If you look around the beef industry today you might see some unusual things occurring. Information on production and carcass merit is being communicated between all production segments. Meanwhile cattlemen of all sizes are marketing their cattle in a value-based system and receiving price premiums for superior cattle. The development of alliances, or coordinated marketing efforts between producers, feeders and packers, are making these changes possible.

Traditionally beef producers and feeders have been an independent bunch, squeaking out profits to the detriment of the neighboring segments. But as the beef industry evolves, so too must your way of thinking and your way of doing business. The need for information up and down the production chain and the desire to obtain more control over the price-negotiating process has led to this shift in cattle marketing.

Generally defined, today's beef alliances are three or more individuals working together to improve beef quality and increase profitability. Defining an alliance as three or more individuals is simply semantics as two individuals make a partnership. But it's the focus on beef quality that makes today's alliances stand out.

Everyone wins

"Alliances tie it all together," says Ken Conway, the alliance expert behind Angus GeneNet, a marketing service alliance boasting 400 producers working with about 40 to 50 feedyards. "We have to get the seedstock producers to get the data so they can get the right genetics. We have to get cow-calf producers to use the right genetics. And then we have to have the feeders that will manage the cattle right so that they are successful on the grid," says Dr. Conway. "We as an industry must work together and develop what the consumer wants and all make money."

Finding your fit

New producer groups evolve each month while others fade away, so there's no accurate count on the number of alliances functioning today. But one thing we do know is that there are as many different reasons for alliances as there are alliances themselves. Identifying an alliance that fits your needs can be difficult so before joining an alliance group, do your homework. Identify the potential returns, the potential risks and how participation in an alliance will affect how you manage your farm or ranch. Take a look at the following alliance participants and see how they became involved in various alliances.
Market access

"Being a small feedlot we're just a spit in the ocean of feeders. By the time the packers got to our feedlot, they usually had their orders filled," says Don Hergert a farmer-feeder in Greeley, Colo. "Or they would bid our cattle at such a discount that small feedlots like mine were at a disadvantage."

For Mr. Hergert, the decision to align with Angus GeneNet was based on his need for dependable market access. Formula pricing on the Angus GeneNet grid allows him to schedule fed cattle into the plant when they are ready, not when the packer is ready. Marketing through the alliance also allows Mr. Hergert to manage his customer's cattle and sell them on a value-based price grid and return premiums for quality carcasses. There are many grids on which to market cattle, but Mr. Hergert says that he found that the Angus GeneNet grid works best for his management and his customers.

"We've found that, even when sorting animals, the probability of getting Yield Grade 3 carcasses remained," says Mr. Hergert. "Selling on a grid with YG 3 as its base really reduces risk because you have a bigger window to hit before discounts kick in."
Finding a direct market

With 100 head of commercial cows, producer Steve Diehls of Fayette, Mo., is one of the larger producers in his county. Yet he was still a price taker, forced to take whatever he could get for his calves at the local auction barn.

"I have been looking for several years for some way to direct market calves off of the farm. I was getting 10 percent or more shrink through the sale barn, so I was looking for ways to keep the money I was losing," says Mr. Diehls.

With the help of the University of Missouri Beef Focus Team, Mr. Diehls and other neighboring producers set up the Mid-Missouri Premier Beef Marketers Alliance.

"There are a lot of small producers in the county with only 25 to 30 head. We put them together so we can offer a buyer a semi-load of calves, and we get a little better price for the calves," says Mr. Diehls. "Plus with this program there are certified scales at the backgrounding sight so we could weigh the calves onto the truck and pencil in just 2 percent shrink."

Participating calves are commingled at the Rocking 8 Cattle Co. on Dec. 1 where they are backgrounded and listed for sale around Jan. 15. Yearly enrollment and no up front membership fee helps to minimize risk associated with committing calves to the program.

"At this point we are seeking higher prices, but we are looking towards genetic improvement. Eventually we'd like to follow them all the way through to slaughter to get information on feed conversion, rate of gain and carcass data so we know which direction to go when we are buying bulls and changing genetics," says Mr. Diehls. "That's something we cow-calf guys never get once the calves leave the farm. We want to find out how they do, if they die or how we can make them better."

The pilot program, with 182 calves from nine farms, provided an average additional value of $50 per head after all costs of the program were deducted. That's in comparison to the value of the calves had they been sold at weaning.

Despite the program's success, getting people in the beef industry to change their way of thinking doesn't come easy, says Mr. Diehls. "People are slow to change. I talked to a lot of people trying to get them interested in the program but a lot of folks have a wait-and-see attitude."
Color discounts

For cow-calf producer Tom Krauss, selecting an alliance that fit all of his needs did not happen over night. On the native prairie grass of the Kansas Flint Hills near Manhattan, nothing fits the forage resources, according to Mr. Krauss, better than Hereford and Hereford-cross cows. But despite their value on the ranch, non-black calves often sell for $10 per hundredweight less than black calves.

"We decided that there was no sense in taking a beating for the genetics that we know we need to make our grass operation work," says Mr. Krauss. "So we looked at retained ownership."

With the possibility of making extra money, Mr. Krauss began marketing his Hereford-cross black- baldie calves that qualified, through the Certified Angus Beef program. Those that didn't qualify were sold on the cash market. Later, the Western Beef Alliance opened its doors. And because it was non- breed specific, WBA fit Mr. Krauss' needs better than CAB because he didn't have to worry about getting hammered with a discounted cash price on his red calves.

"We started putting cattle in WBA but it was slanted toward dressing percentages, which works well if you have exotic bred calves. But the dressing percentage of straight English cattle usually isn't as high," says Mr. Krauss. "Although it was bringing in money, it wasn't tailored to do what we needed so that we didn't have to sell calves on the live cash market."

At that time the Certified Hereford Beef program made it's debut.

"The CHB program has a realistic window in terms of a carcass quality target and yet still supplies a palatable product," says Mr. Krauss. "We can maintain profitability without devoting all breeding decisions to carcass traits. I don't have to produce something that works on the kill floor but not in my pasture."

A big reason Mr. Krauss is a strong supporter of the CHB program is the focus on acquiring and providing individual production and carcass data.

"We can evaluate which cattle are profitable throughout the total conception to consumption system. Basically by looking at the cow in the pasture, the calves in the feedyard, and how they kill, we can tie all three segments together," says Mr. Krauss. "We keep track of every dime we put into each cow and her calf. It allows us to select for cattle that may not be the best carcass cattle, the best feedlot cattle or the most efficient cows, but by integrating our cowherd from conception through consumption, we find out which cows are the jack-of-all-trades. Because it doesn't make sense to make money on one end and lose it on the other."

Another factor that is paramount to choosing the right alliance program for Mr. Krauss is the use of ultra-sound technology to assist in making marketing decisions. "We're big proponents of ultra-sound to. It allows us to market cattle when they are ready and not on pen averages. Over the last six years ultra-sound has increased our gross returns by 10 percent."
Retaining value

For producer Gary Johnson of Dwight, Kan., participating in various alliance marketing programs is a way to expand and diversify his beef operation.

"Because our input costs are so great, we have been driven to seek out more revenue from what we produce," says Mr. Johnson. "We had to look at retained ownership as a way to generate more income.

Like many beef producers, Mr. Johnson started out producing calves so weaning weights were important. Then he took the calves a step further and retained them as feeder cattle, then yearling weight became important. Eventually ownership was retained through the feeding phase so feedlot performance became the most important, explains Mr. Johnson. The next logical step is to put all of those segments together and sell beef based on carcass quality on the rail.

"The real thrust will be on how they perform for the consumer. By selling cattle in a value-based marketing program, you get paid for how those cattle perform," says Mr. Johnson. "You take on the risk of those cattle being of poor quality instead of the packer so you receive the rewards."

But simply selling cattle on a carcass value basis does not guarantee you greater returns.

"It's so important to know what kind of cattle you have and then how to get them to the desired end- point," warns Mr. Johnson. "Once we select a marketing program we have to be careful that we hit the target."

One of the most important things that alliances have done is make producers more product oriented. "I think that alliances will make producers more focused," says Mr. Johnson. "That doesn't mean we'll all produce the same thing, but it does make us all have a goal to work towards."