Do high prices equal high profits?

August 29, 2011

If I had to sum up the Feeding Quality Forums we co-hosted last week in a short phrase, it would be, “So much good information.”

I enjoyed all the presentations, and as I’m listening to them I’m always trying to pick out the most useful take home messages for producers. As I discussed the content with my family, market analyst Dan Basse’s came up a lot.

He and his cohorts at AgResource Co. are predicting fed-cattle prices to reach $130 to $135 early next year.

To outsiders that might sound like everything is roses in this business, but insiders know better. Still, it’s easy to get starry-eyed when talking record highs and dollar signs in the same breath.

So today’s post is somewhat cautionary.

Myth—High beef prices=guaranteed profit for cattlemen and women.

Fact—High beef prices=hopefully enough money to cover all the rising input prices.

No matter what segment of the business you’re in, there are a number of factors that will Continue reading “Do high prices equal high profits?”

Kansan interns from OSU

By Steve Suther

Jenny Gillespie, a Master’s student at Oklahoma State University (OSU), has joined the team working for the Certified Angus Beef^® (CAB^®) brand as the fall 2011 Industry Information intern.

The Copeland, Kan., native earned a bachelor’s in international agribusiness from Kansas State University (K-State) in December 2009. A couple of years earlier, a trip to the Philippines had sparked her interest in those areas and led to studies in agricultural economics, international trade, and Spanish. She enjoyed a three-week ag study tour across Central America, too.

Gillespie worked as a USDA intern in Washington, D.C., for six months before starting the M.S. in agricultural communications at OSU. Gathering even more experience, she has been serving as a graduate teaching assistant, student editor for the Journal of Applied Communications and an intern with the university’s SUNUP television program.

Interested in agricultural advocacy and communication technologies, Gillespie spent the past summer working on her Master’s research into how much credence ranchers give to social media.

“Our team is fortunate to have Jenny’s experience and dedication as a resource this fall,” said Steve Suther, CAB divisional director. “Her research broke new ground in an emerging area of journalism and we’ll make use of those findings as will the broader industry.”

Gillespie is working with the CAB team from her Stillwater, Okla., base to produce feature stories, news releases, video scripts and Web content that help cattlemen profitably hit the CAB brand target.

The Certified Angus Beef^® brand, started in 1978, relies on strict quality standards to ensure consumers “taste the difference.” The only branded beef company owned by the 33,000 rancher-members of the American Angus Association, CAB is headquartered in Wooster, Ohio, where Gillespie attended an information seminar in March.

For more information on the brand, visit www.certifiedangusbeef.com. For ideas on producing cattle to hit that target, and to view CAB industry information articles, visit www.cabcattle.com.

Pounds pay, but…

August 22, 2011

I’m pregnant so I’m used to getting weighed. Often. Like every single month and pretty soon, every other week. But honestly outside of those appointments I don’t think about pounds too much right now.

That’s in stark contrast to the beef industry. Sometimes I feel like all we think about is pounds. And why not? Calves and fed cattle are always marketed with some element of weight and of course, hamburger and steaks go by what? Ah, yes, price-per-pound.

So that’s why everybody from local vets to university researchers seem dead set on this one:

Myth—Pounds is the only thing that matters in the beef business.

Fact–You know I’m going to say that marbling is important. (I do work for CAB afterall.) But it’s not just because you gotta have it to qualify for our brand.

I’m not saying ignore pounds, but pounds in tandem with quality is ideal. Why? Because it brings more profit in for you and the greater beef business.

Highly respected ag economist John Lawrence did a research paper on this in 2002 and updated it in 2009. When the Choice/Select spread was $6/cwt. or more, no other driver of feedlot profitability was more important than marbling. None. Not even those beloved pounds.

“Sure, a $6 spread?!” you might say sarcastically, but the average was $8 from 1996-1999. So it can happen. But in his analysis he checked out results as it moved higher and lower. Even at a $4 spread, marbling was the second most important variable, behind placement weight.

And regardless of where it ranks, those flecks of flavor have monetary value. More pounds that are also worth more is like the American Dream of the cattle business.

Five years ago I covered a Cattle-Fax research paper about the value that premium brands (like CAB) add to the industry. It’s still a pretty interesting read and I’m no economist but I’d have to guess has continued to grow. Here are a couple of the highlights:

“If we went back to a Choice/Select basis on everything we produce today,it would cost us,on average, $2.59 per hundredweight (cwt.) of carcass,” says Brett Stuart, the analyst who authored the paper.
“The fact that we differentiate higher grading beef, including CAB (Certified Angus Beef®), is worth roughly $20 per head,” he says.
“Even the guys selling calves at weaning benefit. That $20 a head filters through the live side of our industry,” he says. “If you look at long-term profitability in the feedyard and packing plant, it’s less than $13 a head. Something that adds upwards of $20 per head in total value is highly significant.”

I’m sure I could dust off some other data if you don’t believe I’ve made my case. But if you’re into arguing this one, I must ask: why wouldn’t you want both? You don’t have to choose pounds over quality, so why not chose pounds and quality?

May your bottom line be filled with black ink,

Miranda

A winning formula

August 19, 2011

As is often the case, I took a trip this week to talk to cattlemen about producing Angus cattle that will meet the specifications for the Certified Angus Beef® brand. This time my destination was Mitchell, South Dakota for the annual Dakotafest Farm Show.

This is a popular and large farm show with a great crowd of farmers, many of which are cattlemen, so it wasn’t hard to find likely targets for conversation. I was teamed up with Pfizer Animal Genetics at this particular venue, so we placed some focus on the latest in DNA technology and how the information gleaned from the genetic tests is factored into expected progeny differences (EPDs) at the American Angus Association to improve the accuracy of those EPDs.

One progressive commercial cattlemen that cornered me shared some of his genetic strategies and management practices. Besides an initial foray into DNA testing some of his commercial Angus cattle, he mentioned that he’s been finishing a good number of steers and heifers at his small feedlot facility and selling them to a packer on a value based grid. He’s already getting about 50% CAB® brand qualified carcasses today, and he quizzed me on what I thought he could do to get more Prime carcasses. I’d say here’s a guy that is tuned in and understands the business of marketing finished cattle!

After I learned more about some of the feed conversion and average daily gain history for his cattle as well as dressing percentages and yield grade figures, I told him that if I were him I wouldn’t change much of anything. I’d hate to see him mess with a winning formula, but increased accuracy of EPDs in yearling bulls (enhanced with DNA results) will possibly get the extra little bit of marbling that he’s looking for if he chooses to increase his marbling focus to get more Prime carcasses.

Otherwise, his breeding program is really balanced with cows that he’s happy with and he’s getting twice the national average in the percentage of his cattle that make CAB®. Pretty neat to hear about a guy that’s found a winning combination for his success and his pocketbook. What’s your formula? Have you looked into the opportunities DNA technology hold for commercial cattlemen? I’m always interested to hear more stories like this gentlemen’s.

The other great part of my trip was driving through the beautiful country in southern South Dakota and the Nebraska Sandhills. That’s always a treat for the eyes this time of year with all of the great ranching country and Angus cows that a person encounters.

I had to stop once in awhile and take a photo while I inspected a bunch of cows from the roadside. It’s hard to find the ranch headquarters in most of that country. You sure can’t see most of them from the highway. Some of the signs a person sees kind of make me chuckle too, like this one at Sparks,Nebraska, a little bitty town near the Niobrara River that lays claim to being the “Canoe Capital of Nebraska”.

The Angus cows in the photo were just west of town.

Next week, I’ll be heading to eastern Nebraska for the Feeding Quality Forum in Omaha. We’re sure to uncover a few new secrets for success in the feeding business there, and we’ll be sure to share those with you here.

-Paul

Paul Dykstra is a beef cattle specialist for Certified Angus Beef LLC. He works closely with current and prospective licensed feedlots and ranchers in north-central and western states of the U.S to help them profitably meet the demands of a high-quality marketplace through breeding and managing Angus cattle to their utmost potential.

Let’s work together!

August 17, 2011

I am biased.

I am opinionated.

I’m willing to admit that, because I love the bible verse which states: “You are the salt of the earth; but if the salt loses its flavor, how shall it be seasoned? It is then good for nothing but to be thrown out and trampled underfoot by men.” (Matthew 5:12-14).

Understand what I’m saying? I like corn-fed, well-marbled beef. I always have. That is why working at CAB is such a good fit for me, besides the fact that I love cattle and everything about the beef industry.

But there’s an issue that I’d like to address. When we begin saying, to serve our own purposes, that “my beef is better than your beef because…….” and you can finish the statement with any of the following endings: “it’s organic, it’s natural, it’s grass fed, it’s raised in a red barn with white trim and we massage our cattle daily, or it’s more heart-healthy.” You can be opinionated, and state why your beef is good,but don’t run mine down; remember,we’re all in the same (industry) boat!

I personally don’t care whether or not the beef I eat was raised organically, naturally, with added hormones, or treated with antibiotics (although I do want the marbling!). That’s just me. I don’t care if the beef I eat comes from cattle have long hair, short hair, or no hair. If your preference is to raise cattle that are of an ancient, southeastern Asia breed that only beller when it quits raining and it’s the most tender beef you’ve ever eaten, then go for it. If you raise, sell and enjoy grass-fed beef, or beef that’s fed flaxseed and gunpowder, that’s GREAT; but please, please, do not tell me that yours is better than mine because of these, or any other reasons. Because for every one of your opines that you think your beef is better, I can write you a dissertation on why mine’s better.

Instead, why don’t all of us in the beef industry just tell everyone that beef is a great product? Let the consumer vote with his or her wallet or pocketbook, and tell us where the demand is. I think there is enough business to go all the way around.

Let’s work together and do each other a favor by saying, “Beef is a great, wholesome and delicious source of protein, zinc and iron. Here are all your choices, which one would you like?” Instead of “my beef is leaner and better for your heart” or, “my beef is treated humanely and grass-fed, therefore it is better for you than that guy’s beef.”

Statements like this imply that other beef is NOT good. Instead of running one another down, like politicians do, just focus on the positive attributes of your product. Let Joe and Joan Consumer decide. Remember, a rising tide floats all boats!

I do think it is important to know why people eat beef (this is my opinionated side).

I do believe there’s a reason why our product sales grew at double digit rates this past fiscal year and are poised to set another record year for 2011 and why we are the number one, fresh branded beef program in the world that pays producers a premium for cattle that qualify.

Until next time, adios! Heading to the Flint Hills Beef Fest in Emporia, KS later this week and then to western Kansas next week!

Mythbuster Monday talks generics

Earlier I revealed that I’m not that trendy (I know, not a shock to anyone who’s seen me out and about), so “knockoff” designer sunglasses, clothes or purses don’t bother me in the least.

When it comes to other areas of my life I’m not that lenient—we’re pretty strong Ford supporters in this family, I can’t seem to find a detergent that does the job as well as Tide and don’t even get me started on the shortcomings of many generic brands in the grocery story aisle.

I think there’s a big parallel between how we feel about brands and how we feel about breeds. Think about those staunch supporters you know. No matter what, they’re going to run Angus, Hereford, Charolais, Simmental, etc.

We think your breed choice should be more about data and solid facts than tradition.

But relating to that “breeds vs. brands” comment, the real kicker is when people think “generic black” is as good as Angus. I could go into a whole series of myths related to that statement, but I’ve picked out the one we probably hear the most:

Myth—As long as they’re black,it doesn’t matter how much Angus-influence they have. They’ll grade just the same.

Fact—Study after study shows the more Angus influence,the better the quality.

And I’m not just talking about research we’ve done. Continue reading “Mythbuster Monday talks generics”

Air, water quality keynote Feeding Quality Forum

by Miranda Reiman

“Going green” is a stirring buzz phrase everywhere, no less in cattle feeding.

Some shudder as they think of the regulations it entails. Others argue that agriculture is the original green industry and producers are closer to the land and natural resources than anybody else.

Frank Mitloehner, University of California-Davis, is an expert in how that term applies to those involved in livestock production. He’ll share research findings and insights from growing up in Europe to working on the U.S. West Coast with attendees at the annual Feeding Quality Forum.

The meetings are set for Aug. 23 in Omaha, Neb., and Aug. 25 in Garden City, Kan.

“I have a lot of research data, both in the area of air quality but also climate change, that will help show where they stand and what they need to do to be ‘green,’ so to speak,” he says. “Producers have to view this whole area in a proactive way, and address issues before they run into trouble with the law or the activist groups.”

The combination of lab facilities and a highly qualified staff give Mitloehner a unique arsenal of facts.

“We have found that some of the allegations out there are not in agreement with our research findings on campus,” he says.

California generally provides the test case for what kind of rules are coming down the pike for those in the Midwest, the professor notes. Air and water quality are in the spotlight in his state.

“They have to obtain permits to make any changes to their operation,” Mitloehner says. “If you want to put up a new shade in your corral, you have to get an air permit for that.”

Both government and activist organizations are trying to enforce this policy.

“Fines can be pretty significant, but the other issue is that there are groups like the HSUS (Human Society of the United States) and others that sue producers they feel are not compliant with current regulations,” he says.

Right now, there are half a dozen such lawsuits in California.

“We’re talking about very large sums of money,” Mitloehner says. Even when they’re not successful, the “attempt itself is scary, particularly because if even one of them is successful, it sets precedence.”

Education and an open dialog are the best tools cattlemen can use, he says.

“Many producers think, ‘We know what’s best for our animals. We know what’s best for the environment and we don’t want people to meddle with it.’ But those days are over,” he says, “because the public wants to know where their food comes from.”

To hear Mitloehner’s presentation in person, register for the upcoming forum at www.feedingqualityforum.com or call Marilyn Conley at 800-225-2333, ext. 298.

The seminars are sponsored by Pfizer Animal Health, Land O’ Lakes Purina Mills, Feedlot magazine and CAB.

Cattle market ponderings

The stock market has been a worrisome topic lately.

Not a lot of good news in that department. But ag commodities are sure showing some resiliency, particularly the two closest to our business, corn and cattle.

Last week yearling steers in the 800 to 900 lb. range sold on the Cattle Country Video sale in Gering, Nebraska at a total of about $1,200 / head. These were very nice cattle, Angus based genetics with good management and very little freight cost to the local feedyards that were snapping them up.

They penciled out at about breakeven to the December Live Cattle contract last Wednesday ($1.20 / lb. live wt.). Suffice it to say, buyers were gobbling them up with hopes of lower-than-projected cost of gain or a higher market by December. The deferred contracts on calf-fed cattle are also holding up nicely under all of the poor economic news of late.

As far as investments go, cattle may stand as good a chance as anything. Anyone planning to feed out calves or yearlings starting soon? They’re worth a lot right off the cows or coming off grass, that’s for sure.

You might be able to use a breakeven calculator like the one we created here to help make those decisions. Or send me an e-mail and we can chat about it: pdykstra@certifiedangusbeef.com.

-Paul

Experts vs. propoganda artists

August 8, 2011

When I hear experts sharing their opinion on the news, I always pause for a moment to think about whether these people really have the credentials for that title–especially when they’re commenting on things like food production or medical issues.

How many times have you seen a famous journalist telling the nation how their food is raised, after they visited one farm? Or a celebrity giving suspect diet advice?

It’s pretty scary to think about the number of people who take these uninformed accounts as gospel truth, so I welcome and encourage folks to use their critical thinking skills whenever they read/hear/see anything.

But that leads some in the cattle industry to think there’s no way they could get credible advice from a group that’s owned by the leading breed association. See if I can change your mind on this one:

Myth—The CAB supply development team just spews Angus propaganda, regardless of the facts.

Fact—We do want you to use more Angus in your herd, but only because we truly believe it will lead you down the trail of profitability.

And it takes a lot to make us “believe” because our team is made up of scientific minds who take a hunch and then find the hard-core data to back it up. We’re not easily swayed by popular opinion. We want to know the numbers, the supporting facts and then firsthand accounts from ranchers and feeders. Continue reading “Experts vs. propoganda artists”

Local connections for worldwide consumer satisfaction

I live in the heart of cattle country. I get to see good cattle every time I drive to town. And even sometimes outside my back window.

But what’s even better than taking in this good scenery? Learning more about it.

On Monday I traveled just north of the interstate to pay a visit to Anne Burkholder, who has become something of a celebrity in the beef industry. Many people have heard of this Florida-native, Ivy League grad turned Nebraska feedlot manager.

She didn’t set out to be in the limelight, but rather to tell beef’s story. Her Feedyard Foodie blog is a place where anybody can learn what happens Continue reading “Local connections for worldwide consumer satisfaction”

Month: August 2011

Do high prices equal high profits?

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