Major restructuring is taking place in the beef industry just as it is in multi-national corporations. How will the beef industry be structured? Who will own it? Who will control it?
When a company or industry restructures, it strikes fear in employees, management, stockholders and/or owners. It is particularly worrisome if:
Your company/industry is mature or market share is contracting.
Your company makes or sells “something” that does not include services and marketing expertise.
You're a white, middle-aged male manager whose knowledge and technical skills of e-commerce amount to surfing the Web and e-mailing dirty pictures of Osama Bin Laden.
Unfortunately, all three conditions apply to many seedstock breeders, a segment whose pure capitalism and intense competition is what often attracts people.
In our segment, success traditionally is measured by the number of AI sires, sale ring tops and show champions a seedstock provider can claim. That's not surprising, as you're likely to find more breeders, breed association staff and university staff/scientists in attendance at cattle shows than at state or national cattle association meetings.
The current system includes a curious mixture of ego gratification and fierce competitiveness. This winner-take-all system does little to reward the most profitable genetics for the entire beef chain or produce consistent beef for the consumer.
In this system, individual animal values are based on uniqueness or rarity within a breed. The highest value is afforded to “extreme” seedstock that may solve problems created by the previous generations of “extremes.” The 180° turn from worshiping extremely large frame to the current exuberance for low birth weights is a classic example.
The seedstock industry has evolved from the Super Show to the Super Bull and the $100,000 donor cow. The next evolution will be the advent of several Super Service providers. These firms will cause major restructuring in the seedstock industry and create both winners and losers.
Here are the basics of Super Service.
Competent, knowledgeable people whose responsibilities include “placing” sires and genetics cow/calf producers need — not necessarily the ones they want. This will require spending hours on the phone and long days at farms/ranches, sorting producer's cattle and providing tech service for producers' cattle records.
Their aim is to “sell” consumers what they want, not what the industry wants to produce. Cow/calf producers are not consumers. They're partners and the first link in the chain of delivering beef to the consumer at a profit.
Super Service providers will “place” (at a price) genetic inputs including transferable heterosis to producers.
They will add real — not perceived — value to cow/calf producers' cattle, using systems and markets that add significant dollars to their customers' bottom lines. These may be genetic source-verified auctions, direct private treaty sales to feedlots, retained ownership agreements or contracts with integrated food companies.
Super Service will include a program for genetic source replacement females — crossbred females with specific predictable genetic inputs for maternal traits. They will be culled for small pelvic areas, bred AI to proven bulls, ultrasound-examined to guarantee a short calving period and developed to enhance future production. The Super Service provider will market these heifers, follow up on the results and act as arbitrator for any problems that arise.
Super Service providers will help build more value for finished cattle by developing and servicing retail and/or restaurant markets. These are markets that demand tasty, high-quality, tender, reasonably priced, source-verified beef.
This will entail spending considerable time and resources with restaurant managers, chefs, dealing with packers/processors, scheduling cattle for slaughter and consumer product promotion.
Most seedstock operations, including ours, lack the capital, land, cattle numbers and people to do it alone. A Super Service program will be a cooperative effort that will include auction markets, an animal health company, veterinarians, bred heifer developers, farmer feeders, feedlots, a packer/processor, a restaurant chain, franchises and a committed staff down to the last cowboy.
The main ingredients to Super Service are lots of time, modest capital and good people. It's not a new recipe; it's just returning to “the good old days” when neighbors helped neighbors.
Dave Nichols is a partner in Nichols Farms, a family-owned seedstock operation in Bridgewater, IA. They sell 600-700 Angus, Simmental and Nichols Composite bulls each year.
Since 1995, Nichols Farms has held two Nichols Genetic Source Feeder Auctions per year for their customers. They place their customers' feeder calves directly into alliance feedlots and sell nearly 600 commercial bred heifers per year. Finished cattle sired by Nichols bulls qualify for premium prices for the Nichols Beef currently being sold in several Machine Shed Restaurants.