and resources. We know wildfires can never be prevented, but with appropriate resource management, they can be kept to a dull roar.

Yep, I'm pointing my finger at you. Didn't 1988 and Yellowstone teach you anything? Do hundreds of your neighbors' homes have to burn for you to get a clue?

And, buddy, don't even begin to blame the drought. In fact, in a semi-arid region where "wet years" are the aberration, "drought" shouldn't even be a part of your vocabulary.

Okay, so now you have to live with your mistakes and the ghostly remnants of the blazes. Question is - will you just move on and create your next little sheikdom, or will you pitch in and help clean things up?

Ready, Set Sort!

High-tech feedyard sorting systems are taking off as technology catches up with value-based marketing.

It's a business in transition within an industry in transition. That's how Jim Meetz, Dighton, KS, describes his cattle feeding operation. He says a movement toward individual animal performance and away from managing cattle based on averages is the hallmark of this transition.

Meetz, manager of Lane County Feeders, is one of the leaders in this shift to "DNA to dinner plate" cattle management. Of course, today's electronic technology plays a huge role in allowing cattlemen to measure, track and exploit the potential of each animal.

Lane County Feeders' investment in the future is a feedyard sorting system that uses an array of technologies to produce an electronic performance profile for each animal fed.

"We're not going to get away with feeding for averages and producing commodity beef for very much longer," says Meetz. "That's why we're investing in systems that help manage the individual for its potential."

Two years ago, Lane County Feeders installed Accu-Trac, the electronic cattle management system designed by Micro Beef Technologies Inc., Amarillo, TX. The system uses a combination of objective measurements - live weight, backfat thickness and external dimensions - to predict each animal's optimum marketing date. But, Accu-Trac does more, according to Matt Cravey of Micro Beef.

"The system also produces a software profile that stays with each animal from the ranch through the packing plant," says Cravey. "This individual animal information benefits everyone along the way - for better genetic decisions by ranchers, more dollars for feeders and increased value for packers and consumers."

Beyond Routine Sorting The sorting process at Lane County Feeders begins at receiving when the cattle are first marked with an electronic ear tag. Feeder calves are video scanned for frame score, and then backfat thickness is measured using ultrasound.

The system calculates each animal's rate of growth and projects days to finish for optimum profit. The cattle are sorted according to their endpoint potential and co-mingled with similar-performing animals. To fine-tune management during the final feeding period, the calves are measured and sorted again during re-implanting, usually 60-75 days later.

Sorting and tracking feeder cattle through finishing may seem routine for ultrasonic-based management systems. But, with Accu-Trac, the integration of other economic components takes the technology to another level. Using advanced economic equations, Accu-Trac allows each animal to be marketed at its maximum economic endpoint, Cravey says.

By also using Cornell University's Value Discovery Program, which uses performance and carcass composition equations, the energy value of the ration is coupled with the feed requirements of each animal to determine individual consumption. The formula partitions the pen's feed to individual animals daily over the feeding period.

"Customers are billed according to what each animal consumes," says Meetz. "We don't think we're necessarily saving money in feed costs, but we are maximizing each animal's performance." He says that the Cornell system is 98-99% accurate in assigning feed costs to individual animals.

This system offers additional advantages, according to Meetz. It's critical in his 42,000-head feedyard to keep pens full to capacity, and it's essential that marketings be made on a pen-ready basis. He also says the live performance and carcass merit information provided back to cow/calf producers can be invaluable.

"It's unbelievable how much information can be generated from this system," says Meetz. He admits the information can initially be a bit overwhelming, but he says it doesn't take long to begin understanding the data and how to put it to work.

Meetz and Cravey agree a key to the system is a packer who is willing to work within the individual identification system.

"The carcass data ties everything together for the rancher. What he does with it from there is up to him," says Meetz. "Most ranchers, depending on the level of management skills, will be able to use this information in nearly every phase of production."

Cravey emphasizes that Accu-Trac's additional value is significantly higher when used in an integrated production system.

Meetz adds that Accu-Trac offers feeder customers an advantage because they know up front what the cost will be to reach the target for the animals they're feeding - helping manage risk under a wide variety of economic and production conditions.

Micro Beef Technologies also has its high-profile sorting system in place at Decatur County Feedyard in Oberlin, KS. Owner/manager Warren Weibert says Accu-Trac technology can help producers improve their genetics as well as help retained ownership customers get paid for the true value of their animals.

Better Than The Eye? Is electronic cattle management and all the technology that goes into it better than "eyeball" sorting, or that much better than the simpler ultrasound measurements common in many feedyards around the country? Ask one of the pioneers in both ultrasound and high-tech sorting.

"These new tools give us an alternative to the experienced eye," says Kansas State University's (KSU) John Brethour. "And they help move us away from the batch marketing procedures prevalent in the industry which probably represent the most inefficient practice in the beef production process today."

Working at the KSU Agricultural Research Center at Hays, Brethour developed and patented a high-tech, commercial sorting method licensed to Cattle Performance Enhancement Co. (CPEC), Oakley, KS.

Brethour says that while there are substantial technological differences between the KSU-CPEC system and Accu-Trac - and the marketing strategies they present - both have the objective of maximizing profit for the producer. He calls electronic sorting a "just-in-time" production strategy that helps build quality control into the cattle feeding business.

"If we look at the optimal number of days to feed cattle, we'll usually see a range of 120 days from when the first and last animals ought to be sold," states Brethour. "And, if there is an ideal day to market an individual animal, we can see an average of about $1 per head loss for every day that ideal day is missed."

And, in today's clean-shaven cattle feeding business, a missed market can spell disaster. As the industry begins to walk the talk of value-based marketing, individual animal management and high-tech sorting becomes even more critical.

"We've had more interest in grade and yield marketing than ever before," says Brethour. "It seems to me that some kind of sorting program is essential as we go more into value-based marketing."

Overweight and overfat penalties, coupled with extra cost of feed wasted on overfeeding, especially concern Brethour. But, losses from cattle sold too light can be just as severe.

The most profitable component of any sorting system is to identify those cattle that should be held another 30 days to get the extra gain on them, according to Brethour. The other use of sorting is to reduce the outliers.

"We all look at sorting as a means to reduce outliers," adds Brethour. A lot of that income could stay with the primary owners. He cautions, though, that this type of sorting is only useful when cattle are being sold on a grade and yield basis. The KSU-CPEC system is dynamic - nearly any carcass grid can be dovetailed into the software and market endpoints can be determined based on those prices.

Jim Almond, J.B Grierson Co., Hysham, MT, began employing Brethour's sorting technology in his cattle feeding regime nine years ago and is sold on the system.

"It benefits us most by being able to separate the Choice and Select cattle and manage them accordingly," says Almond. "The credibility of the predictions is getting better all the time. There's no question it pays."

He estimates he's gaining about $15/head with Brethour's one-time electronic sorting program that also incorporates marbling measurements.

Almond sorts 4-10 weeks after weaning, placing up to 2,800 feeder calves into eight feeding groups. Then, he matches growing and finishing rations to Brethour's evaluation. The goal is to move as many cattle that might otherwise grade Select to Choice - and add as much carcass weight possible without overfeeding.

Last year, though, he went back to sorting based on live weight and eyeball measurements. The eyeball system didn't work as well, and Almond's wishing he'd stayed with sorting electronically.

"The only real indication I have now is to feed until I start getting Yield Grade 4s, and then it's too late," he explains. "But, that's absolutely the worst thing to do." Without electronic sorting, Almond agrees, the tendency is to market underfinished and underweight cattle.

"I'm not saying there isn't room for human judgement - I'm just saying this system provides an objective measurement that works for us," he adds. "The economics of the industry today dictate that we use some kind of sorting system like this."

The greater overall value in these types of sorting systems may be in helping ranchers and feeders become more aware of the kind of cattle they are producing, Brethour says.

"No matter the grid you're working with, once you go through the exercise you begin to focus on the carcass and carcass value," he says. "And, there's no question that when you have more information about your cattle, you do a better job for yourself and provide a better product all the way along the line."