1. “Take Charge” National Angus Conference September 25, 2003 Manden, ND Ron Lemenager Purdue University

2. 2 How can we compete - - in a commodity market?

3. 3 TOP CONCERNS FOR BEEF INDUSTRY: Aggregate Response from Purveyors, Retailers and Restaurateurs:  Low Overall Uniformity and Consistency  Inappropriate carcass weight  Inadequate Tenderness National Beef Quality Audit, 2000

4. 4 What Do Consumers Want?  Food Safety – it’s expected  Implants  Antibiotics  Disease (E.coli, Salmonella, etc.)  Value-added, convenience products  Meal solutions - yes  Uncooked pot roasts - no  “Guaranteed tender”  Aged 14 to 21 days  Process verified

5. 5 What Do Consumers Want?  Source verified  Now - some  Future - yes  Vitamin E fed cattle  RHI trade - no  Retail trade - yes  Environmental stewardship

6. 6 What Do Consumers Want?  Black Angus (CAB-like programs)  Middle meats – maybe  End meats – not necessarily  Other “niche” markets  “Locally grown”  Animal handling/well-being Demand for our product starts here!

7. 7 What Do Retailers/RHI Want? $Differentiated product $Consistent product $Consistent supply $Minimal out’s $Products that are worth more $$$ $Portion Control This group responds to, and affects change.

8. 8 Cattle that are part of a system, alliance, cooperative marketing arrangement, … Cattle that are outs, misfits, extras, small lots, … WHAT DOES THE FUTURE HOLD?

9. 9 The Challenge We are a “Segmented” Industry with many small- to medium-sized independent operations

10. 10 A Changing Beef Industry 2001 Number of new USDA Certified Programs

11. 11 Industry is moving away from producing commodity beef

12. 12

13. 13 By 2007 70% of the product will sell through alliances, branded programs, forward contracts or value grids (30% daily cash market) CattleFax, 2002

14. 14 SEED STOCK COW / CALF STOCKER FEEDLOT PACKER Branded Beef Commodity Beef Where do You Fit ?

15. 15 Value-added Considerations? As a producer: Selling seedstock Considering an alliance Considering a branded product Looking into the future

16. 16 Companion Programs Vision: Increase Producer Profitability

17. 17 Kentucky Department of Agriculture 5-State Beef Initiative Partners Office of the Commissioner of Agriculture

18. 18 Stakeholders 5-State Beef Initiative Management Organization Board of Directors Exec. Dir. & Universities (5) Marketing Organizations (1) State Dept. of Agriculture (5) State Cattlemen’s Assoc. (5) Feedlot, backgrounders (5) Cow-calf producers (5) Farm Bureau (5) Ron Lemenager Executive Director Ron Lemenager Executive Director Mike Bumgarner United Producers Mark Straw KY Dept. of Ag. Maralee Johnson IL Cattlemen’s Jim Culp Feedlot, IN Gary Wilson Cow-calf, OH Ernie Birchmeier MI Farm Bureau Executive Board

19. How can a partnership help? By creating the infrastructure that will allow producers to: target and meet one market at a time.

20. 20 FSBI Action Teams and Chairs Data Management - Dan Buskirk, MSU IRM/SPA - Rich Knipe, UI Certification - Jeff Arseneau, PU Kevin Gould, MI BQA/Health - Steve Loerch, OSU Patty Scharko, UK Genetics - Matt Claeys, PU, Nevil Speer, WKU CSRM - Steve Rust, MSU Economics - Lee Meyer, UK Product quality - Phil Anderson, IBCA Reproduction - John Johns, UK Post-Harvest Marketing – Steve Rust, MSU All Teams Have State and Producer Representation

21. 21 Producer Certification

22. 22 Why? Market Access Marketing tool: – for producers – for retailers Customer trust Something to point to

23. 23

24. Web Certification and Re-certification www.iqbeef.org

25. 25 Goal of BQA To ensure that all cattle shipped from a beef production unit are: –Healthy –Safe –Wholesome –Meet federal management guidelines –Meets or exceeds consumer expectations

26. 26 Preconditioning To increase value Viruses x 2 (IBR, PI3, BVD, BRSV) Clostridia Deworm Castration & Dehorning Weaning Feed and water broke

27. 27 Producer PC Data 199920002001 Calves - # hd8092100 Weaning Wt.443#482#453# ADG, Wean to Sale a 1.21#1.47#1.91# ADG, Wean to Sale b 1.48#1.82#2.15# Total Expenses / hd$35.93$40.19$32.85 Sale Price / hd$82.66$83.54$90.00 Extra Profit / hd$42.00$9.36$30.76 a with Shrink b without Shrink

28. 28 Bull Certification Certification is good for 3 years Power Scores rank individual bulls using breed specific EPD percentile rankings.

29. 29 Power Score System 2 Score System 1)Performance Power Score (BWt, WWt, YWt, MM) 2)Carcass Power Score (Marbling/%IMF, %RP) As in golf a lower number potentially indicates a more desirable bull. (Over 1500 bulls certified from 6 states)

30. 30 Importance of Data Management Building Résumés for your Cattle “ Want access to the competitive value-based market of the future? Better start getting together a résumé for your cattle.” John Sticka, CAB Dir. Packer Feeder Relations What’s in a resume? Documentation of : Genetic history Source verification Management practices Feedlot and carcass history

31. 31 The Emerging Age of Beef Inform ed a c tion  Beyond data  Beyond information  Building knowledge  Integrity

32. 32

33. 33 Cow/Calf Auction Market Feeder Packer Retailer Consumer Seedstock A Responsive Beef System Product Flow Information Feedback Foodservice “ Listens” “Trusts” Information Profit Flow

34. 34 Data Management  FSBI has partnered with eMerge Interactive to accommodate data collection, data warehousing, and information sharing  CattleLog ME was created for “us”

35. 35 Apply Unique Identification All FSBI animals are required to be tagged with an EID tag and a visual tag Tags can be obtained through FSBI State Coordinator Bulls and cows should have a permanent, unique identification within herd (unique ear tag) (C.O.O.L. and Mandatory National ID)

36. 36

37. 37 2001 FSBI n = 2332

38. 38 2001 FSBI n = 2332

39. Value of Financial Information >$170 Total Cost reduction per Cow

40. 40 $ ? ? How can producers get rewarded for enhanced quality?

41. “The lion’s share of producer value in their alliance comes from having the information to make improvements.” Don Schiefelbein, Monfort

42. 42 Fed CattleFeeders Calves Larger Premiums Larger Discounts As fed cattle prices show more differentiation So will feeder and calf prices New Market

43. 43 Receive carcass information on cattle (résumé) This Yield Grade 4 is typically worth $20 per cwt. of carcass less than this Yield Grade 2 This Select is often worth $5 to $15 per cwt. of carcass less than this Mid Choice What’s in it for me?

44. 44 Carcass weight and steak size.

45. 45 600-800 carcass REA, sq. in.Ribeye steak size, oz. 10.5 8.7 11.75 9.8 13.010.8 15.512.0 Carcass Weight and Steak Size Iowa State University

46. 46 Frame Size Live Wt Carcass Wt 1 750 475 2 850 540 3 950600 41050660 51150730 61250790 71350850 8 1450 920 9 1550 985 Importance of Frame size

47. 47 Eliminate “Outs” by Avoiding Extremes Carcass size Quality grade Yield grade Defects

48. 48 Importance of Animal Well-being An industry issue A consumer’s issue A retailer’s issue An animal issue

49. 49 Perception of animal agriculture Perception is reality

50. 50 New Perception of Agriculture

51. 51 Consumers/Retailers are going to expect it Early adopters should benefit financially The future is now Guidelines, Audits and Certification

52. 52 Staying a step ahead! EPA IDEM AFO / CAFO WASCOB TMDL Environmental Stewardship

53. 53 Why Vertical Coordination? Profit –Partners to work with –Market access (value added, niche markets) –Bargaining power - strength in numbers –Consumer confidence –Database, reports, benchmarking = KNOWLEDGE Performance Carcass Economic/Financial Increased predictability –In the feedlot –On the rail –On the plate

54. 54 Challenges Moving beyond tradition Working together “Special” sales Getting feedlots involved and committed Getting carcass data back on a large scale Year-round supply chain Business structure and plan Expertise beyond the supply chain “Herding cats”/Commitment

55. 55 Commercialization of Programs United Producers, Inc. (mktg. coop) –Managed Beef Alliance (MBA) –End user relationships Indiana Farm Fresh Beef (IFFB) –Certified Freezer Beef –Carcass data Premium Indiana Beef (PIB) –Independent restaurants and retail –Carcass data

56. 56 PEOPLE PRIDE PRODUCT PARTNERSHIPS PROFIT This is what it is all about!!!