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Grass-Based Beef: The Business Case

This webinar makes the business case for grass based beef production. We focus on the techniques that have the potential for enhanced profitability.

June 21, 2012

Description

The Wallace Center has been conducting research into supply chain and policy constraints in the grass-fed beef industry, particularly related to production. It is clear that the domestic production of pastured beef is significantly lower than the domestic demand.

This webinar makes the business case for grass based beef production, including grass fed and finished beef. We focus on the techniques that have the potential for enhanced profitability, such as the importance of pasture management, animal genetics, aggregation, use of existing infrastructure and brand development in establishing a sustainable grass-fed business. A case study on the Wisconsin Grassfed Beef Cooperative, which we feel is highly replicable, is featured and discussed.

The Wallace Center and the leaders of this webinar are working with partners in the Upper Midwest to pilot strategies that will increase production, keep vulnerable acres in pasture, inform producers and land owners about market opportunities and provide tools that will aid transition to pasture-based production. Learn how you can be part of these pilots, or start or participate in one in your own region.

Panelists
Allen Williams, Livestock Management Consultants, LLC
Greg Nowicki, Wisconsin Grass-Fed Beef Cooperative

Moderator
Warren King, Wellspring, LTD

Recording

Slides

Download the slides (PDF)

 

Written Answers to Questions

Q: Is it really more profitable to raise pastured cattle, especially now, when commodity corn is $7 a bushel?

[Allen Williams] Your question is a complicated one, but in general, a farmer can transition from corn to grass fed cattle and equal or exceed the net profit per acre compared to corn.  There are several issues with corn that are greatly reduced or eliminated with grass fed cattle:

  1. Corn is a very input intensive crop that requires high levels of water and NPK inputs (nitrogen, phosphorus and potassium amendments/fertilizers).  This is especially true with the new varieties of corn, since they are very fast growing, high yielding.  In addition, farmers are now planting corn at very high density.  Grass fed cattle can perform well on much lower inputs.
  2. The costs per acre for putting in corn are quite high and getting more expensive.  As corn prices rise, the seed companies also raise their prices accordingly, as do the equipment suppliers, etc...  Many farmers this year have costs per acre that are pretty close to $5/bu corn.  They have to have a corn market price of $7/bu to make any money.  
  3. Depending on $7/bu corn is like depending on it raining just when you need it and in just the right amounts -- it is a very risky proposition.  The only reason the market is approaching $7/bu corn right now is because of the widespread drought and heat.  Without those challenging conditions, we would be in the $5/bu range and most corn farmers would be looking at breaking even at best. Corn is a high risk crop. Without the right conditions at the right time, you are looking at a loss rather than a gain and being dependent on crop insurance to cover losses.
  4. Growing corn is very hard on the land (soil) and you will always be working hard to preserve whatever soil organic matter you have left.  High yielding, densely planted corn requires high water and NPK inputs.  These inputs increase soil acidity, have harmful runoff potential, and deplete soil organic matter (OM).  This is particularly true with the current practice of planting ditch to ditch, road to road, fence to fence.  Farmers are not leaving any buffer strips now.  I see this everywhere I travel. 
  5. Cattle are much easier on the land.  They require much lower NPK and water inputs, they help undo soil compaction, improve water infiltration into the soil, build (rather than reduce) soil OM, significantly reduce harmful runoff (nitrates, phosphates, sediments), restore natural soil microbial and earthworm populations, restore insect, pollinator, and wildlife diversity and total populations, restore plant diversity, and lower risk.  
  6. Even in drought conditions (like much of the Midwest and Southeast are experiencing in summer 2012), cattle on grass are much better for the land and the pasture vs. corn. Land that houses pastured animals retains a much higher percentage of water in the root zone and has significantly less water loss.  This is easily demonstrated in NRCS water runoff demos.  
  7. Corn MAY (and may is the operative word here) return the farmer an average net profit of up to $400 per acre on a consistent basis.  Most will not do this consistently. The grass fed cattle will return $400 to $800 per acre on a year-in, year-out basis.  Unlike year to year corn prices, grass fed beef prices are much more stable and the average premium over commodity cattle for the past 10-12 years has been $20-$30/cwt.  This has been extremely consistent.  The farmer can do this with significantly less risk and with a much better impact on the land.  As a matter of fact, if they want to do a corn/cattle rotation, this type of operation will greatly improve their farm ground and allow them to significantly lower costs per acre for their future corn production.  
  8. I can point to a number of farmers who have made this transition because it is PROFITABLE.  We have a farmer speaking at our annual Grass Fed Exchange conference this year who has been able to lower his production costs for corn to about $2/ac using livestock in a rotation with his row crops.  He doesn't need the NPK and water inputs like a typical farmer would and he makes money even when corn is not $7/bu.  
 

Panelist Bios

Greg Nowicki

Greg NowickiCurrently the President of the Board of Directors for the Wisconsin Grass-Fed Beef Cooperative as well as a producer member. He has a small cow-calf though finish operation and direct markets free-range broilers on his 5th generation, forage-based farm in central Wisconsin with the help of his wife Lisa and daughter Anna.

Greg spent 17 years in manufacturing and construction management prior to full-time farming and also served in the Air Force.

Allen Williams, Ph.D.

Allen WIlliamsAllen Williams is founding partner and President of Livestock Management Consultants, LLC, an Agriculture & Food Industry consulting firm specializing in enhanced farm and food company sustainability and profitability through values based value chain product development and marketing, specializing in grass fed beef production. Allen is a sixth generation family farmer and holds BS, MS degrees in Agriculture from Clemson University and a Ph.D. from Louisiana State University. He spent 15 years in academia in research, teaching, and extension, and has written more than 200 peer reviewed and popular press articles. In 2000, he left academia and founded LMC, LLC. Since that time, he has worked with more than 3,000 farmers and ranchers in the US, Canada, Mexico, and South America. LMC, LLC also consults with processors, distributors, retailers, and food service. Allen has authored numerous feasibility studies, business plans, and Cash Flow projections for the natural and organic food sectors. He has written standards and protocols for a number of branded food programs. He currently serves as Chairman of the Association of Family Farms, Executive Committee of the Grass Fed Exchange, Co-Project Leader of the Pasture Project, Member of the USDA BFRDP EET program, and Principal Investigator in soil microbial research as a replacement for chemical fertilizers. Allen has been an invited speaker at over 300 regional, national, and international conferences and symposia.

Warren King

Warren KingWarren spent the majority of his professional career as a trader and commodities broker at Cargill, gaining a deep understanding of the underlying fundamentals of the food system. Since leaving Cargill, Warren has worked as a consultant to numerous non-profits and small businesses in the areas of food and natural products in the roles of researcher, contributor and project manager. He has served as General Manager of Goodness Greeness, the Midwest’s largest certified organic produce wholesaler, and was appointed to serve on the State of Illinois’ Local Organic Food and Farming Taskforce. Warren is currently managing the "Pasture Project" to increase production of grass fed beef in Upper Midwest with the Wallace Center.

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