Dr. Larry Corah has served the beef industry in various roles over the past 60 years. His diverse degrees within animal husbandry and science are only eclipsed by the diverse jobs that he has held within the industry.
Larry has seen many wild swings within the beef industry but has always maintained a steady demeanor and strong desire for knowledge and solutions for producers.
In this episode, we talk about the effect of Beef x Dairy product on our industry, beef demand through the pandemic, increased carcass size challenges, new mid-sized packers and price discovery.
Like always, Larry is well-versed in just about any beef topic he's thrown, so it's a great conversation.
Dr. Larry Corah has served the beef industry in various roles over the past 60 years. His diverse degrees within animal husbandry and science are only eclipsed by the diverse jobs that he has held within the industry.
Larry has seen many wild swings within the beef industry but has always maintained a steady demeanor and strong desire for knowledge and solutions for producers.
In this episode, we talk about the effect of Beef x Dairy product on our industry, beef demand through the pandemic, increased carcass size challenges, new mid-sized packers and price discovery.
Like always, Larry is well-versed in just about any beef topic he's thrown, so it's a great conversation.
hello, and thank you for joining us for episode 16 of practically ranching. This week, we get to talk with Dr. Larry Corah, and as I was trying to title this episode, all that I could think of was the Johnny Cash song. I've been everywhere. Dr. Corah grew up in North Dakota. He learned from two lifelong learners, both of his parents, I'm told never attended school past the eighth grade, but they also never stopped learning. And you can tell it with Larry as he continues to ask questions and be involved in the beef industry. he went to school at North Dakota state university. Then he was an extension agent for a brief time. Got his master's in ruminant nutrition from Michigan state. moved to Australia of all places, took his young family there. And, uh, he consulted on some, early feed yards that were starting in Australia there in the sixties. Came back to the states. got his PhD, I believe in Wyoming. University of Wyoming in, um, Repo reproductive physiology. And then he came to Manhattan, Kansas. When I was a year Uh, 1974. And I remember Larry growing up as the, I believe the beef cattle extension specialist. He worked with feed yards. He worked with cow calf producers and obviously established a lot of contacts because then when he retired from K state, after about 25 years with them, he started. Taking retirement gigs. And I think he worked for NCPA for a brief time and their producer. Uh, education program and then a w to the certified Angus beef program, and started working with ranchers and cattle feeders in their supply development division, starting back in 1998 and, stayed there for a number of years and is, has recently retired a few years ago and, and lo and behold, he still pops up at about every other meeting that I go to. And, and it's working with an AI semen company and who knows who else, but, uh, as you'll see in the next few minutes, Dr. Corah has an innate ability to understand and learn about complex issues in the beef industry, see how they affect us today and especially in the future, and then boil those down into some very common sense terms and ways that we as producers can, can use the information and use the data and hopefully make good decisions for the future. So we talk about consumer beef demand. We talk a little bit about beef on dairy. Uh, the course of the certified Angus beef program and what it has done for the quality revolution in the beef industry. We talk about the effects of genetic selection for traits like marbling, and if they have other effects on other traits. we talk about price discovery of fed cattle, like we so often do with folks and, and I'm just, like I said, hit hit a wide range of topics. All of which I think are are going to be of interest to nearly anyone listening to this podcast. So, thank you once again for joining us for practically ranching, look forward to our visit with Dr. Larry Corah. Well, Larry, I appreciate you joining us here on practically ranching. We've got a lot of folks from a lot of different areas, regions of the country, segments of the industry, and I'm quite certain that we've probably got a group of folks who know you from your days at certified Angus beef. I'm fairly certain, we've got some folks who know you from your time at Kansas state university there may even be some people that knew little Larry when he was knee-high to a grasshopper up in North Dakota. So give us just a quick history of, of how you got to 2022 and some of your experience here in the beef industry.
Larry:Well, it's great to be with you, Matt. I enjoy doing these podcasts and it's I enjoy listening to them. And so I appreciate being invited. My background is just that I grew up in Northeast, North Dakota, very diversified farm. If it Owings squealed, moot or milk to whatever we raised them and worked with a lot of family butcher shops and supplying product to them. And, and so really came from a background of diversified agriculture. Uh, Then went to school completed a degree at North Dakota, state, Wyoming and Michigan state. And it was very blessed to also have had a chance in between my masters and final graduate degree to spend a couple of years in Australia, where I worked on the early stages of the cattle feeding industry in that. And that was uh, a unique experience. Just made me appreciate the importance of global marketing uh, to the industry. Then was able to join Kansas state university, and I've always said I was fortunate to have the best jobs in the world. I worked there for quite a number of years, working with a great cattle industry in Kansas, a lot of tremendous cattle industry leaders in this state. And then moved onto certified Angus beef as as a, a person in charge of the supply development program for them. Again, a great experience. I had not been on the consumer side retail and food service, so that broadened my background a lot. Um, And I certainly appreciate what those people do to help market our beef product and learned a lot about that side of the end of the. And then more recently I've been working with one of the AI companies in helping set up supply chains on this whole area of using beef genetics in dairy cattle. And that's been kind of a fun, new uh, venture for me. So uh, like I say, I've just been blessed to have had a chance to have the best jobs in the world and work with the best people in the world.
Matt:We've always appreciated the way you go about looking at the entire industry and your work at certified Angus beef allowed you to do that. I know, but it's always, always been nice to have someone who comes from the, let's say reproductive physiology was that one of your many degrees
Larry:was actually my area of expertise, but I was actually hired at Kansas state, probably more what I did in Australia. And that was where I was a feedlot specialist at K state when. uh, You know, that gave me a perspective on the cattle feeding industry and the importance of that segment to um, to the beef industry, because that's what really makes the United States beef production different than any place else in the world. And that's, we put these cattle on feed for 150 and 180 days create a product that really is unmatched anywhere in the world. And so it's it, it was really a broadening experience.
Matt:So, as we look at the broad industry, and you mentioned some of your recent work here with the, one of the AI steads on the, on the beef dairy segment of our business, it's grown so much over the last several years for, for numerous reasons. I was recently, and I think maybe you were there for a, for a time. I was recently at a meeting last week. And they had a couple of different speakers talking about these dairy beef carcasses and some of the opportunities. And quite frankly, some of the challenges that they can present in terms of size and, and even um, uh, liver abscess and things like that. But of, one of the discussions that I've had with a lot of folks in the industry, as we look at increased growth year after year, whether it be in the genetics and seed stock side, it be the four or five pounds of average carcass weight that we add year after year after, year on commercial cattle, through the feed yard. especially as we put these beef dairy cattle into the mix, what, again, opportunities, but what challenges do we see going forward? If we continue from a carcass size standpoint, not just from a consumer acceptance standpoint and logistics in the plant, those sisters and, and, you know, replacement females that have to stand out there in the pastures and do their jobs as we're putting more gas in the tank, if.
Larry:Well, there's no question that the trend continues to be in the industry is make them bigger. I mean, every time I'm around a group of geneticists, I say, okay, I look at these EPDs for yearling weight. And are they going to plateau at some point in time? And the general consensus I get is because of the heritability and the ability to make these cattle bigger, that we're just going to continue to, to uh, create more size and weight on these cattle. And that plays into what a lot of the packing industry is, is looking for some of the Packers today. want them is big as you can get them. And the reasoning behind that is that a, it spreads their labor costs over a larger carcass. And so from an economic standpoint, you can understand where the Packers push that envelope a little bit. So they're talking, they want steers in many cases. In most cases they want a black and they want a big, so the you're, what you're getting at is where does that leave us on the female side? And I think that's going to be a challenge for Calcap producers. And one of the things that we're starting to hear in the industry um, and I think we'll probably expand and grow is we will use more on the AI side, if some of the commercial producers that do some AI, they'll probably use some sexed semen, more in a terminal crossing situation, a male semen to create the cattle that will target basically the feeder calf market, and then probably take their heifer population and actually use female sex semen to create replacement heifers. And there's a lot of reasons in the industry. To actually get your replacements out of out of heifers genetically, they should be superior to anything else. You've got coming into the herd. If you're using the genetic selection criteria they're going to be a little smaller coming out of a heifer. Heifers are going to calve by if we're female calves, calves easier. If they're a female calf compared to a male, there's just a lot of reasons why that does make some sense. And so I, I think that's one of the things that this will create. And the other thing that's really driving that Matt right now. The price spread between steers and heifers as feeder calves. Last week Cattle-Fax reported that figure to be$30. So if you take a, say a five and a half wait calf, that's$165 at the time of weaning. That's a lot of dollars. And, and so uh, there are a lot of commercial people kind of taking a look at how do we maybe get more males and probably ended up with, with bigger um, carcasses, bigger uh, uh, products moving through the industry. And that's some challenges, but I think we're going to continue to see that.
Matt:For years, heard the extension community across the nation tell us that when you really put a pencil to it, you can replacement females cheaper than you can raise them. And yet most of the commercial cow calf customers that I work with and sell bulls to, they all keep their best end as their own replacement heifers year to year to year. do some of these things that we're talking about right here are, are they what may make some of these cow calf producers say, you know what, I'm going to either be in the replacement heifer business for myself and sell to neighbors around, or I'm going to be in the terminal business and, and make as many steers as I can and send them all to the feedyard?
Larry:Well, I've always thought that's a good idea to just from numerous standpoints to consider um, buying replacement heifers, and then really target most of your calves you sell or kind of a terminal type program. But yet inherently, we always have the feeling, Hey, I can develop better replacement females than anybody else can. And so I'll raise my own instead of buying them. But there's another reason though. I think, I think too, to look at. Uh, Possibly the approach of, of creating replacement heifers. Let's say you're a cow calf producer and thinking, Hey um, you know, maybe there's going to be a market for these bred heifers or even weaned heifer calves. And I think, as, as our beef cattle population potentially could go under 30 million cows this year uh, at some point in time at we're going to see a demand for replacement females, we, we will build back from some blow point. Whenever that low point is reached, invariably, there's a cattle cycle and we build back. And so at some point there's going to be a market for replacement females. And that may be another reason for some of these folks taking a look at a program like that.
Matt:Yeah, I would agree. And I've been thinking that we were going to hit bottom for the last year or so. And I don't think we have yet. And of course, with increased costs and, and drought and feed resources we're just prolonging the inevitable. And when it happens, it's going to be big. But let's talk a little bit about that next run of the cattle cycle. What do you see beef industry-wide, but specifically on the cow calf segment, do you see any major differences as we rebuild this time through the bottom side of the cattle?
Larry:Well, you know, one of the things that's intrigued me as we've come out of the pandemic is, is of course input costs. I mean, I, I don't know any of us would project that, you know, routinely, we're going to be looking at six, seven in some of these feed, lots of$8 corn going into fed cattle. And so there doesn't appear to be any change looking down the road, at least in the near future, in terms of a lot of our input costs. but I think the, the part, if we look at least the near term future, the fact that we have liquidated down to where we're at, I've been very pleased as I look at calf prices going into this fall where they're at. They almost surprised me with corn prices where they're at that the feeder calf market is maybe going to be as strong as it is. And I think the basis of that is optimism on the part of the cattle feeding industry and a lot of speculators in the industry that we're going to be looking at some pretty nice fat cattle prices as we move forward. I certainly tend to agree with the projections that cattle facts and other organizations are making that we could be looking at some very nice price points. So that part makes me very optimistic. And the other part that I'll touch on a little bit, because I think this is important, man. One of the things the pandemic taught us is that my initial reaction was, yeah, we'll sell a lot of ground beef. A boy, it's going to be a tough market because people are staying home. Many cases, people not working. It's gonna be a tough market for higher quality cuts, such as the stakes and, and um, you know, a lot of the other cuts that bring more value to a carcass in quite the contrary occurred. We actually, if you look at the price spread of what the consumer wanted in terms of quality, the price spread between prime and choice, the price point between premium choice, such as certified Angus beef and choice actually widened. And in some cases, not only widen it doubled and even in a few cases, triple what it normally was. And we're selling more of it. We've actually, as an industry, the cattle industry has responded using genetics, excellent genetics that are out there created more prime than we've ever seen before. Created more certified Angus beef than we've ever seen before. And yet we're selling more of it at a higher price, and that is true demand. And I think that's an exciting part. As we look down the roadmap in terms of the beef industry is the beef demand right now has really been very good.
Matt:and this is the first time in my lifetime I have ever witnessed that not just the increase in beef demand that we've seen since the mid nineties and the ugly point that we were there. But fact that we can charge a higher price at retail for beef and not only get it, but sell more because every time up until then it was a very fundamental supply and demand commodity type of situation every time supplies went down, went up for a time, but then they quit buying them and we couldn't give the stuff away. And every time we ran supply up fell like a rock. And I, I remember you and the Angus association boardrooms. So I was still probably working for the association. So it's been 20 years ago. I remember having the discussion about ribeye area size and red meat yield. And I remember you quietly in your way saying the minute we try to compete with pork and poultry terms of efficiency, we're out of business, they're a mana gastric, we're running. We'll never be able to be as efficient as them. And maybe the discussion was more on feed efficiency than it was on red meat and countability. But point was our competitive advantage in the beef industry is taste the sizzle. And if we lose that, we lose the battle and you were right then. And I think that something like this proves that, that you're even more right today that that quality that beef has over so many other proteins for the center of the plate. That's our competitive advantage. And, and that's what people prove that they are willing to pay more for and continue to buy more.
Larry:that's extremely well said, Matt. You know, if you go back to say the turn of the century in 2000 and you look at, there's a really interesting graph, which we could pop it up on the screen and it shows the price spread per pound of meat, as it would go through a retail. Beef compared to pork compared to protein, and yes, we had a price advantage, but if you look at how much it's expanded compared to pork and poultry, it has just shot upwards. And the spread has gotten wider and wider and wider. During that period of time, to the point that I'd almost argue to what you were saying. Beef has almost become a protein, a product in itself, and yes, we compete in the protein market and yes, we'll always compete with pork and, and, and chicken, but basically beef from a consumer standpoint is almost a standalone type of protein. And there's, there's huge desire to consume it on the part of, of the folks buying our product. And so as I look to the future, I think producers need to continue to keep their foot on the pedal and create, even create more. high quality product that we're producing today. I remember one of the South Dakota state gentlemen that I respect immensely, Robbie Prichard telling a group of cattle, feeders that maybe this was probably 15, 20 years ago, maybe prime should be our target. And I'm not sure, sure. Math that prime, isn't almost our target in the beef industry. Yes, we're at about eight to 10% today, but maybe we can get to 15, 20%. We certainly didn't think we were going to be getting 35 and 38% certified Angus beef acceptance rates uh, many years ago when you and I were at the association we thought when they set a goal of 30%, that was totally wish people were on something
Matt:How long were we there at 17%? or take a half percent for what felt like decades?
Larry:Decades. We didn't think it ever get the, we thought if we could make 20, this will just be tremendous. And now we're sitting at 36, 30 7%, I think the last few years. And those were numbers that we just absolutely would not have been able to imagine that we're getting. And it's because of what producers have done focusing on quality and utilizing the, the, the emphasis on marbling, which is one of the highest heritability traits we have in the beef industry.
Matt:So now let's go to the other end of the spectrum and talk lowly heritable traits, efficiency, and all of the EPDs or all of the traits that we use to try to find the most productive females. There is and I don't think I'm telling you anything that you haven't heard before, but there is a widely held belief by a lot of folks in the cow business that marbling-- and maybe we could throw a lot of production or performance traits-- but let's just focus on marbling since that's what we've been talking about. The last few minutes, and reproductive efficiency are antagonistic or, or inversely correlated. From a reproductive physiologist standpoint, even from a nutrition focused standpoint of getting enough calories and protein to these animals to do what they need to do out on range. Can we continue to push a trait like marbling without having better and better selection tools for making sure we keep the cow herd functional?
Larry:Well, you know, we've looked at that over the years. That was, that was certainly one of the coffee shop arguments of selecting for marbling is that you're going to impact reproductive performance. So one of the neat things about marbling, which is of course, keep in mind eating quality in the beef industry is that it really is very neutral to almost any other traits we select. In other words, we can select for growth. We can select for reproductive efficiency. We can select for virtually any type of traits you want. And marbling is very much a standalone trait. So there's absolutely no evidence in the literature. And in, in the practical application of this, out in the field, that marbling is detrimental to reproductive performance. In actual fact, there's some evidence that it, that it is slightly positive, very small but, but some evidence that it's possibly just a little bit positive towards reproductive efficiency, but reproductive efficiency is always obviously critical in these cock calf operations. But I have been pleased with how we've improved a lot of that in the industry. You know, it isn't that long ago that we still talk a lot about calving difficulty. Well, anytime you have calving difficulty problems in a cow, or it certainly in a halfer, you're going to have problems with re breeding cattle back and, and because of the excellent EPDs that exist in the industry, particularly within the Angus genetics, but certainly other breeds as well is we can, we can eliminate most of our calving problems and we have eliminated most calving problems and that's very conducive to improving the reproductive efficiency of a. And as I look a lot of the reproductive data I think we're doing in many cases as good a job on reproductive efficiency as we have in many years. And again, I would attribute some of that to uh, to reducing it, think problems in the industry like calving difficulty, because those, those were negative impactors. I think we've learned to do a better job nutritionally with cattle and uh, you know, so um, yes, we have wrecks occasionally, but, but by and Lawrence, we've got pretty good reproductive efficiency. And I think there's things on the horizon that can make it better. I think a DNA technology and a lot of these kinds of things will help us down the road make even improve it further. And one of the things that has not been looked at a lot is fertility in these males, fertility on the bull side, again, that's an area that I think DNA technology will probably move us forward in terms of identifying certain markers that help improve reproductive rates. So I, you know, I, I, I'm optimistic that we're making progress and I think there's continued good progress in the future.
Matt:I hope we do make some progress there. And I think that's one way, honestly, we can improve the, not acceptance rate, but pure volume of, of programs like Certified Angus Beef for any kind of quality beef production. We always think about how do we get more cattle to qualify for these upper in types of programs? My question is how do we get more and heifers bred at home so that we increase the number of calves in the feed yards that come in through the packing plant per that's on inventory out there. In other words, reduce the opens, reduce the carry overs and make sure that we get more pounds of high quality product per female. And I think that's one way to address it. And, know, I've had some discussions or some calls from it be sale barn managers or, or folks that are, are spending some time around a cow processing plants. And, know, yes, a lot of those are coming to town because of the drought over the last year or two. But their question to me is why are we seeing this huge increase in, in especially open young cows? And that's a question that I continue to pose to folks in the reproach community that you know, is it nutrition? Is, are we, are we building many demands of these? And, and why are we seeing an increased rate of opens across some of these commercial cow herds. But but it doesn't sound like the ones that any way that you've seen and been working with have experienced that in this.
Larry:Well, I think the part that, that has really driven a lot of it has, has been dry weather and we've had, we've gone through a tremendously long period of time in what I call the big cow cap belts of this country in terms of dry weather. And so anytime you take dry weather, you take away the number one reproductive driver in terms of impacting what your final pregnancy rates going to be and that's nutrition. And so I do think a lot of your open females that have showed up relate to that. And I think it particularly puts, has put a lot of pressure on what I'll call the. The heifer that's cab is a two year old and rebranding back as a two year old. Those two year olds are very sensitive in terms of nutritional requirements. And anytime you're dealing with a drought situation, you don't have enough hay on hand or supplemental feed to be able to really uh, uh, handle that that two year old, the way you need to you're going to have reproductive inefficiency. And so uh, to me, the two kind of tie together is most of, most of our problems relate more to the amount of feed that we have available that we can handle with these cattle. And we we've certainly had a huge part of this country that hasn't had those kinds of feed resources over the last 3, 4, 5.
Matt:Yeah, definitely. So Larry, you mentioned your work with beef dairy and, and um, and that segment of our industry tell us where you see that today. You know, of course where we were three or four years ago before Tyson or whoever was that made the plea with the industry to stop sending full blood Holstein steers to them. and then of course, where you see us go in, in the, in the near and maybe long-term future
Larry:What's really interesting of that segment of the industry has, has developed is you know, it's probably, gosh, Matt, maybe 12, 14 years ago, Mark McCullough. And I started with a program. We call it project spot and we had this idea when we couldn't get supply for certified Angus beef, we'd go area industry
Matt:all Macaulay's fault. This is great.
Larry:Yeah, absolutely. And you know, we said, we went to he and I went to the dairy industry. One of the large dairy conferences pulled a group of guys. I don't know, that probably is a good 14 years ago and told them about this great idea we had and they thought we were the goofiest people in the world. Now why on earth? Would you ever put a beef genetics in a dairy cow? And of course that was at a time there was tremendous demand for, for replacement heifers in the dairy industry. But what evolved is, is the extensive use of sexed semen that really allowed them to take their top dairy cows and then made them so that they could create the replacement females with genetically superior um, heifers coming into their, their milking program. And that left a bunch of uteruses available to be utilized with wood, beef, genetics. But the other thing that also drove. Is the packing industry. Three of the four major Packers said, wait a minute, because of issues like carcass length, liver abscesses, and just marketability of those cattle, we don't want to harvest Holstein cattle anymore. They had enough native beef cattle that didn't want to uh, harvest Holsteins and they backed out of the market. So what does that do create a very limited demand for basically a Holstein steer, the dairy industry responded. And it's amazing how rapid that occurred. I mean, literally within three to four years, they went from the Holstein steer being about 15 to 17% of the fed cattle population in the United States to literally replacing that with predominantly an Angus Holstein or Angus Jersey cross in some cases, other breeds, but about 60 to 70% is an Angus cross. And, and we've gone from. Zero or very few of these beef dairy crosses to today, we've replaced 70% or by the end of this year, we'll ever replace 70% of the Holstein steers with this F1 cross. And it is, it is a different critter in the sense of some of the carcass data we're getting back on these they're very high quality. They'll do 15, 20% prime they'll do acceptance rates of 50, 60, and 70% cab. In many cases, it's a very high quality product. And, you know, I think in some cases that's scared the beef industry a little bit but keep in mind that a big chunk of our prime production in the past has always come from Holstein steers. The dairy cattle are, are known to be excellent marbling, cattle and grade very well. So we they've always produced a lot of. Out of these Derrick carcasses. So we're really aren't necessarily replacing or changing. This is really an F1 and it has it's a different animal than feeding a straight Holstein. They grow faster, they're more efficient from a feed conversion standpoint. And it is certainly created some economic opportunities for the dairy industry. And it created some economic opportunities for some of our branded programs, because most of these Angus Holstein crosses go into the Angus programs, such as certified Angus beef and all the other Angus brands that exist out there. And so it, it has created some real marketing opportunities for the Packers. It's created some real marketing opportunities for brands like CB. And in many cases that's been very positive, but they are a different animal certainly than the Holstein steer that's been around for years.
Matt:so for all the opportunities that they've created for what I'll say. Packing and retail food service side. What challenges do you see that cow calf producers, for instance, need to be understanding and factoring into their you know, tomorrow's challenges.
Larry:yeah. You know, and the first thing I think for people to realize is that a. That this isn't a new animal. It is a replacement for that Holstein steer. So if, if the Holstein steer was whatever percentage you want to use, 16, 17%, we're really replacing it with an F1. What is different is that many of these cattle will now qualify for the beef brands, but I don't think that limits at all from a cock standpoint, they're opportunities to, to create because a beef animal is still going to be more efficient in the feedlot. They're still going to, in many cases grow better than these crosses will. There'll be certainly be better from a feed conversion standpoint and from a cost to gain standpoint. So the same opportunities that we've had on the cow-calf side of creating animals that have tremendous value to the feeding industry and the packing industry are going to be there. It is really going to create more of an opportunity for, I'd say some feedlots that are going to start feeding more of these kinds of cattle, where they did feed Holsteins in the past because they qualify for the brands and the way they sell their cattle. And it's created tremendous opportunities for the dairy industry and in our state, Kansas, what we're going to see is the whole size of the dairy industry increased dramatically partly driven by new plants, cheese plants, and so on going into the state. But also this totally changes the value of that calf instead of 30 to$60 for a day old calf, now, many of these bring 200,$250. So um, uh, it's, it is certainly a change that has occurred mostly in the dairy side, but it has ramifications to the beef industry. I don't see it as a threat uh, But in some cases it'll create opportunities. One of the opportunities is figuring out how to grow these, these calves because they go through a calf ranch for say 70 days. We're going to see folks in Kansas and other parts of the country, beef producers that are going to develop, grow yards for these calves to take them from 250 pounds to what a feed lot wants six and seven weight cattle. So, you know, among all this stuff it creates opportunities from some folks out there. That'll take advantage of it.
Matt:well, there'd be some as specifically in the cow calf business, Angus influenced scalp calf business, who say, okay, it's, it's adding this many millions of pounds of certified Angus beef and prime to the market. Well, that's going to drive the price down. Well, you just said earlier in the podcast, consumer demand for that high quality beef has actually and we've put more pounds through at higher prices. Since we've gotten a lot of this beef dairy beef through the system. So that may not be as much of a threat as we may have thought it was going to be four years back.
Larry:Absolutely Matt. I mean, we were looking at some of the highest spreads on prime. I mean, many of these grids are 20,$25. In some cases, even higher. We're looking at the highest margin for cab compared to choice. You know, it used to be for years and years and years, it was four or five,$6. Now we're seeing figures like 12 and 14 and$16. We're looking at a choice, select spread as we do this podcast, you know, whatever someone 22 to$25. It's just the whole quality thing that the consuming public for our product are desiring and willing to pay for it. Boy, are we blessed to have that consumer looking for what we're, what we're selling. In in, at a large volume.
Matt:You bet. No doubt about that. As I think I heard John's Stika or maybe it was you, someone within CB years ago said the only source for new money into the beef industry is that consumer. And when they vote with their dollar, that dollar gets spread from the top all the way down. Now, hopefully we, we and the market remedy some of the uh, the chasms that have, have existed within the different segments of the beef industry. And that's up to us as beef producers, but yeah, we give them what they want and they pay us immense dollars for it, improves it for all of us.
Larry:Absolutely. It's always the consumer that lets us do in this industry, what we want to do. And we'd better, never lose sight of that consumer because it's his dollars that make us, that creates the opportunities for us.
Matt:sure. Okay. Now you can put your high quality hat back on and, and specifically your old cab hat that I know you surely still have sitting around. We're hearing about small to mid-sized beef processing plants that are either being built scheduled to be built rumored, to be built, want to be built. And we're even seeing some that are already online. Small butcher shops that since spring of 2020 have have ramped up their production and are trying to keep that production high. What happens if we continue to see more cattle that are processed outside of these major Packers, who all have a USDA grader who we're all licensed to sell certified Angus beef? What happens if we see 10 or 15% increase in small packing processing facilities that are completely outside in a USDA graded auspices, and therefore that hided animal that was average choice or higher, can't go into the CB.
Larry:That's a great question. I actually, the Kansas department of agriculture as a program in Kansas, they call it grow and it's grow the beef industry and other agriculture commodities as well. And one of the things that they had Dr. Glenn Tonsyr, an economist at K state, address this subject, and I was not aware that the number was as high of new plants going in around the United States. But his number was 13. And not only 13 that are likely to be built or in some stage of actually being built today, but he then went through and said, what's the probability that they'll reach completion and actually be harvesting cattle. And I think he had like 12 of the 13 with a pretty high probability that they probably will, will enter the, the competition for fed cattle. First of all, I think one of the things that these folks in a planning process need to do is... nothing precludes a smaller packing plant from being licensed to produce a brand such as certified Angus beef. And I would really encourage any of those, any producers involved in these plants to encourage that that they potentially be licensed to produce a brand because one of the hardest things for a small pack and plant to do is build our own brand and get out there and compete with your four major packing companies. And even you know, the next three or four, fairly large, more regional Packers that exist in the industry. It's tough to really develop a new brand and take it to the marketplace. One of the things, one of the opportunities, I think for a lot of these plants being built is to take advantage of the whole concept of local. In other words, if the plant is located in Idaho or pick any states, you want to Iowa, wherever, try to build your marketing program around local. And, and that's one of the things that I hope these folks building these plants are doing is not only looking at the efficiencies that they can create in a new plant, but hopefully also looking at their market end point because you really have got. Really create some economic value. If you're going to buy high quality cattle, as an example, you have to capture the added value that's out there in retail and food service. If you can't do that, your economic efficiency is not going to be very good, particularly because many of these smaller plants are not going to have the same market for the bypass. That many of these large plants have the large plants have virtually created a market for almost anything that comes off that carcass. And in many cases for some of the by-product that doesn't come off the carcass with rather your internal organs and some of even whether it's blood or whether it's offal of whatever you've got, they've figured out a way to create value for that. And that's hard for small plants to do. So I think a marketing plan is going to be critical as to whether they'll survive, Matt. It's going to have an economic impact. And from a producer standpoint, I think there's many producers, very excited about that because that just creates another market. In many cases, a local market for people that have feedlots close to where these back-end plants are located. And we always have had frustration with the control that the major Packers have. So this is going to be an added opportunity. Now the challenge will be for those operations to remain economically.
Matt:What about the challenge of getting labor?
Larry:You know, that's another one, you know, but one, for example, at the being built is in Western South Dakota. And the first thing that came to my mind is, gosh, I hope that works out for them because that's certainly a part of the country that doesn't have a packing presence. But then I get to think about a couple things. One is where are the fed cattle going to come from? They're going to have to come from more of the Eastern south. And then the other of which is where's the labor going to come from, and that part of the country, because you know, you look around almost any town in the United States. And what, what are the most common signs you see is now hiring? It doesn't matter where you go, whether it's a gas station or a manufacturing company or whatever, there's big signs out now hiring. And oftentimes at some wages as a, as a starting point that I think many of us old people never thought we'd reach. And so, you know, it's labor is, is, is a major, major issue in agriculture. It's one of the things that we could get into a whole topic of discussion, which they did on this Kansas Department of Ag grow program, and that's the whole, a whole immigration deal. And, and we can debate and cuss and argue about you know, where that needs to go. But agriculture is so dependent on, on a lot of this a lot of workers that come from outside the United States and it really be nice if some programs were put in place that a lot of these folks around the world that want to learn more about the U S agriculture, that there was a program or an opportunity, and there are opportunities for them to come in and, and work in feed lots of work in packing plants or working on farms and ranches to learn more about agriculture and be very valuable labor to help make things move forward.
Matt:yeah, it never fails to uh, work up a pretty good discussion, but yeah, there's any place you get an agriculture, there's going to be two sides to that, to that discussion. And both of them have probably got fair points, but today, without labor I'm not sure how nearly any segment agriculture continues at least in the short term
Larry:there's so important. There's no question. I mean, because so many of these jobs are jobs that a lot of folks that have maybe pursued an education to whatever level that is just don't really want to accept those jobs in this country. And so they create tremendous opportunities for folks coming in from other countries.
Matt:You mentioned the, the competitive advantage of some of these small to mid plants and their local ties. And I, I couldn't agree more. I think that is almost their sole competitive advantage in some respects both from a, from a sales standpoint of marketing beef to our consumer, but also from sourcing those from, from maybe small to mid-sized feed yards that are a little closer and less transportation and you name it. The, the local dynamics just has fascinated me for however long it's been around a couple of decades now, I guess. And, and at the time I just kind of laughed it off because quite often what was called local in the uh, menu at the fancy restaurant or whatever else... Once you started asking questions, it was no more low, local than Kansas. And but today there's a little more demand or a lot more demand and a little more I guess, documentation behind some of those claims. And yes, I think that anytime that people can find out that this steak, that they've. Came from a packing plant that some of their neighbors work for. Yeah. It's, it's going to drive more value. So it'll be interesting to see how the next few years, once the, some of those plants do get online. I hope we're not at a tough enough point in the cattle cycle they struggle regardless of how many competitive advantages they have to stay around. Because I think there's, there's some benefit to having new competition for these fed cattle. there's some benefit from a rural development standpoint to having some of these plants spread out across the, the nation as well.
Larry:But we certainly wish them the best, you know, in terms of going forward. Cause I think they, they have the potential to be a real asset to the beef industry and to a lot of local communities, as some of these are being built uh, in areas of fairly sparse population, which again makes you wonder where the labor will come from for a lot of those plants. But you know, it, it, it does create some opportunities for beef cattle, producers. And that's the other thing that I'm hopeful that the beef cattle industry will, will support these folks. That's that's all the way to selling cattle to them, to to help in a helping them survive and get through a period of time with cow numbers where they're at. We're certainly looking at fewer fed cattle being available. So the competition for these fed cattle is going to get a lot stronger. And of course that's to the betterment of those that have feedlots and work in that segment of the industry.
Matt:so that's a good segue into the next thing I want to talk about. And that is price discovery of fed cattle. We're in a time and we have been in a time for the last couple of years when we continue to see huge volumes of market ready, cattle out there available. Quite frankly, the producers just have not had the leverage that we need to in, in this market to probably price these as high as what the consumer demand has been indicating. everyone has a different outlook and a different perspective and a different reason that that's happening. course you have on both ends of the spectrum. You have those who say, Hey, it's nothing but supply and demand. We've got a large supply of cattle and we've got to work them through the system. You've got others on the other side of the industry who are saying that is nothing but a. packer, concentration and packer control. And even to the point of manipulation of prices situation, and they're colluding to make sure that they don't give us any more than they absolutely have to, keep out of Hawk with the government. I think the answer is probably somewhere in the middle, as it quite often is question to you is a, is there a problem or an issue that we need to work through as producers and B? Do you have any thoughts on what may be a better solution going forward to discover the price for these cattle? Without giving back all of the, the grids and the alternative marketing agreements and things that have, have honestly brought us this far with consumer demand.
Larry:Well, you know, we always looked for ways of, of being able seller where there's a little more competition for it. And so hopefully that helps us from a price standpoint that, you know, I think for many of us in the cattle industry that have looked at how fed cattle are marketed, it's really a, an extremely archaic poor marketing system. And we, we still are in this where maybe a Tuesday afternoon or a Thursday at one o'clock the market opens and you better sell your fat cattle during that period of time or else you're going to have to wait another week. And uh, it's really been disappointing to see that that has not changed, that that has not evolved. What that has actually led to, I think, is, is what I'll call more of relationship building between especially the larger feedlots and the packing industry. So those larger feedlots know they can market the cattle when they need to be sold. No, they can. Gets price points that are competitive in most cases, know that they can sell the cattle on a grid so that if they're a feeding higher quality cattle, there are premiums for prime and there's premiums for the premium choice like cab and take advantage of that. And, and so that's really evolved into what I'd call a tighter relationship with between the larger feeders and even some of the midsize and smaller feeders and the packing segment. And I think that's been a frustration to a lot of cow-calf producers. They see uh, the packing margins that existed over the last two, three years. They see that relationship. And yet as the, maybe a smaller cow calf producer it's difficult to participate in that whole process. And so that certainly has led to a very vocal group wanting more cash markets. There's an old adage that always said, be careful though what you wish for. We talked earlier about all the progress we've made in improving the quality of the beef we're selling. And I think most producers want to capitalize on that. If I'm I've gotten cattle that are hitting 20% prime, I want to be paid for 20% prime. And as we try to sell on a cash market, the Packers love that because they're going to get their hands on those prime cattle. And because of their computer records, they know where to buy these cattle and who to buy them from and be able to buy them on basically kind of an average market. And so I really don't think a mandatory or at least a certain threshold level of cash market is the answer. So what is the answer to that? It is not easy to come up with. The Kansas livestock association, one of the great cattle organizations in this country put a committee together about two, three years ago, I had a chance to moderate a lot of that discussion. And I really hoped that we would come up with some type of solution. There is not an easy solution to the way we market fed cattle today. I really think Matt, probably the only way it'll change, the only way it'll change. And, and there are many reasons that some of us many people would hope doesn't happen, but it's probably the only thing. And that is going to be continued consolidation on the feeding side, where some of your large feeders get together, many of them sell to the same packer and two of your two or three of your large feeding companies work a lot closer together. And there are going to be federal laws that may create some restrictions in that area. But the point being is the feeding sector has got to create more leverage than they have right now to make a change. And that's the only way that I can really see this whole thing changing. Now, again, all these small Packers that are coming into play, we hope that's going to have some benefit in this whole area and create more a market opportunity. But on the other hand, it has been really hard to create leverage on the cattle side as compared to the leverage that the Packers had.
Matt:and I think times like this, when we have the numbers of cattle that we have, make it even more difficult. You know, cattlemen have been awfully independent group for a lot of years and um, we try to fight every one of these battles on our own. And quite often it's. Simply impossible, especially as we talk about market leverage and, and things like that. I do have to chuckle, you said that group that you chaired was about two or three years ago with Kansas livestock association. My memory is really short. It's so short that I forgot that you were even the moderator of that group. I actually put that group together when I was president of KLA and that was six and a half years ago. So we and, and the reason I bring that date up is because that was 2016. And we started asking to put this group together in 2015. If you think back to that, how good was the producer sentiment? In 2014 and 15, we were selling buck 60 and sometimes buck 75. We were seeing two and a half to$3 calves and feeders and in discussion after discussion that I had with feed yard folks within Kansas livestock association and others, I kept asking do, are we finding the right price here on the high side? Because when it comes back the other way and really nails this because we don't have enough cattle, you know, there were some weeks we all want to complain about only having 20% in the negotiated market. When we were trading cattle at a buck 65 or buck 70 that's when we were in the 17% you know, we had hardly any that were being sold. Maybe there's a supply demand, and that's that's why we got there. But anyway, point I bring that up is. We at Kansas livestock association, I know in CBA had had a similar group working then as well. We're talking about this when times were really good very few people wanted to even talk about price discovery fast forward to the last three years. And you can get anybody in any coffee shop, or sale barn to talk about price discovery today because they don't, it's not a good price that's being discovered. But I, I agree with you. I think we're going to have to come together as an industry. And, I, you know, I don't like to play the blame game and say, this is a feed yard issue, but honestly, some of the cow calf producers who quite often are selling those calves at, or shortly after weening are some of the most vocal and some that are determined that we have to fix the way we sell cattle. And quite often that's cow cafe. Not having a dog in the immediate fight. Yes. Trickle down economics are such that we eventually get, get paid off of that fed cattle price, but we we've got to work with, in my opinion, we've got to work with these feed yards and feed yard managers and owners, and, and find this this better mousetrap as I often call it with them because they're one step closer to that, that packer, to that consumer. And I think probably are, are better equipped at, at helping us figure this out because we can't just my opinion we can't just return to the way we did it in 1996. And before, because I grew up in that world there were absolutely no signals from the consumer back to the producer on what it is that we want in terms of product and consistency, and it showed. And that's why the low point of the demand was in 1996. And that's why grids were created in the first place was so we had a mechanism to say, we're going to pay you more for the ones that we want to buy at the meat case. it's worked. I think there's some unintended consequences in of how many cattle we've pulled out of there, let's not throw the baby out with the bath water.
Larry:Well, that's a great point. And I I'd forgot Matt, that you were actually president and appointed that committee. You probably responsible for why I ended up moderating that whole
Matt:Well, I, I may had a little something to do.
Larry:I'm sure you did, but you know, we really had great discussions and we had great committees put together and didn't make a lot of. I unfortunately I'd say that we certainly didn't build the greatest new mouse trap in terms of creating a solution, but we had, we certainly had some ideas. I think one thing that's kind of fascinating and something I think for the industry to watch as we move forward. And that's kind of tied to a recent announcement that just came the last couple of days, and that is one of the new packing plants being built in north Platte, Nebraska. It is interesting who one of the early investors is in that whole program and that Walmart. And it is, it, it, you know, are we going to see retailers for example, and I think maybe retailers more than food service, but again, companies like Cisco on the food service side are, are huge. Are we going to see more of those reaching back into the cattle sector and what, and there's so many things, there's so many reasons why they want to get back. And that is things that we could talk about. Like they want to create a different. For a lot of the beef going, they want a tie to the sustainability message. They want to tie to the traceability message
Matt:They want to make it local.
Larry:they want an also that's right in, in, in, it creates kind of a local identity. In other words, we can track something that we've not ever been able to do very effectively in the beef. Track it really all the way back to that cow-calf producer that has a tremendous image positive image with the consuming public. And so I think one of the intriguing things is that totally changes the packer influence because now you have the retail sector or the food service sector, really becoming much more of the driver in terms of both the product they want, but how they buy it the supply chain flow. And is that going to create opportunities as we look long-term of creating different relationships between those cock calf producers and the feeding sector and the packer, I, I think that's intriguing. What kind of what's going on in that's that aspect in the industry today.
Matt:So as I read that press release a day or two ago and saw just what you said that Walmart was, was investing in the sustainable beef uh, their north plant north Platte. My first response was, oh, isn't this great. We've got somebody the size of Walmart who believes in the ranching community believes in the efforts and the independent nature of cattlemen enough to invest in one of these packing plants. And within minutes I went full circle and went, holy smokes. Do we really want to be owned by Walmart? Do we really want Cisco being. Our quote unquote, customer. It's just, it's, it's to me, how excited we can get about new money coming into the beef industry and then how hesitant we can be, because, well, it's not the right kind of new money. So I guess the question for you, is it good or is it bad that number one retailer of all goods in the world is now an owner of a beef industry processing plant?
Larry:Yeah, that's a great question. That's an absolutely great question, Matt. And you know, all of us were, so our crystal ball was nice and clear and we could look at
Matt:well, I thought yours always was Larry
Larry:it's never, know, I've learned so much from people in the industry and respect so many of the opinions and ideas that I've had, that, that, that much of what I've learned is just purely in discussions with people. But, you know, it's, it's a great point is do you want large retailers, but, but keep in mind what is different in that segment than say the packing segment? Part of our frustration has always been, we really have three really large Packers and four, if you want to include the national as part of that. And that's a pretty small population. When you look at the funnel, you go from 700,000 cow calf producers down to a few thousand feed, lots down to four major Packers, doing the bulk of whatever that number is close to 80% of all the fed cattle harvest in this. As big as Walmart is one needs to keep in mind that there's still a small percentage of the whole retail industry that you got the Kroger's out there that are huge in terms of the number of stores that are, that are Kroger. Has you have a, you have the targets that also sell one of the biggest sellers and claims to be the biggest seller of prime beef in the United States is Costco. And you have, you're not dealing with the small unknown. On the, on the retail side. And then you have a lot of what we call regional retailers, as we would know them the Snooks in the St. Louis area, the HEBs in the Texas area. And once upon a time in Kansas, the Dylans, which now are part of their Kroger chain, but, but a lot of what I call regional retailers and those have been very competitive and they've been very um, successful in both the bigger metropolitan areas, but also smaller metropolitan areas. So the retail sector. It has a lot of players in it. And each of the players are going to come to the table with different things they're going to look for. And I think as, as cow calf producers or as cattle industry people, what I'd encourage all of us is to keep our eyes and our ears wide open in terms of trying to look at where there's opportunities, because there may be some excellent economic opportunities that if let's say a Costco decides they want to have known suppliers. So they're a prime that they'd put a lot of their emphasis on. Does that create an economic opportunity for a cow calf producer or a feedlot or parts of our beef industry? So, you know, one can look at it negatively, but I think there's also going to be some positive opportunities for people out there in the.
Matt:And that's one of the reasons that we put this podcast together a few months ago is to um, folks such as yourself who have a very good perspective on the industry, not just what it is, but what it can be to share those perspectives and, and better yet your wisdom of, of doing just that, keeping your eyes, keeping our eyes open economic opportunities, whatever they may be, because they will not likely look like they did mom and dad or grandma and grandpa. Larry, thank you very much for being with us today. We hit a, hit a lot of different topics and as always you were well-versed in all of them. So always appreciate your thought and your insights and um, look forward to continuing to have more conversations in the future.
Larry:Well, I enjoyed it immensely and all the best to you and your family. Dale banks has always been uh, uh, one of the great Angus operations in Kansas. And we wish all you folks the very best. And I enjoyed being a part of this.
Matt:Thanks for joining us for practically ranching, brought to you by Dalebanks Angus. If you enjoyed the podcast, heck even if you didn't... help us improve by leaving a comment with your review wherever you heard us. And if you want to listen again, click subscribe and catch us next week. God bless, and we look forward to visiting again soon.