MFA's Health Track Beef Alliance proves valuable as buyers seek more source- and process-verified cattle.

My grandmother used to say that indecisive people were always "waiting for the other shoe to drop." If you've been paying attention to the beef industry lately, you should have noticed shoes flying everywhere. Grandma also used to say that she'd rather be lucky than good. That could be the motto for producers who have been participating in Health Track.

The MFA Health Track program was built around the premise that cattle producers were going to have to create a better product and be able to prove it in order to stay profitable in the changing beef industry. The definition of "better product" has different connotations today than it did a few years ago. ID and source and process verification were part of added value back then because of the normal advantages those cattle had in feed efficiency and carcass quality. Those things are still a factor today, but recent events have provided them a new level of value.

Although the national animal ID initiative has been in the spotlight since the discovery of a cow with bovine spongiform encephalopathy (BSE) in the United States, the value of source and process verification has been on the rise for some time. Well before the discovery of BSE, as early as June of 2003, feeder cattle buyers were setting a new precedent in demand for source- and process-verified (documented) calves. We saw this through a bigger price spread between Health Track calves and non-documented calves at Health Track sales. We had several large buyers contact us to ask for the Health Track documentation who had not asked before. There is no question that large retailers and foodservice companies were demanding traceability even before BSE. That has been easy to see through the normal sale analysis we complete after every Health Track sale. As you can see in graph 1, the premium for Health Track calves in 2002 averaged $5.50/cwt. in June and $5.37/cwt. in December. When you move to 2003, there is a significant increase in this price spread that coincides with the demand for Health Track calves--from $7.11/cwt. in June to $12.11/cwt. in December. Keep in mind, this increase happened before any BSE scare. Now that BSE has changed the industry, we believe that the spreads will continue to grow.

The sale-day premiums are great, but what really matters is how much more money Health Track producers put in their pockets. Graph 2 shows the difference between 2002 and 2003 return per head over selling at weaning. This is calculated by determining average weaned calf weight and value on the day they were weaned, adding the cost of feed and animal health products that are required in the Health Track program, and subtracting it from the total value when the calves are actually sold.

Since we have been keeping records, there has always been added value in a traditional spring-calving scenario. As you can see on the graph, calves sold in December had a net profit of $62.13 per head in 2002 that increased to $72.25 per head in 2003.

The story in June is different. In 2002, Health Track calves actually lost money compared to selling right off of the cow. (In reality, shrink was not used in these calculations, and because un-weaned calves shrink much more than pre-conditioned ones do, the loss was not nearly as bad as it looks on the graph.) This has not been unusual over the last decade, a result of demand for light calves to place on early spring pastures.

But, look what happened in June 2003. It is becoming apparent that, even in the face of high calf prices due to increased seasonal demand, participating in Health Track increased profitability by almost $15 per head. This is further proof that buyers' orders are changing and that this trend will continue.

The beef industry will explode with new opportunity as a result of BSE. Producers need to understand that there will be a mandatory national individual animal ID system, and that it will occur as soon as it is feasible. Hopefully, it will be designed only to protect us from a disease-related disaster, as outlined in the United States Animal Identification Plan. Retailers and foodservice companies aren't going to wait for USDA to initiate an ID plan; they already are demanding traceability from suppliers in certain circumstances. McDonald's has already announced their intention to demand trace-back to the herd of origin. In addition, birth documentation may be accepted to prove age when cattle are harvested. This could become very valuable when you are trying to stay under the 30-month age threshold, another one of the costly negative effects of BSE. Health Track was created to protect the viability of MFA producer/owners who are in the beef business. We have been predicting an increased demand for documented calves for some time, although we did not expect BSE to make it so dramatic. If you have been waiting for buyers to "pay for" pre-conditioned calves or "the other shoe to drop" before becoming a Health Track participant, I think the wait is over.