Creating Value in Pooled Cull Cow Sales

Final Report for FNC98-225

Project Type: Farmer/Rancher
Funds awarded in 1998: $10,000.00
Projected End Date: 12/31/2002
Region: North Central
State: Kansas
Project Coordinator:
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Project Information

Summary:

PROJECT BACKGROUND
In 1998, Myron Runft, Belleville, Kansas, received a grant from SARE for a project designed to research, develop and expand a group marketing program for the sale of cull cows in the North Central Kansas region.

The proposal was intended to fund a seed project that would provide information to assist in the development of a sound cull cow marketing program for area producers.

This report will summarize the efforts for this project and this summary will include highlights, examples and problems we have encountered as we have traveled on this exploration journey. Included in this summary will be results of projects we have explored.

We feel this grant project has been the catalyst for other similar projects which was one of the main goals of this application. Finally, the producers in north central Kansas have continued to use this neighborly program on a periodic basis and we anticipate that the program will continue as a regular program in north central Kansas.

PROJECT DESCRIPTION AND RESULTS
This program had four goals as follows:
1) Research and identify the potential for markets for cull cows which includes doing a survey possible cull cow marketing participants.
2) Organize a cull cow marketing program utilizing as many local resources and ongoing programs as possible
3) Provide for an education program that is related to cull cows
4) Evaluate the program and our results

Our measurements of success were to be based on whether we would have regular shipments of cows sold through the project on a monthly basis. In addition, another measurement of success was based on whether producers in other regions would copy our program. Our goal was to have six other cull cow marketing leaders identified in other areas as a result of the publicity related to our group. We also planned to explore organic markets for cull cows and try to arrange for a separate sale of organic cull cows.

Finally, we planned to have publicity outreach that included local radio stations, ag radio, and news release sent out. Our project planned to develop a logo, policy and procedure manual, and a web page for the project. We also planned to periodically place ads in papers. All of this was designed to create a program that would be sustained into the future.

Like many new projects, our acceptance of the SARE grant was greeted with enthusiasm and a realization that everyone had more responsibility added to their busy schedules. However, our planning and budget helped us grow through the early stages of dependence on development of the project.

We started the project by sending an informational announcement to local media followed by meetings of the core producers who served as our advisory board. Our first meetings were designed to familiarize everyone with the goals we had earlier discussed. The discussion included subjects like structure, timeline, objectives and a name for our group. Early on we settled on the name of “Gummer Cow Marketing” because old cows were usually known as “gummers” and this name would give producers a sense of what the program was about – the selling of old cows through a project designed to capture more dollars from the market.

Following the selection of a name, we selected a local artist to create a logo for us. Kathy Eilert grew up on a farm in western Kansas and she was an art teacher at St. Johns, Beloit High School. Kathy eagerly jumped on the task of generating a selection of logos for us to use. At a meeting a few months later, we chose the logo we currently use and we then sent out another news release that profiled Kathy and the logo she had created.

At the same time as we were selecting a logo, we were having a discussion about the structure for this project. Our initial plans were to utilize local and existing resources, rather than create new structures. In addition, National Farmers had agreed to provide in kind assistance for us; however our plans were to have a program that served the needs for local producers. This meant we needed to research the available programs and compare costs and services.

National Farmers had a program that we could use, however they are a membership organization and so we had to address the membership question. This was a tough issue because membership fees can certainly help an organization become sustainable and that was a goal for our project. However, we wanted to maintain a sense of independence.

Our research into this question led us to Ames, Iowa where we visited with NFO livestock staff, the NFO attorney, and their accounting staff. They all graciously answered questions and gave us access to all printed materials we requested. Everything was an in-kind contribution to the project.

Next we discussed working with a local feedlot and set up a meeting between the local manager at Solomon Valley Feedyards and two representatives from the Gummer Project. The resulting meeting and discussion went very well and both parties seemed to be willing to work together on the project.

A third resource was the local sale barn operator. Myron Runft had the opportunity to visit with the manager about this project. From that discussion, we can report in this narrative that the local sales barn operator/owners can represent a barrier to the group marketing of cull cows if not handled properly. In retrospect we feel we have handled this situation in a positive manner since the local sale barn operator, (Belleville Livestock Sales) was one of the main sponsors to our educational cull cow meeting held in the fall of 2002. However, we believe we have only started to explore an ongoing complementary relationship with the sale barn in Belleville.

Based on our research, there are two national cull cow programs with high visibility. The first program is the National Farmers nationwide cull cow marketing program.

A second large program is the DariyLea, Empire Livestock Marketing program in New York. This program is hosted in livestock auction sales outlets across the state of New York and is successful because it offers producers the opportunity to deliver their cows to a livestock auction sales barn and still have the opportunity to direct ship their cows to a packer, or sell them through the livestock sales barn. No program exists like this in the Midwest yet, but it was our intention to explore his model because it solves the question related to having a centralized shipping place to collect the cows for shipment to a packing plant.

The Runft Charlois farm also has a very good loading facility with several pens that could be used for temporarily holding of cows until a truck arrived for shipment to a packing plant. Runft’s have a very extensive health program, so they were not concerned about diseases. Some producers might have health concern related to allowing their neighbors to bring cows to their pens as a centralized shipping point.

The Gummer program also allowed anyone to ship cows from their own farms and some producers did load trucks at their won pens for direct shipment using the Gummer program. Besides the Runft Ranch in Republic County, we also had another site in Cloud County at Concordia that was used for periodic loading of cows.

The choices used by Gummer Cow marketing were to load cows from the Runft Ranch, load cows from individual farms, including a site in Concordia, and later in the program we loaded cows from a feed yard near Beloit (Solomon Valley Feeders).

After much discussion and research that resulted in the creation of a cost/services comparison worksheet we decided the organizational model for the Gummer project would be to affiliate with the NFO marketing program, but remain arms length from NFO. Gummer would use NFO’s services for accounting, negotiation of cow sales, paper work transactions, and legal protection. This decision was made for two reasons, first, while NFO’s program has a long history of success and is a complete program that has an excellent identity preserved paper trail system that takes into account issues related to health, state and federal regulations, accounting and check processing. They also have experienced negotiators and do market analysis. Further, their program gave us the legal security needed for group negotiated sales that is possible with their Capper-Volstead structure. Our cost comparison indicated that with out volumes of sales we likely could not have replicated the level of services NFO has to offer for the same cost to producers. We also felt that we needed their level of services in order to be prepared for possible problems that might occur with shipping and sales of individual producer’s cows as part of a “pooled sale”. Other groups may want to assume more liability and reduce some of the transaction costs associated with a group marketing program.

After internal discussion and visiting with NFO, it was agreed that Gummer participants could sell cows through Gummer using NFO’s program and not have to become a member of NFO. However, all Gummer participants would have the same marketing expenses like regular NFO members, as part of this arrangement. This was felt to be a fair trade by Gummer participants.

As a result, we have determined that Gummer would use existing programs and not have to formally organize into a business structure, thus avoiding start-up costs normally associated with forming a co-op, corporation or LLC.

The one unresolved issue that delayed us was related to liability and whether we needed insurance. Initially we though this wouldn’t be much of a problem, but since we were not requiring individual membership in an organization like NFO, they did not have a blanket liability policy for our project. We then had to explore the availability of purchasing a group liability policy for the project and found that policies are available. Our board decided to not purchase an insurance policy, opting to use individual farmer’s policies in place of a group insurance policy. We suggest that any/all individual farmers review their policies to determine adequacy of policy coverage if they chose to participate in a similar project or they chose to allow their farms for use as a loading facility. We found it is possible for producers to have an “additional insured” rider added to their individual farm insurance policy. The Gummer Project would not necessarily recommend another group follow the same advice as taken by Gummer Cow Marketing. This was one issue that may need further exploration.

After determining basic structure questions, we placed ads in local papers to determine whether any local producers would be interested in becoming local area coordinators for this project.

The response rate for our ads exceeded our expectations. Several producers responded to the classified ad which included three current or former cattle buyers, at least four or five farmers who were cow/calf ranchers and who actively bought and traded cows on a short term basis.

We sent response letter to all applicants and selected four to interview. Myron and Greg traveled to the location of the producers for the interviews because we felt by traveling to their location we learned information about the applicants and could determine whether they had cattle pens and assess their facilities for use as a loading center.

The interview experience was very enjoyable and after visiting with everyone we invited two people to join our group as a coordinator. Darin Ringer accepted and he participated as a coordinator for us and did move loads of cows. Another person we interviewed that decided he didn’t want to become a coordinator has been involved and joined us for packing plant tour a year later. The lesson learned from this experience as that there are many farmers wanting sideline income and it’s possible to find coordinators for a program like Gummer. However, for a small program like Gummer, participants wanted to keep marketing costs low, so the income potential is limited if the program is not a large program. In the end, we feel about 10% of the applicants will serve in a coordinator position like we advertised which was mostly entrepreneurial incentive based and paid about $3-4 a head for all cows shipped.

The Gummer Cow Marketing project started shipping cows on a pilot basis in early summer of 1999. Interest levels were high. After we sent out news releases to local radio and papers, several individual farmers started contacting Myron to visit about shipping cows. Myron had the ability to send full or smaller trailer loads and he would accommodate the needs of local producers. Several full (40-50 cows) or partial loads were shipped in 1999.

To get started, everyone had to learn the paperwork system that was needed for the project. In addition farmers needed to learn how to coordinate and schedule their cows to fit into a shipping schedule. Most of the time Gummer shipping was based on the number of cows ready for shipment, rather than having a regular shipping date. Other groups may want to explore having regular shipping date.

The coordinator was responsible for completing all needed paperwork. This included filling out a shipping ledger for identity preservation of each cow and each owner when cows were back tagged and loaded. Since all cows are sold as one lot by NFO negotiators and each settlement is treated as an individual settlement with individual checks sent to each farmer, it is important to have a detailed paper trail. Also, its needed if a cow is condemned for certain health reasons.

Basically, the Gummer program would ship cows when Myron had a load of cows ready. When Myron had a load to ship, he would call NFO and describe the cows to the negotiator. Based on the description of the cows, the NFO negotiator would shop the cows to various packers and sell the cows using market timing information and taking into consideration shipping costs. Cows could travel as far as Green Bay, Wisconsin, or be sold to Alabama or into Arizona. After picking a location and a date to sell the vows, the NFO negotiator notified Myron of the shipping date and location and Myron would contact everyone and notify them when to bring their cows and bulls to his location for loading and shipping. Sometimes NFO would arrange for a truck and pay shipping cost. Other times Myron would arrange for the load so that he could control the truck loading and arrival times to fit his time schedule.

When farmers brought their cows to Myron’s loading pens, Myron would fill out paperwork and place a back tag on each cow with the corresponding tag number included in the paper work Bill of Lading and Buyer’s Invoice used for delivery of cows to packing plant. In addition: Myron might have farmers certify that the cows haven’t been fed any prohibited feeds or medicines, or Myron might ask the producer to give him a brand inspection release for shipping. Myron would send a copy of this paperwork with the trucker for deliver to the packing plant when cows were unloaded. After the load had been shipped, Myron would FAX a second set of all documentation to the NFO secretary so she could start the collection and invoice process and the accounting and payment for individual producers shipping cows.

Prior to shipping Myron would also have a local vet sign needed papers for brand inspection or for shipping across state borders. This was easily done by having the trucker stop at a local vet’s office which is located not a few miles from the Runft Ranch.

Gummer Cow uses a paper work system developed partly by NFO, which includes a Buyers Invoice and Bill of Lading form and Prohibited Feed Affidavit. Producers were also asked to give brand inspection release when cows were sold into brand inspection territories such as to Gibbon, Nebraska. Producers also have the option of purchasing it transit insurance for animals.

Most of the participants in Gummer Cow have been satisfied and have been return shippers. A survey taken near the end of the project verifies this information and will be discussed later. Some producers found this as a way to sell a small number of “fat steers” they had fed out, but were unable to find a local market or buyer due to small number available. Another producer found Gummer was an excellent way to sell “Texas Longhorns” which previously had not garnished a very good price at the local auction sale barn. However not all producers were return shippers for reasons such as “producer felt he could have done the same thing himself”, “producer felt he could get the same price”, “producer felt he needed more immediate shipment of cows, rather than wait for a load to materialize.”

Since the project started, we have shipped cows on a periodic basis every spring and in the fall each year. Some months we would have a couple of shipments. Other times we might go six weeks without a shipment. The peak months were April and May and August. Gummer didn’t sell very many cows from October to February.

As the project matured, we developed several written materials as follows and not necessarily in this order:
– Code of Ethics for Gummer Cow Marketing project
– Gummer Cow Marketing informational flyer card
– Gummer Cow Marketing post cards
– Gummer Cow Marketing informational flyer
– Gummer Cow Marketing project summary page (2 versions)
– Cull Cow coordinator job description/independent contractor agreement
– Comparison study of cow marketing services and costs
– Survey report of existing cow marketing programs
– FAX and instructions template for cow marketing coordinator shipping cows
– Gummer Cow buyers Invoice and Bill of Lading Forms
– Telephone report sheet
– Gummer Cow Marketing informational sheet on cull cows
– Created several humorous cow radio spots

The optimum time for cow marketing activity is early and late spring and early and late fall. The optimum time for cow prices is at that same time, or near a holiday because NFO has a track record of negotiating “holiday sales” of cows to packers because NFO has the ability to find, organize, sell and ship large numbers of cows at short notice and serve a packers need at a time when employees are often taking holiday time away from the purchasing of cows for a particular packer. A poor time to sell cows is in the winter.

While Gummer Cow did ship cows on a fairly regular basis, we do not feel we have been particularly successful in education producers to plan for the forward sales of their cows. Most producers basically treated the sales of their cows as a salvage operation, so much work remains to be done in this area yet.

One of the goals for the Gummer Cow Marketing project was to network and create other interest in areas across Kansas. We feel we accomplished this goal because producers in SE Kansas also formed a cull cow marketing group and have had some success like we have had. In Northwest Kansas, a group has started to form and they have shipped a couple loads of cows in the past several months. In Northeast Kansas, producers have a group with two loading locations and they have shipped cows on a regular basis for the past several months. We have had two contacts in south central Kansas, and one in another north central Kansas location, but not much has happened at any of these locations. We had planned to network with six other locations as part of the goals for this project and we feel this has been achieved, though there aren’t six other active groups at this time. We do feel we have been a catalyst for two other groups with a third one that might form.

Conclusion:
While we feel we have met our plans for this project, there have been some bumpy rides along the way. First, the project went beyond our planned ending date; however we feel the project has been very worthwhile and benefited due to the extension of time. A second issue that was a problem was related to the question of liability and insurance. A third problem resulted in the fact that cull cows basically play a minor role in a producer’s operation. Even though several articles and the NCBA audit suggest that a producer look more seriously at obtaining value in the marketing of cull cows, the busy time demands on producers and the fact that profits from calves, feeders, and fat cattle, rightfully have a greater priority all tend to make it difficult to capture a producers attention with a cull cow marketing program. So we had a certain sense of interest, but some of it seemed to be curiosity.

Next, we were disappointed with the difficulty of obtaining cow marketing price comparisons. We were able to obtain price chart trends for beef and dairy cows. However, we were advised by KSU livestock faculty that the two regional sales auctions that reported cow information probably wouldn’t be a good price comparison and that price information for cows wasn’t very reliable. In the end, we used our survey as a price feedback instrument.

Another problem we experienced was related to finding a coordinator. Myron Runft did an excellent job and continues to serve in that capacity. However, Myron and the Runft Charolais operation have many other time demands, which have limited the Gummer Project to one that is a small neighborly program with about 20-30 participants. However, by keeping the project small and operating with the model developed, Gummer Cow Marketing might be more viable in the long run. We did have a setback when Judy Runft became ill and Myron was not able to spend as much coordinating time. The lesson learned from that experience is that a back up plan and back up help is a good idea.

In comparison, our successes outweigh the challenges we experienced. Myron has received high praise from the community for the leadership and work he has done. Second, we have met most of our goals and have developed a sustainable viable small program that can be replicated without much difficulty. And the program keeps maturing.

In late 2002, we had another level of growth by participating with Solomon Valley Feeders to market cull cows using their facility. Several loads were shipped last fall and this represents a new twist to our project and appears very positive for the future. Also, Pete Lorenz, Beloit, has been training to serve as another cow market coordinator for the region.

Our surveys show that producers like programs such as Gummer Cow Marketing and want to have access to programs like Gummer Cow because of price, convenience and the benefits of increased competition and of market access.

OUTREACH
One of Gummer Cow’s goals was related to education and learning. To achieve this objective we used several methods. Fist, we talked about the Gummer project whenever we could. We were invited to set up a display at the Prairie Hills rural conference in New Almelo, located in Norton County. We also had booths at farm meetings in Mayetta, Kansas (Jackson County), Garden Plain, Kansas (Sedgewick County), McPherson, Kansas (McPherson County) and Colby, Kansas (Thomas County).

Oren Holle, a project advisor and organic farmer, applied to take information from the Gummer project to a Small Farms conference in Illinois, so we had a booth there too. Oren has also explored the sales of organic cows, but no sales have taken place. We anticipate cows will be sold into the organic markets in the near future; however, it is likely that organic farmers will probably develop their own marketing programs and not need Gummer Cow to market cull cows.

Another educational component for Gummer Cow involved the National Non-Fed Beef/Market Cow and Bull Quality Audit funded by the National Cattlemen’s Association in 1994 and again in 1999 and completed by Colorado State University. Gummer Cow obtained copies of material related to the first audit in 1994, and again after the second audit was completed in 1999. We circulated executive summaries of this information during our meetings, at the various informational booths and via postal mail. In addition, we invited Dr. Deb Roeber, University of Minnesota, to speak about the audit at two meetings held in late 2002. Dr. Roeber was a principle investigator for Colorado State when the audit was taken in 1999. one meeting was in Belleville where we had great support from Kristie Fulton, Kansas State University Cooperative Extension Services and also from the local sales barn owner/manager. A second meeting was held in Beloit, with support from the county extension agent, local feedlot and banks. Dr. Roeber spoke at both meetings and was well received. About 50 producers were in attendance. At these meetings producers learned management ideas and tips related to the care of cows and how to improve carcass quality as well as ideas related to price improvements for cull cows and bulls. Dr. Roeber explained what is found on carcasses in packing plants. NCBA also sent us video tapes and a set of slides for use in meetings. The slides depict various carcass condemnation examples and other beef quality examples.

A third educational component of the program was to offer tours to Gibbon Packing in Nebraska. We had two cars carpool to Republic County for a trip to Gibbon in early spring if 2002. Myron had a load of cows delivered on the same day. While we didn’t necessarily get to view Myron’s cows during the slaughter process, we did get a thorough tour of the facility and of the operation which was useful for participants.

A final educational component occurred through news releases and with development of a web site and power point presentation. The web site is located at www.cullcow.com. In the area of educational goals, we feel we have met and exceeded our overall expectations for this project.

Research

Participation Summary
Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.