A sea-change is occurring in cattle production. The growing reliance of the industry on electronic tracking and databases is largely a response to the impending start-up of a national animal ID program.
However, increasingly rigid market and consumer requirements for beef are pushing such changes as well.
“Internal market forces for things like natural beef, branded beef, and organic beef are also players in this,” says Bill Mies, Emerge Interactive vice president for national accounts.
“Those internal forces are probably occupying and demanding more cattle daily than any of the export markets. Producers need to understand that. They need to know we're going through a shift from a generic product to a system where there are multiple brands of beef.”
In addition to other services, Emerge Interactive produces CattleLog — a computer database that makes use of electronic ear tags and allows data to be entered at any stage of the production cycle. Available since 1999, CattleLog is used by ranchers, stocker operators, feed yards and packing houses.
“We also have software systems for the high-speed entering of data as well as paper-based systems preferred by some producers. We also offer the opportunity for producers to qualify their cattle for any of the marketing programs. That might be, for example, the Japanese market.”
When opened last December, the Japanese required that U.S. cattle be age-and source-validated.
“That meant someone had to travel to a ranch, look at the calving records, check the ear tag numbers to ensure everything was straight on the records, that they'd pass an audit if necessary. Then, we signed off and validated those calves in our database. That validation was then accepted by USDA all the way to slaughter.”
The CattleLog system was a long time in the making. Mies and Dave Warren, the company CEO, have worked on it since 1992. Warren was previously involved in the development and research of the first electronic ear tags.
“That was the foundation for what we're doing now,” says Mies. “We both ended up working for Emerge and recognized the industry has been moving toward electronic tracking for a long time.”
Was BSE (bovine spongiform encephalopathy) the biggest impetus behind this? Or was it something else?
“BSE certainly put tracking systems on the public's agenda. But this isn't a BSE-caused, knee-jerk response. This is something that's been building. The cattle business has been developing brands for a number of years.”
Mies points to certified Angus beef, which began in the late 1970s and developed in the 1980s. Another program, for certified Hereford beef, began in 1994.
However, the biggest push for such branding came with competition from poultry and pork. At the grocery store, a blizzard of brand names on conveniently packaged chicken and pork awaits consumers. If beef is to compete with those proteins, the cattle industry must provide the same, insists Mies.
There are three questions Mies is asked most frequently.
Will the electronic tracking fit into the national animal ID program expected around 2009?
“Absolutely. Everything being done in these marketing programs today is in lock-step with what the animal ID program will be like if and when it's put in place. So producers who get involved today in branded programs will have very little to do when the national ID program comes along. They'll already be using the same technology, databases and equipment that the national program would require.”
What about the confidentiality of the collected data?
“This is a real concern around the country. People want to know what happens to data after it's put into a databank. Can it be sold? Can the government look at it? Can other people look at it?”
Mies says the data collected is absolutely confidential to the client.
“The producer pays us to put it in the databank and we treat it as if we were a commercial banking establishment. That data is as confidential to a producer as his banking data at the local bank. To provide any data to someone outside, banks require a permission slip. We're the same way. We give out no producer data unless the client has signed off on it.”
Often tacked onto the confidentiality issue is a concern about liability.
“Cattlemen are afraid that somewhere in the production system someone will do something to a calf produced on his ranch and the legal system will turn on him. They worry they'll be sued for something that was done elsewhere in the production system. You know, if E. coli showed up in a meat sample, they'll be blamed for it, or something.”
A producer concerned about such liabilities must protect himself through record-keeping.
“Good records are the best defense. If someone makes an accusation and the producer has records to disprove it, the claim will go away. Whether producers get into electronic ear tags, whether they get into the marketing options I've spoken about, they really need to keep good records.”
Is there increased profit potential through marketing programs?
“Definitely. Premiums are being paid for cattle that qualify for natural programs, for organic programs, for branded beef programs. If Japan comes back on line in the next few months, as we suspect it will, there will also be premiums paid for age-and-source validated cattle.”
Thus far, due to herd size, animal tracking been embraced mainly in the inner-Mountain West — Idaho, Montana, Nevada and the Dakotas. Ranchers with 250 to several thousand cows, who count the beef cattle industry as their sole source of income, are more likely to be the first adopters.
But, more recently, Emerge has picked up smaller producers wanting new ways to better market their product.
“In Missouri and northern Arkansas we see a lot of sale barns having special sales. Often the cattle are age-and-source validated. A producer with one calf can be in the system and sell it in the value-added programs.”
In terms of where the new tracking methods will take the industry, Mies says, the methods used for marketing — whether an auction barn, video sale, board sale, direct marketing, or partnership arrangements with feed yards — will operate much as in the past. But in each of those marketing avenues, there will be changes. Auction barns will be increasingly involved in putting together special groups of cattle that fit branded programs. The same is true of video sales.
As for current and future market conditions, Mies sees several things playing out in the next couple of years.
“We have more feedlot capacity, more room to feed cattle, than we have cattle. That fact alone should tell people that the cow/calf business and prices will remain strong for the next several years.
“We haven't rebuilt the herds quite as fast as everyone thought we would with high prices. Drought has restricted that a great deal. It'll take a while to make up the difference.”
Feed yards are in a “tough position.” They'll likely be paying higher prices for feeder cattle — or, at least, the current prices will be maintained.
The other issue that could squeeze feed yards is ethanol production. If the fuel's manufacture takes off as many analysts predict corn will be taken off the market.
“That could be a problem for cattle feed. Grain in rations will still be required so grain prices could move feed yards into extremely narrow margins.”
Packers are coming off two years of extraordinary losses. Those losses are well-documented because most of the packers are public companies. Mies says the packers' success will largely depend on how well branded beef and export markets do.
“They need a couple of good years to get their feet back under them.”