First there was breed consolidation, simmering for more than a decade, now it appears breeder consolidation is starting to take its baby steps in the U.S. beef industry. And, it's a step that may actually benefit commercial producers.
"There will be fewer choices, but it will likely make life simpler because you won't have to run around worrying about where to find the seedstock you need," says Harlan Ritchie, describing the growing consolidation of seedstock suppliers he sees taking place. Ritchie is a distinguished professor of animal science at Michigan State University and one of the beef industry's trusted trend watchers.
"I think part of what's driving it is the search for consistency in both genetics and management - the search for a consistent, uniform and dependable product," he adds.
Call it a by-product of the value-added world of coordinated beef production and marketing systems or merely a reflection of the consolidation that exists in every other industry segment. Yet, fewer breeders are offering more bulls and service, too.
Up-Sizing For A Reason First, consider the need for bulls versus the supply of them. There are about 30 million beef cows in this nation. Figure one bull per 25 cows on average, and you're talking a need for about 1.2 million bulls working each year. If bulls last for three years, then the industry needs 400,000 new bulls each year; if they last four years, the industry needs 300,000 new bulls.
Now, consider those numbers relative to a population of approximately 50,000 seedstock suppliers. Just a cursory benchmark analysis of some of the industry's most used breeds suggests about 0.6% of the nation's seedstock producers are churning out 10-15% of the bulls required by the industry each year.
Keep in mind, however, that these numbers only represent registered bulls. Some sizeable suppliers still don't register all their cattle. Hopefully, not every registered bull ends up being sold for reproduction.
In addition, the number of hybrid bulls entering the market is increasing. So, fewer than 1% of breeders is probably supplying an even higher percentage of the industry's annual needs.
If those numbers are at least in the ballpark of common sense, that still leaves a fair share of opportunity for 99.5% of seedstock suppliers. But, even some of those are joining forces to capture economies of scale while maintaining their own identity.
Neil Orth, executive vice president of the International Brangus Breeders Association, can attest to that in the Brangus breed.
"We see a lot of cooperative herds being put together where the bigger operations are bringing the smaller ones into the fold," Orth says. "We're seeing fewer sales with more numbers."
Consequently, in that breed at least, Orth says the consolidation is actually expanding the bull market. Rather than rob buyer or seller opportunity, he says cooperation is allowing more smaller producers to market their bulls and provide customer service more effectively. In turn, buyers have a crack at more volume.
For perspective, Orth mentions a bull sale this fall that attracted five commercial buyers representing 70,000 cows. These buyers came, in part, because there were 300 bulls on the block. Split those bulls into three groups of 100 and Orth isn't sure any of those large operations would have shown up to buy.
The Politics Of Value Plus, competition among the larger individual or cooperative seedstock suppliers continues to raise the bar of buyer opportunity. This happens as breeders massage the age-old value equation that says the only ways to increase value are to increase the benefits of the product, lower the price of the product or do both at the same time.
Peering down a short road, Ritchie believes, "These will be full-service providers. They will offer follow up to the product they sell."
And, they'll likely have to offer more up front, too.
Bill Able, executive vice president of the American International Charolais Association, provides an example. He points out that as coordinated systems continue to grow, ferreting out more information about the cattle coming in, ultimately seedstock suppliers will likely need to help bull customers gather and sift through more data.
Couple the benefit side of the equation with the fact that bull prices haven't increased significantly in real-dollar terms since Billy the Kid wore diapers. It tells you today's commercial bull customers receive more value for the bulls they buy.
"I think it will really simplify life for a lot of commercial producers," says Ritchie. "And, there won't be any more of this business of selling a guy bulls one time, then cutting and running."