Can you imagine trying to figure out how to increase the demand for your product, only to discover the enhancement you were using to boost the appeal of your product ended up having more value than the product itself?
That's exactly the kind of product transformation the folks at The Topps Company, Inc. lived through. Way back when, they started putting baseball trading cards in with their bubble gum as a way to boost the appeal of those slivers of powdery pink chewing potential. That's why those waxed paper depictions of Mantle and Aaron and all the rest were known first as bubblegum cards. Now, you buy a Topps package and you get the cards, but no bubblegum—the incentive became more valuable than the product itself.
Potentially, cattle producers stand upon the threshold of a similar product transformation where information—the incentive for buyers to become more loyal—has as much or more value than the cattle it describes. It's an age where beef production is replaced by the manufacture of consumer eating experiences.
“There are those of us that operate at a high, high level, and with the aid of information, we're just now beginning to understand what the opportunities are,” says Ken Spann of Spann Ranches, Inc., a commercial cattle operation headquartered at Gunnison, Colo.
Spann was addressing a group of seedstock suppliers, commercial producers and cattle feeders at the Limousin Focus 2000 conference in Stillwater, Oklahoma. He and other industry experts were invited to the fall conference to share their thoughts about where the industry is heading with Limousin breeders.
“We are in a part of the cattle cycle where the available feeder numbers are small and shrinking. For a while, not knowing or being able to demonstrate what your cattle are doing might not make any difference at all as the feedlot capacity out there chases anything with four legs and a rumen,” says Spann. “But, what happens the next time corn goes higher or there is an over-abundance of feeder cattle?
“Will your customers want your cattle? Will you be able to assure a spot on the kill schedule? If you feed out your own cattle, will you know enough to correctly assess the risks in a given grid scenario? Can you price your cattle, reflective of their true value?”
Keep in mind, the Spann operation is one of those multi-generational ranches slugging it out for survival like everyone else, and they're using information to do it. For perspective, the Spanns manage 900 Black Baldy mama cows that they build themselves, then they breed Limousin to the Baldies in a true terminal crossbreeding program. They breed the keeper heifers out of this mating and market them. All of the rest of the calves they feed and track individually on through the packinghouse.
“We are on our fifth lot of cattle through this system (retained ownership) and have had the opportunity to sort the cows twice, but we won't begin to see the real change in what we're doing until next spring,” says Spann, noting the fact that cows always have to be bred for the next calf before you have any idea how their last calf turned out. “I tell you all that because the equation is real simple. If you don't know exactly what your cattle are doing today, you're at least three years behind, even if you go home and start aggressively trying to find out what they're doing tomorrow.”
Actually, producers who haven't figured out where their cattle fit on the spectrum of feedlot and carcass performance may begin losing ground at an exponential rate.
“I remember clearly the Directions Symposium your breed held in 1990,” said Bill Mies, professor of animal science at Texas A&M University, addressing the same rapt crowd of cattle producers. Mies, a long-time cattle feeding guru, explained, “One statement that I made was that I made more money buying bad management and good weigh-ups rather than good genetics. I'm happy to tell you that's no longer true. I can make more money today buying good genetics than I can buying bad management.”
Moreover, Mies says predictable performance and the documented information that offers buyers more confidence in predictability has more value today.
For instance, Mies says, “Consistent performance in the feed yard is now worth more than compensatory gain…Predictable animal health has become more valuable.”
Ironically, the value of information is increasing, at least in part, because the thinner calf supplies today, and predicted for the next few years, are driving prices up to the point that there will likely be less retained ownership and more company-owned cattle.
Plus, Randy Blach of Cattle-Fax pointed out at the same conference that excess feeding capacity and growing industry consolidation continues to shift value points. For perspective, Blach says two percent of the feedlots finish about 85 percent of the cattle in this nation, while 3.5 percent of cow/calf producers control about a third of the nation's cow herd. Couple the fact that he says the 25 largest cattle feeding organizations will be feeding 45-50 percent of all the cattle within the next five years (they currently account for 38-40 percent of all the fed cattle) with dwindling calf supplies and excess pen space and Blach predicts, “Some feedlots will become grower yards rather than finishing yards.”
Whether it's the tail or the dog, a key driver in this evolution is consumer demand for branded beef products that deliver on the promise of a specific eating experience. Consequently, packers, feedlots and producers are joining forces more than ever before to develop product that consistently and predictably delivers the promise of specific brands.
In fact, Mies predicts 75-80 percent of all fed cattle in this country will trade away from the cash market within a few years. And, Blach says, “We could see as much as a third of our product branded within five years.”
With that in mind, Tom Field, professor of animal science at Colorado State University advised participants at Limousin Focus 2000 that the number one trend to watch in the beef industry is the increased competition in the meat case between branded product lines borne out of coordinated beef production and marketing systems.
“We're shifting from the cattle game to the knowledge game,” says Field. “For the first time I think the brain power game will become more important than brawn power in agriculture.”
Other noteworthy trends cited by Field include:
* Selection aimed at natural resource management, which Field says is key to the survival of the beef industry.
* Increased competition from international beef producers.
* Increased focus on improved eating satisfaction of beef, balanced with yield, feedlot performance and pasture performance.
* “Commercial cow/calf enterprises and industry alliances focused on cost-efficiency will dictate the demands for seedstock,” says Field. “Seedstock producers of the future will offer a spectacular array of information and services that go far beyond today.”
* “English breed genetics will dominate the beef industry in North America,” says Field. “Terminal heterosis is the ace in the hole for product lines.”
* “The beef industry must find ways to engage a new generation of people to participate in what we are doing,” says Field.
* “Those with information will have the opportunity to share in value-added returns. Those without it will be relegated to duking it out in a more limited commodity market,” predicts Field.
Indeed, it is the kind of information that folks like Spann are investing sweat and dollars in discovering. As an example, Spann says, “As we feed more and more of our own cattle out, we are developing our own regression analysis about how much our particular strain of feeder cattle (calf-feds) can be fed and still make a Yield Grade 2 carcass…We are developing similar regression lines for our Limousin cross yearlings, Angus-Hereford cross calf-feds and Angus-Hereford cross yearlings.”
Regression analysis? That's how far down the road of information discovery and utilization some commercial producers already are.
For folks who have yet to embark on the journey of discovery, the good news is that the higher prices served up by cyclically strong cattle markets mean the information can be discovered with somewhat less economic risk. “Corn's cheap,” says Spann. “This is a good time for me to find out more about my cattle.”
However, like all bubbles, the forces conspiring to make the cattle business profitable again will also burst again. But producers still have time to choose which side of the impact they want to be standing on when that happens.
“Don't waste these good years,” cautions Mies. “The first day you feel comfortable is the last good day you will have.”