GeneNet wants ranchers and feeders to quit leaving money on the table. And it looks like this marketing alliance is helping remedy that matter.
Tom Williams, Chappell Feedlot, Chappell, NE, says GeneNet has been a great benefit to him and his custom feeding clients — both in selling finished cattle and sourcing calves. Through the first half of 2002, he's marketed 1,174 cattle via GeneNet's pricing grid, averaging $26.80/head over the live market.
“It's a good program, especially for the smaller feeder or cow-calf producer who needs help putting numbers together,” says Williams. He doesn't use GeneNet exclusively, but he tries to market the higher-grading cattle through the program.
“I know we're better off with this program than without it,” adds Williams, who markets 70-80% of his cattle through grids.
An added benefit of GeneNet is sourcing cattle — Williams recently found a “big string” of yearling steers in South Dakota that he would not have come across otherwise.
300,000 Head And Counting
“We've harvested over 300,000 head so far through GeneNet,” says Ken Conway, Hays, KS, GeneNet president. “Overall, those cattle averaged $19.88/head over the average live price — with the top 50% bringing $38.65 over.” This means more than $6 million has been added to the pockets of GeneNet producers.
“Beyond our goal of getting the most possible money for high-quality cattle, a key to GeneNet is data transfer,” explains Conway. Participation costs $3/head for group data and $5-$7 for individual eartag data. This is the total cost to use GeneNet's formula and services. There are no membership fees.
Conway and his crew are presently working with 1,000 cow-calf producers and more than 100 feedlots like Williams' — adding more every week. He notes that cow-calf producers can receive a report card of their cattle's feedyard performance. While a large percentage of the cow-calf producers have become retained owners, carcass data can be obtained without retaining ownership.
“Cow-calf producers rely on feedlot and carcass data to help them improve their herds,” he says. “Cattle are sourced to our certified feedlots for direct purchase, partnering or custom feeding.” GeneNet is also working with the Certified Angus Beef (CAB) supply development team and its certified feedlots.
The Seedstock Producer
GeneNet still continues to operate with breed associations under its Angus, Brangus and Charolais divisions.
As a seedstock producer, Doug Honald, Coon Rapids, IA, uses GeneNet to find a market for his customers' calves. Raising Angus and Tarentaise in a breeding system under his Hat Ranch brand, Honald is able to see that his customers use the data GeneNet recovers to improve their herds.
“I use GeneNet as a service to my customers,” he explains. “This program has really helped them with breeding and feeding decisions.”
Honald has worked with Conway since the conception of GeneNet — helping market 10,000-12,000 head of customer's calves through the program. Earlier this summer, he lined up four loads through GeneNet. They averaged $36.97/cwt. more than the base price — grading 89% Choice or better, with no “heavies” or Yield Grade 4s.
“The grid is designed for high-quality cattle,” adds Honald. “In this market, that's a good premium and doesn't count what they gained by selling their cattle on a timely basis.”
On the packing end, GeneNet is working exclusively with ConAgra at its Grand Island, NE; Greeley, CO; and Dumas, TX plants.
“We can schedule any cattle to be sold on the weekly weighted average if scheduled with us by Monday,” explains Conway. “They'll be killed the following week.”
Participants who'd like to bid the “start price” can call the GeneNet office when they're about to sell cattle that week and receive a bid before they are killed. GeneNet promises to have carcass data out within seven days after slaughter.
Conway credits much of GeneNet's success to an exclusive carcass merit formula set up with ConAgra.
“ConAgra's interest in acquiring top cattle, helping to develop relationships with feeders and producers, and in helping us make sure that all the carcass data is accurately collected is second to none in the industry,” says Conway.
“GeneNet does a great job, and this service is certainly worth the dough,” says Tim Schiefelbein, Greeley, CO. He's ConAgra's director of value-based processing. “Ken's built a great producer base with a lot of repeat business.”
Schiefelbein says GeneNet is especially good at getting performance and carcass information back to producers in a timely manner and in a form they can understand.
“They take the quality incentives we have in place and find cattle that fit what we want,” he adds. “They earn those premiums through good information and hard work. It is capitalism at its best.”
Schiefelbein emphasizes that GeneNet is a “non-captive” program because a producer is not required to lock in a non-negotiated base price.
“It's very flexible,” he says. “A producer has a lot of options for risk management.”
Conway says the competition between the four big packers has really heated up with all four coming out with formulas and programs to help them get high-quality cattle.
“They know they can no longer get by with just paying the average price for high-quality cattle,” he says. Because of this, GeneNet has been able to keep improving its formula.
“And the more high-quality cattle we get into this program, the more negotiating power we have,” he concludes. “This helps us get more money back to feeders and their customers. I guess that's what this business is all about.”
While past numbers tell one story, Ken Conway, president of GeneNet, is even more excited about the interest his alliance has generated in 2002 and the improvements GeneNet has made to its formula.
“Since last fall, most grids have reduced Prime and Certified Angus Beef (CAB) premiums,” he explains. Consequently, the yield grade base has been moved up to where a lot of grids are giving less yield premiums and are now discounting USDA Yield Grade (YG) 3s by $1/cwt.
GeneNet is still paying an $8/cwt. premium for Prime, $4.50 for CAB, $3.50 for Armour Premium (AP) (non-black-hided), $5 for USDA Choice YG 1s and $3 for Choice YG 2s.
“And our base price is a Choice YG 3,” says Conway. “We have now doubled our minimum USDA Choice/Select spread to be $6/cwt. instead of $3.” He notes that producers can bid the price or use the weighted average to determine the base price.
GeneNet provides the following data collection options:
Group data/tag transfer (no individual eartags): Number and percentage breakdown of group average in all carcass categories then compared to all cattle killed in system.
Normal data/tag transfer (individual eartags): Each tag tied to a hot-carcass weight, quality grade, yield grade, if it went CAB, AP or a calculated yield grade.
Complete data (individual eartags): Each tag tied to a hot-carcass weight, marbling score, quality grade, ribeye area, backfat thickness, percent of kidney, pelvic and heart fat, CAB, AP or a calculated yield grade.