NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

February 26, 1998

[Editors: This is the third in a series of articles on bull buying.]

Customized Cattle Can Boost Profits

Customizing cattle to meet market demands is netting some livestock producers added profits.

"By targeting specific cattle at specific markets, those producers are able to earn premiums above the typical market prices. It's a way that they can add value to their product," explains Karl Hoppe, a livestock specialist with the North Dakota State University Extension Service at NDSU's Carrington Research Extension Center.

"The easiest way to move production toward those specific markets is with the bull-buying decision," he says.

Taking a more target-market-oriented approach to management means taking a close look at your herd and available markets, Hoppe says. "You have to figure out what markets will provide the most profit for you. That means looking at your herd and finding the changes you can make with the least amount of cost and the least amount of risk."

Hoppe said some producers in North Dakota and surrounding states are already doing a good job of producing cattle for specific markets. Those markets include:

• Alliance-based markets where cattle with specific meat quality traits are raised under agreements that encompass every segment of the production chain from seed-stock producer to retail marketer. Branded products such as the "Certified Angus Beef," "Certified Hereford Beef," "Angus America" and "PM Beef" programs are examples.
• Markets based on production systems. An example: producers who sell their calves off the ranch at weaning can emphasize traits like high weaning weights and milk production. Heavy healthy calves mean higher prices.
• Markets focused on cattle size. Bigger cattle typically mean more meat per animal at a lower cost. However, packer discounts kick in once cattle exceed about 1,500 pounds live weight. Producers also need to beware of calving difficulties with larger calves. Some markets prefer smaller cattle, but discounts become a factor if cattle aren't at least 900 pounds at marketing.
• Replacement heifer markets. Improved calving ease, milk production and the ability to produce calves with good weaning weights and frame size will add value to heifers destined for the breeding herd.
• Specialty markets such as highly marbled beef or other characteristics. These markets often rely on retained ownership so that market cues can travel directly from consumer to producer.

"Choosing a market means you have to focus," Hoppe says. "It's tough to find a bull that's all things to all people." Selecting bulls based on expected progeny difference ratings (EPD's) is one way to select bulls, he says. Those ratings for traits ranging from weaning weights to ribeye size help producers guide breeding choices.

He also reminds producers that they need to look for healthy bulls with good reproductive capability. Without those traits, any capability for added value is worthless. He also warns producers to be cautious in adjusting production systems in pursuit of value-added markets.

"It gets down to knowing your costs and potential benefit. It's easy to spend more than you add when you go after some of these markets," he warns.

Hoppe also cautions that producers need to know their markets before they make significant changes in their herds. "Some markets that are available in some parts of the state or country aren't available in other areas," he says.

Producers also need to know that changes in marketing and production can have significant effects on cash flow and may require different kinds of financing or ownership arrangements than producers are accustomed to.

"Those are adjustments that can be made in many cases, but producers have to be aware of them and willing to assume any associated risks. But with risk also comes the potential for reward in terms of profit," Hoppe says.

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Source: Karl Hoppe (701) 652-2951

Editor: Tom Jirik (701) 231-9629