Lynsey McAnally (00:04):

Angus at Work, a podcast for the profit-minded cattleman. Brought to you by the Angus Beef Bulletin, we have news and information on health, nutrition, marketing, genetics and management. So let's get to work, shall we?

 

Hello and welcome back to Angus at Work. Cattlemen are, without a doubt, one of the most resilient groups of people on the planet. While the cattle industry has weathered its fair share of market ups and downs, this current point in the cattle cycle is treating producers selling cattle pretty well.

 

I'm Lynsey McAnally, and on today's episode our very own Shauna Hermel sat down with Senior Beef Analyst with Rabobank, Lance Zimmerman, to discuss the current market, what to expect in the near future and what expansion might look like for producers down the road.

 

But before we get started, we want to take a moment to thank CustomCattleTags.com for their sponsorship of this episode.

 

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Shauna Hermel (01:59):

Hello, I'm Shauna Hermel, editor of the Angus Beef Bulletin. Thank you for joining us today on the Angus at Work podcast. We're here to bring you information to help you be more profitable with those Angus bulls. I have a wonderful guest with us this morning, Lance Zimmerman. Lance, can you say a little bit about your background and where you are today and just describe a little bit about what your role is?

 

Lance Zimmerman (02:27):

Yeah, I've been involved in the industry. I grew up in the cattle business, as a lot of your listeners have, in western Kansas. We had a diversified farm and cattle operation there. Still do today. Predominantly commercial Angus cows. 150 head. We'd love to be back up to 180 or 200, drought permitting. We can get somewhere towards that in another year or two. But shortly after that, when I got out of high school, I went to Kansas State University and actually got the chance to work for Certified Angus Beef for eight years. And that's where our paths had crossed! But then after that, went back to school in ag economics, got a master's degree in that at Kansas State. Spent a dozen years at CattleFax. Today, I'm the senior beef analyst for Rabobank for all of North America, working with our clients from farms, ranches and feedlots to the processing segment all the way to end users — restaurants, further processors, things of that nature. I help advise them on what's going on in the cattle markets, how to navigate beef prices and cattle prices, how to just think through strategy and how to make their operations better.

 

Shauna Hermel (03:37):

This is certainly a critical time to be revisiting that strategy. Like you say, you're hoping to increase that cow herd. We hope that a few other producers do out there in cattle country shortly. You've put together a paper here that kind of looks at some of that and what the opportunities might be in the future. Can you kind of expound on that?

 

Lance Zimmerman (03:57):

Yeah, the paper was released this week while we're out here at Cattle Industry Convention. It's titled “Beefing Up Strategies to Help the U.S. Beef Industry Get Stronger, Even Amid Record High Prices.” And so the idea of the paper is we're in a unique situation starting 2025 in that we've had five consecutive weeks of essentially new record highs for almost every class of cattle and beef. That's not normal, but it's to assure people that just because we're seeing record highs today, it doesn't mean they're going to go away tomorrow. I think we're operating in a business where we always look over our shoulder and realize what just happened, and we think about '14 and '15 in particular. 2014 and 2015 where prices were so strong and then all of a sudden it was like Charlie Brown and Lucy pulling the football away. This is different. We've seen really good prices in 2024.

 

We're starting out 2025 very strong, but every fundamental indicator would suggest that we're going to have prices that continue to be strong for the next several years in the paper. Basically I chalk the field and say we should have confidence that prices should continue to set new record highs each year all the way to 2027. And so, if that's the case, that challenges us — whether we're a cow-calf producer or a beef end user — to rethink, okay, what does that mean for my buying strategy? What does that mean for how I want to market my cattle or my beef? What does it mean for how I'm going to manage my day-to-day business? And so the paper delves into the reasons why we think there can be record-high prices for that sustained period of time, but also then what do we do about it.

 

Shauna Hermel (05:35):

When we look at the numbers today and we thought two years ago that we were going to start this cow herd rebuild and it didn't materialize. A lot of people are looking at heifer prices and thinking, how can I not sell them at weaning time? Are we getting to a point where we're seeing some of that retention?

 

Lance Zimmerman (06:01):

Yeah, no, fantastic question. We just had the cattle inventory report that came out. I'm sure your listeners have already been able to dissect some of the numbers behind that. And one of the things that I'm telling folks to remember is at the back of that report, the government will always publish their error in the report and you can do the math calculation to figure out what that equates to. Essentially when they print that cow herd number —and today it's just under 28 million head — there's usually a plus or minus couple hundred thousand head error around that number. And so even though the beef cow number was about 200,000 head below what it was printed at last year, even though they revised last year's number about 200,000 head lower, it's essentially the same cow herd because it's still within the error of where you would expect things to be.

 

If you look in the report, we talk a little bit about cow herd growth going forward. I don't expect significant growth in 2026 or 2027. So essentially whether you're looking at 2024's cow herd number or all the way out to 2027, each of those, all of that four-year period is going to be operating on a cow herd that's pretty similar. So that's a long way around saying I don't see a lot of retention happening enough to offset continued declines in the cow herd. Now as we go forward, I do think when we look at this upcoming fall run — the fall run of 2025 — that's probably going to be the first place where we're going to start to get meaningful heifer retention where then we can look ahead and say, "Okay, maybe there's some nominal growth in that January 1, 2027, cow herd, but then the real growth will develop as we go to 2028 and 2029."

 

So again, for your listeners, kind of comparing this cattle cycle to the last one, I'd say we're either in 2012 areas of enthusiasm around heifer retention or where we were in 2013 leading into that 2014/2015/2016/2017 rebuilding effort.

 

Shauna Hermel (07:55):

Now it takes a while for those calves being born. 2025 fall retention, we're looking at breeding those heifers a year later and a calf hitting the market two years later.

 

Lance Zimmerman (08:07):

Exactly.

 

Shauna Hermel (08:09):

How does that affect the beef prices today? We look at prices in the store and it's kind of phenomenal.

 

Lance Zimmerman (08:17):

Yeah, it is. Let's break down the supply side first, then we'll talk about those record-high prices on the retail side. You hit the nail on the head and that's why when I said, "Hey, we're probably not going to have real meaningful cow herd growth until 2027 or 2028." It's literally just the biology of what we have to go through, but let's talk about what has to happen to slaughter and beef supplies before we even get to that point.

 

Last year (2024) was an amazing year from a supply perspective. We had three things happen that no analyst at this time a year ago was forecasting. One was a 25 pound (lb.) increase in carcass weights across all classes of cattle. You just look at fed steers: It was a little bit bigger. Nobody was forecasting a near 25% year-over-year increase in beef imports, but we did. And nobody was expecting fed-cattle slaughter/steer and heifer slaughter to be steady with a year ago.

 

As we looked at 2024, if any one of those factors had happened, we probably wouldn't be talking also about record-high cattle and beef prices in 2024. But we also had demand that was at highs we hadn't seen since 1986. That's a credit to what your listeners are doing from a genetic standpoint, what we're doing from an improvement in nutrition and health management and just individual management of animals today. And so as we look at this going forward, we're going to see this decline in supply occur this year. That didn't happen in 2024. We actually saw beef supplies increase in 2024.

 

Shauna Hermel (09:47):

How much do you see those carcass weights trending this year?

 

Lance Zimmerman (09:52):

Yeah, we're going to see an increase in carcass weights again this year, and you have to think about what the seasonal looks like for carcass weights. Typically, we peak carcass weights in the fourth quarter, usually somewhere around the 1st of November. We drew that out just a little bit later last year, but we're essentially then starting January 1, 2025, well above a year ago because those weights tend to trend through the entire second half of the year higher. And so right now we're seeing those weights still massively bigger than a year ago. As we get to the fourth quarter, those gains will narrow, and so I still expect a good 6- to 7-lb. increase in carcass weights, but a lot of the big gains are going to be in the first half of the year.

 

And so what we have to think about though is if we're going to continue to have some declining cattle slaughter going forward, and again, if the idea is we're going to start retaining heifers with this upcoming fall run, you're going to start to see that heifer number contribute to a decline in fed slaughter. We've already seen cow slaughter decline. When you look at the decline — both beef cow and dairy cow slaughter — we saw a million-head decline in cow slaughter last year. We're going to see both beef cow and dairy cow slaughter continue to decline this year and probably the next several years because just as there's [reason] for beef cattle producers to retain some heifers and rebuild, there's equal efforts on the dairy cow side. Milk margins are exceptionally good right now. They want to retain more heifers than they have been. Move some cattle out of the beef/dairy production system, develop a few more replacement heifers. All of that's going to lead to tighter supplies just on slaughter alone. Yes, weights are going to continue to trend higher. We're going to continue to see nominal improvements in beef imports to replace some of that decline in cow slaughter, but we're going to see probably over the next three years an average annual decline of 3% a year in beef supplies. So that puts us back at 54 lb. of beef per person, which is where we were in 2014 and 2015.

 

Shauna Hermel (11:46):

In those cycle lows, we really don't want per capita consumption to decrease too much. We could give that demand away to another protein.

 

Lance Zimmerman (11:55):

We could. I mean, that's certainly always a concern. And certainly we're not going to win a price war with pork and poultry, but I don't think we want to. We want to be a product that stands on our own merits, and one of the things we talk about in the paper is the idea of continuing to lean into value creation. That's not lost on anyone who's listening to this podcast. We understand what that means as a beef industry very, very well, but we have to continue to demonstrate value to the consumer. Especially if we're going to see new record-high prices these next several years. We need to continue to lean into what the consumer wants. How can we make sure that we're producing that as a beef industry? And that's in our DNA. It goes all the way back to the first National Beef Quality Audits, but there still continues to be a focus on how can we add flavor, how can we add taste, how can we add tenderness? And that plays right into the beef industry's hands.

 

Shauna Hermel (12:50):

We've been doing that for decades. You've said some of those answers, right?

 

Lance Zimmerman (12:51):

Yeah, exactly. Yeah, so I think that's really an important part of the discussion going forward. So yes, per capita supplies are going to decline because we're a cyclical business. We got to get those heifers out of beef production and back on the herd, but it's going to create a lot of opportunities for us to demonstrate better value to the consumer.And as long as we don't hit a recession, I think that's the biggest thing. I don't think we've got to concern ourselves too much with having that price gap widened between pork and poultry.

 

Shauna Hermel (13:21):

Excellent. So we saw the border close because of our health issues (referring to New World screwworm being found in Mexico) and a stoppage on some of the trade with those steers coming in from Mexico that's been opened. So as we resume that, how much can that southern supply help offset a lack of feeder calf numbers here grown domestically?

 

Lance Zimmerman (13:45):

Yeah, as we look at that Mexico import number, feeder cattle and calves, the last several years we've imported in a little over a million head. Annually, we would've been on pace for probably 1.4 to 1.5 million imports had we not seen the late November shutdown down of the border for those cattle. As we talk to folks as that border reopens this week, we're going to miss out on some of those cattle that we would've imported in November, December and January. They quite simply got too big, and it's not a situation where they're too big to work in the feed yard from a weight standpoint. It's actually a situation where they get too big to work from an age standpoint, especially when we're focused on 30 month and younger-type cattle coming out of feed yards. So there is going to be some loss that we just won't recover from that January/December stoppage.

 

As we go forward, we're going to continue to lean into that Mexico supply. Especially those southern feed yards that have the greater access to that. The freight advantage is better to import those cattle into the southern yards. We're also going to lean into continuing to try and grab onto that beef-on-dairy supply to maintain some capacity through here. Especially as we know numbers are going to tighten. But I think also we have to remember that Mexico has their own very strong budding beef processing business. Mexico stands in contrast to the U.S. and Canada. In Canada, they have the same cyclical patterns that we do in the U.S. Almost mirroring that. But the decline in their cow herd has been more dramatic than the U.S. In the U.S. we've been in a declining cow herd situation, but we've had stronger recoveries cyclically over the last couple decades. Mexico actually stands in contrast to both in that their cow herd is at 30 year highs. They have a growing cow herd, even with the drought challenges that they had over the last year. It's tended to slow down that growth, but they're still very focused on continuing to grow, and I think that's because they do have a stronger beef processing segment than they had 30 years ago. They have a more active cattle feeding business, and I think that infrastructure around that's supporting a stronger cow base.

 

Shauna Hermel (15:56):

Now as they build their cow base, are they looking to the U.S. as an export market? Are they looking elsewhere or more internal?

 

Lance Zimmerman (16:05):

No, you nailed it. The U.S. is a major source for them as they look at the marketplace. And I think as we think about our product, your listeners probably know full and well how the trends have been in Prime and Choice grading. The reality is then we're producing less Select product, we all want to have the highest quality steak we can possibly eat, but we don't necessarily need that same product to be used for ground beef. We don't need that to be used for lesser quality cuts. And the reality is there's a market in the U.S. for lower quality beef too. It's not the one we're focused on. It's not where we have the comparative advantage in the U.S, but Mexico actually does have probably the comparative advantage for that lower quality product. And so those producers, the highest quality production they're going to export into the U.S. is going to be product that fits very well into what would be a comparable Select or low Choice type market here in the U.S.. And so it's the better cattle in Mexico that are finding their way north that fit into that marketplace, and they can offer a more consistent supply of that lower quality product than we can offer consumers here in the U.S. because of the gains we've made in quality grade.

 

Shauna Hermel (17:14):

Excellent. So now with the record prices that we have today, it's one of the unique times when it seems like all sectors of the beef industry can get a little bit of profit out of that pie, right?

 

Lance Zimmerman (17:28):

Yep, absolutely.

 

Shauna Hermel (17:29):

How long will that last and who is most at risk in the future?

 

Lance Zimmerman (17:33):

Yeah, anytime I'm sitting there making a fundamental price for outlook, especially as I do in this paper for the next several years, I always start out with looking at what I think that available supply is going to be. Then I look at what I think the demand implications are, and then that helps guide where we're going to be at retail prices, and then we kind of figure out, okay, how do we fight for the pie, right? We're a segmented industry, and so as we look at it, we'll start with the retail side just to give folks on the podcast a chance to understand where things could potentially go. I already mentioned beef supplies are going to go towards 54 lb./person. We were at 60 lb./person in 2024. As we do that, even if demand just holds steady from where we were in 2024, which was very good demand. If we hold steady, that is still a win.

 

It is still well above the trend line that we've been on for growth since the lows in 1998. That would imply that you always have to think about a little bit of inflation every year that beef prices could go from where they were in 2024 at $8 to about $8.30 in 2027 because you have to pick up that inflation. That CPI as we go each and every year, but I'm forecasting steady demand and declining supplies about 3% a year the next three years (this year, 2026 and 2027). That would imply that retail prices are going to go well above $9.00, probably about $9.20. If you want to say, "Lance, you're crazy, demand's going to continue to grow, not hold steady!" then you could see upside for an annual average in 2027 of retail prices closer to $9.50.

 

And so based on that, obviously your listeners want to know, "Well, that's great. I need to sell calves. Where are those going to go?" Well, on the other end of the supply chain, you're going to be talking about calves that on an annual average basis, so there's a range around this within a calendar year, calf prices are going to go well above $4.00. $4.25 or $4.50 is not out of the possibility.

 

Shauna Hermel (19:34):

That seems unreal, isn't it?

 

Lance Zimmerman (19:35):

Yeah, it really is. But when you talk about a retail price going to $9.00 or $9.50, it changes the calculus for every cattle market beneath it. And it also means that as we think about the cost of those replacement heifers, they're probably going to inch up to $4,500 a head potentially.

 

Shauna Hermel (19:54):

For a replacement heifer?

 

Lance Zimmerman (19:56):

Exactly. A bred heifer. And so the challenge in that - as you wrap your mind around that - is if you have some listeners today that they're trying to consider, when do I expand, what do I do? If you have the means around you to start leaning into it early, you're going to be better off because 1.) those heifers are going to be cheaper, but 2.) they're more likely to have a pregnancy into a point in time where that will still be at or near some of those highs for maybe that first calf or maybe even that second calf.

 

Shauna Hermel (20:25):

You bet. Lance, we talked about the prices and going higher, and we know eventually there will be. We know as they go higher, our input costs are going higher as well. And we always have unique avenues to navigate with our regulations, with new administrations, with just a difference in the management process or management landscape. What are some of the things that we can do to prepare to take advantage of some of those high prices that are coming, but maybe prepare for when they decline?

 

Lance Zimmerman (21:06):

Yeah, no, and I think that's the biggest thing as we look at the cycle we went through and we broke down from those highs. Folks felt like if they had risk management in place going into the 2013-2014 rally, they left some money on the table. And so a lot of folks made a conscious decision that, "Well, we're going to be a little bit more open in our market positions", and then the market broke on them and they were exposed to downside risk. I think the biggest thing that I would stress to folks is risk management. We all want to wrap our mind around the price side of it, and that is very real. And of course it makes perfect sense why we would do that. And when you're talking about feedlot animals today, they're at a value of about $2,800/head, and we have that much working capital tied up in those animals as we're sending them off to market. Yet when we look at the historical returns on cattle feeding over 30 years, it's about a 1% return on investment. And that hasn't changed

 

Shauna Hermel (21:59):

Pretty slim margin.

 

Lance Zimmerman (22:00):

And it hasn't changed over those 30 years. We've had some ups and downs obviously as we cyclically do, but it basically means we have more cash at risk for no additional return. And so when that's the case - and I gave the example relative to the feedlot sector - it's the same whether we talk about cow-calf or the stocker background or the packer. It means we have to be that much better at managing risk across our entire business. That's not just price risk. I think about the most recent cattle inventory report. One of the big discussion points was when you look at that calf crop number relative to the prior year and the number of heifers and cows that we're expecting to calve. The percentage of that ratio was the strongest it had been since the calf crop number was first reported in the early 2000s.

 

I think there's some things going on with the beef-on-dairy [cattle] that are helping with that, but I also think it's just people recognizing these calves are expensive and there's a massive cost in not having a cow that's getting pregnant and contributing to a viable calf every year. And so as we think about risk management, I broke down in the paper four key categories well beyond just price risk management. We talked about production risk management, the traditional kind of market and financial risk management, institutional and we'll break some of these deals down so your listeners better understand and even environmental. And so first, in the area of production, one of the things that I think we miss out on is the idea of wealth transfer. What I mean by that is these are family operations. When we talk about the cattle business, what happens if the person who's currently running the operation perhaps owns the majority of the operation unexpectedly passes away?

 

What are we doing from a generational transfer perspective to make sure we have all the legal documents in place? The wills in place? What happens if there's unexpected critical illness? All of a sudden you're diagnosed with cancer or there's a farm accident? Who's there to make sure that the operations continue? Is it a son, a daughter? Is it a niece, a nephew? Is it a hired man? And you hate talking about these things, but you have to when it comes to risk. Even things as sticky as divorce and how does that affect the viability of that operation going forward? And those are all tough conversations, especially if it's just a single family entity, a husband and wife, but even more so if you have other family members that are part of that operation. An issue with one side of the family or the other can really ripple through the entire business. And that's unique to the cattle business because we have a lot of sole proprietorships on the market and financial side. We talk a lot about futures and options. I'm not going to go into that. I think most of your listeners understand that. But also, what about the term sheet for your bank debt? What about interest rate risk? Are you exposed to that? I think those are important market and financial considerations.

 

Shauna Hermel (24:59):

Are banks becoming more interested in maybe the cattle industry as a profit center? Cow-calf production wise?

 

Lance Zimmerman (25:10):

Yeah, it's really interesting when we talk about banks. And I think it's always difficult. Now, I was in the same boat as listeners. I'm new to the bank environment, but I'm not a banker. I work for a bank. And one of the things that I've learned is I had this misconception, maybe your listeners did too, of how banks really make money. You think, "Well, they got all this cash, they just need to give it out." Well, banks are a lot like a feedlot in a lot of perspective. And what I mean by that is feedlots are in the commodity business. They're in the business to buy grain, buy cattle and sell cattle. Money is also a commodity and banks are in the commodity business of making money on money. And so they bring money in from hopefully good customers who are paying their bills and then they reinvest that money in different businesses. They also loan that money back out to customers as well.

 

Shauna Hermel (26:09):

Risk is a part of that.

 

Lance Zimmerman (26:10):

And risk is a major part of that equation. And so honestly, today, I think you're hearing this not just from our institution, but a lot of other institutions. We're also asking a lot of these questions around risk management as we lend money and make investments in the cattle business. If you're a good customer with good production practices, good management, good risk structure around you, we're excited to be involved in that aspect of the industry. But our antennas are up too with these higher prices. And if you're not a good operator, you're a higher risk operator. And so I mentioned in the paper the institutional risk side of things.

 

We're living that right now with the new government transition to the new administration, and that affects us on the banking side too. As we talk about new regulations, new policies. It trickles down even to our business and how we operate as well. So there's a lot of these things in this paper. Sometimes we have to look internally as well and say, "Oh yeah, we're dealing with this day in, day out."

 

Shauna Hermel (27:14):

The fourth item on the risk areas was environment.

 

Lance Zimmerman (27:18):

Yeah, environment.

 

Shauna Hermel (27:19):

How do we handle risk in the environment?

 

Lance Zimmerman (27:21):

Right? Yeah. There's certain things that are always out of our control a bit when it comes to the environment, but there's also things that we can invest in when we think about our operations, right? Many of us have been dealing with drought across many areas of the country right now, but what that often does is it offers some opportunities to shore some things up alongside that. What I mean by that is maybe you have some ponds on the pasture that you need to shore them up. You need to build up the dams, you need to clean out the bottoms. Well, they're at rock bottom right now. So go ahead and get some of that work done now so that when we enter into a wet season, we're prepared for it. What do we need to do to reevaluate our crop rotations? What do we need to do to reevaluate our pasture rotations?

 

Looking at infrastructure improvements in terms of can we do some cross fencing? Can we better utilize crop residues? And then what are some of the overlap between some of the institutional risk and environmental risk is what are some government programs that exist out there that can minimize some of our risk exposure? One of the ones that we're using really well as an industry is pasture and range insurance government program. And many operators I talked to say much like risk management on the futures and options side where you need to build your plan and stick to it, not jump in and out of it. Pasture and range insurance has been, I'm being told by the guys that use it very effectively, it's the same way. You don't want to pick and choose the years you're using it. You're going to be in a net loss in paying for those premiums. But over a 10-year period, if you stick to it every single year, you're going to be at money ahead as an operation because it'll help you through those tough times. And so I would tell folks, "Hey, we're in a drought now, so we're talking about it. If we start getting rain this spring and the pastures are green, that's not a time to ignore that. It's a time to lean more into it, especially if we're going to rebuild and get our stocking rates back up."

 

Shauna Hermel (29:17):

It's not in our nature to look at that long range average over 10 years. A lot of times we get so focused in on, "Okay, who had the highest calf prices at the market this week?"

 

Lance Zimmerman (29:29):

Exactly.

 

Shauna Hermel (29:31):

So kind of a change in mindset.

 

Lance Zimmerman (29:33):

You have to, and I mean when we think about our business, the reason we have multi-generation farms and ranches dotted all throughout the United States is because our predecessors did a good job of keeping the long run in mind. And I think our best in class operators that exist today still do that. The challenge is when you have per head values, I mentioned the fed cattle price at $2,800 a head, a 2% swing to the market today is just a little under $200 a head, where 15 years ago is about $50 a head. And so you have a lot more, what should I say? You have more near term volatility that sometimes can cloud your long-term perspective.

 

We have got to make sure as we look forward, we don't allow the near term chaos to distract us from our long-term goals. And I think that especially over the last two weeks as we've had a new administration, there's been a lot of short-term chaos thrown at us, but we got to keep that perspective. And if we do that, we can weather a lot of these storms. I think back to my old boss at CattleFax - Alan Smith who is head of risk management for Cargill - he beat into my head, "Lance, an error in execution is more serious than an error in judgment." And what he means by that is your execution is your plan. Stick to your plan. Don't deviate from your plan. Doesn't mean you can't tweak your plan here and there or revise it as needed. That's good business, but don't allow an error in judgment to cause you to deviate from script. And we're going to have judgment calls that we're going to miss on occasion. That's human nature. None of us are perfect, but don't let it cause you to deviate from what you're doing day in, day out.

 

Shauna Hermel (31:13):

Talking about some of the other different sectors, and we look at the number of feeder calves going into the feedlots. They make their money off of cattle being on feed there every day, pens being full. How are they going to adjust as we go into lower feedlot or lower feeder cattle supply?

 

Lance Zimmerman (31:40):

Yeah, excellent question we go into in the paper talking about there being a need to diversify a little bit more. We're not a vertically integrated operation in the beef industry, right? We're very segmented from sector or segment to segment. There are limitations to our ability to see the packing industry really enter into the feedlot business or a feedlot business, really enter en mass into the cow-calf business in a way that's going to significantly improve their capacity utilization. Perfect case in point, earlier this year, we saw King Ranch take a 50% stake in Cobalt Cattle Feeding. King Ranch is a Top Five cow-calf operation in the U.S. in terms of inventory. Well, even if King Ranch could take every single mama cow and sync her up so that she calved within the same 60-day window that would allow them to send all of those calves to Cobalt cattle in one run, they would be able to fill one feed yard for one turn of cattle. That's it.

 

Shauna Hermel (32:41):

That's a good perspective.

 

Lance Zimmerman (32:42):

That speaks to the problem we have of scaling up one segment to be big enough to fully satisfy the next, but that shouldn't discourage any one segment from maybe looking at opportunities to diversify into the ones around it. And we go into that in the paper. So for instance, if you're a feedyard, we'll use that example from the paper I talk about right now. We have a cow-calf business that they're looking around and saying, "How do I fund this next rebuild to come full circle?" We talked about those bred heifer prices getting well above $4,000 a head probably as we work forward, maybe there's an opportunity for feed yards to go to some of their major cow-calf clients and say, "We'll actually help you with some of the funding for those cows. We'll take ownership of the cows, we'll pay you for the management and we'll share in the cost of those cattle, but we'll also share in the profit and loss with you along the way.

 

Again, it's probably not going to take a feed yard from 80% occupancy to a hundred percent overnight, but it offers them an opportunity to have a very coordinated supply of cattle that are tailor built to exactly what their needs are while also helping give them an opportunity so they don't have to worry about procurement for a certain subset of their cattle. Perhaps it gives them some cattle that can work very well into a niche program from a processing standpoint and end product standpoint as well. And so that was one example. Another one that I think we're going to continue to hear, and it's not new, we hear it every time we go through these cyclical turns, is do we diversify some of these finished yards into more development and grow yards? And I think that's going to be another opportunity that's going to creep up, especially as we continue to add days on feed on these cattle and we look for opportunities to have more freshly weaned calves going into feed yards and things of that nature. More days on feed can help tie up some of that empty bunk space because you're turning cattle over at a slower rate.

 

Shauna Hermel (34:35):

Will there be some opportunities for maybe heifer development?

 

Lance Zimmerman (34:40):

That's a great point. Yeah, and I think that's going to be key too. I think as we look at where we are in this cattle cycle versus the one we were in previously, an inescapable challenge that we all are going to have to wrestle with is the idea of labor and especially at the cow-calf level because those are dominated by part-time operators, right? The average herd size we talk about all the time is 40 to 45 head. They don't have a lot of time on their hands. And so there's a place for coordinated heifer development where they can essentially put their order in and say, "Hey, our operation today is at 30 head, we need to get back up to that 40 or 50 head, but we don't have time to invest in the genetics and the breeding program. It's not efficient for us to do that, but we also just don't want to settle on buying whatever runs across the sale barn floor." And so leaning into more heifer development opportunities is certainly a possibility that I think we're going to hear more and more about going forward.

 

Shauna Hermel (35:36):

So there's a lot of material that you have presented to us with your paper. I know our listeners are going to be interested in following up and accessing that. Where might they go to be able to access that online?

 

Lance Zimmerman (35:52):

Yeah, they can. The first place they can stop by is knowledge.rabobank.com, and there'll be an opportunity if they're not a Rabo customer to sign up there for our research. They simply just mark Prospect as they sign up. And then once they're there, just search Lance Zimmerman in the toolbar and they'll get access to that paper immediately as well as other papers that I've authored over the last 3 years.

 

Shauna Hermel (36:15):

Excellent. Well, we'll try and put all that in our notes for the show as well. We'll make it as easy as possible for people to get access to that. Thank you for your time today.

 

We do like to close out our Angus at Work podcast by presenting something positive, whether it's on a personal level or a professional level. Can you share?

 

Lance Zimmerman (36:41):

Well, we've talked a lot about cattle. I'm actually going to pivot and talk about family.

 

Shauna Hermel (36:47):

Awesome.

 

Lance Zimmerman (36:48):

I'm sitting here today, first week in February, and we're on Wednesday. Tomorrow is my son's birthday. Lawson is 13 years old. We have a teenager in the house starting this very week, and as you would expect with any 13-year-old boy, energy abounds everywhere. So he's busy playing basketball right now in junior high and already thinking about travel baseball. And for all the listeners on the call, they'll probably get a kick out of this. His travel baseball team is named The Barn. Oh, awesome. And so we're looking forward to some warm weather as we have this teenager in the house to get him outside and work some of that energy off. So that's kind of an exciting little milestone that's hitting in the Zimmerman house this week.

 

Shauna Hermel (37:32):

Well, thank you, Lance. I appreciate it. And we'll have a good convention here.

 

Lance Zimmerman (37:36):

Thank you, Shauna. Appreciate the time.

 

Lynsey McAnally (37:45):

Listeners. For more information on making Angus work for you, check out the Angus Beef Bulletin and the Angus Beef Bulletin EXTRA. You can subscribe to both publications in the show notes. If you have questions or comments, let us know at abbeditorial@angus.org and we would appreciate it if you would leave us a review on Apple Podcast and share this episode with any other profit-minded cattlemen. Thanks for listening, this has been Angus at Work!