A chain is only as strong as its weakest link, and the old adage also applies to the production chain in the beef industry.
With 40-plus years of experience in the beef industry, Steve Gabel at Magnum Feed Yard Co. LLC in Wiggins, CO, knows this truth. Some cow-calf producers don’t know what happens after their calves leave their property on a shipping trailer, but there’s usually two destinations: a custom feeding yard or backgrounding program.
At their base, Gabel said the two options are actually quite similar. Both center around producers sending calves to a different location to be fed until they reach a specific weight.
“If you’re wanting someone to custom feed your cattle, you’re going to pay them for the services that they provide which would include initial processing, all of the feed and care, and probably all of the marketing,” he explained to WLJ.
Typically, he says backgrounding operations aren’t designed to handle the same volume, as the pens are smaller. They also come with a slower rate of gain, as rations aren’t designed to pack pounds on a calf as fast. Naturally, this means a smaller bill, too.
There are many factors that might shape a producer’s decision between the two, but Gabel warns against relying fully on tradition.
“If we’re used to selling those calves straight off the cow or after they’ve been weaned for 60 days, because we’re a victim of habit, we’re going to do the same thing,” he said. “I think the more progressive cow-calf operators are willing to do the math and jump through the hoops to determine if it’s a risk worth taking.”
It all starts with knowing the breakeven amount at every point of the production cycle.
Gabel said the biggest question for the cow-calf man is, “How many dollars per head do you have to make to satisfy your profit objective?”
That’s just the first step, however. Next, Gabel encourages producers to pick up the phone. Whether it’s a backgrounder or finisher, there’s another breakeven point to talk about.
“They have to know what my cost structure is going to look like,” he adds. “If we take their break-even point and apply that to what my expectations are of my production costs in my environment … I think that then provides the very basic info for that rancher to make some decisions.”
For Duane Martin Jr.’s business, Martin Livestock LLC, the biggest factor affecting the choice between a finishing lot and a backgrounding lot is how much risk he’s willing to take on. But for Martin, that isn’t just in terms of finances; it also includes the risk of the animal itself.
The California cattleman said backgrounding tends to be the perfect fit for light calves that need extra attention.
“You can get them weaned and get them straightened out and make them an eight- or nine-weight yearling before they go into the feedyard,” Martin explained to WLJ. “A lot of these custom feedyards are not equipped to deal with that lighter weight calf. Their cowboy crew and their facilities are more equipped to deal with a bigger calf, a yearling.”
A grow yard helps stretch the animal, giving them time to grow frame and gain weight, as well as prepare their stomach for those higher-gain rations that are the backbone of a feedlot.
It was a good choice for Martin in years past, but he said today, there aren’t a lot of five- and six-weight calves that leave his property. He aims to pull 800- to 900-pound calves right off the cow. While they’re big as a yearling and clearly large enough to go straight to a finishing program, he admits that still comes with risk. Their larger size sometimes can have a feedlot owner thinking they’re more mature than they are and underestimate their health risk.
Luckily, Martin says there’s an easy fix: open communication.
“You have to communicate. If you just ship [cattle] to them and don’t communicate, they’re blind to what they’re dealing with,” he explains.
It’s a universal truth, no matter where calves are headed.
“I firmly believe that people do business with people,” Gabel said. “I would encourage a rancher to establish a relationship. Whether that relationship is with a backgrounding yard or a larger feedyard, be very open and very forthright with intentions.”
A big point of conversation should be any preconditioning measures, he adds, as a good program prior to shipping calves can create predictability for the feedyard.
“If we can deal with the same suppliers year in and year out, and I can know I’m getting the same genetic pool that has been fed and vaccinated in the same way … there’s value in that because it provides predictability,” Gabel explains.
Measures that add value to an animal can vary from producer to producer, but details of a preconditioning program are vital.
“If I think about how calves can best be prepared to come to me, I want to know they’ve been vaccinated. I want to know that we’ve done something to eliminate or control parasites. I want to know whether or not they’re implanted,” Gabel adds.
There’s higher value placed on preconditioned animals, but it’s also knowledge that allows him as the feeder to create the best opportunity for success as that animal changes environments.
Martin says, “Whoever is buying the cattle needs to know what they’re up against.”
He wouldn’t want calves to be put through unnecessary stress or treated too soon or too late after they leave his property. Beyond animal husbandry, Martin says that transparency is also a big part of doing business the right way.
“Without that communication, if they have problems with your calves and they don’t really understand why, they’re just not going to buy your calves next year,” he explains.
That’s not to say any complication spells trouble for future business, however. The key is the open pathway of communication between the parties involved.
If Martin’s calves prove complicated and he doesn’t seem willing to talk to a feedyard about it, he says odds are high he’ll get red flagged. If he puts in effort to work through those issues, he says it might actually prove the opposite—a feeder might trust him more than before.
“Your word is your reputation,” Martin said. “This is a really small industry, and when you burn a bridge, it doesn’t take but a few years for everybody to know you’re not trustworthy or your delivery’s no good.”
And for Gabel, that trust is key.
“If I believe a rancher, I’m going to take him at his word until I have a reason not to,” he adds.
If a breach of trust occurs, Gabel confirms the easiest thing for him to do as a feedyard owner is to either not buy from that producer again or require third-party verification for the parasite control or vaccinations an operation is claiming to have administered. It can be a costly piece of the puzzle for the cow-calf producer.
There’s more to this chain of communication than just amicable working relationships, too. Shared knowledge is a win for everyone. A win for a cattleman is a win for the feedyard is a win for the consumer.
“There’s a lot of education in this industry that needs to get passed, both upstream and downstream,” Gabel said. “I think we can all still learn immensely from our industry chain partners up and down that supply chain.” — Megan Silveira, WLJ correspondent
