From the March 2016 issue of Drovers.
As we enter a period of bearish cattle prices, I find myself pondering what other changes might be on the horizon. How will our industry evolve and what adaptations will shrewd cattlemen make to keep that competitive edge? Exploring or cultivating options to add value to your calves may be more important than ever.
As supplies expand, buyers will continue to become as discriminating as the market fundamentals allow. Cattle with more to offer will be worth more. I can see a point along the gradual supply/demand shift that could ignite substantial premiums. Cattle with greater health, carcass quality or genetic potential unlocked through DNA analysis will offer more value to producers. Value-added marketability is the one area I believe will produce the greatest premiums over the next decade.
Value-added calf (VAC) programs are already successfully returning market premiums. Preconditioned, vaccinated, age and source verified, and most recently, carcass potential verification are a few examples. Commodity cattle are becoming a high-risk proposition, leaving producers at the whims of an extremely volatile environment. Adding value to cattle through market differentiation can be one of your most important risk-management practices.
The health and wellness of young cattle, such as feeders or developmental heifers, is tied directly to profitability. It is easily one of the costliest factors our industry faces. This is why preconditioned and VAC-program cattle are already returning premiums. Moreover, there are additional health- management issues not currently addressed by traditional VAC programs.
The most significant fitness condition is cattle persistently infected (PI) by bovine viral diarrhea (BVD). Each year, backgrounders, feeders and heifer-development operations suffer substantial losses from BVD-PI cattle that are purchased and then infect others through the commingling process. BVD-PI cattle are undetectable without proper testing. Fortunately, reliable testing is available.
Screening generally costs around $3.50 to $4.50 per head. Labs with the ability to pool samples can lower that cost to $2.50 per head. At that price, adding a PI-testing regimen to your current preconditioning or VAC program deserves consideration. If the opportunity for value creation through aggressive marketing is seized, premiums for PI-negative cattle could become reality.
When developing a calf-marketing strategy, you should also examine genetic value. Setting your cattle apart from the crowd with DNA carcass profiling is becoming reality. Advanced algorithms for DNA analysis continue to shape the cattle industry, bringing more affordable testing and increased reliability.
These investigative tools are gaining ground as a legitimate way to segregate cattle that possess extra-value potential. However, the important underlying message is that expansion is well underway and supply is no longer in favor of the producer. Its time to consider possibilities to differentiate your product by adding value as efficiently as possible.
Jared Wareham belongs to a team of beef-industry specialists called Allied Genetic Resources. Allied assists seedstock and commercial producers with education and support in the areas of marketing, customer service, genetics and sale management.