COOPERATIVE AGREEMENTS ADD VALUE TO END PRODUCT

by: Clifford Mitchell

Creative agreements by people with a common goal are gaining ground. Sure there are the old standbys that have had members for generations. Like the local co-op all farmers belong to and the rural electric co-op is another longstanding group effort. Today, especially back east, community farms are popping up in different areas. These co-op farms provide produce to the membership who essentially pays the farmer to grow to their specifications. The thing all of these agreements have in common is quality control and some form of leadership.

Cattlemen have also been longtime, maybe unknowingly, members of coop agreements. Cooperator herds could be the most widely known and thought of for these specific agreements. Something as simple as sharing ownership in a herd bull could fall under some form of cooperative agreement. Capturing opportunity is probably the foundation for most of these agreements. Most thought adding dollars to the end product was the logical place to start.

“We formed Quality Beef Alliance with 15 original members, some of those remain and others have given way to new members, but we limit our alliance to 15. Our original focus was to sell load lots of calves because our members thought they weren't getting enough for what they were producing. There was a big advantage to selling larger numbers of calves, whether it was on Superior or at the local sale barn,” says Tom Shields, LSU Ag Center, Calcasieu County, Lake Charles, Louisiana.

“Most of these marketing groups began with a group of people deciding this is the product we're going to produce, this is how we're going to produce it and this is how we want to market it,” says Jim Collins, Executive Vice President Georgia Cattlemen's Association, Macon, Georgia.

“When we started having co-mingled sales it forced the local sale barns to become more progressive. Some auctions had to change the way they did business to keep these calves in state,” says Dr. Justin Rhinehart, Mississippi State University.

“Our association has four consignment sales per year, at two of those sales we sell bulls. We needed to improve the quality of our bulls and look for ways to get them into more commercial herds. We started an association bull test and it has accomplished many goals,” says Ralph Hawkins, Executive Secretary, Texas Limousin Association, Krum, Texas.

As certain groups continued to take advantage of lost opportunity from the marketing end some groups realized they were also leaving money on the table from the cost side. Groups adapted to trying to purchase inputs in bulk to save money.

“It's amazing how things change and can quickly go from the mindset of producing the most valuable calf, to producing that product cheaper,” Rhinehart says. “Most producers are going to have to realize they have to work together to stay in business.”

“As these groups formed the main concern was not to leave money on the table. Now, I think producers have also adopted the policy not to leave money in the pasture. Meaning producer will have to decide whether it's more important to produce something that is making them money or something that's not costing them money,” Collins says. “This is not a home run philosophy. It takes a lot of singles to get the job done. It's hard to place a value on information exchange from producers working together both formally and informally.”

“Some of our smaller producers wanted more data on their cattle, but were limited because of cost or facilities. We were already scanning bulls for our BCIA bull test so it made sense to allow producers to bring heifers to centralized locations,” says Rhonda Vann, Mississippi Agricultural and Forestry Experiment Station, Raymond.

In the beef business, foundation has been a big word used for a variety of things that can be successful as long as there is a solid base. Add marketing agreements to the long list of things that need core stability to survive.

“The cornerstone of these programs is people. Most involved will have a long term commitment to the goal at hand and a unique ability to move forward even when times are tough,” Collins says. “Some form of organization has brought these like thinkers together.”

“Monthly meetings are the key to our organization. We have marketing and purchasing committees, as well as a section of new business that allows our members to exchange ideas and get organized for what business needs to get done,” Shields says. “We also use these monthly meetings as a forum for continued education. These discussions have covered everything from killed vs. MLV vaccines, to ultrasound or having an equipment dealer or seedstock supplier speak to the group. As a county agent, these meetings help me stay on my toes. If I don't know the answer, I better find out quick.”

Profit and cost have been quick to put a pretty black and white stamp on how these programs can be used in the beef business. Just like most decisions benefit is measured in value. In some cases this will undoubtedly overshadow other benefits of the program; however, some payback will fall in a uniquely gray area that only time will tell the true value of this form of cooperative agreement.

“We have bought everything from pharmaceuticals to fence posts through our alliance. Rye grass seed and fertilizer are two that aren't as cut and dried, but usually there are a couple options presented and our membership can choose. Some inputs like fertilizer, even though we're buying in bulk, have been hard to get a break on the last couple years,” Shields says. “We work with local suppliers. There is no separate bank account, we just say we need this many loads or this many doses and our supplier has to be willing to bill each of our members for their share.”

“Our Cattlemen's Exchange program is a group that was formed just to exchange ideas,” Rhinehart says. “Some producers found out their neighbors were using a mineral that worked in the area and they teamed up to get a discount on that product because they purchased it in bulk. Some of our local merchants have made it difficult for producers to purchase direct. I think you'll see more of these agreements in our area, but the key will be to incorporate the local business.”

“Management levels can change quickly in this type of organization. You have producers who have been in it a long time and made mistakes, exchanging information with people who are new to the business. It allows the new guy to turn the corner faster. We were in a prolonged drought, group members had the chance to exchange ideas and talk how they could do things differently rather than get bogged down in their own situation,” Collins says. “These groups can develop synergies within an area. For instance, as we've seen challenges with row crops in certain areas, some of these producers substantially grew the beef herd and added diversification.”

“This is the fifth test we have required for our bull consignors. During that time our bull sale average has increased $643. This is a great way for producers, who don't have the facilities or knowledge, to develop bulls in a cost efficient manner,” Hawkins says. “It creates a better product for potential buyers because the bulls are all managed and grown out the same. The bulls look more uniform and we can do a better job of eliminating the problem cattle. Having the bulls in one place really helps from a marketing standpoint because we can get the bulls pictured.”

Organized efforts are starting to uncover other places producers; both large and small, can benefit have come to the forefront. Cattlemen are exploring opportunities to decrease costs of services, to gather the important data that it's not only going to take to improve the herd, but also better market what they produce.

“Since we are at a test facility, the cost to ultrasound the bulls is really not that bad because a technician can come and scan a lot of bulls. Having this data available helps because even though every cattlemen may not be interested in ultrasound measures, the ones that are can use it to, hopefully, make a better decision,” Hawkins says. “Besides ultrasound, we see a pretty big savings in fertility testing because we have a group, not just one or two like most of these breeders would have at home. I have had people put bulls on test with no intention of selling them. They wanted to take advantage of better management to grow bulls properly and get the data for their bull customers or to use in their herd.”

“We have producers bring cattle to centralized locations for ultrasound scanning on specific days. We send them barn sheets, tell them their time schedule and are ready when they get there,” Vann says. “Some technicians will charge a set up fee for under 50 head. By doing it in a centralized location we can keep the cost down and we have a lot of producers who wouldn't normally ultrasound bring in bulls and heifers to collect data. They must see the benefits, because if we can get them here one time they keep coming back.”

“We started a co-op heifer development program. We can develop heifers for about one third of what it would cost a small producer to develop his own replacements. It will lower input costs because most don't have a designated place to run their heifers,” Rhinehart says. “Most producers end up with a heifer that is developed correctly and will stay in the herd longer. There is also the opportunity to get an Igenity profile and gather some more basic information such as pelvic area. We have seen a lot of interest in this program because people can properly develop genetics that are already adapted to this environment.”

“These groups may have 2,000 head in a special sale. They look to a local supplier to purchase tags and other products,” Collins says. “One group wanted to reward the local vet because he could provide all the other services they needed. He puts in the order and sells products to members at a discount.”

The success or failure of some of these ventures could be highly comparable to the factors individual firm's measure achievement. Even though these agreements or organization can position the group to either save money or add value the focus can't be lost.

“We don't ever limit ourselves from a marketing standpoint. Our goal is to remain flexible and take advantage where the market will allow the group to add value or save on inputs,” Shields says. “We have sold calves about every way they can be sold because we're not locked into one avenue. One year the group had an opportunity to market some replacement heifers for a premium. We were able to switch gears and take advantage of that opportunity. The big deal we're adding to the table now is source and age verification because, depending on the market, that is a sizeable premium.”

In certain areas, the organization and preparedness of these groups can also be called on to face adversity. According to Shields, knowing who he was dealing with was a big help during the after math of Rita and Ike.

“Several members worked with me and we mobilized a lot quicker because we were more prepared for Ike than Rita,” Shields says. “Some of the members used their places for staging areas and we are currently stockpiling hay in certain areas, with helicopter access, in preparation for the next storm.”

Many marketing agreements are in place throughout the industry. There is no blanket policy that works for every producer. However, the days of looking across the fence and wondering what your neighbor is up to could be coming to and end.

Relationships have and always will be the backbone of the cattle business. Cooperative efforts from saving a couple bucks here and there to sizeable cuts in expenses or significant increases in profit could help producers add stability to the bottom line.

“This is a fun group to work with. We start every meeting with a prayer and everyone knows we mean business,” Shields says. “We have adapted a lot of ideas that have worked for other groups. Shop your business around and it just takes a couple phone calls to find out if you can get a deal.”

“We have tried to develop some programs that will work for every producer,” Hawkins says. “It is up to each individual to how they want to utilize it and take advantage of it.”

“These groups help spread out the challenges facing each individual. They try to provide producers of every size the opportunity to continue to improve their operation,” Collins says. “These groups aren't for everybody. They work well for those who can see the big picture and are committed to each other.”







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