Betty Jo Gigot, Editor and Publisher

President and CEO of Friona Industries James Herring oversees both the customer feeding division and Hi-Pro Feeds. The two companies serve over 10,000 customers, including ranchers, farmers and stocker operators as well as packers and retail outlets.

Their customer feeding division, the fourth largest cattle feeder in the nation, consists of four feedyards with a one-time capacity of 275,000 head. They market 500,000 cattle per year and mill 1.2 million tons of feed.

Searching for solutions
Herring views his company’s place in the industry as a “facilitator” between the cow-calf and stocker sectors, and the packer who works with retail and foodservice outlets. Each of those sectors make decisions that affect the next segment in the chain. All have to make purchasing and marketing decisions and all suffer from lack of capital, understanding and information about the industry as a whole, Herring said. He also sees a lack of communication between feedlots, packers and retailers.

Beef industry concentration is a fact of life for most segments, according to Herring. There are over 800,000 producers with an average herd size of 40 head, while the 50 largest companies in cattle feeding have 240 feedyards and 65 percent of market share. Five major packers have 85 percent of the market share and the big 10 in the retail chain share 55 percent of the market. Beef is dispersed to 240 million domestic consumers and, currently, nine percent is exported.

“Beef is a value equation,” Herring said in a speech delivered to the Texas and Southwestern Cattle Raisers Association recently. “The public loves our product, but they would value it more if it was more consistent, more cost efficient, more tender and more convenient.”

In 1995, Friona Industries started working on the Beef Advantage Project, an integrated program that involved procurement of cattle by Capitol Land and Livestock, feeding at Friona, processing at Excel and retailing at McDonald’s. The program, dedicated to understanding the key metrics of success, became an odyssey of discovery for Herring. What evolved was a system driven by attributes of “brand.”

A brand is born
Three years ago, Friona used the business system they had learned from the Beef Advantage Project to develop a partnership with Excel in two of their feedyards. Randall County Feedyard and Friona Feedyard now feed exclusively for the partner program Ranchers Registry.

Cattle – both calves that have been backgrounded and yearlings – are sourced from preferred buyers. Fifty-five percent of Ranchers Registry cattle come from Texas and the rest come from Oklahoma, New Mexico and the eastern U.S. Cattle are fed at the two feedyards and then processed at Excel to go to three supermarket chains – Safeway, Kroger’s and Harris Teeter – under their own house brand names. The benefits are obvious because value is added at every step.

Making the transition had its challenges, according to Herring. Going to a one-customer system meant that the customers who had been feeding at the two yards had to find other feedyards (although, he said, right now customers are hard to find).

For cow-calf and stockers, the program provides a consistent, year-round demand with many pricing and delivery options. It also creates a sure market for quality and consistency. There is value associated with differentiation, and Friona has created a database for long-term relationships for differentiated quality.

The aligned production system has meant cost savings and increased efficiency for the feedyards. At Randall County Feedyard, for example, capacity has gone from 65,000 to 75,000 head, while employee numbers have dropped from 66 to 42. They run only three feed trucks instead of six, and operating expenses per head have decreased 19 percent. Ration costs are down 17 percent, and death rates and railers are down 20 percent.

They have also seen carcass traits go from a hot yield of 63.8 to 65.4; YG1/YG2 from 45.2 to 71 and brands from 7.8 to 66 percent.

Electrical muscle stimulation and carcass aging ensure tenderness and feeding of Vitamin E enhances meat color and prolongs shelf life.

For the packer and the end user, creation of brand equity brought source and process verification, consistency and uniformity of the end product.

What it all means
Herring ended his presentation to the Texas and Southwestern Cattle Raisers with the following summation: We can finally plan instead of react. We can focus on a consistent target. We can build an organization to fit a single task. We can fully optimize our production capability. Size matters but consistent size is huge.

“When you have the right cattle put through the right process and the right post harvest, it all comes together,” Herring concluded.