My View From The Country

There Are No Black-And-White Answers In Our Gray World

Building demand goes beyond continuing to increase exports, growing branded and value-added differentiated products, and stopping the decline in commodity beef demand.

I had an hour-long discussion this week with someone who sees the world in black and white on virtually every subject, and he doesn’t let facts that refute his stance get in his way. The conversation began over beef demand and per-capita consumption, which economists will tell you are two vastly different metrics.

Building demand has to be the industry’s focus. By building demand for our product we can also increase per-capita consumption. We can also increase per-capita consumption by increasing production. The main issue is at what price that extra production moves.

I have heard two minority views expressed regarding demand. Some are content with a shrinking industry if it means increased profits. Others are open to increased production and/or lower prices in order to grow the industry, even if that equates to decreased profitability. Most people, however, take a third view, which is that we need a growing industry and growing profits.

But what is more profitable – having 100 cows that make $10,000, or 200 cows that make $10,000? Margins change but profits are consistent; is that a good thing or a bad thing?

It depends somewhat on your perspective. Is a decline in domestic per-capita consumption a bad thing if it occurs because we export more beef and the domestic population is growing, which results in higher margins? Conversely, is increasing per-capita consumption a good thing, if it’s accompanied by declining margins and profitability?

The industry’s problems, challenges and opportunities are complex; they contain a whole host of variables, and they don’t fit into nice tight boxes. Some things are so simple that black and white answers exist, but in today’s world that is rarely the case.

The individual I was talking with this week seems to view every issue in black and white. For example, he believes that one size of cow is the most profitable, and that the majority of producers, academics, etc., are ignoring economic realities. In reality, the data tell a much different story – moderate cows work best in most instances. However, in some production environments, big cows are the best; in other production environments, little cows rule.

Of course, profitability rankings of cows vary depending upon the costs of inputs, and prices received for calves, cull cows, etc. If you sell your calf at six months of age, you might find one optimum; if you sell those calves as backgrounders, feds, or take them all the way to the retail case, and the economic models show that animals (ideals) dramatically re-rank.

As an industry, we know that the silo approach to economics, where we only consider our own economics and pay no attention to the segments above or below us, doesn’t work. I think the number-one reason we have failed to keep up competitively with pork and poultry is that they’ve been much better at improving efficiency of production and quality of the product from a total systems approach.

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Meanwhile, our industry has tended to measure those metrics within each segment. We maximize these metrics within segments, which often results in decreasing values for the other segments in the production chain.

Wouldn’t it be great if we could merely decrease production costs and buy back lost market share, or produce a certain size of cow to fix all our problems? Unfortunately, we’ve moved beyond the simplistic; there are no simple black-and-white answers to these questions. The answers require lots of information and knowledge, and usually involve finding a balance of competing interests in an ever-changing environment. What is right for today may not be right for tomorrow. The model in a pre-ethanol world is not the model for a post-ethanol world.  

Building demand goes beyond continuing to increase exports, growing branded and value-added differentiated products, and stopping the decline in commodity beef demand. It means putting together a marketing structure, a business model, and industry infrastructure that will facilitate those things.

 

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Perhaps more importantly, it means changing our silo mentality and segment paradigms, and increasing our knowledge of the thousands of factors that drive profitability from conception to consumption. We then need to create the decision models that will allow us to make the right decisions and adapt to an ever-changing environment.

It’s a multi-faceted program that will allow us to deal with attacks from groups like The Humane Society of the United States, focus on meeting the needs of baby boomers in retirement, and improve beef consumption among our youth. Broad efforts at beef demand are good, but the market is becoming so segmented that broad campaigns may have lost their effectiveness. Or perhaps we just don’t have the resources to carry out broad-based efforts anymore.

We live in a world today where the answers lie in the gray, not in the black and white. While the challenges are great, the opportunities are just as vast, but we won’t capitalize on them with black-and-white edicts. Today’s issues simply aren’t that simple anymore.

 

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Discuss this Blog Entry 8

on Jan 10, 2014

Would you consider writing an article on how larger cows are more efficient on a per acre basis in some environments (mathematically)? Increased cow size has not resulted in increased efficiency or even production on a per acre basis. http://hereford.org/static/files/0114_CowEfficiency.pdf
Increased weaning weight is the most expensive to produce and worth the least. In the south plains the first 450 pounds are worth around $2 and the next 100 pounds are worth around $.70. That means I only need to produce 1/3 as much weight in lighter calves to have the same gross income. I can put on the first 450 pounds in weaning weights cheaply. Everything after is expensive. Out of season calving with increased hay and protein supplement, increased cow size that require a higher plane of nutrition due lower relative intake, increased milk that results in lower rebreeding rates. The market structure is signaling the efficiency of a lighter weight calf for the stocker industry.

Wisconsin (not verified)
on Jan 10, 2014

Where is the "data" showing that larger cows are more profitable in some environments? I have yet to see any real data from actual production systems showing that to be true.

Some producers are inclined to believe that since we can grow an abundance of high energy feeds in the Midwest that larger cows might just be more profitable here, because they will wean larger calves. Research done in Wisconsin in the 1980’s showed that wasn’t true. Researchers (Davis et al. 1983b) demonstrated that larger cows won’t wean as many pounds of beef per pound of feed as smaller cows will. The same researchers (Davis et al. 1983a) also discovered that feeding higher energy feed to the larger cows increased pounds weaned, but not at a high enough level to offset the higher energy intake and cost—and this was long before the ethanol craze increased feed prices. Easy access to high energy feed does not make it cheap enough to feed to beef cows, especially at today’s prices for feed.

That said there is no easy answer to increasing beef consumption. With less beef production, prices are going to increase for beef, and that will lessen consumption even more. Beef production won't increase much until the federal government quits subsidizing crops and more land reverts back to pasture and hay production, but that won't likely happen anytime soon. At least not until are economy starts going into default.
In the early 1980's New Zealand's economy experienced problems similar to those facing Greece, and responded by removing all agricultural subsidies. They went from being one of the most subsidized agricultural economies to zero subsidies. The farmers didn't riot or go belly-up like many predicted. Instead they became better. New Zealand is now the world's lowest cost producer of dairy products, despite having high minimum wage levels and no easy access to cheap labor. They can produce milk so cheap that we put trade barriers up to it's importation into the U.S.
Why are we so afraid of cutting subsidies in the U.S.? Is it because we don't think farmers are smart enough or creative enough to exist without them? Or is it because politicians need to get elected?

Davis, M.E., J.J. Rutledge, L.V. Cundiff, and E.R. Hauser. 1983a. Life cycle efficiency of beef production: I. Cow efficiency ratios for progeny weaned. J. Anim. Sci. 57:832-851.
Davis, M.E., J.J. Rutledge, L.V. Cundiff, and E.R. Hauser. 1983b. Life cycle efficiency of beef production: II. Relationship of cow efficiency ratios to traits of the dam and progeny weaned. J. Anim. Sci. 57:852-866.

Kary (not verified)
on Jan 10, 2014

Troy, I'm gonna keep this short. If you had a clue as to the difference between raising cattle, which is what we do, and the meat complex you might not look so foolish in your writings. When you put on Twitter that you long for the stability of your previous jobs, I would contend you'd have that if youd stop serving the masters of the meat complex. You could also help cattlemen all over the country if you'd never touch your keyboard again to write this kind of propaganda.

avatar (not verified)
on Jan 10, 2014

I see nothing in the article addressing the penalties of excessive milk production for the nutrient resource, which are greater than for being too big. The problem is cows excessive in both traits.

I agree with some of the comments that the tail tries to wag the dog too often. We especially don't need feedyard managers trying to dictate how those with cows should operate their business.

Keith Evans (not verified)
on Jan 11, 2014

There is a danger is looking to the pork and poultry industries for guides to our future. Both industries are controlled by big business. They control both the market and product standards. To this end they have made pork, for example, into a single product. Most of the pigs slaughtered are virtually identical, and they produce a bland white meat that accepts almost any flavor the cook wants to add.

Some people, I assume, would like to duplicate this in beef production. But beef today is many products from USDA Prime, dry-aged loins down to cow hamburger.

What the public needs to know is that beef is a high nutrient-dense, healthy food, regardless of what which kind of beef one eats. There is even proof that well marbled beef is a very-heart healthy food.

Consumers need to know the truth, and it is up to the beef industry to convince them. I would like some front page headlines, and lead stories on TV news and healthy living shows, that reads something like this,"Dr. Oz Admits Misleading Public, Beef Is Found to Be Important Health Food"

In the meantime we can quit worrying about the ideal size of a cow. Economics takes care of that.

Keith Evans

W.E. (not verified)
on Jan 13, 2014

We agree, Keith, that we can't compare beef to pork and poultry, and that cow size takes care of itself when the cows are required to survive and thrive on only available forages. The number-one reason beef has failed to keep up competitively with pork and poultry is not that they’ve been much better at improving efficiency of production and quality of the product. It’s that the animals have a shorter reproductive life, are smaller creatures and can be mass produced from conception to consumer in confinement operations. Unfortunately, confinement and transport are also the reasons that more than a million baby pigs died shortly after birth from an incurable viral infection last year. The main advantage of beef is one that cattlemen can very efficiently lay claim to: Vertical integration. Our animals can grow up in clean environments, in the open air, from conception to carcass in the same place, grazing grass and local hay, fertilizing the land where they graze, perhaps getting a little grain as supplement during the last ninety days to satisfy customers who want that kind of beef. Other than our local processing plants, there is no real need for a highly segmented beef industry. Talk about a paradigm change! Uncounted costs for feed, transportation, vaccines, medications, ionophores, hormones, steroids, beta agonists, and extra labor disappear with vertically integrated beef, allowing beef producers to pocket the difference for their extra trouble in moving their cattle to new grass each day or two. Instead of paying for extra medicine and vaccines, we can pay for better quality forage seed. But if vertical integration is to happen industry-wide, the big three or four processors must be willing to give back what they have been taking away for the past forty, fifty, sixty years, allowing industry infrastructure that will facilitate regional and even local production. Downsizing the big feedyards will mean taking more land out of corn and putting it back in pasture. Maybe downsizing some of those top ten landholdings that monopolize a total of 13,250,000 acres, some of them sprawled across multiple states, would give more ranchers an opportunity to produce beef. Investment in and absentee ownership of vast tracts of land is largely a bane to the American dream of independent productivity, not to mention food security.

Avatar (not verified)
on Jan 13, 2014

Beef production will never be as vertically intergrated as poultry and swine because the basic unit (the cowherd) will still be raised on range or pasture. The investment in land for the cowherd precludes a corporation from vertically integrating from conception to finished product. Packers don't want to own cows. Neither do strictly stocker operators.

Beef production will always be largely segmented, with some exceptions and some "vertical-like" integration, examples of which exist today but which represent relatively low percent of total production.

Anonymous (not verified)
on Jan 14, 2014

Thanks for another interesting, thought provoking column, Troy.

Your first paragraph points up a fact that is borne out over and over again in the previous comments, and which I feel is one of the problems for the cattle producer: producers who insist their way is the ONLY way to raise cattle/produce beef. They also seem to be quite universally certain that 'corporations' and/or big packers are all out to 'get' the cattle producer and force him into servitude in one way or another.

What could the cattle business become if we all found a way to use the land and climate we have in the best way to raise the type of cattle the majority of consumers want today? The touted model of using the expensive forage seeds and moving the cattle at least once a day simply won't fit much of the range country which is nearly desert like, yet this 'Great American Desert' is capable of producing some very fine beef IF it is used properly. Cattle are at least as likely to remain healthy without huge medicine inputs with acres of range per animal as they are grazing those lush paddocks shoulder to shoulder, in my experience! We need different genetics, of course, and maybe a different mind-set to work with what we have, or find an environment we prefer, but always work for the sustainability of the grazing land while producing the best cattle to make the best beef we find practical. What might we achieve if we would just forget about trying to force everyone into our own methods!

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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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