Market-toppers need proof

Without a history, premiums paid don’t mean profit made

by Miranda Reiman

In most investment situations, you get a chance to evaluate the risk and rewards, do some research and make an informed decision. But when cattle pass through the sale barn in 30-second intervals, it’s not always easy for buyers to base decisions on anything more than appearance.

Data from Oklahoma-based Professional Cattle Consultants (PCC) shows that challenge could make the difference in whether feeders make or lose money on individual sets of cattle.

“You’d think premiums in the marketplace are being based on factors that will ultimately pay off when you’re going to sell those cattle,” says Dillon Feuz, ag economist with Utah State University.

This analysis, taken from five years of closeout data on millions of cattle from across the feeding belt, shows otherwise.

To get at the answers, actual purchase price was subtracted from the USDA Cash Feeder Price Index. All weights were standardized to a 750-pound (lb.) average using a 5 cent slide, and then sorted into four quartiles: heavy discount, light discount, light premium and heavy premium price.

The main finding? “Just because cattle look pretty doesn’t mean they are going to perform,” says Ron Hale, PCC analyst.

The top profit-getters were those with the heaviest discount, at -$20.90 per head, followed by those in the light discount (-$9.39) group. They earned $86.92 and $27.44 per head, respectively.

“If you pay a premium just because they look good or they have the hide color that you think is best, there’s enough variation in those groups that you’re going to come out short on those premiums,” Feuz says.

The PCC numbers illustrate that point. The quartile with a light “premium,” so slight the average came in barely negative at -$0.79, lost $17.15. The most expensive calves—purchased for $12.37-per-head above the market—lost $101.83 on feed.

Does this mean cattle are never worth a premium? Hardly; but it takes information to make them pay.

“If we could correctly identify the cattle that make the most money in the feedlot and grade the best, if we could identify those as feeders in the auction market,” Feuz says, “then the premiums aren’t big enough.”

The most expensive cattle in the analysis had the worst feed conversion at 6.56 lb. of feed/gain, compared to 6.38 lb. for the most efficient group. They ranked third for average daily gain.

Although grade wasn’t part of the dataset, previous PCC work pointed out a highly favorable correlation between gain and grade, so chances are those cattle with the highest premiums didn’t live up to quality expectations either.

Danny Herrmann, Ford County Feeders, says he’s willing to pay more for cattle that stay healthy, gain and convert, and grade. The best chance at those is recruiting repeat suppliers into his Kansas feedlot.

“If I have a pretty good history, I’ll try to buy those cattle again,” he says. In the long run, partnership pays off for ranchers, too. “Those people probably get more of a premium than the person who is just taking the highest price every year from a different person.”

Hale says producers who want to ensure cattle top the market year after year should make certain they deserve to.

“For a cow-calf man to do the best at marketing his cattle, he needs to know how his calves have performed and graded in the feedyard and how their health has been,” he says. “Then he can make changes and improve his cattle and develop a history.”

Communication is the key, says Herrmann—that and an extra dose of concern for the entire industry.

“If you do all the vaccinations and everything you can to give it 100%, I’ll be more interested,” he says. “But if you’re complaining about a 50-cent shot, then you’re telling me you don’t care about me. You need to be concerned about how the cattle perform for the next guy.”

Paying more for high-grading or source-and-age verified cattle, but selling them on the average live or dressed price is a flawed business model.

“If you’re paying a premium for cattle that you think are going to grade above average, but you’re not selling in a market that rewards that,” Feuz says, “then you’re just wasting money on a [calf] premium.”

At the ranch level, lack of knowledge on how cattle gain and grade after weaning makes it hard to know if its worth paying a premium for breeding stock, he adds.

Through the years, premium levels in the feeder-calf market have remained fairly consistent, but what they’re paid on has evolved.

“Feedlots are paying premiums based on perceived feedlot performance or end-carcass merit,” Feuz says. “What we’ve thought would deliver that over time has changed.”

Black-hided, Angus influence animals used to fetch a discount, for example.

“The biggest impact on feedlot profitability is how much you pay for those cattle,” Hale says. “There are times that discounts and premiums are worth it, but it all comes down to some kind of history.”

Big beef business in the Little Apple

Last night, something big happened in the Little Apple.

A local restaurant in the Sunflower State had a party. But not just any kind of party. As you would expect from this blog, it was a beefy party.

The Little Apple Brewing Company celebrated being named the 2011 National Beef Backer Award winners. We couldn’t have been happier for or prouder of Little Apple for this well-deserved recognition.

Co- part-owners and managers Russ and Kelly Loub accepted the award earlier this month in Nashville at the National Cattle Industry Convention with partner Lori Fink, who also co-owns the restaurant with her husband Galen.

The Fink family is no stranger to the award stage. That special connection they have between the cattle business and selling steaks in the Manhattan, Kansas restaurant has made them a shining star to the Certified Angus Beef® brand for years.

This winter, I got to visit with Russ and Kelly about the restaurant business, their connection to CAB and their affinity for serving incredible beef dishes to their customers. Their passion for quality food service and inherint pride in satisfied beef eaters was inspiring.

Of course, my favorite open-faced steak sandwich was also inspiring:

Here are a few of my favorite quotes from Russ and Kelly from my interview that day. If you get the chance to travel through Manhattan, Kansas, make it a priority to stop in and say hello to them. These folks are working hard every day to make sure your high-quality cattle are in demand by hungry customers. Tell them “thanks,” and “congratulations.” And for heaven’s sake, order the open-faced sandwich!

“From day one, we aligned ourselves with CAB and became a licensed restaurant. That was really where we put our focus, on having great steaks. We needed to be aligned with a brand that was nationally known, that had its own quality reputation. There was no other place in town that was doing that kind of thing, putting their steaks out front, saying ‘Yeah, these are the best you can get, right here.’”

“You drive down the highway and see lots of cows in the field, but don’t really think about what’s going on there. Behind the scenes – we just see meat in a box, but there’s an awful lot that goes into that, way more than I ever imagined. From breeders to production people to packers — it’s just amazing how many people are involved in this industry. When I think about that, I just say, ‘Wow!’ There are an awful lot of people out there really looking to put out a great product.”

“We salivate knowing we had a really great food and eating experience, and we want to relive that again. I think that’s what we’ve always stived to do here — have consistancy, consistancy, consistancy. The Certified Angus Beef® brand has certainly provided that.”

“That’s what delineates a great resturant from just any resturant: the ability to replicate the same thing over and over and over again, thousands and thousands of times, and have it still comes out as good as it did the very first time. CAB has been there to do that for us.”

“What’s made it work more than anything else is our staff, the loyalty of our staff. Our customers like seeing those same people. It’s like home for them. People love that they come in and see the same person they’ve seen for five years taking care of them. We’ve been so blessed that way – people come back to see us when they’re in town. That’s really been a godsend for us, the loyalty of the staff.”

Read more about the Little Apple Brewery in the March issue of the Angus Journal.

Fed cattle up; 25.2% CAB boosts supply

Here’s the Meat Market Minute:

Live cattle traded even to slightly lower last week after the previous week’s surprising $5 rally. Packers have continued to run reduced hours to manage margins, but feeders reduced show lists by 22,000 head in an effort to push values. It worked for the feeders, but that jump was still surprising given that the reduced packing hours had been able to hold live cattle values down for four weeks coming into February..

Boxed beef prices were up across all grades in reaction to those higher live cattle costs. Packers moved the values up sharply to begin on Monday and then leveled off the remainder of the week. CAB middle meats were a significant driver to the cutout as ribs and loins were up 3.7% and 5.7%, respectively.

CAB acceptance rates continue to increase, posting yet another rise, week over week. In fact, certification rates have been steadily improving since the first of the year to reach 25.2%. Just in one week, the jump accounted for an additional 5,000 head compared to the week before.

Until we meat again,

-David

ASCC winds up four-year demo

By Steve Suther

The commercial Angus world warmed to the concept of AngusSource®, with more cattle enrolled each year from 2008 through 2011. During those years, the AngusSource Carcass Challenge (ASCC) saw entries totaling 6,188 with 58.3% accepted for the Certified Angus Beef^® (CAB^®) brand; nearly 13% of the total made USDA Prime, according to Ginette Kurtz, AngusSource manager.

Over the past 20 years, several carcass value demonstration contests have showcased high-quality commercial Angus cattle that can hit the CAB target, going back to the Value Discovery Project, Best of the Breed and National Angus Carcass Challenge.

Those programs assigned dollar value to carcass merit, but in light of varying grids and seasonality, the ASCC simply ranked pens on ability to hit the CAB target. Tiebreakers came down to cutability comparisons.

“The goal was to build relationships with feedyards that are feeding AngusSource calves, accumulate harvest data on them and facilitate the transfer of information back to cow-calf producers,” Kurtz says. Along the way, we demonstrated that pens of Angus cattle really can hit 100% CAB.”

Twelve CAB partner feedlots participated, with a relatively few 22 distinct owners of entries across the four years. There were 40 ranches of origin from West Virginia to Oregon and Louisiana to Montana, 13 states in all.

The first year’s results showed excellent quality with the Beller Feedlot, Lindsay, Neb., winning pen of 62 Montana steers making 80.7% CAB and Prime. They also fed the third-place pen that made 68.2%. Competing cousins at the nearby Beller Corporation came in second with Nebraska steers that went 69.1% CAB; and fourth went to Cattleman’s Choice Feedyard, Gage, Okla., which partnered with Jimmy Taylor of Cheyenne, Okla., on the 67.7% CAB steers.

Before the contest would end, Beller Feedlot would account for more than half of all entries, with 3,202 head.

Two veterans of the Angus carcass contests sparred in year two. Mike Kasten, Millersville, Mo., who would end up enrolling 273 head at Irsik & Doll Feed Yard, Garden City, Kan., over three years, started 2009 with steers making 90.5% CAB. That edged out Mason Fleenor of Ida Grove, Iowa, at 90.2% CAB, but Fleenor would hit 92.7% CAB the next year.

However, a little-known farmer feeder at Savannah, Mo., would quietly miss those upper levels with only 80% CAB to start 2008. But John Osborn would be back, again and again. His 474 calves from a pool of known Angus genetics set records of 92.3% and 92.5% CAB in 2009 to win the ASCC, one of those groups achieving 36% CAB Prime.

By the time 2010 drew to a close, everybody knew all of Osborn’s 521 enrollments were exceptional. There was other news, as the University of Missouri’s Thompson Farm, Spickard, Mo., showed what the steer mates of Show-Me Heifers could do, pushing toward 87% CAB.

But dozens of other producers with cattle hitting 70%, 80% and 90% CAB could only watch in wonder as two of the Osborn Farms entries made 100% CAB; they shook their heads as one steer in the third-place entry did not make CAB, but 61.5% of them achieved CAB Prime.

For 2011, the notables were again Mike Kasten at 81.6% CAB, the University of Missouri with 89.5% CAB, and Beller Feedlot’s 84.2% CAB cattle from veteran contender Jimmy Thomas of Adrian, Ore. Of course, the last annual $500 prize and winner’s jacket went to John Osborn, even though his numbers were down with just 154 head in four pens, and the championship pen mustered “only” 92.1% CAB and Prime.

“It was a good run,” Kurtz says. “Grid premiums out there today mean producers can earn their own rewards in the real-world market, and AngusSource enrollment is still a great way to start.”

Changing the world, one beef eater at a time

I am somewhat of a Certified Angus Beef evangelist.

I’m not a fire-and-brimstone style crusader. I know everybody has their own tastes, but I want everybody to base their choice on good information, by golly. By now most of my family members (and quite a few friends, too) are trained to look for the CAB logo before associating that beef with my company. And before they shell out a pretty penny for a lower quality hunk of meat.

I’d like to think I’ve single-handedly saved many a dinner party or Saturday night supper club selection, but I digress.

There’s nothing like a comment from a close friend to bring you back to reality: “I just had one of your Certified Angus Beef burgers at McDonald’s.”

Well, there it is. I have more work to do.

Just over a year ago I wrote about this myth, “In short, it’s probably the most common one we get.” Apparently that’s as true in 2012 as it was in 2011, as we polled our Facebook followers and they overwhelmingly said that’s the word on the street.

Myth: “Certified Angus Beef? Ya, I’ve seen that at McDonald’s…”

Fact: You have not seen Certified, Angus and Beef—those three words, together with this logo

at McDonald’s. That’s the only way you know it’s Certified Angus Beef and not just Angus beef. Don’t know the difference? Don’t worry, it happens all the time. Here’s the crash course:

To be CAB cattle must pass a total of 10 carcass specifications designed to provide predictably delicious beef.

So, if that beef at McDonald’s isn’t CAB, that begs the question: What is it?

There are 126 programs certified by the USDA. Of those only 89 are Angus programs and only 30 are Premium Choice. Packers want to do something with all the cattle USDA has already identified as Angus-type, so when they don’t make CAB there is a wide variety of programs they might fall into.

Only one in four (sometimes one in five) of these A-stamped carcasses end up as CAB, so the other 75% to 80% will fulfill the needs of companies like Hardees, Arby’s, Burger King and Mickey D’s.

“Angus” is not the same as saying “Certified Angus Beef”

That’s why we’ve coined the tagline, “Not all Angus is equal.”

Are you ready to bring this good news story to the world? Check out our consumer website to load up on more facts. I could use a little help here.

May your bottom line be filled with black ink,

Miranda

Beef for your Seoul

Last week, Miranda talked about how CAB seems to be here, there and everywhere, including far away places like South Korea. If you’re interested in taking a little ’round-the-globe trip from the comfort of your computer, I grabbed my co-worker Emily for a quick Korean Q & A.

Emily’s a farm girl from southern Ohio who currently works in our international team. Faster than she could ever dream of getting through customs, here’s a five minute snapshot of her trip:

First off, tell us why you were in South Korea: What is Certified Angus Beef LCC’s interest there?
Our goal was to work with and build relationships with those restaurants that are serving Certified Angus Beef. We want to support their efforts. We’re also focused on working with packers who export overseas and the USMEF (United States Meat Export Federation) to continue to build demand for US beef, especially Certified Angus Beef.

Specifically, we’re working to expand the South Korean market because there are incredible opportunities for growth there. It’s a huge market with endless potential. In Seoul alone, where we were, there are 10.5 to 11 million people! They’re huge meat eaters, and there’s an incredible amount of wealth in that city.

Tell us about the biggest difference you saw between doing business in South Korea as opposed to working with our American restaurants and retailers.
First of all, when you’re accustomed to the meat/food industry in America, it seems very complicated over there… or maybe it’s actually simplified and we’re the complicated ones. All the steps of the production chain are much more integrated. Importers and distributors also own restaurants and retail stores, unlike here where those are all separate entities.

What’s more, LotteMart, the major retail partner we were working with, has an incredibly diverse portfolio. LotteMart is not only a grocery store, it also has hotels, shopping centers, theme parks and more. KMEAT is a food importer/distributor, but they also have a retail meat case in front of their corporate office and operate restaurants. They have meat cases in some restaurants, too. So that’s a challenge when you’re trying to sort out who to do what business with.

You mentioned you ate at several Korean barbecue joints. I’m guessing these are not what we typically imagine when we hear traditional ‘barbecue.’
No, this wasn’t exactly your traditional Texan barbecue! In Korea, it’s as much about the presentation as the preparation method. In the middle of each table is a pit filled with coals. They put a grate over the pit and fire it up, cooking your meat and sides right in front of you. Of course, it’s a lot quicker process than barbecuing here, because they’re using very thinly sliced meats, mostly from the short rib or chuck.

What kind of feedback did you get from the Koreans you visited with about their feelings on US beef?
We continued to hear from our retail partners that their consumers still have a lot of fear surrounding eating US beef. They have this huge misconception that the US keeps all the good meat for ourselves and exports the “reject meat” to them. Even one of our translators, who was born in California, married a man from Michigan and then moved back to Korea told us she didn’t eat US beef, even though she admitted she preferred its taste and it was more affordable. Ever since the BSE case in 2003, US beef has had a hard time shaking a bad reputation.

How do we combat that?
We continue to partner with USMEF to share truthful, accurate information about the safety and wholesomeness of American beef. But Rome wasn’t built in a day… the Korean business culture is very cautious. They’re extremely strategic and formal in their business decisions, so it will take time to rebuild their trust in US beef.

In the mean time, we’re focused on creating demand from the end users by sampling, educating and distributing more information about the brand. We’re creating special marketing materials and information in their language, and we’re working on creating a video that shows the pasture to plate connection in Korean.

Do you have questions about Emily’s Korean adventure? Send me an email at lnelson@certifiedangusbeef.com and I’ll ask her. Until next time,

-Laura

The hurrier I go, the behinder I get!

On the few days I slow down long enough to think things through, the better off I am.

When I take the time to analyze and really study a subject, I can master it; the job will get done. It will all be OK. There are times when I have too much to do, that I just dive in and am a flurry of activity. Sometimes, as my wife will tell me, you try to get too much done in a set period of time. If I take a day off of work to work at home on projects that need tending to, I always line up more than I can possibly finish. That ends up with me feeling frustrated, and I don’t like that!

Along with that, thinking on my feet is a glaring fault of mine, particularly if I am not well prepared. What I am is methodical. I like concrete things. I like Step 1, Step 2, Step 3. Summary: think things through, make a plan, and carry it out in a logical manner, and I can be very productive.

A well-designed cattle operation that meets your goals takes a lot of thought, planning, crafting, researching and consulting with others to make it successful. Foresight doesn’t hurt, either. I am about to share with you a very exciting new DNA tool for commercial Angus producers: it’s called GeneMax™ (also denoted as GMX™). This test will enable producers with commercial Angus cowherds to plan and make selection decisions in a methodical manner (good for people like me!).

With GMX, we can find out what’s in their genetic makeup for marbling and yearling gain as early as day one.

GMX is a DNA test that doesn’t require deep pockets (It’s $17.00). It determines an individual animal’s ability to deposit marbling as well as it’s ability to gain weight (more specifically, yearling gain). It was designed with the commercial producer in mind who utilizes registered Angus bulls on high-percentage Angus cows.

GMX can help the producer select breeding females and screen feeder cattle. You can take DNA samples (blood) and submit them the day the calf is born and know what it’s outcome will be regarding these two traits. Will I keep this one, or does it not fall into my goals and plans? Rather than finding out three years later what kind of feeder calf or slaughter steer that heifer will produce, you can know now, at least in terms of feedlot performance and quality grade.

We have excellent tools available to us now in the form of Expected Progeny Differences (EPD’s). However, on unproven, or low-accuracy sires, they are not quite the perfect thing until we get some data back on those bulls.

With GMX, we’ll know in about four weeks after the test has been submitted. I feel certain that as we move along and this tool becomes more well known, it will become a standard for helping us select cattle. Eventually, more tests will be developed that will allow us to measure even more traits.

For now though, you really need to look into this. Check out our GMX info on the www.cabpartners.com/GeneMax website. You’ll be glad you did.

OK, now: hook up the bale fork; set that corner post; roll up that old wire; treat that cow; cut those cedar trees; call the COOP to fertilize the brome, order feed, clean the pens…………..shucks, what’s next?

Mythbuster Monday goes beyond the logo

I am new to the Certified Angus Beef LLC family, but I am not new to the Certified Angus Beef® (CAB) brand.

I grew up with CAB practically in my backyard, with the same zip code as the company’s original West Salem, Ohio office. My aunt previously worked in marketing for the brand. I drove past the current CAB headquarters in Wooster every time I visited town while growing up. Not to mention, and perhaps most importantly, I have enjoyed many delicious CAB steaks in my short life span.

Last summer, I had the amazing opportunity to intern as the brand’s Promotions & Communications Marketing Intern. The job title is a mouthful, but essentially I was a part of the oldest and most recognized American beef brand, and I am at it again as the spring Industry Information Intern with Miranda, Laura and Steve!

Why I am telling you this? Though I grew up surrounded by CAB, I did not recognize the breadth and depth of the brand until I gained an insider’s perspective. Last Monday, Miranda talked about the company’s vast reach in the beef industry, and her blog post has me wondering if I am not the only one who has known of CAB, but has not truly known how CAB works.

Myth: CAB is a logo you see in the grocery store that works entirely on the demand/consumer side of the beef production chain.

Fact: CAB works closely with cattle producers and feeders to help them raise the highest quality beef and works with every stage along the beef production chain, starting with the producer.

As you may know, CAB is a subsidiary of the American Angus Association, with the mission to increase demand for registered Angus cattle. But if we increase consumer demand for high-quality beef, we also must increase supply!

It is true that CAB owns only its logo. But beyond that, there is a well-trained team of employees who understand the beef industry from pasture to plate, and is involved all the way from cultivating consumer demand for exceptional beef to ensuring market supply.

The Black Ink blog and the Supply Development website are simple examples of how CAB offers producers relevant and valuable management information. The CAB team provides timely information about feedlot performance and beef market statistics. And, key to production success, the brand builds relationships within the industry and fosters networking among producers.

I am excited to join this network and continue to grow in my understanding of the industry and brand, which is a whole lot more than a logo at the grocery store!

-Emily

Emily Krueger is an Industry Information intern for the spring 2012 semester. A senior at Ohio State University, Emily will complete her degree in agriculture communications this spring. She grew up on her family’s cattle and horse farm in West Salem, Ohio, and currently serves as vice president of the OSU Collegiate Young Farmers club of Ohio State University.

Register now: Backgrounding for Quality seminar

by Laura Nelson

Everybody is paying more for cattle now than ever before.

That should be reason enough to attend the “Backgrounding for Quality” field day, says Gary Fike, of Certified Angus Beef LLC (CAB).

Set for Thursday, March 8 from 2 p.m. to 7 p.m., the event aims to help stocker operators reach profitability by focusing on their output. White Brothers Cattle Co. will host attendees at their ranch south of Chickasha, Okla.

“With tight feeder calf supplies, rising feed costs and all the other market dynamics, backgrounders may have to manage cattle a little differently than they have in the past,” says Fike.

The speakers will provide data and ideas.

Darrell Peel, Oklahoma State University (OSU) economist, kicks off the program with a market outlook.

Then, three rotating breakout sessions will cover management and marketing practices:

“Backgrounding best practices,” by Mike Nichols, Pfizer Animal Health, and Chickasha veterinarian Bruss Horn
“Managing stockers for a quality endpoint,” by Gerald Horn, OSU
“What a feeder wants,” by Dale Moore, Cattleman’s Choice Feedyard

Pfizer’s Greg Quakenbush will cap off the program shedding light on industry myths with his presentation, “The truth about…”

“We have some of the foremost experts on stocker research and education lined up,” Fike says. “They’re good at stating the hard facts, comparing numbers and giving practical advice.”

The field day, sponsored by OSU, CAB and Pfizer, is free, but interested stockers must RSVP by Friday, Feb. 24 to Marilyn Conley. Call 800-225-2333, ext. 298, or e-mail her at mconley@certifiedangusbeef.com.

Middle meats for your Valentine

Here’s this week’s Meat Market Minute:

Last week live cattle traded steady with the previous week at $123. Production levels remain low compared to last year (602K vs. 639K) as packers keep working to regain market leverage and return to profitability. CAB-qualifying cattle numbers continued their upward trend in late January, climbing a half point to 22.25% acceptance.

Coming off three straight weeks of limited harvest, packers were able to push boxed values higher on limited inventories. Middle meats found strong support, especially early last week as buyers looked towards ribs and strips for Valentine’s Day needs. Although end meats were slightly higher, there was not as much demand there as for the middles.

Until we meat again,

-David

Market-toppers need proof

by Miranda Reiman

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Beef for your Seoul

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