Get paid for producing difference
By James D. Ritchie

At the 2006 MFA Beef Innovator series, producers got tips on ways to tack value onto their livestock.

“The incremental value of gain is greater when beef prices are higher,” said Mike John, cow-calf producer and current president of the National Cattlemen’s Beef Association.

In other words, as long as the price of an additional pound of beef is higher than the cost of producing it, putting gain on calves is profitable. That’s been the case for several years now, added John, who has headed up MFA Health Track since 2000.

“Also, the longer you retain a calf, the more direct advantage you are likely to receive from implementing new technologies and better management,” said Monty Kerley, University of Missouri animal scientist. “In our studies, preconditioning calves after weaning increased their value by an average $43 per calf. And better health management cut health costs by $7 to $23 per head.”

“Differentiation” is the main way to add value to a calf, noted John. You want to make your animals different from run-of-the-market calves, and, hopefully, more valuable to buyers. The goal is to make your cattle more of a product rather than a commodity.

Speaking at the 2006 MFA Beef Innovators’ Seminars, John and Kerley agreed that adding value  to cattle by breeding them better, feeding them better and managing them better puts money in producers’ pockets.

“Cow-calf producers shouldn’t be willing to settle for leftovers,” said Gary Smith, Colorado State University animal scientist. “Producers who sell cash cattle get what’s left after every other claimant in the beef supply chain gets his piece of the pie [the consumer’s beef dollar is the pie]. Producers who understand change driven by market dynamics and who meet cost and quality demands are the ones who remain in business through the boom-and-bust cycles of the cattle industry.”

The structure of the beef business has changed dramatically over time, and much of the industry has become more concentrated, especially in the feeding and packing sectors, Smith added. The largest 2 percent of feedlots market 85 percent of the finished cattle. The top five packing companies hold nearly 80 percent market share. The seven largest supermarket chains control 65 percent of food sales and are expected to control 75 percent by 2010.

Smith listed several ways producers can react to this kind of industry concentration:

• Own a packing plant (National Beef, Washington Beef and Creekstone Farms are examples of producer-owned plants). “If you don’t like packers, you can become one yourself,” he said.
• Join a partnership such as Harris Ranch Partnership for Quality.
• Join an alliance.
• Supply a producer-owned brand, such as Nebraska Corn-Fed Beef.

“Smaller-scale cow-calf producers can share in the 81 percent added value from the farm gate to the retail counter or restaurant check,” said Smith. “You can change your genetics and management practices to improve the sales value of your cattle. You can retain ownership of your calves through finishing. You can join an alliance, a cooperative or a partnership that will add value to your cattle. You can even develop your own finishing, packing, marketing program.”

“The main ways a producer can find added value now are genetics, management, nutrition, health and marketing,” said Monty Kerley. “For example, our research shows that selecting the right sire can increase the hot carcass weight of calves by an average 33 pounds and can increase quality grade value by $47 per calf.”

Genetics
It takes time to make significant genetic changes in a cow herd, but producers have better tools today than ever before.

“We haven’t made much improvement in beef quality grades over the past 10 years,” admitted Daniel Schafer, with MFA Health Track. “But we can take action now to remain the premier supplier of quality beef in the world.”

New AI (artificial insemination) technology takes a lot of the time and labor out of artificial breeding and a wider selection of proven AI sires can put small cow-calf producers on an even footing with bigger operations when it comes to improving herd genetics, Schafer said.

“When you calculate the added weight and other benefits [of using a superior sire], there’s no real difference in cost between fixed-time AI and natural service,” he added. “You can buy better genetics in a semen tank than you can afford to own, and bulls need a certain amount of management—they can cause heartache and heartburn year ‘round.”

Nutrition
“The faster a calf gets to market, the fewer total calories you have to buy for him,” said Dr. Alan Wessler, MFA Feed Division. “Some people are skeptical of creep feeding calves before weaning, but there are some sound nutritional reasons for creep feeding, provided that subsequent nutrition is adequate.”

For one thing, creep feeding can reduce the total number of days on feed, thus reducing the number of days you own the animals. For another, calves begin to deposit marbling (intramuscular fat) at an early age when they are fed ample energy, which sets the stage for marbling and quality grade in the finished animal.

“And when creep feeding is done right, weight gains earned now are not lost later on,” said Dr. Wessler.

Health
Both nutrition and genetics play big roles in a calf’s health and disease immunity, said Dr. Kent Haden, MFA Director of Livestock Operations.

“If you’re a calf, how sick you get may depend on who’s your daddy,” Dr. Haden said. “We followed calves from different sires for the entire feeding period and found that genetics may play a bigger role in building immunity than we earlier thought.”
In the calves observed, only 4.17 percent of those sired by “high-proof” AI sires (sires with a good deal of EPD history) required treatment. By comparison, 39.8 percent of calves sired by natural-service bulls required treatment.

“We’ve long known that the nutritional level at the time of vaccination has a big effect on how well calves build immunity to disease,” he added. “That’s a big reason we specify a minimum level of post-weaning nutrition in Health Track calves.

“But we’ve also learned that the timing and type of vaccination has a definite effect on sickness and treatment rates. Using an MLV (modified live virus) respiratory vaccine before weaning and again for the actual-weaning booster leaves animals three times less likely to get sick than a calf vaccinated with a killed-product vaccine before weaning, followed by an MLV vaccine after weaning.”

Dr. Haden added a caution: if you use an MLV vaccine on calves that are still nursing, be sure the cow is also vaccinated.

Marketing
“The cow-calf sector of the beef industry is in the driver’s seat for the first time in my adult life,” said Mike John. “But this is no time to relax. We still have a lot of challenges to face.”

Identifying animals in ways that allow them to be traced back to the source of origin is a program whose time has come.

“Being able to trace cattle in the event of a disease outbreak is important,” said John. “But there are merchandising concerns that are even more critical. We must certify beef as to source, age and processes before we can sell American beef to several foreign countries.

“And it’s not only our foreign customers who are demanding that beef be identified to its source,” he added. “Wal-Mart [the largest U. S. food retailer] and McDonald’s [the largest U.S. beef food service buyer] are demanding source I.D. on beef they sell. Health Track cattle meet certain management and health criteria and also are identified electronically as to source, age and process.

“That all differentiates Health Track cattle and makes them worth more,” John went on. “Our records show that Health Track calves earn $50 to $100 per head increased net return compared with non-program calves. And there is as much or more to gain for a small producer, potentially, than for a big cattleman.”

The word has gotten around about  MFA Health Track. This fall, Health Track enrollments will reach more than a quarter-million head since the program began.

“That makes Health Track the biggest alliance of its kind in the country,” said Mike John.