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Successful producer word cloud

What Successful Producers are Doing Today

by Bob Campbell, Senior Vice President

Producers are operating in a complex and volatile business environment. Unprecedented technology developments have increased the pace of change. Global markets, trade issues, politics and weather seem to introduce new risks at every turn.

I recently was asked to speak about what we, at Frontier Farm Credit, see producers doing to succeed in this challenging environment. The insights I collected from teammates and others as I prepared for my talk are worth sharing because they set top producers apart in every economic cycle, good and bad.

We often define success in agriculture in terms of an operation’s size, the experience level (or age) of the operator or some other outward measurement. But success really is about accomplishing what you set out to do, whether that is growing your operation to make room for the next generation or staying small and focused on producing a quality product with your own labor.

Successful producers have many things in common, and they tend to be behavioral, all of which can be learned and honed. My list of behaviors is fairly long and the descriptors aren’t necessarily the same that you would use. But no matter the words, they all point to a strategic mindset – the ability to think about where your operation is going and how it will get there.

Agricultural operations are complicated enterprises. And even when they are run by just one or two people, successful operations incorporate the thinking of a CEO (the visionary and final decision maker), a chief financial officer (the numbers person who knows where the operation stands financially at any given time) and a chief operations officer (the person with day-to-day responsibility for getting an operation from Point A to B). I also would argue that today’s world increasingly requires the mindset of a chief technology officer who identifies emerging technologies that make an operation better and more efficient.

This is a lot of hats to wear and too much expertise for one person to possess. Which brings me to another key characteristic of successful producers: They know what they are good at (which often is what they most enjoy doing) and rely on the expertise of others to fill the gaps in their knowledge and ability. I have worked with large operations in which everyone is good at production but nobody has the mindset of a CFO, and they have not filled that gap. These are not financially viable operations long term because the operators don’t understand their cost of production and how that fits in today’s economic conditions. On the flip side, I have worked with husband-and-wife teams in which one focuses solely on production and the other on finances. These often are among the most successful operations because each partner has a delineated duty. Just as importantly, they own responsibility for executing on their individual duties.

We all know that a strategy is only as good as its execution. And today, successful producers are focused on executing in those areas that they control – their costs of production, the marketing of their grain or livestock, the performance of their operation on key financial indicators.

I challenge each of you to think about the behaviors you see in the successful producers you know. Then ask yourself: Do I have the behaviors and mindset of a successful producer?

Busy trading port in China

Opportunities and Obstacles in China Beef Market

By Matt Hoesing, retail commercial beef lender

The re-opening of the Chinese beef market comes as the U.S. beef industry is in growth mode and reliant on exports to help support prices. But experts caution that the Chinese beef import market poses as many obstacles as opportunities.

For producers such as Bill Brush, whose Almeria Feeding Co. near North Loup, Nebraska, is hormone free and traces the origin and age of its animals, China could be a viable market.

“Our sustainably produced NHTC (non-hormone treated cattle) beef has a following in Europe,” Brush said. “There will be consumers in China who will want to know how the cattle are raised and will want to try our beef.”

For U.S. producers who use synthetic growth promotants, marketing to China might be too pricey a prospect. Brett Stuart of Global AgriTrends calculates the cost of foregoing growth promotants to comply with China’s hormone ban to be as high $275 a head.

“We are good at doing what we get paid to do,” Stuart said. “And we cannot afford to forego hormones on a large scale.”

Even so, Stuart and CattleFax’s Kevin Good hail the China trade deal as good news for U.S. beef producers.

“We must exploit any crack in the door we can get and they have cracked the door open,” Stuart said.

A shipment in June marked the first time China allowed U.S. beef into its country since a heifer slaughtered in Washington in 2004 tested positive for mad cow disease. In the intervening years, China’s appetite for beef has grown while the country’s ability to meet domestic demand has fallen to 88 percent, down from 99 percent just five years ago, Stuart said.

Between 2010 and mid-2015, China increased beef imports tenfold, and many put the value of the Chinese beef import market at $2.5 billion. In reality, Stuart said, as much as $7 billion worth of beef flows into the Greater China region, including Hong Kong and Vietnam.

These kind of numbers are tantalizing to U.S. beef producers, who are adding 800,000 head this year and looking to exports to take much of this growth off the U.S. market, Good said. About 45 percent of last year’s increased beef production was exported and about 55 percent of this year’s additional production will be exported.

Good said the forecast for the next couple of years calls for soft beef prices, unless exports expand. Stuart, however, cautioned against looking to China as an export elixir. There are a number of constraints to overcome for U.S. beef to gain a major foothold in China, including:

  • U.S. beef is at a cost disadvantage in a price sensitive market like China’s.
  • The U.S. produces beef with the white fat preferred by Chinese consumers. But U.S. beef is not widely known and the Chinese market is crowded with competitors familiar to consumers.
  • It is estimated that less than 5 percent of U.S. cattle currently meet China’s traceability requirements.
  • China has zero tolerance for beta agonists – and will test for any trace of synthetic hormone residue.

China’s ban on growth promotants isn’t discriminatory to the U.S. – it applies to all trading partners, Stuart said. The difference is that the U.S. is one of only a couple countries that widely uses synthetic growth hormones in beef production. These compounds, Stuart notes, are FDA approved and safely used.

Where China is unique is in establishing a zero-tolerance standard for growth promotants. This runs counter to world standards of safe residue levels, Stuart said.

Beta-agonists and hormone additives are unlikely to drop out of U.S. production on a large scale, he predicted. That makes China largely a niche market for U.S. beef producers.

At Almeria Feeding Co., Brush and his partners have been certified for nine years as hormone-free. A ranch-to-rail operation, Almeria backgrounds calves from its own herds and delivers them to a packer that specializes in non-hormone treated cattle. The packer is one of only four initially recognized by China as eligible for processing beef to their standards.

Almeria plants cover crops on fields cut for silage, Brush said. Its herds and feeders graze and feed on or near the fields. Both practices are integral to sustainable beef production – the cover crops building soil health and the manure supporting plant growth. Background feeders are on full feed to meet the packer’s six-month harvest schedule, Brush said.

“Sometimes the grazing runs past optimum corn planting dates,” Brush said.  “This would cause heart failure for a corn farmer, but the ranch-to-rail operation values the grazing days, and the irrigated corn and cane is chopped for silage.”

Brush said that in an operation like his, it is critical to get the size right — large enough to supply finished cattle when the packer wants to pull them, but small enough to adhere to sustainable growing and feeding practices.

“From the breeding and gestation period until the carcass is on the rail, it may be as long as 25 months,” Brush said.

The costs of ranch-to-rail sustainably produced NHTC beef are significant, he said. Almeria’s Samson vertification process, for example, is time consuming and an expense non-certified operations do not have. Nevertheless, Brush said, projections show the operation will be profitable at current prices.

“We think that beef consumers worldwide would like to eat the beef from this and other sustainable ranch-to-rail operations,” Brush said. “I think consumers would pay a higher price for this as branded beef. In a perfect world, the producer and the packer would be partners; the packer would try to sell the beef at a higher price and the beef producer would get part of that extra premium.”

To those who are wondering if they should tag calves this fall for traceability or hold off on hormones, Stuart advises doing some homework. Then apply those practices for which you are paid.

“Check with buyers. Sure, if someone is willing to pay you to (tag and forego hormones), do it,” he said. “But have a deal in place.”