Steve Suther: Black Ink 3-18-13
October 16, 2013
"That's real money!" It seems like I've heard that exclaimed a lot lately. In presentations and sales pitches, it's the popular way to illustrate the value of using a management strategy or product.
Even the nightly news shows feature stories on how a consultant helped consumers save on prescriptions or when buying a car saying, "That's real money!"
Some of you may be of the same philosophy that we adhere to in our house. The "penny saved, penny earned" concept has my husband figuring cents-per-ounce on my grocery store purchases and leads us to do without cable.
If you fit into that conservative camp, then pocket change is significant in your book.
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To others, it takes a little more shimmer to get their attention, or at least to cause real change.
In a recent article, Burke Teichert, who used to manage Deseret Ranches, said, "I like to feel pretty secure that I will get back at least $1.50 for every $1 spent on direct inputs. This includes things like feeds, supplements and healthcare products."
When it comes to your farm or ranch, what is that threshold level for you? What's worth it when you talk about making a switch?
There are small tweaks that seem easy enough to implement and can add up, 50 cents here and a dollar there.
Some practices take a little more studying because they cost more, but the possibility for increased profit is clear. Take pour-on versus injectable de-wormers, for example. Every study I've seen shows that the latter is way more effective than pour-ons, but their price tag is higher.
Although the economic reviews prove its worth, you still have to take that leap and spend more to make more.
But if you want to talk big dollars in the beef business, it might take more than this or that decision. Many cattlemen have made whole-herd management shifts. Those who see the growing demand from high-quality beef know it pays to aim their herd in that direction.
Some of the changes don't take more money. Some do. Some of them take more labor. Most do not.
All of these producers started down this trail toward higher quality because of economics. They saw which cattle were earning premiums at the salebarn or they held onto at least some ownership of those calves through the feedyard. These cattlemen were motivated by real money.
They invested in better genetics. Sometimes it's just a matter of watching EPDs (expected progeny differences) more closely, but other times it meant paying up for a bull, switching suppliers or breeds. Perhaps it even meant trying artificial insemination (AI) for the first time to increase uniformity.
Once they tuned up their starting material, the genetic base, it was all management. Where could they improve herd health? What tweaks in nutrition might make a difference? And the list goes on and on.
Cattle-Fax recently predicted that beef prices will reach record highs this year, not all good news on the consumer side unless they always find the experience is worth the price. An extra $1 per pound in the meat case is enough to make some consumers walk away, especially if they have been disappointed. But if they feel confident in the consistent quality, most will stay with a premium brand.
The "premium" in premium Choice beef brands has consistently meant price rewards of at least $40 per head. How much is enough for a producer to change course toward the premium? The prospect of it is certainly enough for a cattle feeder to bid up the better calves.
Others say, "If you think that's worth the effort, you should aim for Prime. That's where the money is."
They know it, since many have regularly achieved 20 percent to 40 percent Prime grades, each earning about $200 more than a Select carcass in a grid-based marketing system. That's real money!
Questions? Call toll-free at (877) 241-0717 or e-mail MReiman@CertifiedAngusBeef.com. ❖