Cattle marketing during an economic downturn

Beef prices have ridden a world-class roller coaster in recent years, making profitable cattle marketing an enormous challenge. Prices peaked in 2014, going as high as they’d been in recent memory. However, they began a downward slide in mid-2015 before tanking through most of 2016.

cattle marketing

Troy Hadrick, pictured with wife Stacy, recently began doing things different when it came to his cattle marketing efforts. Those efforts helped him and other producers get through a recent run of the worst cattle prices the industry has seen in some time. (photo courtesy of advocatesforag.com)

Troy Hadrick is a producer from Faulkton, South Dakota, who rode the highs and lows in beef cattle prices, experiencing firsthand the challenges that low prices present. While fed cattle prices had rallied from October of 2016 into early this year, the business is cyclical and low prices will come around again. Hadrick said it is possible for beef cattle producers to make it through the down times, provided they’re willing to try new things.

There are a lot of theories as to why prices began a free-fall in 2015, falling at an unprecedented pace. Before prices got to that point, Hadrick says beef saw a perfect storm of conditions that drove prices to record highs in 2014. A large number of pigs in the U.S. had died of PED so pork production was way down. An Avian Influenza outbreak had pushed chicken and poultry production lower as well. Combine those facts with the lowest cattle numbers America had seen since the 1940s and you have the recipe for high beef prices.

“There wasn’t enough beef and protein to go around,” Hadrick said, “so our industry did what it always does. It responds and makes a bunch more of the product.”

But the number of cattle head in the herd doesn’t paint the full picture. It’s more about the pounds of product the industry produces. High prices meant producers were getting cattle as fat as possible to produce as many pounds as possible. The industry was at record carcass weight during the boom.

“We were producing carcass weights of approximately 850 pounds at that time,” he said. “Our recent carcass weights were around 814 pounds. So if we kill approximately 500,000 head a week, take that times 30 pounds a head, and look at the difference. The population stays the same as we’re killing the same number of head but the amount of product we’re producing is different.”

Needless to say, prices going from record highs to unbelievably low prices came down hard on the beef industry. There’s no doubt producers were pushed out of business as profits margins shrank to razor-thin levels. Theories ranging from oversupply to market manipulation abounded as the industry was under stress. Hadrick is very sympathetic to the plight of his fellow producers, having gone through the downturn himself. He does want to point out that if producers are willing to try new things, it’s possible to weather the downturns more efficiently.

Back in 2012, the Hadricks began changing their breeding and marketing programs for their cattle. There are different grades of beef and those grades are priced differently.

 

 

Higher quality beef demands a higher price because there’s less of it available. There’s a good demand for higher quality beef because it tastes better.

“We started shooting to produce cattle that would give us the beef that would qualify for these premium programs, such as Certified Angus Beef and USDA Prime,” he said. “If you produce cattle that fit into those categories then you get a nice premium price for your product.”

They did a couple of different things to try to speed up the process of producing premium beef. The family implemented an AI program on the ranch that covered the entire herd, using the best genetics they could find on the market to help them produce the highest quality beef. There’s a lot of data being collected on sires and they looked for the bulls that could get the job done.

So, with that as their focus, here’s where they did something different from what might be considered the ‘norm’ in beef production. Their cattle go down south to be finished but the Hadricks retain ownership.

 

 

“Those cattle are then marketed on a grid,” Troy said. “They harvest those cattle, they hang on the rail, and they’re graded by a USDA Inspector. Based off of that grade and the weight, that’s how the price we receive is calculated. We don’t know the final value of the cattle until they’re hanging on the rail as meat.”

Obviously, there’s a risk of being discounted when you market on a grid. The actual grid is just like other grids you may have seen. For example, if a particular animal graded Prime and was a Yield Grade 3, you follow those two columns and where they meet, that’s what the price was that week for that animal and that’s what we’re paid.

“We started our program with AI and then combined it with genomic testing,” Hadrick said. “We would take DNA samples from some of our cattle, get it analyzed, and that would give us an indicator as far as which cattle would perform well on the grid. We’d also keep back those females that would produce the best calves.”

Between those two technologies, Hadrick said their production went from grading 90 percent Choice, 35 percent Certified Angus Beef, and no Prime, to cattle that finished 57 percent prime, and 100 percent Choice. Hadrick said producers get really good premiums for numbers like that.

“The nice part about it is it doesn’t cost us any more money to raise those cattle,” he said. “It doesn’t cost us any more to feed them, either. Of course, we have to get them bred, but at the end of the day, they’re worth more money.”

There is an additional cost with the genomic testing, but Hadrick says it’s worth it to them because the idea is to identify the cattle that are going to make the family money and those that won’t. They sort cattle accordingly and market those cattle accordingly.

The Hadrick cattle are harvested through a cooperative called U.S. Premium Beef. It’s a rancher-owned cooperative based in Kansas that owns parts of the National Beef Packing Plants in Dodge City and Liberal, Kansas. Hadrick said some visionary people put this idea together back in the 1990s.

“They wanted to give producers the incentive to produce better beef,” Hadrick said, “and they wanted food service businesses and consumers that need beef to be able to come and know they’re getting the highest quality beef. They also wanted to reward the producers that could give them the highest quality beef consistently.”

The grid system runs off what they call plant average. Hadrick said in order to get the premiums, producers have to bring in cattle that are better than what everyone else brings in. That can be a big challenge as they’re attracting a lot of cattle that are high quality right from the start.

The plant isn’t buying cattle from the Hadricks, but instead, they’re buying carcasses. Hadrick said that makes it much harder for producers to try to sneak a bad one through the plant. There’s no hiding a poor carcass once the hide comes off.

He said the new system has advantages from the traditional way of doing business in the cow/cattle industry.

 

 

“On the farming side of things, we got into ethanol, we got into crushing soybeans, in order to get our product closer to the end point,” he said. “The closer you sell your product to the final consumer of your product, the more you’re going to get for it because you’ve added some value to it.”

He said doing business this way isn’t easy. Producers have to manage risk more, they have to have a relationship with the packer, and with the feedlots they work with. Producers also have to know their cattle because they won’t get away with trying to slip a bad one through the chain.

“If you market average cattle, you’re going to get an average price,” Hadrick said. “We’re trying to do things a little differently to do things better.”

Chad Greenway talks Vikings football

Chad Greenway talks Vikings football

US Bank Stadium is the site for a Thursday night game between the Minnesota Vikings and visiting Dallas Cowboys. The Vikings are in need of a big win as the game kicks off around 7:30 central time. (photo from ESPN.com)

The Vikings host the Dallas Cowboys on Thursday night in a prime time NFL game at U.S. Bank Stadium in Minneapolis. There’s no question the purple are in need of a quality win over a good team to get their mojo back from earlier in the season. Remember when the team was 5-0 and a “Super Bowl contender?” Sigh.

Chad Greenway took some time this week to speak with reporters about the upcoming game. My first encounter with Greenway took place a long time ago at the Dakota Dome in Vermillion, South Dakota. He was the quarterback/middle linebacker for Stickney-Mount Vernon as they took on my hometown Castlewood Warriors for the 9AA state championship. Most football teams talk about setting the tone early in the game, correct? Sticky-Mount Vernon set it during pregame warmups.

I was a young broadcaster doing sideline reporting and watched as the black-clad team took the field. I thought a college team got their schedules mixed up and were ready to take on the University of South Dakota Coyotes. Sticky-MV was a big squad. Castlewood relied on speed so they were looking at an uphill climb before the opening kickoff.

You can just tell about some players. Chad Greenway was a man among boys that afternoon on the astroturf. His talent level was so far above anyone else’s on the field, either his teammates or the opposition, that you just knew he was going places. He certainly did.

After a stellar career at Iowa as a Hawkeye, he’s been a Viking stalwart for a long time. The thing I like most about the guy, who just happens to be a fellow native South Dakotan is he doesn’t seem to have forgotten where he comes from. That’s a rare thing in today’s professional sports. Here’s some thoughts from Chad (Greenway, not Smith) on Dallas.

Why FFA and agriculture are the Best Things Ever

By: Talisa Smith

A recent article by PETA described FFA as “lame AF.” Now, I see more and more posts from people who used to be in FFA agreeing with PETA. You folks that changed your mind, I’m betting you only did it because other people did. That means you are not, and never were, a proud FFA member.

Let me start off by introducing myself. My name is Talisa Smith. I’m 16 years old, and from Fort Pierre, South Dakota. Right now I’m a sophomore at Stanley County High School. I have been a FFA member for three years now, and I can say I would never go back in time and change my mind about becoming one

I am my chapter’s reporter and am stationed by the flag when we hold meetings. Much as the flag covers the United States of America, I strive to inform every man, woman and child I can that FFA is a national organization. It reaches from the state of Alaska to Puerto Rico, and Maine to Hawaii. I am there to let everyone know what goes on in the chapter. So I’m going to tell you what FFA is to me and what my side of the story is.

Many people have read this article about how we are a lame organization. One thing that most people probably don’t realize is that those pictures they have are entirely out of context. What they said is wrong and they clearly don’t know what they are talking about.

In one point that they made, it states FFA teaches kids to raise animals and send them to the slaughterhouse to have them cut apart while they are still living. Well yes, these animals do die so that people don’t starve. However, the methods that they say they use to put the animals down are wrong.

In a slaughterhouse the animals are put down with a stun gun to the head because it’s painless to the animal and quick. The other way is they are put down is by a gas. To make sure that they are dead, workers will drain the rest of the blood so the animals don’t suffer. Then they are butchered for the meat so that the world can have food.

They had also mentioned that sheep tails are cut off and ears are pierced without using painkillers. Cutting the tails off is a process is called docking and it is for the sheep’s benefit. If we don’t do this, the tails would end up getting dirty and infection is a good possibility. We dock the tails so the sheep can stay healthy and not get sick. They don’t feel anything but a little pinch when they do this.  When we pierce their ears, it’s basically a small hole, just as cows get tags in their ear to tell them apart.

The next allegation is we steal calves away from their mothers. We bottle feed those calves instead of giving them milk from the cow. The milk we get from the cows is not just used for drinking. That is used for all sorts of thing like, cottage cheese, cheese, and ice cream. So if we take away that milk, you are going to take away ice cream. Do that, and you have to tell your kids that you are the reason that they can’t have any more ice cream. Now, to me, that just doesn’t sound right.

FFA and agriculture

Stanley County FFA chapter members volunteer to clean up local emergency vehicles as part of summer camp activities. (Contributed photo)

Another point in the article says that the skills needed to stand up and talk in front of a group are lame, uncool, and have no purpose in the world anymore. The article says people should just stick to their phones. What happens when you want a job and you can’t talk to someone in person? You can’t talk only through texting. I can tell you this: you will not get hired and you will not find a job if you can’t have a decent face-to-face conversation.

The article said it’s cooler to judge people instead of knowing different kinds of livestock and other animals. Well you are now saying that it is ok to belittle people and lower their self-confidence. FFA is trying to stop that in the first place.

FFA and agriculture

Talisa Smith of the Stanley County FFA chapter poses with the Peterson brothers, farmers who are nationally known Ag advocates. They made an appearance at a recent South Dakota State FFA convention. (contributed photo)

They had stated that it is better to be a follower than it is be different and stand up to be a leader. You are going to tell people that it’s better to act and follow someone than to stand up and be yourself? I am proud of who I am and I’m not afraid to stand up and be a leader that may change the world for the better.

Many FFA members take care of animals and know how to feed them and give them the right medicine so they don’t get sick. We want our animals to be the healthiest they can be. We take pride in this because we are feeding the world while doing something that we love to do. Some people are saying that’s dumb. You shouldn’t do that. Instead, be more like PETA and just talk about caring for animals, and not actually doing it. Well if nobody raises livestock, then what happens? We have no food if farmers just stop working. Great: We got everyone to stop like you wanted, but guess what? We have no food for anyone. Now what do you want us to do? We’ll see FFA members and the farmers they might grow up to be as where you’ll get your food from, so we need them.  Did you know that 1 farmer feeds at least 100 people, if not more?

 

FFA and agriculture

National FFA officers often take over local classes to teach life skills all FFA members can use. (contributed photo)

FFA doesn’t just teach you about agriculture. It teaches you life skills that you can use everywhere. You will meet great people along the way that you never would have met in the first place. There are 692,327 members right now, and 7757 chapters in the United States, Puerto Rico and the Virgin Islands. Those numbers are growing each year and I am so glad for that. Our mission is FFA makes a positive difference in the lives of students by developing their potential for premier leadership, personal growth and career success through agricultural education. And our motto is Learning to Do, Doing to Learn, Earning to Live, Living to Serve. As an FFA member I am proud to live by this with everything I’m doing. I don’t think that most people realize is that agriculture is everywhere and is in almost all the jobs that we have.

So the next time someone wants to say that FFA is lame AF and belittle FFA and agriculture, make sure you do some research on it so you know what you’re talking about. You are also offending everyone involved because you information is wrong and hurtful.