Everybody wants to get out of the commodity business. That’s what Tom Brink, CEO of the Red Angus Association, told Cattlemen’s College attendees at this year’s NCBA Convention and Trade Show in San Antonio in February.
“It’s very difficult if you’re an average producer to make a profit in the long-term, if not impossible,” Brink said. “That leaves rational people thinking about how they can get out of the commodity business.”
But how?
Brink, along with Tommy Perkins, an associate professor at West Texas A&M University, examined ways to do just that. Those included participating in value-added programs, using planned crossbreeding and incorporating reproductive technologies.
“We all wish the cattle market was different,” Brink said. “We all wish the market would reward our cattle in a different way or maybe that the price of all cattle would go up. However, the reality is we are going to have to think about changing our cattle to better fit the market because the marketplace is bigger than all of us.”
The right cattle
Bringing a unique perspective with his experience working for two different breed associations as well as his academic career, Perkins assured producers that “breed does not matter.” But rather, it’s how the breed is managed that really counts.
Perkins pointed out that while heterosis may not be a new concept to the beef industry, it has been largely overlooked for the last several years. Instead of breeding cattle that fit the environment, the industry tried to modify the environment, he said.
“Let’s find a new vaccine for it, or maybe there is a better mineral or probiotic,” Perkins said, explaining the band-aid approach to single trait selection. “I am not against using these technologies, but they are going to affect the bottom line when it is all said and done. Management is important as well as genetics.”
Heterosis is what Perkins called “the only free lunch in the beef business.” Lowly heritable traits such as ribeye size and marbling can get a big boost through heterosis. In order to produce a product the industry needs, Perkins suggested producers start using terminal sires, which to do effectively, he said, would require the use of artificial insemination (A.I.).
“Everybody should be using A.I.,” Perkins said. “There is so many excuses on why you don’t do it. This is one you have to embrace. I don’t know why it has taken us so long to get here.”
Perkins cautioned producers that while full-blood breeds such as Limousin, Simmental and Charolais are considered terminal, not every sire in those breeds are anymore. Today, there are maternal cattle in terminal breeds and terminal cattle in the maternal breeds.
“I would not buy a bull without genomic EPDs today,” he said.
Keeping that in mind, Perkins gave some recommendations on how to use terminal genetics. One option he gave producers was to use the best yielding and best quality grade, terminal semen on their cows and buy all of their replacements. Or, if producers want to raise their own replacements, he suggested using sexed heifer semen on the better cows that bred up early and then use the terminal semen on the bottom end.
“Now you’ve got a set of terminal calves the industry can use,” Perkins said. “Make good decisions based on the tools you have available, and you will hit a home run every time.”
Better marketing
Brink pointed out that beef producers are experts in marketing their calves one to two weeks before they are sold. But in order to get out of the commodity business, he said, “We’ve got to think about [marketing] when we create them.”
Today’s beef producer needs what some marketers would call a “unique selling proposition,” Brink said. They need something different, something better about their cattle that they can legitimately claim or third-party validate to give them an edge in the marketplace.
“Commodity cattle produce an average price,” Brink said. “We can’t put an average effort into what we are doing in genetics and management and expect above-average results. It’s just not going to happen. Specification cattle, however, that’s different. That is what we are moving toward. That’s the road to above-average prices more and more in our marketplace.”
There are so many value-added programs available in the beef industry today. Some of those include health, genetics, nutrition, all-natural and source- and age-verified, to name a few. While some of these programs may be on their way, Brink said some will likely fall away. He predicts in the short run the beef industry will see more value-added programs pop up as more people look to get out of the commodity business.
“We are in a position in this industry where we are going to have to do more to earn more,” Brink said. “Add the value and then put yourself in a position to capture that extra value, and in many cases, that is going to be third-party verification.”
Brink recommended producers start by asking themselves, “What attributes of my calf crop can be verified to make them worth more? Can I capitalize on one or even a few of the value-added programs available?” And, in the case where an operation doesn’t align with one of these value-added programs, he suggested producers consider making changes to better fit what the market is asking for.
“This isn’t theory anymore,” Brink said, referring to premiums in the marketplace. “A lot of people use to wonder if there was such a thing as premiums. That is over now. There is such a thing as premiums, and some of them out there are quite substantial.”
To learn more on this topic, listen to this podcast interview with Tom Brink.
