My View From The Country

It’s Bigger, But Angus Shares Much With Its Smaller Counterparts

Even with all the new technologies available today, the cattle business is one where family and kids are still the top priorities for most operations.

While attending the recent American Angus Association (AAA) annual convention in Louisville, I had the chance to review some current breed stats. I was amazed by what they depict, not only about the breed but the industry.

First off, most of us are familiar with the claim that the professional lifetime of an average purebred breeder is only seven years. And because the seedstock business tends to be 3-5 times as capital-intensive as commercial production, it’s not surprising that seedstock herds on average are smaller than commercial operations.

I found that the membership demographics of AAA are not only similar to those of other breed associations but almost all cattle membership organizations. They all seem to share the dynamic of the vast majority of members being relatively small in size, while the large operations are statistically small, but represent a large percentage of the inventory.

In AAA’s case, 65% of its members registered less than 11 head, but that same 65% only accounted for about 11% of the cattle registered. On the other end of the spectrum, only 4% of the membership registered more than 99 head, but they represent 46% of all the cattle registered in the last fiscal year. The top 9% of the membership registered 63% of the cattle.

I’ve always felt that the policy differences between two groups like AAA and the overall beef industry is overstated. After all, theoretically, what’s good for the Angus breed should be good for large or small producers alike. And what is good for the cattle industry should be good for small and large producers, tool. As JFK once said, “a rising tide raises all boats.” Still, there is inevitably tension between these demographic groups.

Technology is transforming the business. Registrations overall were down for the year as the industry continues to consolidate. However, just over 10% of registrations were the result of embryo transfer, while 52.2% of the calves registered were the result of artificial insemination.

In addition, the amount of data now being incorporated into the national genetic evaluation program is staggering, as it includes records on more than 20 million head of cattle! While ultrasound was revolutionary just a couple decades ago, now it’s DNA, and more than 100,000 DNA samples were processed by AAA last year – double what it was the previous year.

 

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I remember when AAA rolled out its computer program geared to helping producers collect their data and transmit it electronically. Today, more than half of the membership is using the Angus App on their smartphones. And where new EPDs once were calculated every six months, they’re now run on a weekly basis.

Public relations and communications are vital to any organization, but the primary means of communication used to be a monthly print magazine. AAA now has a TV show, a radio show, is all over social media, and utilizes YouTube and live streaming of cattle events all over the U.S. Today’s world demands to be connected and informed on almost a real-time basis, and the electronic media not only makes this communication more timely, but even more personalized.

But even with all the new technologies, this remains a people business. Family and kids are still the top priorities and the primary focus for so many operations.

Another thought I had is that the segment approach is dead. A lot of organizations used to divide themselves up based on industry segments, or were created to represent just one segment. In one sense, that’s logical as every segment has specific issues and areas of emphasis. In the end, however, every segment is so intertwined and interdependent that these barriers seem out of place. For instance, nothing is further removed from the seedstock producer than the consumer, but nothing is more vital to the success of the seedstock industry than the consumer.

Certified Angus Beef® (CAB) was a revolutionary concept at its inception 25 years ago; now it’s helping to drive bull sales and breeding decisions. CAB sales were up 6.7% this year, another record, at 865 million lbs. No one within CAB likely envisioned ever selling 1 billion lbs. of beef, but that level undoubtedly will soon be reached.

CAB’s overall acceptance rate continues to grow as genetics improve – it was 24.2% this last year. I’m simply amazed at the growth of the various branded products and programs, and their export growth, when compared to the generic domestic beef market. It’s obvious that our future rests in differentiation and meeting specific consumer targets.

The final comparison is the rather mundane but ever important topic of money. The Angus breed is the dominant, most influential breed in our industry. That size provides Angus with tremendous opportunities, as AAA and its subsidiaries had over $45 million in revenue in the past fiscal year.

I’d never underestimate the value of passionate members in helping an organization achieve its goals and get their message out. But whether it’s a breed association, a state or national cattle organization, or even an anti-livestock group, if you want to understand their importance and political clout, look at their revenue figure.

AAA is unique in this regard, as it’s among very few membership organizations that don’t rely on membership dues for revenue. In fact, AAA’s registration, transfer and membership revenues were flat or down compared to a year ago. However, total revenue increased by nearly $6 million, thanks to increases in royalties, investment income and new revenue streams.

 

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Discuss this Blog Entry 5

Doug (not verified)
on Nov 22, 2013

This is a real nice report!

I agree the revenue dynamics will be key to AAA future.

A few years ago I read a book by Keith Evans named "A Historic Angus Journey The American Angus Association 1883-2000". It covered the association's history ending on a positive note with the breed's growth to its current dominance in our industry.

It also covered the association's reactions to periodic revenue shortfalls. Basically, personnel and services were cut to the bone.

In addition, it carefully stepped through the introduction of artificial insemination by non-owners of the bulls in question. At one time, a breeder must own the bull to register offspring. The end run of this effort was a more open mating possibilities and a new revenue stream for the association commonly called AI Certificates.

I believe these are the lessons learned that motivated the association to its industry position and revenue diversification we recognize today.

Perhaps, an in depth report/book would be well read describing the modern dynamics of breed associations in light of revenue sources and services offered.

No doubt each association has its perspective on the industry and each breed has its unique utility for moving the cattle business forward. But it is revenue (cash flow) that allows these positive influences to remain part of the industry. Which associations are prepared for the coming/current downsizing of the industry?

Avatar (not verified)
on Nov 25, 2013

"The segment approach is dead". Could not be farther from the facts. The majority of cow-calf producers are not affected by what happens beyond weaning. The only influence later segments have on them is what price a buyer pays. Unless and until consumer, packer, feeder, stocker desires are more effectively transmitted in the form of more significant price differences at weaning, this will not change.

Steve C. (not verified)
on Nov 26, 2013

I am truly amazed at how AAA managed to make CAB, especially black angus, to be so in demand at the supermarket and restaurant without other breed organizations orchestrating a counter measure. Instead, practically every breed now has a black phase to tap black demand. (We all know all the 1 billion CAB beef sales aren't all black Angus.) Further, black isn't even the best color for producers who tout environmental concerns for their animals. Black may have an advantage a few days out of the year, otherwise it is a disadvantage resulting in animals spending extended periods standing under shade or in water fouling the later and concentrating nutrients under the former. How did we let this happen?!

W.E. (not verified)
on Nov 26, 2013

Troy, like you, major purebred associations are so intensely feedlot oriented that they have overlooked the desires of a growing segment of the consumer public, as well as the needs of most commercial cattlemen in the eastern US. Although frustrated to witness such disconnection, we have it to thank for pulling our farm out of debt. The size and scale of a cattle operation is directly proportional to its ability to provide personal customer service. We register fewer than 100 animals per year, and can’t justify growing much larger. The wants and needs of individual customers who buy our products, are a niche that breeders ambitious for more dominance have overlooked. Our products include registered Hereford bulls raised entirely on grass, sold mainly to Angus breeders who are looking for more manageable and more efficient animals, while reaping the benefits of heterosis. Another of our products is 100% grassfed Hereford beef, sold directly to consumers looking for an alternative to feedlot-raised black Angus beef. Our beef customers want quality, good tasting beef raised without hormones, antibiotics and steroids. Our low-input, high quality all-grassfed Herefords make a good enough living for us that we can convert row-crop land to pasture. Top males become bulls; the rest become beef. Management-intensive grazing techniques have also eliminated the need for increasingly expensive artificial nitrogen fertilizers to fortify pastures, making our farming operation truly more self-sustaining. Major purebred associations, especially the AAA and AHA, tend to ignore producers like us, focusing instead on topics unrelated to food, like showring champions and feedlot-oriented EPD numbers. The breeds moving into the void of forage-oriented genetics are still considered minor. Increasing food awareness may change that.

Steve C. (not verified)
on Nov 29, 2013

I think the majority of factoryline producer feel threatened by the growing market of grassfed beef and our willingness to meet our customers preferences.
Thanks for responding, W. E.

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What's My View From The Country?

As a fulltime rancher, opinion contributor Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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