Cattle & hog similarities?
By James D. Ritchie
More and more livestock industry analysts are seeing similarities between beef today and pork in the early '90s. But the situation is more than a numbers game. Data drive changes. Producers need to capture that data. And more importantly, they need to be in position to take advantage of information.
In the early '90s, several packers wrote letters to selected pork producers. The letters weren't congratulatory notes. Rather, the packers told producers their pigs did not measure up. Unless significant genetic improvements were made and made quickly, the producers should look elsewhere for a market.
About this same time, MFA Livestock Operations formed a swine marketing network. The network allowed individual pork producers to pool their pigs for marketing clout. After all, when you sell 270,000 hogs per year, you're in a far better negotiating position than if you market 2,700.
But it's more than merely a numbers game. While marketing in greater volume with others who produce a consistent quality product helps a producer enhance profitability, there have been other benefits to the MFA swine marketing network launched in December 1995.
An important benefit is the amount and quality of information the network yields. Walt Swier, MFA swine marketing manager, gathers data from both packers and producers. He converts that data into useful information swine producers can apply to selection, breeding and management in their herds.
The results have been dramatic. In 1996, the first full year of network marketing, hogs sold averaged 49.6 percent lean. During the first two-thirds of this year, MFA swine network hogs averaged 52.8 percent lean.
That's remarkable progress in a short time. And it's an appropriate story for today's cattle producers. The similarities are great.
"We're now with cattle marketing where we were with hogs six or seven years ago," said Dr. Kent Haden, vice president of MFA Livestock Operations. "We knew that when major packers began doing serious buying on a grid basis, things would change rapidly. Last February IBP opened their grid to all producers.
"Also, more packers and more retailers are putting their own brands on beef," he continued. "They are breaking carcasses at the plant all the way down to retail cuts and pre-packaging them in packages for the meat case. When packers were only breaking beef into primal cuts, we used to say we needed to produce carcasses that fit in the box. Now, we need to be producing the kind and quality of beef that fit the retail package."
These changes are being driven by the consumer. And big retail beef marketers are listening to their customers. McDonald's specifies quality criteria. Although the chain deals almost exclusively with ground beef, McDonald's wants to know where its beef comes from--all the way back to the farm of origin.
Wal-Mart (and Sam's stores) has emerged as the No. 1 beef retailer in the country. Wal-Mart demands to know the origin of beef it buys.
"More than 95 percent of the pork producers know the percent lean and how their hogs cut out," said Haden. "The typical calf producer doesn't even know what kind of cattle he's putting on the market. But we're at the point where beef producers will have to know.
"One of the driving concerns we have is to allow smaller beef producers to sell on even footing with anyone," he added. "We need a framework that will let everyone participate, whether they sell 20 calves a year or 2,000. And, we need the numbers to justify getting back the carcass data producers need to make the changes that will keep them in the game."
Some argue there will always be a place to sell calves. Southern Missouri and northern Arkansas are adapted mostly to grass and livestock. We'll always have cows there, is the saying.
"Maybe, but look how fast the Missouri feeder-pig industry faded from the scene," Haden countered.
"Twenty-five years ago, most south Missouri hills had farrowing houses on them, and people were saying they would always have sows because there wasn't anything better to do with the land," said Haden. "Now some are saying that about cows. But just because the guys who own the land run cows now is no sign they will in the future.
"We will probably be able to sell mediocre calves to somebody at some price," Haden said. "But if you aren't producing the kind the market demands, you may have to sell at a discount. Change is coming. It's like an oncoming train. You either get on board, you get out of the way or you get run over. Our goal is to help more producers get on board."
Numbers alone are not the answer, but numbers are an important part of the answer. As the MFA swine marketing network has shown, you need numbers to negotiate with packers, including the retrieval of carcass information that lets you make selection, breeding and management decisions.
"Not long ago, we considered a potload as the ideal for merchandising groups of calves," said Haden. "Now, it's the size of a pen in a commercial feedlot--that's 100 head and up."
The average beef herd in Missouri has fewer than 35 cows. Assuming the cows are of similar genetics, bred alike and all calve within a reasonably short season, it would take the steer calves from seven or eight typical herds to make just one pen full.
That should give everybody in the calf-producing business plenty to think about.