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CATTLE TODAY

HUNTIN' DAYLIGHT -- TECHNOLOGY UPSIDE REMAINS

by: Wes Ishmael

If you're running cows, you don't need much analysis to tell you profit margins are getting thinner than ice in the Sahara. Quantification does provide some perspective, though.

At this year's National Cattlemen's Beef Association annual meeting, Stan Bevers of Texas A&M University at Vernon said that based on data from Southwest Standardized Performance Analysis (SPA), cow carrying costs in his part of the world were $571.53 per breeding female in 2006. Jim Mintert from Kansas State University estimated annual cow costs in his neck of the woods to be at around $670 per head currently.

Last month, researchers at the Livestock Marketing Information Center (LMIC) estimated 2008 annual cow-calf returns over cash costs for a typical southern plains operation to be negative $20 per cow, the first negative return in a decade. It was a positive $34 per head by the same measure last year; a record high $150 per head as recently as 2004.

“Net returns have been squeezed by surging input costs, especially fuel and feedstuffs (including pasture). Further, calf prices this fall are expected to be below 2007's and the lowest since 2003. The only bright spot is that cull cow prices are likely to remain strong,” say the LMIC analysts. “Overall, U.S. cow-calf producers will see little if any near-term incentive to hold back extra heifers for breeding herd re-building. In fact, many producers will need to sell more heifers than normal to cover their out of pocket costs.”

That's why the technology some producers take for granted and others ignore looms larger in the mirror of necessity.

The Power of Technology

“Through a combination of research, technology development and innovation, the U.S. industry has increased beef production per head of cattle by over 80 percent in the last 50 years.”

That's how Thomas Elam, president of Strategic Directions in Carmel, Indiana and Rodney Preston, professor emeritus in the Department of Animal and Food Sciences at Texas Tech University summed up industry production gained through technology in their 2004 landmark analysis, Fifty Years of Pharmaceutical Technology and its Impact on the Beef We Provide to Consumers.

But, increased production is only part of the story. The two researchers went on to explain, “Another major implication of the increase in beef industry productivity has been a dramatic reduction in the industry's overall environmental impact. Had these productivity improvements not occurred, we would need a much larger cattle herd to produce a smaller total beef supply. Those extra cattle would occupy significant amounts of land now needed for other agricultural crops and land now in non-agricultural uses. In addition, the impact of lower cattle productivity would also be felt in the form of increased demand for alternative meats. The primary benefits of increased productivity have accrued to the cattle industry and to U.S. beef consumers. In 2004, we have a more plentiful, less expensive and higher quality beef supply than we did in 1955.”

Rather than a single watershed technology, Elam and Preston pointed out it's producers' ongoing willingness to exploit a combination of additive technologies that made the gargantuan leap forward possible.

“Pharmaceutical technology, genetics, nutrition, pasture management, stocker management and feedlot production have all played important roles. Increases in grain (corn) yields and a reduction in the real prices of grains have been pivotal in the growth of the feedlot industry, which has enhanced the efficiency of beef production and improved the consistency and quality of the end product,” explained Elam and Preston. “The overall impact of these technologies has been to keep beef cost-competitive in the consumer's market basket while simultaneously improving its quality. Pharmaceuticals have greatly facilitated and enhanced the increased importance of grain feeding in the U.S. beef production system.”

Untapped Potential Continues

Yet some of the most powerful technologies available to beef producers remain underutilized, while some widely adopted ones are receiving increased public scrutiny.

Consider artificial insemination. It has been around the cattle industry since the 1930's. Yet, according to the last Beef Survey by the National Animal Health Monitoring Service (NAHMS) in 1997, only about 10 percent of producers utilize it, most of them in the seedstock industry. There are plenty of reasons for the paltry level of adoption—convenience, chiefly—but it's staggering to consider how much genetic progress has been shelved in the name of static management practices.

Likewise, crossbreeding is a proven technology to add pounds, reduce costs and increase production efficiency but it has never really captured the hearts of commercial producers. There was plenty of mongrelization early on when Continental breeds were introduced to the U.S. in the 1960s and 1970's, but true complimentary, systematic crossbreeding — truly precise management of maternal heterosis — remains much more of a novelty than a practice. Convenience has something to do with it, but even hybrids and composites — a more convenient, more goof-proof application — have gained only intermittent momentum. In fact, all indications are the national cowherd is becoming more straight-bred than otherwise.

Other technologies taken for granted or ignored by lots of producers revolve around management. For instance, according to that NAHMS Survey: only 34 percent of herds routinely preg-check cows; only 23 percent utilize Body Condition Score to evaluate and manage nutrition; only about half the herds have a defined calving season and only about half of the herds use individual calf identification.

Low-Cost High-Return

On the other side of the spectrum are technologies many use because the results are immediate, easy to see, and because the net economic benefits are consistent.

As an example, growth promotant hormones (implants) consistently provide net economic return, increased performance efficiency and overall environmental benefit. As such, 92 percent of all feedlots use them, and even about 14 percent of cow-calf producers use them on calves prior to weaning, say John Lawrence and Maro A. Ibarburu of Iowa State University (ISU) in, Economic Analysis of Pharmaceutical Technologies in Modern Beef Production, a companion analysis to the one mentioned earlier in this article.

“Using 2005 prices and production levels, the estimated direct cost savings to producers of the five pharmaceutical technologies evaluated was over $360 per head for the lifetime of the animal,” said Lawrence and Ibarburu. The five technologies analyzed were growth promotant implants, parasite control, antimicrobial therapy, ionophores and beta agonists. If the use of these technologies was discontinued Lawrence and Ibarburu explain, selling prices would have to increase 36 percent percent to cover the increase in costs.

Based on a Food and Agricultural Policy Institute (FAPRI) Model of the U.S. beef industry, the elimination of those five technologies alone—by choice or regulation—would result in a smaller calf crop, less U.S. beef production, more U.S. beef imports and higher consumer retail beef prices.

Both studies were funded by a coalition of pharmaceutical firms called The Growth Enhancement Technology Information Team.

In the FAPRI model, the ISU researchers explain, “There would be fewer total cattle, fewer cattle on feed and fewer cattle slaughtered. Beef production would fall 18 percent or 4.5 billion pounds annually. Net imports of beef would increase 180 percent or nearly 2.2 billion pounds per year. Per-capita consumption would decline 8.5 percent while retail prices would increase 13 percent. Pork and poultry would expand to fill this void in domestic and export markets. Cattle prices would increase along with retail prices. Nebraska fed-cattle prices would increase 20 percent, approximately $17/cwt. Oklahoma City 600-650 pound steer prices would increase 23 percent or more than $26/cwt and cull-cow prices would increase as well, up $13/cwt.”

Unfortunately, net producer opportunity would decline. According to Lawrence and Ibarburu, “The smaller beef industry would mean fewer cattle operations and less employment in rural communities.”

Ironically, the need for cattle producers to embrace technology with more relish than ever before arises at the same time that a growing cadre of consumers believe food produced with the least technology is equated to increased food safety and healthfulness.

Considering the urban sprawl and alternative land uses taking land away from agriculture in general, the grain-based subsidies taking agricultural land away from grazing, and escalating global populations and grain demand, it's hard to disbelieve the notion that technology will be more important to the industry's future than it has been in the past.

Short of an explosion in global demand for U.S. grain-fed beef—and it could happen—the U.S. beef industry will continue to shrink in size and become more costly. Ultimately, higher beef prices will lead to higher cattle prices, though increased prices will subsequently place more pressure on consumer demand.

A powerful opportunity producers maintain is the technology and the opportunity to embrace it.

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