BEEF’S CHANGING MARKET                                             added 5/12

The source verification of beef along with the forthcoming national animal identification could provide marketing opportunities for beef producers.  If you recall some two years ago now, we heard Wal-Mart had announced to their top one-hundred beef suppliers, that they wanted their beef suppliers to be RFID ( Radio Frequency Identification ) compatible.  This was unprecedented in the fact of a wholesale consumer like Wal-Mart placing a demand on their suppliers.  According to Christi Gallagher the spokesperson for Wal-Mart; who stated that beef cases and pallets are being RFID tagged prior to arrival at Wal-Mart.  As you can see, Wal-Mart has leverage over their suppliers.  We might assume from this fact that there will be a trickle down affect or impact on you as ranchers.  We might also assume  with Wal-Mart being the largest beef retailer that it will set an industry standard.  In any event it will be safe to say that this influence will be felt in the value placed on your calves.

We have been very fortunate in the fact that we have seen a demand in beef consumption and a rise in price at the same time over the past few years.  This popularity is becoming a driving force for some dramatic changes in the beef industry.  One of those changes is the improved quality with the conscious awareness of consumer demands in the meat case as a repeat buyer for a consistent product with a great eating experience.  The merchandising of branded and convenience products from the meat case to hydro-sealed products has improved better than three fold from the first beef audit.  The beef demand index has improved better than twenty five percent since 1998.  This rise is great for the beef industry.  It also affords an opportunity to encourage retailers and food service operators to take extra steps to protect the value they receive from beef’s current popularity.

For instance, the RFID can provide a lot of benefits for a large company such as Wal-Mart.  The beef product can be processed faster and inventories monitored instantly through this system.  It reduces the demand for the element of error resulting from human labor.  More importantly, the RFID is another tool to ensure food safety and of course benefiting a satisfied consumer.

RFID of course is technology in its infancy so to speak.  However, the potential exists to generate data that can be used universally in the meat supply chain.  The fact that it has traceability potential with country and ranch of origin, growth date, freight, nutrition data, and carcass data as just some of the information that can be made available in a tracking system such as this.

The fact that retailers are using this system with success; so might it work for the other side of the coin as well with producers.  They too, have a system now for source verification of which is a perception of becoming an indicator of quality.  It has attained a perception equal to genetics and time on feed.  Some producers are already earning premiums for the source verification of their beef.

FEEDLOT NITROGEN

This past week the Extension Staff ( Field and Faculty ) held their Spring Conference in Brookings.  Part of our training included a tour of the ethanol plant near Aurora, South Dakota.  This plant is capable of producing over one hundred million gallons of ethanol.  With that volume comes the spin off by-products of which some are being used for livestock.  That is how we were involved especially with the dry and wet corn distillers grains.  This in itself is a large business let alone the research that is being done for other livestock feeds of a marketable value.  The glitch to these products becomes the concern for high levels of nitrogen or in affect the feeding of too much protein.

Dr. Robbi Pritchard, Beef Nutritionist, explains that the one issue driving the research is the fact that area livestock producers are increasingly wanting to feed distiller grains and co-products of ethanol.  The inclusion or concern becomes the fact that distillers grains can result in very high crude protein diets.  The problem is that the accepted nutritional requirement equations say distillers grains, which are high in crude protein, don’t have enough of what ruminant nutritionists call DIP  (degradable intake protein) crude protein fraction available to feed the microbes in the rumen that help the animal ferment the feed it eats.  When we feed distillers grains, the equations that are used for distillers grains as the sole source of crude protein doesn’t provide enough ammonia for the rumen microbes.  So we add urea to the diet to feed those microbes because they ferment the feed and generate the energy.  The result is diets containing excess crude protein.  Inevitably the addition of more crude protein will make the feed lot nitrogen balance worse.

Dr. Pritchard explained that there are several experiments that are currently being done with high levels of crude protein indicating that it is a waste because all of the excess nitrogen that comes out of the system ends up in either urine or in the feces of which most is in the urine.  A high percentage of the urine nitrogen ends up degrading into ammonia and heading for the atmosphere in the form of gas.  Distillers grains were incorporated in all of the diets.  In one of these diets he included no urea.  He added increasing amounts of urea to the other diets as the source of the additional crude protein the equations call for.  We went from zero, to some, to more urea.  But when we looked at the performance he said, there was absolutely no difference in the average daily gain or in feed efficiency.  He believes distillers grains have enough crude protein to meet the animal’s needs without the additional crude protein that is called for in the equation.  However, the industry still typically adds crude protein because that is what the National Research Council ( NRC ) model suggests that is necessary.  This NRC is used as the reference source or accepted standard for livestock nutrition.  He contends that more research is required to align the altered distiller’s by-products with the accepted standards of naturally grown feeds.  Dr. Pritchard feels he is in the camp of a small handful of nutritionists that think we just feed too much crude protein and we place too much confidence in the NRC feeding standard.  The problem is that there isn’t a large enough body of research data to convince the current commercial livestock feeder.

HERD’S GENETIC POTENTIAL

I would like to share a thought or two this week concerning some issues that need to be considered for genetic improvement within commercial cow herds.  A herd’s genetic improvement has been a fascination of mine since my college days as to the study of genetics with inheritance and of course the advance genetics specific to livestock genetic carriers for predictable improvement.  Over the years we are seeing more and more genetic influences impact herd profitability.  The point of the conversation was – can we as commercial producers target production to fit a Branded beef program such as what our Governor is initiating?

The genetic demands from commercial herds for uniformity of production when there is a diverse genetic herd pool within a commercial herd, is a challenge for the commercial producer.  We have as a goal to hit or obtain a specific market in this case a Branded with a reasonable price and yet avoid a possible discount associated with the marketing curve within your herd.  Hitting that goal requires making continual genetic improvement to meet both production and marketing.  A producer needs to set a benchmark with his herd genetics to be in a position to select traits that will be a benefit for improvement and not negative or antagonistic with their combination.  We find that so many times even in crossbreeding programs for heterosis that the traditional EPD’s ( expected progeny differences ) such as weight of gain and growth are contrary to the profit index with grade and yield.  A good example is buying bulls for yearlings or the issue of calving ease when you want you’re herd targeted for gaining efficiencies with an early maturing carcass with an early market.  You might want to rethink this goal because you will have one or the other and obviously not both.

Basic crossbreeding systems as an example will include rotational, composite or a combination of genetic pool traits for the heterosis impact for your herd breeding program.  The line breeding program of a closed herd requires attention to trait detail and compatibility of inheritance for the common goal.  Are we concerned about calving ease bulls to alleviate Dystocia with our two-year old first calvers or are we within a breed for an early maturing carcass with a Choice Grade, 2.2 Yield and an April market.  What I am alluding to is the detailed attention given to EPD evaluation selection when we are assuming a constant with management and environment.  In the real world, they are all variables.

We have accepted the fact that there are nearly a dozen possible indexes for your herd improvement depending on the breed of cattle and of course your intentions.  These indexes are tools that we use where we combine several traits into each profit index for example.  If we have a rancher that wants to buy bulls and raise terminal cattle that are placed in a feedyard for a specific grid market or our South Dakota Branded; then he may select bulls strictly for this goal or select the genetic mix of tools to accomplish this goal.  Quite likely he won’t have to consider the dozen traits but instead be index specific for an easier selection.  We would assume that this would prevent him as well from chasing a single trait on the flip side.

NICHE BEEF MARKETS                                                     added 4/17

I would like to share a thought or two this week concerning `Niche Markets’.  We have the assumption that a niche market is the offering of a particular product to a targeted group of consumers who want something different.  In terms of adding value for our producers; we would like to think these consumers would be willing to pay more money for beef products.  However, the challenge with a niche market is that can we as producers create a special demand for a specialty product with a constant eating quality or can us as producers supply a beef product with a constant eating quality.  Let us assume that we can do both.  A case in point is the word `Angus’ in which it is so prevalent in beef brands and promotions today that it is hardly being considered as a niche market.  

Most of the niche markets that are emerging today with our beef promotion efforts concerns the consumer and their perceptions.  This is especially true for our Governor and his South Dakota Branded Beef in which we want the perception of wholesomeness with a great eating experience.  The consumer has perceptions as to how producers raise cattle.  The consumer has perceptions of animal welfare, health, natural growth, organic growth, original growth, grass finished, and environmentally protected as some examples.  The next level of this perception becomes the source and process verification to provide the documentation of the promotional claim.  This is the issue with our Governor in establishing protocols and of course the Beef Quality Certification with assurance.  We need to keep in mind from the producer’s point of view that the documentation claims become rather insignificant if the eating experience is unfavorable.

We would like to think that demand will create opportunities.  The current consumer demand and their preferences for quality beef is being shown in the beef market with consumers paying a higher price for their beef.  Our Governor with our branded beef would like to recognize that demand by offering a supply of good quality beef to meet the demand of these consumers.  With respect to the many beef audits; we are hearing the retailers with Wal-Mart in particular stating that they don’t want just a product, they want a story with it.  Our fast food markets like McDonalds, Arby’s, Bonanza, and Wendy’s as well want to know where the beef came from and how it was produced.

Our producers need to understand the challenges and the risks to niche markets.  The producer needs to realize that first of all they are dealing with a food commodity that is terminal and perishable.  Beef from birth to the plate is less than fifteen months for seventy five percent of the market.  As our Governor has mentioned; protocols need to be established and followed.  The animals’ welfare is just part of the equation.  Other basic issues the producers need to be conscious of will concern herd genetics, forages, water, health, and finishing practices.  The bottom line for the producer is an open mind to the consumer’s demand for a consistent beef product with quality assurance and a rewarding eating experience.