Working with the feeding and buying segments, I see a substantial price divide between conventional, non-program cattle and those with documented, program-driven value. It was easily observed through the hundreds of thousands of forward contract cattle that sold last summer.
A common thread among feeders is their preference for cattle with programs or programming behind them. To better understand what is driving this demand, let’s define programming and why it has become such a pull in the marketplace.
The following are all examples of programs: Charolais Advantage, Red Angus FCCP, NHTC (non-hormone treated cattle), Certified Natural, GAP 4, a Method Genetics score, etc.
Cattle that carry these labels or badges have been audited or evaluated by an independent third party to segregate them from conventional feeders. These added layers of documentation reinforce value through relationships between genetic potential and profit, as well as enhancing the attraction of those cattle within the value chain all the way through the consumer.
As noted, the more value your cattle have when the next owner becomes the seller, the more potential you have for premiums.
Consumer demands for source and age, non-implanted and/or antibiotic-free cattle have created a pull-through motion within supply chains, domestic and global, for cattle that are documented to meet these specifications. By providing linkage to the consumer and establishing the foundation for transparent production that comes with a “story,” additional margin has been built into the value chain.
Audited genetic evaluation also plays an important role.
For example, feeder cattle with documented genetic ability to excel for growth might be highly advantageous when feeding and marketing non-implanted NHTC calves. Programs help connect the ranch to the feeder by pinpointing cattle that feed cheaper and harvest better. Whichever way you look at it, increasing the opportunity for profit or decreasing the risk for loss, having an advanced genetic “scouting report” on feeders has value.
The classic sentiment that “you don’t get paid for that stuff” still remains in parts of our industry. Though these cattle currently demand premiums, the participation expense must be evaluated by each ranch through break-even analysis. Is the juice worth the squeeze? Further, you must also consider how well your current strategy aligns with the programs that exist.
There are two sides to the risk equation you must evaluate when deciding how to market your calves.
Do you expend the resources to have your cattle audited, verified, documented and risk they won’t bring enough to justify the effort or expense? Or, do you commit to being conventional, or average, and place a cap on their value?
Both scenarios offer a risk position that must be evaluated ranch by ranch. Moreover, many of the available programs are driven by the consumer and directed by an industry undulating toward alignment. I wouldn’t count on them fading away. More than likely, they will simply evolve.