Depending on your position and perspective, the fortunes of seedstock suppliers could go one of two ways. They'll either cascade beyond previously imagined high-water marks, or they'll run dryer than a Saharan stream. It all depends on perspective and position.
“I think we're moving into an era of having to be full-service genetic providers (FSGP),” says Donnell Brown of the R.A. Brown Ranch at Throckmorton, TX. “In the past, seedstock producers have convinced the commercial producer to buy what they had to sell. I think that has to change to where seedstock producers must provide what the commercial producer needs. That includes helping him market his cattle and helping him develop a long-range breeding plan with cows that fit his environment and calves that fit the market.”
And, that ain't easy. Just ask Tony Matthis of Clinton, NC. For the better part of 20 years, he and his family operated S&J Cattle Co. They have built a solid reputation for their Angus seedstock, topping bull tests and selling about 30 bulls each year.
While that type of operation used to be the definition of a profitable enterprise, Matthis explains, “We were in the seedstock business but losing our tails. We couldn't sell them at a price where we could stay in business because we couldn't sell them with the service we needed to.”
Seven years ago, Matthis traded the S&J name for that of Nichols Farms NC Division, coming on board as a franchise of Nichols Farms located at Bridgewater, IA, which sells about 500 bulls each year. Along with sharing expense and revenue, Matthis can offer his customers a wide range of services, including genetic source feeder calf sales where cattle built with Nichols Genetics are eligible to be fed and marketed as Nichols Beef. Nichols is the exclusive supplier to Machine Shed Restaurants, a Midwest restaurant chain. These days Matthis markets about 100 bulls off his place each year.
“There's a difference between being in business to make money and just handling money,” says Matthis.
Likewise, Dan Snodgrass of AB Farms at Lathrop, MO, says, “We were at a crossroads in our operation where we needed to get bigger and do a better job or get out.”
He'd been in the registered Gelbvieh business for about 20 years, in addition to the commercial cattle business. Like Matthis, he'd built a steady following for his bulls. But he explains consolidation and increased competition from larger operations that could provide more service forced him to change or exit the seedstock business.
He decided to become a member of Seedstock Plus. It's a cooperative of individual seedstock producers with similar goals who collectively develop and market about 800 bulls each year on a regional basis.
This system offers an array of customer services Snodgrass could never practically provide on his own. This includes everything from free delivery to an unconditional guarantee for the first breeding season, to guaranteed competitive bids on the calves sired by the bulls they market. Now, Snodgrass is expanding his registered herd.
“We're not really doing anything new or unique, we're just capitalizing on some of the old basics,” says Snodgrass.
Size Is No Guarantee
“I think if a seedstock supplier is going to be a survivor, he's going to have to offer at least 100 bulls a year,” says Brown. “It seems like to get really good customers and to get them to your sale, it takes at least 100.”
To be a long-term survivor, Brown believes it will take at least 250 head. “If you can't do that on your own, you'll need to align yourself with an FSGP and be part of the production and service team,” he adds.
But, even the largest seedstock suppliers have to adjust to the changing industry. Consider the Brown family's operation.
They've been in the seedstock business for decades, offer five different breeds and composites and market about 500 bulls along with better than 200 females each year domestically and internationally.
They're partners in a feedlot.
They're founders and members of Rancher's Renaissance, one of the industry's up an coming, vertically integrated systems.
Yet, several years ago, Brown says they decided they couldn't keep doing their own thing as seedstock suppliers and survive.
“We started our cooperator system because we needed more bulls for our customers, and we couldn't cost-effectively expand from a land standpoint,” he says.
So, they began signing on cooperator herds, individual producers with cows that fit the Brown system. Any bulls cooperators produce using R.A. Brown genetics go to the Browns at weaning time where they are developed. Whether the cattle make the grade to sell as bulls or are steered for the feedlot, both the Browns and their cooperators share the proceeds and the risk.
Besides help in marketing the cattle, Brown says their cooperators most often cite convenience and management help as reasons they'd rather be a cooperator than continue trying to make it on their own.
“If you're going to survive as a seedstock producer, you need to be part of an alliance with a branded product, and you need to be able to provide the genetics and the carcass that consumers demand,” says Matthis.
More specifically, Snodgrass says, “I really see at some point there being two different kinds of beef — branded and commodity. I don't have any delusions that there will be much of a premium for branded beef, but there will definitely be discounts for commodity.”
But building cattle capable of playing in an alliance is about more than marketing. It's about developing the tools to market.
“I think a seedstock producer is going to have to have a foot in the door with an alliance,” says Brown. “First, for the data flow so he knows how his cattle are doing. Second, these are the people buying your customers' calves and will be recommending bulls to them.”
Indeed, the three genetic providers mentioned in this article each work with feedlots or packers who are becoming increasingly involved in suggesting genetic sources to the producers they buy cattle from.
In sum, Snodgrass says, “Fewer and fewer of us will get bigger and bigger. I think that's the trend in agriculture, period, and I think it will continue.”
One thing's for sure. Consumer demand for specification beef is spurring increased demand from feeder and fed cattle buyers for both the product and the product information that allows them to provide consistent brandable supplies to retailers. In turn, commercial producers are clamoring for more selection, more information and more predictability to serve the market.
In terms of selection, Snodgrass explains, “Traditionally, we've seen a lot of seedstock producers hook up with just one breed. Long-term survivors will have to look at offering multiple breeds or composites.”
Besides the breed consolidation that has been slogging along for the past 15 years or so, Brown points out commercial customers are demanding more hybrid and composite bulls that allow them to manage and exploit hybrid vigor.
Whichever breeds and composites are offered, Brown believes the genetics themselves must be positioned for the long haul.
“Genetically, you have to move rapidly; not to compete, but to survive,” he explains. “For breeds to be survivors, they will have to have a large population, rapid and timely genetic evaluation, and breeders in place who will mass-multiply the superior cattle.”
Moreover, Brown believes all breed choices and specific genetic decisions will be driven by data. He emphasizes, “Just having registration papers doesn't mean sic 'um anymore. You need the data, and now we're moving to an age of having DNA markers.”
“As seedstock producers,” Snodgrass adds, “it's up to us to provide accurate information to our customers and in a format that is not cumbersome for them to use.”
All of this is to say that genetics in the seedstock business are quickly becoming the price of admission. It's the services — from information, to one-on-one consultation, to help in marketing — that are separating the survivors from the also-rans.
“We have to help our customers make every dollar possible, and at the same time we need to reduce their risk,” says Brown. “Our number-one goal is to improve our customers' profits.”
Bottom line, Matthis says, “If we make more money for our commercial customers, then we'll make more money.”
With due respect to the unfolding challenges, Brown believes there will be more opportunity than ever for the seedstock suppliers who position themselves effectively.
“As we move to value-based marketing, I think there are great times ahead for the seedstock business because commercial producers will be willing to pay more for bulls since those bulls will represent more of a quantifiable investment in what they're doing.”