Color blind? Quality is key with smaller packers

For several weeks in the late summer and early fall of 2021, some buyers of market-ready beef cattle were paying bonuses for Hereford and Hereford influence cattle, while many others were nearly refusing to buy anything but black-hided cattle for slaughter.

How and why was this happening and will it happen again?

Jon LaFleur of LaFleur Bros Co. Feedyard blamed the situation mostly on a glut of cattle that allowed the packers to be more choosy than usual.

“It was almost impossible to get a bid. I had to almost beg to get one. They could be so selective, they wanted to buy something that was all black or 90 percent black,” LeFleur thinks the tide has turned more in the favor of the feeder for the time being, though.

“Now we are in a situation where our numbers are in a much healthier place. Selling cattle with mixed colors is not a problem now,” he said.

For a while, though, he wasn’t sure.

“I think it really comes back to supply and demand. There was oversupply,” LaFleur said he hadn’t seen such an extreme insistence on black cattle in the past.

LaFleur, whose family feedlot near Jefferson, South Dakota, has traditionally bought cattle based on quality, not necessarily color, was able to move their “colored cattle” in a relatively timely fashion, but he didn’t have a large number ready to go during the most extreme period of segregated demand.

Because he maintains relationships with Tyson, Greater Omaha, Cargill, JBS, and National, LeFleur is able to keep his options open, he said. He hopes the color selectivity was a one-time deal.

Fred Berger, a North Dakota cattle buyer and feeder also observed the pickiness on the part of some of the bigger packers earlier this fall and believes it was mostly due to high supplies as compared to shackle space available. “They wanted them strictly black. They are getting a pretty good premium on CAB,” he said. He predicted the selectiveness would be short lived, which seems to have played out. With tighter supplies, demand for all cattle has improved in recent weeks, said LaFleur.

Berger, who buys cattle from North Dakota, South Dakota and eastern Montana to be fed in Nebraska, Oklahoma, Kansas, Minnesota, Iowa, South Dakota and Wyoming, also said that if a packer buyer was unsure about the quality of a pen of cattle, it would be easier to just pick and choose the blacks, which could be more likely to qualify for a premium program.

Berger himself believes there are high quality cattle of every breed and color. “What feeds well? When I see cattle that come in the ring that I see a lot of gaining potential – they can be any breed. I like cattle that really perform. Every breed has good performing cattle,” he said.

Moville, Iowa, cattle feeder Eric Nelson, said he witnessed first-hand the insistence that loads of cattle be 90 percent or higher black. “Evidently there were adequate enough supplies and thin enough competition, it allowed them to be particular,” he said. The packers continued to buy all colors of cattle from feeders further south, though.

“It was so aggravating. In the south, they were buying cattle of every color under the sun. They don’t feed nearly the percentage of black cattle in the south as we do here,” he said. “For this feeder that made it sting even worse.”

But cattle supplies are more current, tipping the situation slightly more into the feeder’s favor, he said.

“That has evaporated now. Now if they look and moo like cattle, they are good to go,” he said.

Matt Bode buys cattle for the Aberdeen, South Dakota packing plant. White Oak Global Advisors bought the packing facility in 2017 and have grown it to a 6,500-head-per-week regional packing plant.

Bode said, in an effort to differentiate their product from the run-of-the mill product buyers can find at many grocers and markets, they became a Certified Angus Beef packer and have developed several labels of their own with some of them being reliant on 51 percent black cattle.

“We process 90 plus percent black cattle. We’re not opposed to buying colored cattle but we have a customer base that is now focused on the higher grading black cattle,” he said. To help them develop a niche market for themselves, DemKota determined it would not process cattle fed the additive called ractopamine, which helps the animal’s body to convert more of its feed intake to muscle and less to fat. Bode said that because the colored cattle do not qualify for CAB or some of the DemKota premium brands, they mostly seek out black cattle.

Additionally, the packing company buys black market-ready young cattle, and also fattened cows. There is no color requirement for DemKota’s private Gold and Legacy labels.

Meanwhile, almost 400 miles to the south, another regional packing plant was offering significant bonuses for Hereford influence cattle during this timeframe.

Nick Rausch who serves as the brand manager for Greater Omaha Beef, Omaha, Nebraska, said his company has found great success with both CAB qualifying cattle as well as Hereford and Hereford influence cattle, which can qualify for their Greater Omaha 1881 Hereford or their Greater Omaha Classic Hereford Beef program.

Over the last 10 years, Greater Omaha has grown demand for their Hereford programs to the point that they have added another 1,000 head of Herefords to the weekly harvest as compared to a decade ago.” They harvest about 2,500 to 3,500 head of Herefords per week in order to qualify enough for their needs. They process about twice that many that qualify for the CAB program.

While all of their products are considered high end, Rausch said their burger has a “tremendous following.”

“I would say it has as much to do with the quality of cattle as the attention to detail,” he said. He added that his company has a “quality driven mentality” which means their ground beef may be a bit more expensive than the run-of-the-mill big box product because “it has as much to do with what you don’t put into it as what you do,” he said.

Dan Cahoy with stores in Bonesteel, Lake Andes, and Tyndal, South Dakota, and Spencer, Nebraska, said he appreciates being able to advertise USA beef, which he buys from Greater Omaha. The ground beef is good, he said.

“We have people drive a distance to buy meat from us. We have good product,” he said. “Last week this lady said, ‘you guys have the best hamburger here,’” he said.

Rausch said Greater Omaha, like Demkota, has several labels for the different types of animals they process.

“The Classic Hereford Beef is the workhorse. About 90 percent of the volume of the Hereford program carcasses fall under that label,” he said. The other ten percent of the Hereford qualifying beef is marketed under the 1881 label he said.

The original ratio of foodservice to retail was very small at only 5 percent of volume going to restaurants, he said. “Now demand and utilization of Hereford boxes in restaurants is 50 percent of the total Hereford program base and rivals the volume of retail.”

How did Greater Omaha develop a seemingly elusive market for Hereford beef? “I think it’s a combination of things. I would say that we found companies that were in alignment with what the Hereford program had to offer which was a high quality eating experience, a high quality palatability that was price competitive.”

“And most importantly, the program provided a chance to separate from the herd with a genuine product that delivers what it says it delivers on the label.” To take it one step further, Greater Omaha is a brand, and Hereford is a brand within the brand. The company brand stands for quality, and the Hereford Brand provides a huge point of differentiation without sacrificing quality. The vast majority of what they market is under the “Classic Hereford” label. Each box of Classic is a mix of about 85-90% choice, and 10-15% High Select. The program end-users are typically mavericks in the marketplace who dare to be different. They look for a story to tell that is genuine, and Hereford is just that. Selling this concept is thinking outside of the box when the industry is focused on Choice or Higher beef. It is not the me-too method, and those partners understand where quality, consistency and price can meet in an optimal point. Our premiums are modest, but they are big enough we can afford to pay a premium on the cattle. Without partners in retail and foodservice willing to blaze their own trail, we wouldn’t have success selling the Hereford label, no matter how consistent the beef is. It doesn’t jump out of the box and sell itself. The reason it works is because once customers figure it out how effective it is to be slightly different and “better,” they rarely quit the brand. It is one part finding folks that get it, and two parts product that delivers on its promise.”

Rausch explained that the bulk of Hereford cattle they utilize come from the northern region, and are seasonally available. “They are mostly traditional spring-born calf feds on feed and then when the bulk of them are ready to harvest, we come into them seasonally in the fall, winter and early spring,” he said. Rausch added that Greater Omaha insists on purchasing USA born and raised cattle, which isn’t difficult given their location in the heart of cattle country. But the Herefords do tend to easily fit this requirement as well. Summertime is the most difficult time for his company to find finished Hereford cattle, hence the more enticing bonuses for qualifying cattle that time of year. The standard bonus for cattle that qualify for the Hereford programs is $25 per head but the premium offered can be higher than that in the “clutch periods” when Herefords are particularly hard to come by, he said, and depending on how many on the truck qualify (the more the better.)

Greater Omaha also offers an attractive grid option for Hereford and Hereford English cross cattle, including Red Angus and Red Angus-crosses. “All of our cattle buyers stay in the market for Herefords each week even after we have filled our weekly overall needs. If they are inside our strike zone, we try not to miss a hoof,” he said.

Greater Omaha works hard to be a good partner to the feeders in the area, accepting a certain amount of cattle of all breeds.

“I would go so far as to say that our head cattle buyers likes nothing more than black nose Chars that will grade and yield and do everything. They won’t qualify for the Hereford or Angus programs but we like them from the standpoint of yield grade and performance,” said Rausch. “That is why the continentals aren’t going away.”

“The one thing they cannot do for us is qualify for our Hereford and Angus branded domestic programs, but colored cattle are as ideal as any other for our EU customers. We have really good quality colored cattle mixed into our NHTC program and the premiums are there for all good quality cattle regardless of color,” he said.

“We’re the smaller guy. Yes ,we are flexible with producers. Yes, they’ve got colored cattle mixed in. At the end of the day, the colored cattle have to go somewhere. The bigger packers out of necessity are focused on numbers, and to a certain extent so are we, but quality is more important to us.”

The President of Greater Omaha, Mike Drury echoed Rausch’s thoughts. “From our perspective, we’ve been very successful listening to our customers on the Hereford program. We love it when a load comes in as straight Hereford.

“We’re aiming for English – Hereford and Angus and any variation of that typically fits what we’re looking for,” he said, adding, however that they want to work with feeders. “We will take a pen with 80 percent that match our needs, we want to be a good partner,” said Drury.

Is it possible feeders will struggle again to move colored cattle? “I hope this is a one-off thing, just a supply glut,” said LaFleur. “Hopefully this doesn’t continue going forward, but I can’t say anything for sure.”