Thursday, May 08, 2008

Around Every Corner...

It seems like everywhere I turn these days I see more and more evidence for a roll back to the smaller family farm (not that they have to be as small as mine). This time the story comes from the May issue of "The Stockman Grassfarmer". The article, titled "Small Feedlots Being Done In By High Priced Feeder Cattle", gives a glimpse into the state of the feedlot industry in the United States. A couple of things that really "hit" me after reading the short article were that small feedlots these days are for 10,000 to 15,000 head, just 200 feed lots (100,000 head or more capacity) finish most of the nations beef, and that it requires $12 million in capital to fill a 15,000 head feedlot.

Check out this quote from the article:
"Top Producer Magazine recently had an article chronicling the decline of "small" feedlots in the 10,000 to 15,000 head range in the Great Plains. This comes 30 years after those then-large feedyards eliminated the 200 to 1000 head Midwestern farmer feedlots."
So, following that logic (and I feel safe doing so) the next in line to go out of business is the 100,000 head feedlots that will be replaced by super feedlots that have a 200,000 head capacity. It would promoted as a step towards maintaining the cheap food that Americans love, but think of all the problems that would ensue.

But, above all the $12 million figure is the one that blows my mind. I totally understand why it takes that much, but it makes me wonder. It makes me wonder why more people aren't doing grass-finishing. It makes me wonder why more people aren't doing Managed Intensive Grazing. It makes me wonder why more people aren't High Stock Density Grazing.

In the "King Corn" movie the huge feedlot owner stated that they would grass-finish animals if that is what people wanted, but that it would cost more. I tend to disagree. But, I'm not out there doing it on a super-sized scale. Although I do know that there are people that do it...


Rich said...

The feedlot system is complicated because it is geared towards the commodities markets, cattle futures contracts, etc., rather than simply producing beef.

From my limited knowledge, feedlot operators make their money by feeding cattle (and lending money to people to pay for their cattle feeding services), they don't actually own the cattle in their feedlots. In addition, most of the cattle are "owned" by people speculating in cattle future contracts.

Cattle future contracts are based on truckloads of 40,000 - 50,000 lbs. of cattle, so a small feedlot is depending on a smaller group of clients to fill their feedlot, therefore there is more financial risk in losing clients, loaning money to clients, and/or keeping the feedlot full. A larger feedlot can afford to have more fluctuation in its cattle numbers, and will theoretically have more money to lend.

The whole feedlot business model seems to be geared more towards the commodities trading market customer rather than producing beef for the consumer. The 200-1000 head feedlots of 30 yrs. ago were actually in the business of producing beef, not warehousing a commodity for commodities traders.

When the feedlot owner says "...they would grass-finish animals if that is what people wanted, but that it would cost more...", the people he is talking about are commodities traders, not consumers, the beef produced is just a byproduct of the system, even if it is sold at a loss it is still possible to make a profit on the futures contract.

Personally, I would rather have my food produced by a system interested in actually producing beef (either ultra small feedlot or grass finished), not a system designed to cater to the desires of commodities traders.

Steven said...

Unlike Stockman Grass Farmer article titles, I had no idea what was coming with this title.

All I have to say about this article is, isn't it nice to continue getting confirmation that you're on the right track?

Also, when did you get this months SGF?? My first should be coming this month and I haven't gotten it yet.

Ethan Book said...

Rich - One interesting thing that the article said that it used to be that 70% of the cattle finishing on a feedlot were owned by the farmer/rancher that fed them on grass and that the feedlots were more like hotels with fast gains (in fact one study said that was best for everyone). But now it is the total opposite where the feedlots (or whoever) own 70% of the cattle and the farmers/ranchers sell to them. By the way, I'm with you on the producing beef not the desires of traders!

Steven - I believe I received this issue a couple of days ago...

Dave_Flora said...

The reason more people aren't grass finishing their cattle is that:
1) It takes more managment, which takes it away from the mechanical-minded approach that most of today's farmers have been duped into following.
2) You can't produce the kind of numbers you could by just working a huge feetlot.
Even though you get a superior product by grass-finishing your beef, the farmer has to be more responsive to the types of cattle he has, the types of forage, climate, etc., whereas most farmers are told that the desirable yield is only a few (expensive) chemicals away.
Running a farm like a factory takes less thought, but because biological relationships are too complex to be placed into an equation, it is destined to fail.
A small production on a small farm is the only way to ensure production of a healthy, quality product.

Steven said...

I agree with what you said but I also agree to some extent that producers don't produce grass-fed animals because it isn't demanded by the customers. A year ago I had some awareness of hormones being used in animals but didn't have a clue how much difference it made in the meat to have the animal eat grasses (or whatever it is naturally designed to eat). I also wasn't aware of the corn issues, subsidies, etc. If I saw "grass fed beef" on a label I probably would have taken that to be more telling of the happiness of the animal when it was alive than the healthiness of the meat in the package and I wouldn't have spent extra to know that the animal was happier. Now that I know these things, not only am I starting to raise my own, but I'll spend extra in the supermarket for semi-local grass-fed beef, and extra at a local farm for similar pork, eggs, and chicken.

All I'm trying to say is that very few people know of the benefits of more naturally grown meats and I believe that as more people learn, the demand will go up and people will start to produce to meet that demand. To some people cheap food will always rule but I believe the tide is changing.

Rich said...

"...The reason more people aren't grass finishing their cattle is that: ..."

I tend to think (rightly or wrongly) that the major obstacle to grass-finishing cattle would be finding a market for the finished beef, I'd hate to spend 18 months to get 20 finished steers ready to be butchered and only have 8 people wanting half a beef. The perceived possibility of waiting 18 months for a paycheck, and then not finding one, could be a powerful deterrent to trying something out of the ordinary.

Selling weaned calves, or 800 lb feeders is a guaranteed paycheck with much less "risk" can seem like a "safer" way to do business, even though it might result in a smaller paycheck.

Finally deciding to take the risk would be the hardest thing to do initially, not abandoning "...the mechanical-minded approach that most of today's farmers have been duped into following...".

Dave_Flora said...

"To some people cheap food will always rule but I believe the tide is changing."

Absolutely right, Steven. When you're trying to raise and market a quality product to people, you're really selling relationships. A relationship between the customer and their food, the food and the farm, and of course, you and the customer. At this stage of the grassfed market, it's important for the farmer to be as much an educator as anything else. Of course, there are always going to be people who don't value their food and go with "whatever is cheapest". You don't want those people as customers.

"Selling weaned calves, or 800 lb feeders is a guaranteed paycheck with much less "risk" can seem like a "safer" way to do business, even though it might result in a smaller paycheck."

Rich, it may seem that way, but any time someone else tells you what they will give you for your product, you are on the losing end. Our family raised dairy cattle for nearly 30 years until the 1980's, when suddenly the milk companies didn't feel that it was worth making a living wage at, and we got into beef (it keeps better).
I'm just not a believer in "safer" much anymore.


Rich said...

"...I'm just not a believer in "safer" much anymore..."

I agree, that's what I meant by a portion of my comment, "it...can seem like a "safer" way to do business...", with emphasis on the word "seem".

Mellifera said...

This is a little bit off-topic, but it's good! I heard something interesting a couple weeks ago. The university here (Florida) hosted an ag extension agent from Australia who specialized in working with small farmers to talk a little bit about his experiences. Here's a brief-brief synopsis...

Once upon a time we figured hobby farmers were a nuisance ("hobby farmer" still being the predominant term for a small-acreage outfit in Australia, and "small" being defined as anything under 100 hectares. Pretty big, but not a mega-operation). They make industry groups nervous, which makes the USDA-equivalent nervous (notice the chain of command there). For example, in their main thoroughbred racing area there are also a lot of farmettes mixed in where people keep horses just for fun, and unlike a place with million-dollar horses they didn't see it to be worth their while to keep a little bit of a border between their neighbors. So horses on adjoining farms would hang out and pass germs at their mutual fenceline, which facilitated an equine influenza outbreak right in the middle of their racetrack industry area.

Now my first reactions were 1) Clearly it would behoove (har, har) people with million-dollar thoroughbreds to be *really sure* about keeping a little extra distance for their own biosecurity then, wouldn't it? and 2), "Ok, so worst-case scenario is collapse of the horseracing industry and a bunch of gamblers (this includes people who buy million-dollar horses, not just bettors at the track) lose a lot of money. Big deal, nobody eats horse anyway." But the point of it is: Small farmers were viewed as a bunch of semiretired bozos who were not only not serious about growing food (or anything else), but an actual disease risk to those who were. Thus small farming was at least ignored by the government, and definitely disparaged by industry groups- whom the gov't agencies live to serve, as they are considered the representatives of "real" farmers.

Then some census numbers came in and the ag agencies realized that these "bozos" are raising 25% of Australia's food.


Not only that, they realized a few more things. They were raising this 25% of the food on much less than 25% of the agricultural land. They of course recalled that a lot of Australia's national economy is agricultural exports, so this was really a matter of vital national interest. They did the math and discovered that if you remove that ring of pesky quasi-suburban hobby farmers from around (Melbourne? Sydney? Some big city- I can't remember), 5 million people would stop eating vegetables. And also that a recent surge in "hobby farmers" moving up into the Cape York Peninsula has actually involved enough population movement to change who's winning the elections there.

You can bet the gov't attitude changed real quick when they figured all that out. : D

I think I took away a couple things from this. #1: Australia, and presumably the US, really are democracies- as skewed as they are. If you have enough small farmers, who really are growing food and not just dinkin' around with alpacas, they WILL be taken seriously. You just can't ignore the 25% figure. And second, it IS possible to have that many farmers. I think a lot of the demographic shifts that made this happen in Australia also exist here in the States. The last one may be more controversial... engage the gov't, darnit! I think maybe part of the reason Australia's system was so terrified of the small farmers was because the only ones they ever saw or heard from were the paranoid wackos and retirees who really didn't have the means or desire to actually farm... they just wanted to "have some [insert animals here]." It was finally realizing that some of these small farmers must actually be real businessmen and husbanders that made the difference for Australia.

Anyway, if anyone wants more info on it I'm due to get an email with his presentation on it when he gets back to his office sometime this month... I'll let you know where to find it when that happens.

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