Category: News

 

We will cover in this 5 part series the major threats facing all cattle feeders, how they impact our operations and some solutions we are implementing in each area.  Please feel free to comment on each segment as we go.  The order in which we discuss these threats does not necessarily rank them as

each operation is different in how these threats apply to them, but each has an impact nonetheless.

Regulation

There are many types of regulation that can affect a business but we will focus here on environmental regulations of the EPA as it pertains to livestock operations under the Clean Water Act and the Clean Air Act.

Some background, in 2012 the EPA is operating with a $10 billion dollar budget.  According to the justification for their 2012 budget allocation, they have 17,000 FTE employees and in the past 18 months have hired 200 “Special Enforcement Agents”.  In recent days, they have to date successfully defended their practice of using flyovers as a method of enforcement.   Earlier this spring an EPA regional director resigned under scrutiny of a comment he made regarding EPA enforcement tactics, “…We operate like the Romans used to…crucify the first 5 in any town and the rest become easier to manage”.     Again in the justification for the 2012 budget, the top three water quality issues the EPA is targeting; 1. Raw sewage in water (I would agree).  2. Reduction of Urban runoff (here, here).  3. Livestock manure management (and we part ways).  In specific, any NPDES permit holders, which would be any permitted livestock operation.

The EPA considers it’s work in the Chesapeake Bay to be successful and a model for other waterways.  This is all fine and good until we start asking questions about the basis for determining what is good, what base level are we starting from?   What is the natural state of the Chesapeake Bay waters?  How do we determine between domestic animal wastes and wild animal wastes in terms of fecal coliforms and nutrient loads?  Does this take into account the population of squirrels, bears, geese, deer, ducks and every other multitude of wild creature?

The Clean Water Act determines waters that fall under the federal umbrella to be “navigable” as defined below:

“Based on the agencies’ interpretation of the statute, implementing regulations and relevant caselaw, the following waters are protected by the Clean Water Act:

• Traditional navigable waters;
• Interstate waters;
• Wetlands adjacent to either traditional navigable waters or interstate waters;
• Non-navigable tributaries to traditional navigable waters that are relatively permanent, meaning they contain water at least seasonally; and
• Wetlands that directly abut relatively permanent waters”.

 

This by no means is meant to be comprehensive the long and short of it is that the EPA continues to fight for more jurisdiction over what can be determined as “waters of the State”.    Note that, currently groups that do not think the EPA is doing enough to protect water resources sue the agency 3 times more than those being regulated.

On the front of air quality,  the EPA has stated as its number 2 target is “particulate matter” which is a fancy way of saying dust.  This should not only be of concern to those in the livestock industry but all of rural America.  Dust a fact of life in rural areas.  Gravel roads or most any field operation creates dust.  Creating regulation about the control of dust will most definitely create unnecessary hardship for the vast majority of this great nation.

This information brings about the certainty that the rules that affect how we do business in the future will not become more lenient but more stringent.  As we plan and prepare our operations for the future, we must consider not only the regulation as they stand today but the spirit of the law and the mentality of the regulatory agencies we are dealing with.  Do not trade one pollution for another ie runoff control for odor.  Does what I am doing to satisfy the regulatory agency improve the profitability of my operation or just meet requirements?  We will discuss this aspect more in weeks to come.

Don’t Track it in the House….We Got Ya Covered.

Many industry articles of late in the wake of the criminal misinformation on Lean Finely Textured Beef, LFTB, have focused on the efficiency of the beef industry. This focus has largely been on making the most of what we produce and how the capturing LFTB helps keep beef affordable for all demographics.
In these articles it talks about the efficiency of the United States Beef producer. Amazing facts really like though the US is home to only 7% of the world’s cattle yet we account for 20% of the world’s beef production. The fact that since 1977 we have reduced the amount of feed to produce a pound of beef by 20% and land used for beef production has been reduced by 30%.
As Hoop Beef System customers we are doing our part in taking the next step in improving the efficiency of beef production in the United States. We harvest about 34.4 million head of cattle annually in the US. It takes 129 billion pounds of dry feed with and average feed efficiency 7.5 lbs of feed per one pound of gain. A 15% improvement in feed efficiency would save 19 billion pounds of dry feed annually in our industry! That is enough feed to finish another 6 million head of cattle. Improving the hot carcass yield by 1.5% will yield another 619 million pounds of beef annually. Given the average consumption of 59 pounds of beef per capita in the US,together that would feed another 92.5 million people annually.
As the demand for high quality protein increases worldwide we will need to continue to implement the best technology and designs available to increase the volume of beef we produce with limited resources and do it in the most efficient means possible. Thank you for what you do in feeding the world!
We Got Ya Covered….Don’t track it in the house.

The Million Dollar Advantage

            How would you spend a million dollars? It is kind of a million dollar question.  Would you put your kids through college?  Take your family on a nice vacation to a place you have only dreamed of?   Maybe even buy 100 acres of farm ground in Northwest Iowa.  Why the question? What does it matter?   Recently when walking a perspective customer through his options with Hoop Beef System, as compared to another way of feeding cattle under roof, the difference was over $1,000,000.00** in ten years!

Now, before you stop reading because you think this impossible, let me show you the money.  This is basis a 500 head project of new construction in the upper Midwest.  Names have been changed to protect the innocent.

Jim was considering a single sloped cattle feeding building (a building not a system there is a difference) for his operation.   Jim is considering the same capacity of the Hoop Beef System.   As a trusted advisor to his operation, we began the comparison with the basic equation: Cost of construction + Cost of daily operation=cost per head per day (yardage) over the amortization period.    Jim had chosen a 10 year payoff period for his project.  With the single sloped building he was considering, the per head of capacity cost was $250 per head more than the same capacity Hoop Beef System.  The difference in up-front cost was $125,000.00 with interest at 5.75%; this was a $164,653.00 difference over ten years. Advantage Hoop Beef System.  That’s just the additional cost of construction.

The other building was fully concreted throughout the floor plan.  The best university research available today states that a single sloped building will require 11lbs of bedding per head of capacity per day.  This correlates to 3.3, 1100 lb. corn stalk bales per head of capacity annually or in Jim’s case 1650 bales.  At Grand Meadow Feeders, a Hoop Beef System feed yard, the annual bedding usage is less than one bale per head of capacity, but for the sake of argument let’s say 1.   For a 500 head operation, that is 1100 bales difference annually.  According to Rock Valley’s hay auction last fall that bale is worth on average $32.50 per bale.  That is a $35,750.00 per year advantage to the Hoop Beef System.   That is $35750 x 10 years = $357,500.00 advantage.

What goes in must come out.  As there is no available university information on manure production, we will assume at minimum that you will have to haul at least the additional 2530 lbs. of bedding, used plus an additional 40% in moisture for a total increase of 1.77 tons per head or 885 tons per year, at an average spreading cost of $10 per ton that is $8850.00 per year.  Note that the crop nutrients come from the cattle, not the bedding and adding additional volume to the manure dilutes the manure resource, which increases the tons required to get the same crop nutrients dispersed. For ten years, $8850 x 10 = $88,500.00; advantage Hoop Beef System.

The best advantage is the knowledge and cattle feeding and marketing experience that we bring to our customers.  Our marketing agreement with those that purchase our cattle, over the past 6 months has added an average of $37.50 per head over what the average producer received for his cattle in the same period.  Our ration design and its corresponding cattle performance saves on average $.1925 per head per day, in a 210 day feeding period that is $40.42 per head per turn.   Follow the money, $37.50+$40.42=$77.92 per head.  Assuming an occupancy rate of 90% on an annual basis gives us 1.64 head fed per space of capacity annually.  500 head capacity markets 820 head per year.   820 hd x $77.92=$63,894.00 x 10 years is $638,940.00.    Advantage Hoop Beef System.

1. Cost of Construction                       $164,653.00
2. Cost of Operation                            $357,500.00
3. Manure Hauling                                 $88,500.00
4. Hoop Beef System Premium          $638,940.00

Total Hoop Beef System Advantage              $1,249,593.00**

I believe you know what Jim decided was the best way to position his operation for the future.  When you do the comparison, you see there is no comparison!  This is why we are the leader in cattle feeding facility construction and management in the nation.   Who will you hitch your wagon to?  We inform… you decide.

 

We Got Ya Covered….Don’t track it in the house.

 

**No representation of profitability is hereby made.  The statements and figures shown here are based performance and records from Grand Meadow Feeders.  Neither Hoop Beef Systems, LLC nor it’s employees, agents or assigns make any warranty of any kind including the merchantability or results, relative to the information contained herein.  Actual results will be affected by ability to gain, health of animals, management and previous treatment etc.

 

Say Buddy, can ya spare a few hundred Thousand?

We all know that the title of this article should not be the opening line of your visit with your lender.   However, if you aren’t prepared to show him what he needs to see to be able lend to your operation the capital it needs, that line is about what he hears.

As cattle feeders we are used to and fairly adept at, handling large amounts of capital.   The challenge in today’s business climate is that our lenders have to play by a whole new set of rules brought on by the shenanigans (good Irish word for a March article) in the mortgage industry.   The topic of access to capital has been a reoccurring one over the past couple of years and seemingly more so in the past 6 months.  This prompted us to visit with our contacts within the Ag lending industry and ask them point blank, “What are you looking for in a business proposal?”

We will be using the addition of 640 head of capacity of the Hoop Beef System to an existing feeding operation as our target discussion.  This will be approximately a $300,000.00 project.   The goal of the project is to be able to provide enough income producing capacity to bring Junior and his new wife into the farming operation.

1. Knowledge and Passion for the project:  Your lender wants you to sell him on why YOU believe this is the best avenue for your operation.  There is marked difference between the statement to the lender, “Well we were thinking that this might be a good deal and we are hoping that you…..”  And “We are going to build 640 head capacity of the Hoop Beef System and here is how we believe the project will work…. and we want you as our lending partner….”

Can you hear the difference? If not read it aloud. Your lender wants you to show him your passion for this project.  It shows you did your homework.  In this presentation you will need to show your lender: Project Cost Estimates, Closeouts current and projected, Outline your current challenges and why you BELIEVE this is the best solution i.e., Consistency of performance and profitability, Regulation compliance, Reducing Market Risk, Efficiency of Labor etc.

1. 2.     Records of past performance:  Your lender does not want to see just 3 years of tax records, but records from your feeding operation.  What is your current feed efficiency?  How much improvement can we expect in the new feeding system?  How does this system pay for itself over what period of time?   In this arena actuals trump projections every time.  We are happy to provide to our prospective customers closeouts from our feeding operation as a basis of comparison for your current operation.

 

1. 3.   Equity:  You can’t borrow every dime for a project.  Your lender wants you “to have some skin in the game”.   20-25% equity in the project is fairly standard in today’s world.  More or less equity may be required depending on our current financial situation.  In our discussion scenario, Junior most likely does not have adequate equity and will rely on the more well-heeled partners to bring that to the table.  This is potentially a great way to transfer assets to the next generation, without a whole mess of tax implications.

 

1. 4.   Sensitivity Analysis:  In laymen’s terms this is laying out the risk factors that can affect the outcome of a scenario and determining which factor has the greatest influence on the outcome.   For instance in cattle feeding, the major risk factors are; Feeder Cattle or replacement prices, Feed prices, Sales or market prices, which are all under the broad category Market risks.  Another broad category is Production risks including: Death loss, Morbidity or treatments, Weather events, Average daily gain and Feed efficiency.  There are also Operational risks which cover: Life Transitions like Death, Divorce, Disability or Departure from the operation.   In the sensitivity analysis we layout all these risks and determine which will have the greatest impact on the outcome.   Identifying the risks is one step; the next step is laying out the plan to mitigate these risks.

 

Feeding cattle in the Hoop Beef System mitigates many of these risk factors already.  When you put a consistent type of cattle, in a consistent environment, you get consistent predictable results, which allows for better business modeling and planning which reduces Market risks.   The System takes care of weather extremes and their corresponding impact on performance, which narrows the production risks to just our management ability to feed cattle well.    The only impact the Hoop Beef System has on Operational Risk is that when life happens, know that the learning curve to manage cattle successfully in the Hoop Beef System is relatively short and the next man up can step in and do a great job in short order.

As always, we are open to helping our prospective customers prepare for this conversation and we have the tools and experience to make this as painless as possible.   Contact us to schedule a time to lay out your plan and we will help you position your operation for the future.

 

We Got Ya Covered…Don’t track it in the house.

 

 

At the 2012 NCBA Annual Convention in Nashville, Tennessee Shaun Haney with realagriculture.com visits with Hoop Beef’s System Consultant, Tim Bickett, about the benefits of the Hoop Beef System.

Over the course of the 3 day trade show dozens of producers from all across the United States, as well as a producer from Brazil, stopped by our booth to learn about how the Hoop Beef System can improve their operation’s bottom line.
These producers were from all aspects of the beef industry; university professors, stockers and backgrounders, cow/calf operators and feeders of all sizes. The common theme in all these conversations is how do I take advantage of these good markets and do it profitably, without breaking the bank.

It was exciting to spend time around progressive positive cattlemen and women. We are excited to about the prospects for 2013 in Tampa, Florida

We Got Ya covered, don’t track it in the house!