California's cattle feeders balance good weather and a challenging basis in an effort to stay competitive.
Challenges facing California producers and feeders are as volatile as a ride on Disneyland's “Space Mountain.” They face a lot of twists and turns that might seem a little “Goofy” in some cattle circles. Then there was the isolated animal cruelty fiasco at a Southern California processing plant last spring.
But don't sell the left coast's cattlemen short.
California continues to maintain a sound beef industry comprised of about 1.5 million beef cattle, with 700,000 fed cattle marketed annually. The state has tens of millions of consumers, most of whom will gladly take a tri-tip or steak over tofu or sushi, despite the region's “health food” reputation. Plus, a growing Pacific Rim export market for age- and source-verified cattle is helping feedyards say “sayonara” to poor overseas sales.
Paul Cameron, who operates Mesquite Cattle Feeders, Inc., in Brawley, is vice chairman of the California Cattlemen's Association (CCA) Feeder Council. He likes the state's future in the beef business. “We're still the best place to feed cattle in the world nine months out of the year,” he brags.
But he's fretful of the continued line of hurdles that his state's producers and feeders must jump.
Input costs high
Feed efficiency is enormously important for his Imperial Valley desert feedyard, where temperatures were still 100°+ in mid October. After all, corn can be 50¢/bu. higher than what Texas Panhandle yards pay, and $1.50 higher than a typical Corn Belt feeding facility.
“We have to ship in 90-95% of the corn we feed,” Cameron says. “So our corn basis is huge, $1.25-$1.50 over (corn futures prices).”
Since the majority of cattle in his and most of the 20 other commercial California yards are Holsteins and other dairy breeds that go on feed at 275-300 lbs., that's a lot of corn to feed over a full year at the bunk.
“They are corn-eating machines and are on feed for 52 weeks,” says Matt Byrne, CCA executive vice president in Sacramento. “But Holsteins are a uniform product; they perform well at the feedyard and grade well at the packer.”
Holstein beef regularly grades 70% Choice or higher and provides a consistent product for California and Arizona retailers. In the 1990s, California feedyards worked directly with an Arizona packer and a major California supermarket chain to sell Holstein beef. It was a success, but more markets were needed, as well as more slaughter capacity.
So California cattle feeders built their own plant. Brawley Beef LLC was started by Cameron and other feedyard operators in 2001. Its eventual 2,000 head/day capacity provided an added link for California cattle to the Los Angeles Basin trade area. Brawley Beef was bought by U.S. National Beef Packing Co. LLC in 2006.
“We're grateful to have the packing facility,” says Cameron, admittedly concerned about October's Justice Department suit against a merger of National and JBS S.A. “Most of our cattle are age and source verified and fit perfectly in the Japanese market for cattle under 20 months of age.”
Overregulation; that's an understatement for California animal agriculture. Air and water quality and animal welfare are serious issues nationwide, but California faces local and state environmental guidelines that go beyond federal Environmental Protection Agency requirements.
Greenhouse gas emissions are regulated, even when a feedyard is in the middle of the desert 100 miles from major metropolitan areas.
“The greenhouse regulatory regime is still being established by the state,” Byrne says. “We're trying to determine the right way for our industry to participate. It (greenhouse regulations) will also start driving new regulatory efforts, not just for livestock producers and feeders, but for transportation of feed, fertilizer and cattle.
“It's not unlikely that similar regulations will be coming soon to other places around the country.”
Byrne says studies are underway at the University of California-Davis to measure methane gas emissions from feedyards. The studies are partly funded by CCA Feeder Council members in an effort to stay ahead of regulations.
Virtually all feedyards outside California can feed corn that contains aflatoxin at a rate of up to 200 parts per billion (ppb). But in the Golden State, the restriction is at 20 ppb, the same as for dairy cattle.
“That's hampered any major growth of corn production in our state,” Cameron says. “Because of the heat we see in the growing season, there is too much of a risk of aflatoxin forming. So we're forced to buy nearly all our corn from the Midwest.”
When corn futures prices dipped to near $4/bu., Cameron pre-bought several months supply for winter feeding. “I don't use futures for risk management on feed like I do on cattle,” he says. “But it seemed feasible to get some corn locked in at those low rates.”Next Page: Mild winters
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Feedyards in more northern climes would like to “suffer” through just one California desert winter. No days of sub-freezing weather, no blue northers to make life miserable for cattle handlers and slow gains to a crawl.
The average high in January and February is about 70°F.; the average low is about 40°. The region receives barely 2.5 in. of rain/year, so mud's not a problem. “We have ideal feeding weather for nine months of the year,” Cameron says. “But we do lose a little production in the heart of the summer.”
To help keep cattle as comfortable as possible, virtually all California yards provide shade in the pens. “For these Holsteins, we try to provide from 30-50 sq. ft. of shade/animal,” Cameron says.
However, Justin Oldfield, CCA director of industry affairs, says 2008 saw Holstein feeding numbers slightly down in California due to high corn prices much of the year. Feeding more traditional feeder cattle will likely remain steady.
San Joaquin Valley area feedyards, in particular, have cut back on Holsteins. Central Valley feedyards are now about 75% Angus, Hereford and other British cross-bred cattle.
Byrne says the negative basis problem for corn also exists for cattle shipped east. “We see that basis problem on both sides,” he says, citing transportation costs as a main reason. “We're a major exporter of feeder cattle and take a basis hit there to get those cattle to Colorado, Nebraska or the Texas Panhandle. It's no cheaper to move the cattle than it is the corn.”
And then there was the Hallmark fiasco. Cameron, Byrne and others in the industry were among the many who were frustrated over the case involving the Hallmark/Westland Meat Packing Co. in Chino last February. Byrne says CCA has always been proactive in the ban on processing non-ambulatory cattle.
Immediately following the recall of beef sold from the plant, CCA worked closely with other cattle-producing groups to formulate a document in which all groups committed to educating their producers about proper animal handling throughout all phases of production.
“It was a tough year all the way around for our state's industry,” Cameron says. “But we've been used to a lot of challenges for a long time.”
Larry Stalcup is a freelance writer based in Amarillo, TX.