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Cattlemen are always responding either consciously or subconsciously to market signals related to how they use resources to raise their product. (Journal photo by Lacey Newlin.)

Breedlove Professor of Agribusiness and Extension Livestock Specialist Derrell Peel says cattlemen are always responding either consciously or subconsciously to market signals related to how they use resources to raise their product.

“In the business school they teach the importance of marketing the right product, at the right place, at the right time and to the right consumer,” Peel said. “If you’re in the stocker business or higher, you’re also part of that marketing system. Cattlemen are a part of what I believe to be the most complex set of markets on the planet.”

Peel says as soon as a producer leaves the cow-calf sector where he is harvesting grass from a primary production standpoint, he is involved in marketing. Those cattle are still being raised and brought through the stocker phase and finished in the feedlot while being moved around the country.

“We’re changing the timing of those animals in terms of when they’re going to hit the market,” Peel said. “Just think for a second about the big picture of the ability of any consumer in this country to walk into a grocery store any day of the year and find fresh meat. If you think about that coming from calves that are born once a year, it’s a remarkable process that this industry accomplishes collectively to make sure we spread out and have fresh meat year-round.”

However, Peel says key challenges exist for multi-sector production and marketing across various segments in the cattle industry.

“There’s really two basic levels of challenges that I can identify,” Peel explained. “First, we need to make sure we have the right incentives for each sector to be doing what’s best for the whole industry. As this industry tries to get more and more efficient, we’re trying to bridge that gap and get to a point where we can get the incentives at the individual sector levels to align with the industry. Second, because of the multiple sectors, there can be a certain level of antagonism and tradeoff between various sectors. As a broad example, things that sometimes have production value, don’t necessarily have the best carcass value.”

Peel says the cattle industry also needs to start viewing the cow-calf, stocker and feedlots phases as one business and part of the same production phases.

“This industry just has one job ultimately, and that is to get animals ready for slaughter in a way so that they have carcass traits that meet the demands of the marketplace.”

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Breedlove Professor of Agribusiness and Extension Livestock Specialist Derrell Peel says cattlemen should take advantage of the incentives of preconditioning cattle and meeting the market demands. (Journal photo by Lacey Newlin.)

Adding value

Meeting the demands of the marketplace adds value to calves and therefore delivers premiums for cattlemen. However, not everyone takes advantage of those premiums and it ends up hurting the cattlemen and the beef industry as a whole.

“I can tell you from sitting in a lot of sale barns, there’s a lot of calves that come through that haven’t been dehorned, castrated and have never seen a needle,” Peel said. “Those things add value in the market place, and you can package them together and add additional value.”

Peel says data shows around 70 percent of producers in Oklahoma castrate their calves, but when it comes to dehorning and vaccinating those percentages drop off. Preconditioning cattle solves a lot of these issues associated with preparing cattle to enter the feedlot phase. Cattlemen do not always see the value in this step.

“Preconditioning is not a new concept, but the valid complaint from producers has been that they couldn’t count on getting a premium for those measures. You’re providing a service the market may or may not value.”

Peel says one of the things that has changed in the last 10 to 15 years is that premiums for preconditioning have gotten much more consistent. At the root of the preconditioning question is whether or not the market is offering premiums for cattle that have been through the preconditioning process and all data points to yes. In the end cattlemen must respond to those signals if they want to cash in on more desirable prices.

“There’s no question that preconditioning is a good thing for the industry,” Peel said. “Part of it is because we’re doing both the practices and providing the certification which changes the risk associated with that information and we’re also providing the sale environment that attracts the people who will to pay a premium for the investment.”

Preconditioning programs benefit the collective cattle industry by providing uniform animal health protocol which promotes the beef industry’s reliability. Providing a healthy product to consumers in turn rewards the cattlemen with incentives for responsible stewardship.

Lacey Newlin can be reached at lnewlin@hpj.com.

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