Satisfying the 21st Century Beef Consumer

Cattle Feeder’s Perspective

Tom Brink

Five Rivers Ranch Cattle Feeding, LLC

• ContiBeef plus Smithfield (Monfort) Feedyards• 50-50 owned by ContiGroup & Smithfield• Ten feedyards in Five States• 811,000 head of feeding capacity• Market cattle to 4 of the 5 major packers• Majority sold on grids (formulas)

Hartley Feeders, TX135,000+ Head/YearSwift-CactusPackerland Naturals

XIT Feeders, TX165,000+ Head/YearSwift-CactusNolan Ryan

Coronado Feeders, TX150,000+ Head/YearSwift-Cactus

Liberal National, KSDodge City National, KS

Greeley, CO

Cactus, TX

Cimarron Feeders, OK145,000+ Head/YearSwift-Cactus

Colorado Beef, CO130,000+ Head/YearSwift-Cactus/Greeley

Grant County Feeders, KS245,000+ Head/YearNational-LiberalNaturewell

Legend:= Feedlot= Swift Plant= National Plant

ContiBeef: Locations

YumaYuma, CO270,000+ Head/Year

KunerKersey, CO185,000+ Head/Year

GilcrestLa Salle, CO185,000+ Head/Year

Hyrum, UT

Grand Island, NEGreeley, CO

Cactus, TX

InterstateMalta, ID110,000+ Head/Year

Legend: = Feedlot = Processing Plant

MF: Locations

Five Rivers Ranch Cattle Feeding, LLC

• Commodity principles are foundational

• Must be efficient in all aspects of our business

• Specification production and marketing

• Sorting and segmenting our cattle inventory

• Feeding for branded beef programs

• C&P efficiency plus Value-added marketing

How do we satisfy consumers?

• Better cattle health• Right breed composition

Health in the Feedyard

• “Old problem” but still identified as the #1 production problem feedyards face

• Impact on performance and carcass quality is well documented

• We have the technology and know how to get cattle better prepared to leave the farm or ranch…implementation is lacking

Many cattle still need stronger immunity when they leave home.

Impact of Health & Death Loss*

Death Loss ADG DMC Profit per head

0% - 0.5% 3.09 6.48 -$10.89

0.5% - 1.5% 3.00 6.65 -$20.41

1.5% and up 2.84 6.86 -$57.62

*800-lb. yearling-fed steers closed out in March 2006

Did the higher DL% steers satisfy anyone in the system from producer to consumer?

Pre-conditioning in simple words…

“Vaccinate calves at 2 to 3 months of age, and again 2 to 3 weeks before weaning. At weaning control internal and external parasites, castrate all remaining bull calves. Make sure all calves are dehorned (preferably a 2 to 3 months of age). After weaning, calves should be exposed to supplemental feed for 30-45 days. If properly preconditioned prior to shipment, producers have done a great deal to prepare their calves for the future.”

---Dr. Max Irsik, University of Florida

Is cattle health improving?

• 55% of High Plains feedyard managers in 2002 said health in southern-origin feeder cattle was “better” or “much better” than a decade ago.

• VAC-45 type programs are on the rise, as are special sales for such cattle

• Data is readily available that shows the value of preconditioning (Pfizer-CSU)

• So some progress has been made but…

Cattle health is now a Social Problem not a Technological Issue.

Breed Composition

---Large numbers of the industry’s cattle are designed wrong genetically…wrong breed composition to succeed in the feedlot and satisfy the consumer.

We skirt the issue and remain politically correct.

“More difference within breeds than between breeds.”

---And it costs the industry millions of dollars and reduces our worldwide competitiveness.

---The feeding industry is also guilty of not consistently communicating what they need to producers.

Here is what Five Rivers wants…

Our first choice: AN x Continental

• 50% to 75% Angus and 25% to 50% Continental • Good feeding, Good grading, Good yielding animal that

is usually the right size• Higher percentage British cattle lack often muscle, yield

and produce too many YG 4s.• Higher percentage Continental cattle lack often grade,

and often get too big before they finish.

Balanced combination of Angus and Continental breeding is tough to beat.

Heat tolerant genetics?

“Eared” genetics are necessary in the South

No more than 25% eared genetic influence in Southern feeder cattle!!

Cow herd can still be up to 50% Bos Indicus influenced

Woodward, OK Auction (4/7)

Feeder Quality Average Weight Average Price

#1s 777 lbs. $99.93/cwt.#2s 771 lbs. $93.90/cwt.

Minus $6 per cwt. ($47 per head) for too much ear.

You will be paid more for avoiding breed composition problems in your cattle.

Up to 25%Other Breeds

25% to 50%Continental

50% to 75%Angus

Breed Composition Pyramid: Ideal Feeder Animal

Chronically low quality grades in Southern U.S. plants

Week ending 4/1/2006

Choice & Prime

Nebraska 63.7%Kansas 44.9%Texas 44.5%

Choice-Select spread was $10.74/cwt.

This problem is visible…

They’ll feed fine, but won’t grade

Balanced breed composition…

Progressing in the 21st Century

Quotes from Five Rivers’ Managers (to producers):

“Embrace individual animal I.D. and maintain verifiable age and source records on you calf crop.”

“In today’s industry, with source and age verification being on the consumer’s mind, I think this would be one of the easiest and most rewarding steps any cow-calf producer could take.”

“If we in the industry want to give consumers what they are willing to pay for, then cow-calf producers should begin to shift their mental paradigms to the age and source verification process.”

Feeder calf value built in steps…

(1) Right breed combination--- sell at the market (not below)

(2) Verifiable immunity--- sell cattle above the market

(3) 1 + 2 + well selected genetics within breeds used--- access to significant grid premiums

(4) All of above plus age and source verification give you access to branded beef or “program” premiums that can add further $$ to the producers bottom line

Example: premiums paid for verifiably natural calves = $25 to $75 per head

Age, source and process verification at the farm and ranch level are the platform from which cow-calf producers can access

branded beef premiums.

Another quote:

“Cow-calf producers should shift their mindset toward more cooperative integration within the overall production chain.”

Where are we, really?

• Fix health issues and get the breed composition right.• Realize that communication and educational challenges

are now bigger than technological barriers in making progress at the producer level.

• Source, age and process verification can open the door to branded beef premiums…that pay all the way through the system…yes even back to the producer.

We have NEVER had a marketing system that rewarded true value like we have today…leverage it to your advantage!

Thanks.