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Filling pens to create supply

Kuner Feedlot named CAB 2013 Progressive Partner

 

by Miranda Reiman

No one is automatically insulated from the effects of a shrinking national cowherd, but Kuner Feedlot, one of 12 in the JBS Five Rivers Cattle Feeders group with 1.6 million annual marketings, goes for proactive rather than reactive ways.

The management team’s unique approach caught the attention of the Certified Angus Beef ® (CAB®) brand, which named the Colorado yard Progressive Feedlot of the Year at the CAB annual conference in Palm Desert, Calif., on Sept. 18-20

“We knew last fall that it could get tough to find cattle and we’d be forced to be creative,” says Nolan Stone, general manager at the 100,000-head capacity yard located near its namesake town along the South Platte River. They quickly gravitated toward developing replacement heifers.

“The idea was, ‘Let’s do something that will separate these heifers from what else is out there,’” he says.

They purchased 4,500 head of known Angus females and then used all available tools to make them a value-added group of replacements. Blood samples were collected during processing, to evaluate each heifer for gain and grade potential using CAB’s GeneMax™ (GMX) genomic test. The first decision on which to feed versus breed was based on those GMX scores.

“They wanted to base their selection on something that was more objective and had direct feedyard and carcass economic meaning attached to it,” says Kent Andersen of Zoetis, the genetics company that developed GeneMax in collaboration with CAB and Angus Genetics Inc. “They looked enough alike where it wouldn’t have been so easy to do that initial sort on phenotype.”

Using the 100-point combined measure for both gain and grade, the team at Kuner sorted off anything that didn’t make at least a 50. Then Colorado State University assigned docility score and evaluated the females for depth and width. Those that didn’t make the cut went into a natural feeding program.

Then they used timed AI (artificial insemination) on the remaining 1,250, followed by a second round of heat-detected AI at the feedyard. The remaining 1,100 heifers were then sent just south of Steamboat Springs, Colo., to Saddleback Ranch, which Five Rivers leases. Fifteen cleanup bulls, all 15/16 brothers leased from John Raftopoulos of Diamond Peak Ranch, Craig, Colo., completed the breeding program.

Andersen helped select the four AI sires.

“We went straight to the American Angus Association sire selection tool on their website,” he says, noting the Kuner goals of a double-digit EPD (expected progeny difference) for calving ease direct (CED), a “sensible” birth weight and “as much growth and grade as possible.”

Using the Sire Match feature of GeneMax, several sets of heifers were identified by known sires, including some Mytty InFocus and SAV Final Answer daughters. Only 39% of the heifers with unknown sires were selected, compared to 60% of those with superior genetics.

“We wanted to pick three or four AI sires that represented enough diversity that we could match to the heifer groups and accentuate strengths or cover any weaknesses, as well as minimize inbreeding,” Andersen says.

The average $W and $B indexes of the AI sires were $41 and $87, respectively. That puts them in the top 5% of the breed for those indexes.

That’s an advantage to any of the bred-heifer buyers, but also has a greater industry benefit.

“We felt like we could do a small part to improve the cowherd. We’ll be creating a set of feeder cattle down the road that were selected for things like dollar-B ($B),” Stone says.

He would like to see what could happen if others follow suit.

“We’ve told people our goal is not to just market these 1,100 heifers, because that’s not much in the whole scheme of things,” he says. “We’d like to tell people ‘here’s how we did it’ and hopefully others will do it and make better cattle.”

 Andersen says it’s perfect timing.

“We could expect pretty substantial increases in heifer retention in the next one to five years,” he says. “This project really served as a very large scale prototyping effort for how we can use all technology at our disposal to select the best heifers possible and then breed those to the best, proven, genetically superior Angus AI sires possible.”

“We’re also hoping to avoid the costs associated with heifers that aren’t going to make good cows or produce progeny that gain and grade,” Andersen says.

That’s become a bigger concern for Stone, who has worked for Five Rivers for 14 years, the last seven as the Kuner general manager.

“We’ve really learned since we started feeding naturals,” he says. “We do mass sorting on the traditional cattle, but the natural cattle, we generally leave in their contemporary groups and they don’t receive the benefits of all the available technologies, so you see huge gaps in performance.”

Some 3,500 head come and go at the feedyard each week. As the traditional cattle come in, they’re individually weighed and stay in holding pens for 30 days while they’re stepped up to a finishing ration.

Although the Kuner Feedlot tracks performance, grade and profitability on every pen, the co-mingling makes it hard to relate back to individual ranches.

But the natural cattle are mostly kept together by source.

“Feeding them really made us realize the better cattle are worth more money,” Stone says. “We’re interested in cattle that have better genetics. We can’t just buy the best cattle, but if people understand we’re paying attention to it, maybe it will become more of a management style than it used to be when everything was just a commodity.”

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How can beef compete

Higher prices bring higher expectations

 

by Miranda Reiman

Eleven to one—those were the odds the beef industry was up against for two decades.

“We got $10 in new spending over that 20 years, meanwhile our pork and poultry competitors got $110,” said Nevil Speer, an animal scientist at Western Kentucky University. “You can’t grow an industry without new revenue coming in, and we basically worked in a stagnant industry for 20 years.”

Speer presented as part of the Harlan Ritchie Beef Symposium during Midwest American Society of Animal Science meetings in Des Moines, Iowa in March.

Beef struggled with health perception issues, convenience woes and the challenge of being the most expensive protein in the meat case, he said.

Then, the independent sector orientation began to adjust for mutual good.

“We began to understand that we need to work together in this industry,” Speer said.

That lent itself to more branded programs and supply-chain alliances.

“Today we’re averaging somewhere around 12% to 15% branded sales on a weekly basis,” he said. “This push will probably continue in the years ahead.”

As a result, grid and other negotiated sales make up 75% of all fed-cattle marketings today.

Part of that also comes from increased competition for feeder cattle, and the need to recoup premiums paid on cattle coming into the feedyards.

“They’ve begun to implement more and more supply management over the last 10 years, and those are strategic business decision,” Speer said. “If we can find cattle that meet some end-user specification and then match our inputs and do that securely, we begin to kind of distance ourselves from the rivalry of fighting it out in a commodity market.”

That’s not only happening on the cattle side of the business, but once it’s processed into beef, too.

An estimated two-thirds of retail marketings are “out front sales,” Speer said. “They’re not spot sales.”

“What’s happening is that we are continuing to have more need for efficiency of movement, precision, to meet consumer needs,” he said. “We need the right cattle, the right products, at the right time and the right place, and that’s ultimately because we want to offer high-quality, highly competitive products with consistent, predictable turnover.”

That’s especially important as beef looks to compete with much cheaper alternatives. Beef is running at 240% the price of chicken and 140% that of pork.

“We’re on the upper edge of where we’ve ever been,” Speer said. “At what point do consumers begin to push back? I don’t know; they’ve shown amazing resilience and continue to do so, but this is a concern.”

“Certainly, higher price equals higher expectations,” he said.

The apparent solution is more teamwork.

“If we can supply high-quality product on a consistent basis, then we create demand,” Speer said. “Then the demand feeds back into the supply and it’s really a network-type of perspective where we create an entire ecosystem around a business, and ultimately we get new value creation.”

To those who say at some point the industry will have too much Prime or Choice beef, Speer counters, “If we can over-deliver that in an efficient way, and be more price-competitive with a quality product, I say let’s go. That means more opportunities in the beef industry.”

The National Beef Quality Audits, along with numerous other studies, show that meeting consumer demand sets the industry up for success.

“We have pretty good evidence that as we increase cooperation and responsive to consumers, we do a much better job in this industry,” he said.

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Uniform cattle increase profit potential

 

by Miranda Reiman

John Simons ranches with his family near Enning, S.D., where they’ve focused on reducing variability in their Angus-based cowherd for the last 20 years.

“If your calves all look the same, they’re just a pretty package,” he says. “And pretty sells.”

Sticking with one breed and bloodline for several years lets Simons produce calves that not only have the same phenotype but also perform similarly in the feedlot and on the rail.

“They might not all be brothers, but they’ll be related,” he says, noting the family only switches bulls when they start retaining heifers and need to infuse a divergent bloodline.

Salebarn studies routinely prove uniformity in weight and cattle type mean premiums at auction, but the rancher really noticed the difference when he began working closely with Haverhals Feedlot near Hudson, S.D., a decade ago. Simons has retained partial ownership on steer and heifer calves ever since.

“This has been an eye-opening experience for me,” he says.

A recent analysis spanning nine years and 67,000 calves fed in the Iowa Tri-County Steer Carcass Futurity shows finished cattle in the same pen differ in average value by nearly $700 from top to bottom.

“Variations within a feedlot pen make management and marketing a great challenge, especially when selling on a carcass merit basis,” says the technical bulletin published by Certified Angus Beef LLC.

In the study, receiving weight varied by 401 pounds (lb.), and the gap in finished weight widened to 546 lb.

“The more uniform a group, the more likely that a feeder will pass some premium back to the producer,” says Kelly Bruns, South Dakota State University animal scientist. “It saves them time and pen space, because they may not have to sort these groups.”

Breaking the data into the most uniform quarter compared to least shows a much tighter set of cattle. The top group sold within a 25-day window and had a 388-lb. average difference in finished weight. That’s compared to the most variable 25%, which sold during a 56-day period and had a 750-lb. average span in harvest weight.

Cattle with similar performance potential allow feeders to make blanket decisions about feeding and implant strategies, Bruns says.

“As they try to capture value on a carcass-based pricing system, being more uniform is certainly a benefit,” he says.

As feeders try to hit a “sweet spot” on many grids, the fewer outliers, the better.

The carcass value disparity in the least variable quarter was $148 per head, compared to the most variable, which had an average carcass value variation of $329 per head.

Bruns says the two easiest ways to create a more like set of calves are related to age and genetics.

“If we can keep calving window tight, it’s huge,” he says. Technology like synchronized artificial insemination (AI) can help, but anybody can cull cows that are continually late calvers.

Good herd management helps narrow that window, too.

“Proper nutrition and management in the months before [a rancher] decided to turn out bulls becomes pretty important, so that they’ll settle in their first heat,” Bruns says.

After that it’s about selecting like sires.

“If they have the ability to choose bulls with similar parentage or at least similar genetic potential, it helps,” he says.

That’s been the key to Simons’ successful transition.

“I was so poor when I started, I couldn’t afford to pay attention to what kind of bulls I had,” he laughs. Now they invest at least five years of careful study in the next bloodline they want to use, and always look to buy the top bulls they can afford.

“Once we started buying the good ones, we had to continue to do it,” he says. “Because if we didn’t, we weren’t improving.”

Simons gained cowherd consistency as an unintentional secondary benefit. “I want the calves to be uniform, because that’s what I sell, but my cows have been more uniform and more predictable.”

Plus, it has reduced on-ranch labor.

“When one is ready to go, they’re all ready to go,” he says. So there’s little sorting and the next segment is happy with his calf crop.

“If they like one, they like them all,” he says.

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Beef picture: record prices in, out

 

by Miranda Reiman

If there was ever a good news/bad news story in the cattle feeding industry, this year is a classic example. 

Market analyst Dan Basse, AgResource Company, warned cattle feeders of continued upward pressure on input prices while also pointing out the “bright spots” of increasing exports and high cattle prices.

Basse spoke at the Feeding Quality Forum in Omaha, Neb., and Garden City, Kan., last month.

“It’s another year of struggle between an economic landscape that’s less than favorable—we don’t see domestic beef demand rising this year—and this new worry about the price of feed and forage,” he said.

Utilizing field agronomists, weather data and historical trends, his company predicts an average corn yield of 148 bushels (bu.) per acre this season. Southern drought, combined with very high nighttime temperatures in the upper Midwest, all contribute.

“Extreme heat during the day, we never cooled off at night and that gets us back to problems like ear tipping, pollination blanks, long silks and, unfortunately, a less than desired corn crop,” Basse said.

Global stocks of corn are tight, and that’s why he sees a trading range of $6.50/bu. to $8.50/bu. going forward.

Of course, corn isn’t the only feed resource with bullish pressures. The extended drought in the Southern Plains is pushing forage and pasture prices upward. The drought has already devastated those regions, but if it extends into 2012 its impacts could be magnified for the entire beef industry.

“What does that mean for forage prices? What does that mean for wheat crops? What does that mean for future cattle availability?” he asked.

The decline of the U.S. cowherd is rapidly intensifying—a trend that’s being realized south of the border, too.

“Mexican cattle imports into the United States have been very, very high,” Basse said. “I don’t think we can continue that trend, though.”

Their domestic per-capita meat consumption is increasing. In contrast, the U.S. beef demand has been on a slow decline since 2006. Fortunately, imports to Mexico have stepped up.

“For the longest time it used to be that as retail price went up, beef use went down,” Basse said. “Now we are in this environment where retail prices are rising but we are also seeing an increase in total demand. That is due to the export segment.”

Ag Resource Co. projects exports reaching 12% to 13% of supply in the near future.

“That takes us above the pre-BSE (“mad cow”) levels and will keep cash cattle prices very high,” he said.

As Chinese consumers start encroaching on annual incomes above $5,000, the tipping point for including more meat in the diet, they are a target market.

“We think that U.S. beef is on the doorstep of making it to a greater degree into China,” Basse said.

Demand seems easier to pinpoint than supply right now.

“Could we have cow numbers to a low enough level that would send beef prices up to $2 on a live basis by sometime in 2013 and 2014?” he asked. “To some degree cash cattle prices will try to keep at a high price level so we don’t liquidate any more of our cowherd.”

Feeder prices will stay in the $125 to $140, range and may even climb to $150 in the next year.

These high numbers mean there are going to be more discerning diners.

“We want quality to be maintained at a very high level in beef, because if we’re going to have this elevated beef price we want to make sure the consumer is rewarded for that consumption,” Basse said.

The main take-home message is this: “Margin, margin, margin is the new mantra for feedlots if it hasn’t been already,” he said. “It’s just a challenge of margin—what goes in and what goes out—and how do we manage both ends?”

The meetings were co-sponsored by Pfizer Animal Health, Certified Angus Beef LLC (CAB), Feedlot Magazine and Purina Land O’Lakes.

More information and proceedings will be posted when available at www.cabcattle.com.

Quality, price higher for beef in 2010

January 28, 2011

The 2010 beef business trends include exceptional prices, increased quality and better rewards.

“Slaughter cows and bulls were a hot commodity and producers cashed in on those record prices from the spring through the fall,” said Paul Dykstra, beef cattle specialist with the Certified Angus Beef ® (CAB®) brand. He tracks USDA grading trends and harvest numbers in his weekly column, Rearview Mirror on Quality.

Reviewing last year’s data, Dykstra noted fed steers averaged almost $12/hundredweight (cwt.) more in 2010 than in 2009, according to the USDA 5-Area Report ($94.89 vs. $83.16). However, that just marked a return to 2008 levels.

“They were a highlight only with regard to timing and the state of the nation’s economy,” Dykstra said. “The elusive $100 target was captured or surpassed one week in October and four out of the last five weeks of the year. Still, the beef market was resilient, to say the least, during a very tough time.”

Strong exports and improved hide and offal values have been credited for some of the bounce-back.

“Corn and other grains faired just as well, so we can’t discount what drove breakevens to new heights,” Dykstra added.

Higher cattle prices did not subdue the packers’ rate of harvest. Federally inspected harvest numbers were up 2.81% year over year. That’s 17,812 head per week, roughly equivalent to the output of one additional medium to large size packing plant—but that is not what happened.

“There were no major facilities added to production,” Dykstra said. “Packers simply kept their chains working more hours and kept the schedules full. But carcass weights were down.”

Steer carcasses averaged 835 pounds (lb.), down 12 lb. from 2009, while heifers were 14 lb. lighter at 768 lb. each. 

“Early predications say carcasses will get bigger in 2011 to compensate for fewer available calves and fed cattle,” he noted. “As the world’s foremost producer of corn-fed beef, the quality of the U.S. product is top-of-mind to everyone with a stake in the game.”

From 2000 to 2007, the number of carcasses grading USDA Choice increased only 0.05 percentage points, but 2008 and 2009 brought two years of heavy increases. The Choice share of the annual harvest moved up by 3.37 and then 3.51 percentage points, respectively.

“Stakeholders questioned if this rapid advance would hold or if short-term factors had created the two-year anomaly in grading,” the CAB cattle specialist said. “Extreme winter weather covered the feeding belt in 2009 and the onset of heavy inclusion of distiller’s by-products in feedlot rations coincided with the timeline, as did full adoption of camera-assisted grading by USDA.”

Dykstra said, “2010 may have settled some of the doubts.”

The Choice grade moved higher again, though not as dramatically, by 1.53 percentage points to end the year at 61.4% for all USDA-graded plants. The Prime grade increased a modest 0.17 percentage point, to bring the annual average to 3.15% of last year’s annual fed cattle harvest.

“That small fraction is of little consequence to the commodity masses, but it carves out an advantage for breeders and feeders who care to focus on it,” he said. “Scarcity means higher values.”

USDA grid pricing numbers indicate that an 850-lb. Prime carcass would’ve brought $132.86 above regional fed-cattle averages in 2010, $167.62 higher than a Select carcass of the same weight.         

The portion of black cattle, eligible for branded beef programs based on the “Angus type” requirement, was higher again in 2010. 

“Data tracking came to a halt in late October, due to USDA system overhauls, but the nine-month trend showed the black-hided share of fed cattle at 63.68%,” Dykstra said.            

That’s up 2.34 points from 2009, when USDA first began reporting it. With the combination of more black-hided cattle in the harvest mix and a higher grading trend, USDA shows 25.4% of the Choice-grading carcasses were certified into an upper-two-thirds-Choice branded program like CAB in 2010. That’s an annual increase of 2.24 points.

Price per pound still commands attention when cattlemen decide production goals and management plans. 

“Choice and premium Choice beef supplies are at record levels, so we’d expect price per pound to decrease for these two classes on a year-to-year basis, but the opposite is true,” Dykstra said.

Weekly USDA grid price data says packers paid an average of $6.30/cwt. for Choice above Select in 2010, up $1.20/cwt. of carcass compared to 2009. The CAB premium—added to the Choice bonus for qualifying carcasses—also increased. Although individual grids paid significantly more, the weighted U.S. average moved up from $2.71 to $2.78/cwt. At the same time, Yield Grade (YG) 1 carcasses (those with the least external fat) improved 4 cents while YG 4 carcasses were devalued by 3 cents to a discount of -$3.83/cwt. 

“The premium for marbling is much lower than it was in 2006, when we had 10% fewer Choice carcasses and the U.S. economy was roaring,” Dykstra allowed. “But, given the uncertainty in our domestic market and the increased availability of Choice and higher beef, the uptick in premiums flew in the face of expectations. The nod goes to quality, where American cattlemen are leading the world.”

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