In his guest commentary (“If I were a purebred breeder,” Drovers, June 2009), Dr. Max Thornsberrry, R-CALF USA president, told us about a whole herd of boogiemen that were headed our way. The threats Dr. Thornsberry warns about include such things as corporations, vertical integration, composite/hybrid breeds and, of course, the scariest beast of all — change.
Dr. Thornsberry explained how Missouri independent hog producers underwent a major metamorphosis during the period from 1977 to 1985, and they either sold out or became contract producers for major swine integrators. As a result, the purebred swine breeders in the area lost their customers because the corporations developed their own line of hogs which were more efficient or more effectively met the specifications of the marketplace.
Consider that last point about “… more efficient and more effectively met the specifications of the marketplace.” I believe the most important lessons I learned in animal breeding classes were that antagonisms exist between growth rate and reproductive performance, and those traits must be balanced against each other to achieve peak operating efficiency. Additionally, hybrid vigor from crossbreeding increases the performance of traits which have low heritability, such as reproductive traits. Purebred animals are simply just less efficient than crossbred animals, and the swine integrators knew that. I doubt that any decisions about which genetics to blend into their hogs was influenced by the hair color they wanted on the pigs, or the fact that they had always raised a certain color or breed of pigs, or how it would be a betrayal of their ancestral legacy to not continue raising the same kind of pigs.
Because the decision about genetics was made at a corporate headquarters rather than on the farm, those changes could take effect immediately. Centralized planning of animal agriculture production practices typically leads to some horrible failures, unless you can exert complete control over the diet and environmental conditions. That is exactly what a confinement unit allows you to do. The diet and environmental conditions inside a hog unit in the Oklahoma Panhandle are going to be similar to the conditions inside a unit in Iowa or North Carolina. Consequently, if we want to cast blame on any entity for the consolidation which occurred in the pork or poultry industries, we should blame national agricultural policies that rewarded farmers for producing more corn and soybeans than the marketplace was actually demanding.
A second important consideration is that cows are not pigs. It seems almost silly to make such a point, but in light of concerns Dr. Thornsberry raised in his commentary, it appears the need to do so actually exists. As beef producers, we have almost no control over the diet and environmental conditions in which we operate. We just have to deal with the conditions God gives us. Consequently, the top-down, vertically integrated organizational structure which exists in the pork and poultry industries would be extremely difficult to implement in the beef industry.
Does that mean vertical integration will never take place in the beef industry? I rarely, if ever, use the words “never” and “always” when discussing biological systems. But I think it’s safe to say that top-down, vertical integration will never take place in the beef industry. Prior to becoming a full-time cowhand, I worked as a nutritionist for a feed company that had a partnership with a private consulting group. At one of the meetings with the private group, they indicated that they had been involved in a project with National Farms, who was considering owning enough beef cows and land to keep their feedyards running at capacity year-round. When they finished their calculations they discovered they would need to own half the state of Kansas to achieve their goal, which basically put an end to the project.
Some might breathe a sigh of relief that an evil, multinational agribusiness corporation isn’t going to turn us into serfs working our own land, but I believe it’s important to understand what vertical integration does for an industry. At the 1995 Range Beef Cow Symposium Jack Maddux defined vertical integration as “the final economic result of the many bloody battles to become low-cost producers.” We are faced with the same genetic antagonisms between growth traits and reproductive traits that exist for pork producers. The problem for us is that we need animals that balance those traits and operate in environments which range from the desert Southwest to the Northeast, with nearly every imaginable environmental extreme in between. I believe some kind of vertical integration system would help us put the numbers to the various costs and benefits by more effectively communicating pricing signals up and down the supply chain. If vertical integration comes to the beef industry, it is going to come from the bottom up rather than from the top down. And rather than being full-fledged integration involving ownership and control of the assets, it will more likely be “vertical cooperation.” That conclusion is more a retelling of recent history rather than a prediction of things to come, because the most effective branded-beef program to date, the Certified Angus Beef program, flourished because it provides financial incentive to cow/calf producers.
Unfortunately, I believe the greatest hindrance to more vertical cooperation within the beef industry is the presence and actions of R-CALF USA.
Change happens whether we like it or not, and for R-CALF to claim they are going to stop it is misleading and a disservice to our industry. We will prosper only to the extent that we continue to deliver a quality product to consumers that meets or exceeds their expectations. For this to occur, pricing signals must be communicated between consumers and cow/calf producers. That can only happen when cow/calf producers realize that the participants downstream — the feedyards, packers or retailers — are not adversaries but partners in delivering beef to consumers.
Mark Sip ranches near Geddes, S.D.