Keeping a productive cowherd while focusing on value-based traits challenges this cow/calf producer.

John Grande knows he's at a crossroads with his cattle operation. While he's aiming his cow/calf operation at the value-added, branded beef market, this Lennep, MT, rancher also needs to compete as a commodity beef producer. He knows his bread and butter still lies in production. Traits like fertility, birthweights and stayability are key to keeping his supply pipeline full.

With a herd of British cows — straight Angus and South Devon bred in a rotational backcrossing program — a portion of his calves will fit into a quality-based program. In fact, 30% of his calves have been marketed through the Nebraska Corn Fed Beef program for the past two years.

He likes the production information his Nebraska affiliation has brought him. But, he's as frustrated as anyone with the market signals floating around the countryside.

“How do you place value on a calf?” asks Grande. “Some programs will pay you a premium, but you have to be careful about how much money you put into the calves before you get any money back.”

Grande saw several years ago that the future was in premium programs. He knew that to play in the new premium- or value-based programs he'd have to know more about his cattle's performance.

“We've been collecting feedlot and carcass data for 10 years. We're just getting to where we can use it to target the genetic changes we need,” he says.

In fact, this winter he's using the performance data to develop long-term genetic strategies. Specifically, he's looking at fertility and breed-back percentage, improving weight gains while calves are on the cow — and “stayability” of the herd.

“With later calving and earlier weaning, we don't expect heavier weaning weights,” he explains. “And, we don't really want heavier calves because a lighter calf gives us more marketing options.”

By improving 205-day weights, he feels he can improve the efficiency of his cow/calf segment.

Grande is also looking at increasing feedlot performance and improving carcass value by improving yield grades. He'd also like to improve dressing percentage and marbling scores without adversely affecting other performance traits, not to mention disposition, more growth and increased efficiency. It's easier said than done.

“We have to set some priorities,” he says.

Today, those priorities are specifically improvement of breedback and stayability and getting rid of outside fat. “If we can maintain our other traits while doing so, we'll have the icing on the cake.”

The Price Signals

Grande holds his calves a minimum of 45 days post-weaning. If he sells calves, they usually go in October-November, usually a better market for him than May-June because, he says, “it spreads out our cash flow and reduces the risk of hitting a bad market.”

The calves kept back go on feed at 575-625 lbs., and finish at 1,230-1,300 lbs. after 120 days. If you're marketing on a grid, you have to be ready to sell when the time is right, he advises.

“Everything we put on feed is eligible for the Nebraska Corn Fed Beef program,” he adds. But, the decision on whether or not to market into the alliance is based as much on commodity market conditions and price protection as it is any pre-determined target. Price protection in this case is the commodity markets and hedging opportunities.

“You can rely less on premiums or discounts if you've got yourself protected by the ‘board’,” he says.

When considering value-based grids, Grande believes producers need to look beyond the premiums and discounts. They need to look at how the base price is established and what it takes in terms of additional costs to meet the grid.

Is there extra freight to get cattle to a plant that has the grid? Do the cattle have to be fed in specific yards? Do the cattle need to be implant free? Do the cattle need to be fed Vitamin E? Do we need to change the way the cattle are managed in order to produce more marbling or less fat?

Experience has proven to Grande that value-based marketing is here but it's not perfect. Some price signals don't work their way through the production chain. For example, some ranchers still make more money producing heavy carcasses with large ribeyes (particularly in times of cheap feed) even though these are not necessarily desirable for beef customers down the chain.

He has other questions, too. For instance, is all this effort to gain information and change genetics to fit a niche really worth all the trouble? With all the technology that packers are adopting in the processing and merchandising of beef, do packers really need better raw material?

And, if beef packers can, in effect, make a “silk purse out of a sow's ear,” how much of that value will they be willing to pass back to the producer who has striven to produce a superior product?

“The new ways of processing are great for the industry as a whole,” Grande says. “But, what do they mean for all the segments along the chain. To, me, it further complicates the transition to value-based marketing and the price signals coming through the system.”