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Are value-added programs right for you?

Gilda V. Bryant for Progressive Cattleman Published on 24 September 2018
Beef Quality Assurance

According to a recent Progressive Cattleman survey, the majority of respondents sell their calves at local sale barns.

Many producers are aware that backgrounding calves, applying Beef Quality Assurance (BQA) practices and selling a uniform lot of animals with comprehensive vaccinations can add value at calf sales, but when it comes to participating in value-added programs, money is often left on the table.

Let’s take a look at a few options.

Owner-certified programs are just one of the many value-added categories available. Here producers sign an affidavit certifying a group of animals meets certain qualifications. One plan in particular is Owner Certified Natural. The rancher acknowledges these animals have not received antibiotics by injection or feed, ionophores, implanted hormones, or any feed or supplements containing animal byproducts.

On the other hand, third-party verification plans utilize an independent third party to confirm a producer’s marketing claims. The USDA verifies production records and practices during inspections.

USDA-monitored programs include Source and Age Verification (SAV), which certifies the animals’ age and origin. A program-compliant tag that meets export requirements is necessary. Several companies, including IMI Global and many breed associations, offer verification with USDA oversight.

The Non-hormone Treated Cattle (NHTC) program is an option that approves animals for export to the European Union. They may not receive added hormones and an on-site visit by a USDA-approved third party is required. A NHTC backgrounder or feedlot must purchase calves processed by an approved packer to maintain this certification.

Beef producers who qualify for Owner Certified Natural, Owner Certified Natural Plus and Verified Natural programs must confirm their cattle have not received ionophores, antibiotics and/or sulfas, growth-promoting hormones/steroids, beta adrenoceptor-agonists or any animal byproducts in feedstuffs, mineral supplements or feed tubs.

Animal welfare programs include IMI Global’s 5-Step Animal Welfare Rating for products sold in Whole Foods Market stores. State verification programs include Nebraska Verified and New Mexico Beef.

Do they really add value?

Joe Lichtie, vice president of Superior Livestock Auctions, reports his company initiated a value-added vaccination program in 1994. Since then, the company has developed a number of plans, including the popular VAC 45.

“Most cattle run through our system in some vaccination program,” Lichtie explains. “We recognize the health program they’re on, such as Merck’s Primevac or Zoetis’ SelectVac. We sell animals during the televised auction and place program logos on the screen. If the producer utilizes a progressive genetics program, that logo is also displayed.”

Superior Livestock Auction has 385 representatives located throughout the country. A representative meets a rancher to check the cattle, facilities and learn about his management practices. The representative determines the program or programs the animals qualify for.

In July 2018, IMI Global analyzed Superior Livestock Auction’s sale numbers. The average SAV premium was $3.72 per hundredweight (cwt). The average NHTC premium, $7.32, and the average Global Animal Partnership (GAP) only premium was $15.05 per cwt. Heifer premiums ran slightly lower.

“Value-added programs add money to the producer’s calf crop,” Lichtie concludes. “You’re getting the most for your calves when you lay these programs on top of [good management practices].”

Working with breed associations

Breed associations also provide value-added programs for their members. Trey Befort, director of commercial programs with the American Hereford Association (AHA), reports his organization has developed several plans to improve genetic quality, which adds value to animals.

The Hereford Advantage Program, based on the certified Hereford beef index, focuses on feeder cattle. A Hereford bull battery that ranks in the top 50 percent of the breed must sire animals in this program. The AHA verifies the sires’ genetic merit at no charge to members.

“I develop an expected progeny difference (EPD) and profit index summary for [a producer’s] bull battery,” Befort explains. “This summary shows the group’s strengths and weaknesses. [The producer] uses that data as a genetic improvement tool as he makes selection decisions the next time he buys bulls.”

AHA also provides a Maternal Advantage program that generates replacement females based on Hereford sires and British-based or Brahman-based females. AHA has also joined the Red Angus Association of America to offer the Premium Red Baldy program. This female-only program capitalizes on hybrid vigor for replacement females utilizing Hereford Red Angus genetics.

Once Befort determines a group of cattle meets program requirements, that information can be used for any marketing method. AHA collaborates with major video auctions, including Superior Livestock Auction, Western Video Market and Northern Livestock Video Auction. Animals in these AHA programs have sold above the USDA average sale prices.

“The ability of a producer to take advantage of these programs to improve genetic quality and add value to your bottom line is [significant],” Befort adds. “In a competitive market with lots of different value-added programs, being able to set yourself apart from other producers and put a little proof on the cattle allows buyers to have confidence in what they’re buying.”

Tina Saitone, Ph.D., assistant cooperative extension specialist in livestock and rangeland economics at the University of California, Davis, encourages ranchers to check with extension experts to learn about available value-added programs and their associated premiums and/or discounts. They should also consider other factors such as backgrounding, desirable breeds and uniform weight.

It is critical to think about supply and demand for these programs. Saitone reports she has seen new, hot programs pop up with few lots of cattle, so they sell for large premiums. As more operators opt for that popular program, they drive the premium down. By the time producers implement all the necessary changes, there may not be a big demand for that program.

Saitone cautions operators to consider ranch-specific costs and not take value-added program claims at face value. It is often more profitable for producers to opt into several programs, so costs are reduced when the programs are verified through the same third-party entity.

“Be cognizant of your ranch-level costs and capacity to add time and labor to comply with these programs,” Saitone advises. “Be cautious and research the costs associated with the certification and also the potential implications for the productivity of your herd. Finally, always try to consult multiple sources of information about a likely premium associated with these programs.”  end mark

ILLUSTRATION: Illustration by Philip Warren.

Gilda V. Bryant is a freelancer based in Amarillo, Texas. Email Gilda V. Bruant

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