TAG PROGRAMS OFFER MARKET FLEXIBILITY FOR CATTLE PRODUCERS

by: Clifford Mitchell

The Olympics provide a good look into what it means to be unified and, at the same time, the freedom for athletes to rise above their countrymen. During the opening ceremonies, all the countries are unified under the flag creating a symbol for its athletes. For each competition, individual athletes can distinguish themselves with their achievement.

Tag programs come in many forms, but also have the ability to unify groups of calves into a single marketing group. The information base and management protocol needed to meet the requirements of these programs will often differentiate certain producers from competitors.

These programs often start producers keeping records. They start operating their cow herd like a business. Through simple record keeping and the information created with these programs producers can make better management decisions,” says Ben Neale, Executive Director, Tennessee Livestock Network, Nashville, Tennessee.

“Sometimes these programs will put more pressure on operators to become better businessmen. As producers pay more attention to detail, they can start identifying troublesome cows or that inferior herd bull, which leads to genetic improvement,” says Curt Lacy, Extension Economist-Livestock, University of Georgia Cooperative Extension, Tifton, Georgia.

“Programs like this help producers keep better records. They'll do things like tighten breeding season up more so they have a more uniform set of calves to sell. Any program, like the OptimaxX, will help producers be more aware of how to run their operation,” says Steve Densmore, Circle X Land and Cattle Co. Ltd., Bryan, Texas. OptimaxX is an IBBA sponsored PVP program available for users of Brangus genetics.

There are many programs available to producers. Each program comes with its own laundry list of benefits. Producers need to look at each program and see which one will suit the program and production goals.

“The biggest advantage of the OptimaxX program offers is the calves are age and source verified. Right now, we're not seeing a lot of premium, but hopefully as the demand for age and source verified cattle increases we'll see those premiums at the producer level,” Densmore says. “There is more paperwork, and we don't like to do more paperwork, but we have to do it so we can share information.”

“The fact the cattle are age and source verified is a big advantage. We bought some of these program calves and have them on feed. When we get closed out, hopefully, we'll know more about what the cattle will do,” says Lee Alford, Alford Cattle Co., Caldwell, Texas.

“There are buyers who are very interested in age and source verified cattle because there are some programs that provide guaranteed premiums at harvest,” Neale says. “Producers who have two calving seasons have a great opportunity because these programs will need a steady supply of age and source verified cattle.”

“Age and source verification is becoming more important as a marketing tool. I really think you are selling information,” Lacy says. “Documentation of management practices applied to an animal and how cattle are handled will be important in the future.”

Cattlemen have been trained to look for premiums at the market place. Allocating the benefits of increased management throughout the operation could help justify the extra management.

“Cattle that qualify for these programs give producers more market flexibility and should create some value,” Lacy says. “Cattlemen are going to have to focus on avoiding discounts rather than capturing premiums. I think as the market turns there is going to be more of a difference in base price and cattle that are discounted.”

“Premiums for age and source verification vary from time to time. It all boils down to what the cattle are going to cost and how they fit the market,” Alford says. “You would think there would be a point in time, age and source verification would be a definite advantage. It all depends on timing and market demand.”

“To get full benefit you have to market cattle that qualify into specific programs,” Neale says. “There are a lot more benefits that come with increased management than just a market premium. Following program guidelines and keeping better records can help create a better product.”

“OptimaxX is a good program, but it could take a while for the producer to actually start seeing premiums for his calves. The demand for age and source verified calves is still in the infant stages,” Densmore says. “Producers need to take advantage of any program that offers the potential to add value to the calf crop.”

As cost of production continues to climb, some producers may have to re-evaluate management. Producers need to look at the business model to determine revenue generating goals.

“Lower market price and rising costs of production are both contributors to shrinking profit. I don't see anything out there that makes me think cost of production is going down,” Lacy says. “Producers have to do anything they can to help maximize profit generating ability. Find ways to add revenue, with the current production costs.”

Cattlemen must be prepared to do a little extra to realize value in their calf crop. Producers who are willing to take the extra step add market flexibility and are able to maximize profit.

“We sell our calves to the same buyer year after year for a premium. The age and source verification component of the OptimaxX program works well for us because we we're already individually identifying calves anyway,” Densmore says. “We've been backgrounding and pre-conditioning our calves for years. Age and source verification allows us more flexibility in the market.”

“You still have to buy cattle right and lock in your profit, but there should be a little more profit potential with age and source verified calves,” Alford says. “The commercial cow calf man needs to realize along with age and source, the best way to add value to his calves is to background them. Age and source doesn't affect health.”

“Putting that tag in their ear is just the “cherry on top of the sundae.” It's a combination of genetics, health and the ability to market in load lots. What good is age and source on cattle if they still get sick,” Neale says. “Market your cattle into a specific program. Some years retained ownership is an option or producers need to focus on direct marketing to find “true value” in the calf crop.”

“Age and source verified pre-conditioned cattle are what buyers are looking for. We're seeing this through the sales our feeder calf marketing associations are having right now. Buyers are looking for a bundle of attributes not just one thing or another,” Lacy says. “People who can't provide this information are very limited in their ability to market the calf crop. This information provides a producer with the flexibility to market cattle in a special sale, take them to the local auction or if they are willing to take the risk, retain ownership. Whatever situation provides the most value.”

The information trail created should help facilitate information up and down the chain. This data could be useful to the cow/calf man and help influence future genetic improvement decisions. Enrolling cattle in specific programs could have benefits for smaller producers willing to cooperate with other producers in the area or look at special sales.

“We have more buyers who are interested in this type of information. This should help information move up and down the chain more efficiently,” Lacy says. “As the number of cattle enrolled in these programs increase, we're seeing local auctions willing to feature this type of cattle. Producers have to get used to marketing this information.”

“This type of information could definitely assist producers in making decisions with the cow herd because they have a better feel for what they are producing,” Alford says. “I don't know if this type of program will help the guy with 25 calves unless he can co-mingle his calves with a neighbor to make a load lot. Buyers want load lots and are willing to pay a premium, in some cases, for this information.”

“There are programs out there where you can get carcass data back through the 15-digit number on that ID tag. We're in the information age, we have to use all the information we can get to start making changes,” Neale says. “These programs can help level the playing field somewhat. Smaller producers can become more efficient and make better breeding decisions. With a little organization and teamwork smaller producers can become “price makers” instead of “price takers.” It takes a little more effort marketing, but he can make it work, even if he only has 25 head to sell.”

“Information is important. Down the road, if we can get enough customers enrolled, we'll buy the tags for people using our genetics the first year to help get them started,” Densmore says. “If we can show them a program that works, it will benefit both of us in the future. We have to be able to exchange information in a timely manner.”

The market is ever-changing. As producers dig into their marketing toolbox the alternatives to help find value all come with a price and increased management. Working with a combination of tools to help improve the product could be the only answer.

Tag and health programs are nothing new. Finding the right program to facilitate information flow, add market flexibility and increase profit potential could begin with one of these programs. To find “true value” producers must concentrate on production goals, constantly evaluating their parameters to be successful. Focusing on one element of any given program only adds to the confusion in the market place.

“Once we have more consumers demanding an age and source verified product, hopefully the premiums will trickle down to the producer. People using our genetics have to be successful and they'll keep coming back, if they make money,” Densmore says. “The OptimaxX program offers a lot of potential. You have to start with a quality product. It still comes back to genetics and health. The tag will not change quality just, add ways to market the calf crop.”

“The program has lots of potential and lots of advantages. If I am looking for this type of product, the program could help everybody, even if I don't buy the calves,” Alford says. “I'll give a little premium for age and source verified cattle. I'll give a little premium if they have been backgrounded. It all has to go hand-in-hand. It's a combination of things that make cattle worth more.”

“The potential with these programs is endless. If nothing else, the information you get back that can help your program. It still boils down to relationships made with potential buyers. As the confidence builds in your program, that's where you'll really start to see premiums,” Neale says. “If you already have a program in place and the market changes, you know what type of product you're selling because you have the data and can make changes accordingly. Producers who don't have information, have to start from scratch.”

“We're starting to see more cattle sold with this combination of health and information. One of the strong markets we're seeing is for locally produced products right now. People want to know more about what they're eating,” Lacy says. “You're selling a reputation that you've created through a relationship with the buyer. If you participate in these programs, you're proud of the product you're supplying. You're not necessarily offering a warranty, but you're willing to associate your name with those cattle.”







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