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B3R Sustainability

Historic opportunities for beef stocker industry

April 18, 2011

Sky-high corn prices don’t typically outline “exciting opportunities” in the cattle business, but one economist says those in the stocker business can benefit from high feed costs by focusing on available forage. 

“I think in the next 20 to 30 years, this industry is going to spend a lot of time trying to figure out how to raise high-quality beef with the least amount of grain. That means that every one of you [stocker cattlemen] has a tremendous opportunity, because it’s going to put an emphasis back on forage.”

That was Oklahoma State University agriculture economics professor Derrell Peel’s message at last month’s “Backgrounding for Quality” field day. The event, held at the Collinge Ranch near Hamilton, Kan., was sponsored by Certified Angus Beef LLC (CAB), Pfizer Animal Health and Pratt Feeders LLC.

The tightest grain supplies in 15 years are only half of the concern.

“We are extremely tight on cattle,” Peel said. The industry has liquidated cattle 13 of the past 15 years. As of January 2010, total cattle inventory was less than 93 million head, the lowest since 1959.

“We still don’t have any data that tells us that we are saving heifers,” he said. “I think we’re looking at 3 to 5 years, at least, before we fundamentally change herd numbers.”

So every cattlemen needs to make the most out of each calf they care for, but usually that quest for eking out more quality includes corn.

“Corn prices are probably not coming down any time soon. We’re in a whole new world,” Peel said. “It’s not a supply problem. We’ve continued to produce record levels, but the increased total demand for this product has made us barely able to meet our needs.”

The average price for corn during the past 25 years was $2.25 per bushel, less than one-third the level of many spring 2011 reports. Energy competitors for those bushels are not going away, even if policy changes, he said.

“How do we survive high corn prices? In the short run, we make changes by taking cattle into the feedlot at higher weights and utilize the forages we have as much as we can,” Peel said. “Longer term, I think we might have to re-evaluate how we feed cattle altogether. Long term, your forage business is going to take on an emphasis like it’s not had in 30 to 40 years.”

There is a glimmer of good news.

“The beef industry can survive higher corn prices better than pork or poultry,” he said. “We spent 50 years in this country trying to figure out how to allow cattle to eat the most cheap grain they could, and that was the right thing to do in that environment.”

The next few decades will focus on how to maintain quality while decreasing grain dependence, he said.

Just as the corn prices are sure to stay high, Peel predicts the same for beef prices.

“It always makes me nervous of course, when prices come on that fast, that they’ll go away that fast. But this really is something that’s been building for a long time,” he said. “Fed cattle have increased relative to feeder cattle, relative to the calves and boxed beef—all of these prices have moved together. That tells me that these prices are proved by real market fundamentals.”

For more information on the meeting, search “Backgrounding for Quality” on the Black Ink Blog, www.blackinkwithcab.com.

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New manual guides stocker-backgrounder to quality

 

by Laura Nelson

When it comes to beef quality, the stocker industry is sometimes considered oblivious, or driven only by pounds. But market dynamics have continued to build the case that quality matters to these entrepreneurs, and of course, they matter in any discussion of beef quality.

That’s why Certified Angus Beef LLC (CAB) recently published its Best Practices Manual (BPM) for stocker operators and backgrounders, a guide to targeting the Certified Angus Beef ® brand.

“The stocker segment has historically been considered a low-cost, margin operator,” says Mark McCully, CAB assistant vice president for supply. “The reality is they have a huge influence on end-product merit, and those best management practices need to be identified and kept in mind.”

The BPM highlights strategies that guide stockers to maximize profit and quality. “It covers everything from genetics to cattle procurement, from health and nutritional management to marketing. All of these areas are critical to the bottom line as well as product quality,” McCully says.

Pfizer veterinarian Robin Falkner says the booklet doesn’t just give producers tools to improve their animals; it opens their minds to new ideas.

“This publication raises the stocker’s awareness that what he does matters down the production line,” Falkner says, noting they are often farmers or grassland managers first and beef producers second.

“A lot of stocker operators are simply looking to turn grass into gain. But they could be part of a more elegant system that allows them to capture additional values in a branded beef program like CAB while doing that,” he says.

McCully says there has been a “knowledge void” on management practices to help stockers capture that value, which led to the development of the stocker BPM. The stocker industry is changing, and its producers need more information.

Falkner points out: “We’re moving from a commodity stocker industry where every 750-pound yearling is worth 80 cents to an industry where some of them are going to be worth a dollar, some 60 cents, and some may be unmarketable. This is the type of manual that starts opening people’s minds to how they can make sure their cattle are those desirable ones.”

The manual breaks down each production step that affects just how desirable those cattle will be in a quality-driven market. Greg Highfill knows the stocker industry has a unique set of needs and challenges. The Oklahoma State University beef cattle specialist says BPM serves as a practical tool to meet those challenges.

“The Best Practices Manual addresses the issues that reduce stress, while improving health and production efficiency,” he says. “Those things come together to yield a higher-quality end product.”

Stockers are often challenged to take calves from diverse backgrounds and improve them for a profit. This often means straightening out health and dealing with weaning stress, Highfill says. “The manual does a nice job of addressing weaning and the stress that comes with putting cattle together from different backgrounds. It helps identify ways of treating them that will improve stocker health and addresses appropriate animal handling guidelines.”

Another beef cattle specialist says the manual gives stockers a condensed but information-packed guide to “understanding how everything from nutrition to implanting to sourcing their cattle affects quality grade and CAB acceptance.” Justin Rhinehart, Mississippi State University, says the manual’s discussion on growth implants outlines practical and applicable information on how different products affect quality.

The BPM also addresses marketing ideas that affect production profits. Highfill says it’s a tool that increases information sharing between cow-calf producers, stockers and feedlots, which lets each segment reap the benefits of better management.

Rhinehart points to the CAB Feeder Calf Value-Discovery System as an important marketing tool. “Everyone should know by now that if we do all these management practices and then sell them as commodity cattle, we’re just backing up,” he says. “Utilizing the marketing tips in the manual is so key.”

For all of its great information, cattlemen must still customize the BPM to maximize its use, Falkner says.

“While there are a lot of people who will look at this manual for answers, the really astute stocker cattlemen are going to look at this to get better questions,” he says. “It’s a thought-provoking starting point that asks, is my operation where it needs to be? How do we need to manage cattle for better quality? What do I need to be aware of in the future that I haven’t been in the past? Every answer is not in there, but there is enough to stimulate the thinking that will ask the right questions.”

To start asking these questions in your business, e-mail Marilyn Conley at mconley@certifiedangusbeef.com or call (800) 225-2333 to order your free copy of the Best Practices Manual for stockers and backgrounders.