Changing Times Ahead for the Cattle Industry

Long, Bob

Biography of Tom Field, Ph.D.

Professor of Animal Sciences at Colorado State University

Tom Field, Ph.D., is a Professor of Animal Sciences at Colorado State University. He is also a partner in a cow-calf enterprise in western Colorado. A native Coloradoan, he teaches introduction to food animal science, beef production and industry, beef feedlot management systems, and family ranching. He is also coordinator of the seedstock merchandising team, manages performance data for the seedstock cattle in the RI herd, and serves on the management team for the livestock program at ARDEC. His work focuses in beef cattle management systems with an emphasis on improving the profitability of ranching. A frequent speaker at state, national, and international beef cattle educational events, Dr. Field is also the author of Scientific Farm Animal Production and Beef Cattle Management Decisions. He received all of his degrees from Colorado State University.

Tom Field, PhD • Colorado State University

Cattle production is a complex enterprise that results from the inherent inter-relationships between:

  • the biological and financial aspects of production systems,
  • a growing focus on the development of supply chains,
  • pressure from externalities including governmental regulators and international trading partners,
  • societal concerns about, for example, the environment and animal welfare,
  • an overwhelming amount of information and data, and
  • limited availability of cohesive benchmarking systems aligned with production and marketing goals.

These factors, when taken in total, create a cattle industry environment accentuated by change rather than stability.

The agricultural business that functions as it has in the past, no matter how successfully, will find it difficult, if not impossible, to prosper in the future. Thus, organizations must develop strategies based on the evolving nature of the business rather than what has been true in the past. Planning is in danger of becoming a four-letter word as the result of so many planning efforts that yielded nothing but wasted time and paper. And if a plan fails to yield action, then the process is typically viewed with cynicism. However as John Preston points out, “the beauty of not planning is that failure comes as a complete surprise and is not preceded by any period of anxiety.”

Yet management guru Tom Peters challenges business leaders that “the first and foremost task of our generation is to re-imagine our institutions, both public and private.” Given the dramatic changes in the social, economic and political landscape, agriculture must develop strategies and approaches to successfully negotiate amidst these changes. History tells us that every successful organization that fails to repeatedly transform itself is doomed to mediocrity and loss of market share. I would advise you to take heed of the words of a manager at MCI, who said, “Do something. Make things happen. It’s inaction that kills you.”

Perhaps a look at the history of another industry will proveuseful. A Ford Motor Company correspondence in 1952 stated, “To the average American, our present car and its size represent an outward symbol of prestige and well-being.”  The post-war optimism and success of American industry was manifest in the U.S. automobile industry. There was every reason for the big three automakers to ride high in the saddle. In 1955, for the first time U.S. made car sales exceeded 7 million. Despite the recession of the early 1960s, U.S. manufactured automobile sales set new records in both 1964 and 1965. “Understandably, Detroit figured that it must be doing things right. They cavalierly built the cars that they wanted to build, and then, in the best tradition of American car selling, they “pushed” the vehicles on customers who usually had no choice but to buy them,” wrote Doody and Bingaman in Reinventing the Wheel. “America was so rich, so far ahead of the rest of the world, that there was no need to look anywhere else for useful ideas, and no reason to believe that anything would change. America was alone at the top. And for Detroit, it was a heady time”, wrote Ingrassia and White in Comeback.

Meanwhile, a funny-shaped little import called the Beetle increased its sales from 2,500 in 1953 to 420,000 in 1966. By 1980, imports had grabbed almost 27 percent of U.S. auto sales. How bleak was the situation?  Despite the hopeful advertising slogan in the 1970s of “Is there a Ford in your future”, Doody and Bingaman pronounced “during the three-year period of 1980-82 it was touch-and-go as to whether there would be a Ford in anybody’s future.”

It is useful to look back at the first responses of domestic automakers to the challenges coming from the competition.

  • “Small and economical” meant “puny and cheap”.
  • Only hippies and communists will buy foreign-made cars.
  • The Detroit auto industry knows best.
  • OPEC is to blame.
  • Unfair foreign competition is to blame. (Yet, without Ford’s European operations, the company would have been in bankruptcy by 1982.)

Source: Doody and Bingaman, 1988

The fact of the matter was that domestic automobiles were gas guzzling, boring, heavy, poorly made, and completely out of touch with the needs of customers. The once invincible American automobile was on the ropes. The prescription for recovery as defined in Reinventing the Wheel was to “define quality and identify the standard by which quality could be judged. American carmakers had to consult American drivers. And they had to listen, as they had never listened before.”

Ford Motor Company, under the leadership of Philip Caldwell, led the change. “The quality I am talking about is not limited to products or to our manufacturing and assembly plants. Quality is an ethic, a course of action to govern everything we do”, wrote Caldwell. His strategy included discarding aging and unproductive factories, slashing fixed costs everywhere possible, linking production capacity and sales levels, streamlining manufacturing, and dramatically altering the mindset of the company to get in tune with the demands of the contemporary driver.

The Taurus is often seen as evidence that the changes at Ford were working. The development of the Ford Taurus was predicated on four principles:

  1. Create a world-class car with a team approach.
  2. The customer would be the absolute focus.
  3. Product integrity would never be compromised.
  4. To insure achievement of the first three objectives, the team would involve people from beginning to end. The rigid walls between segments would be destroyed.

General Motors and Chrysler successfully followed and by the mid-1990s, the Japanese had fallen into the same trap that ensnared the American industry twenty years previously – arrogance and inaction. Jack Smith, CEO of General Motors, summarized the experiences of the automobile industry in 1994 when he stated “GM’s unrivaled size and success made it easy for us to ignore the significance of change and the signs of potential future problems. The lesson we’ve learned is that, for unrivaled leaders, success itself breeds the roots of complacency, myopia, and ultimately, decline.”

The leadership in Detroit either failed to recognize the changing trends of the 1960s or misinterpreted their impact. The leaders of the U.S. automobile industry also failed to be wary of changes to the assumptions upon which their business had been built.

The beef industry has become dependent on the assumptions of low interest rates, cheap fossil fuels, and abundant sources of affordable feed grains. For the sake of discussion, the following trends ought to be carefully evaluated.

  1. The competition at the meat case will intensify. Continued differentiation of the market place will be met by an increasing number of value-added and/or branded products. The mindset of the future will be “product lines” not “commodities”.
  2. Natural resource management and conservation of agricultural lands are keys to the successful continuation of the beef industry. At the same time, cow-calf production will likely be shifted onto more marginal lands. The dramatic increase in price of corn, wheat and other grains has resulted in a dramatic increase in the competition for acreage. As a result, the average cost of an agricultural acre in the United States has nearly doubled in the past five years.
  3. International beef producers will become more competitive. However, demand for beef will increase on a global scale as more people enter the population and as economic growth increases the average incomes of consumers worldwide. 
  4. The focus on improving eating quality attributes must be balanced with need for acceptable cutability, feedlot performance, and productivity at the cow-calf level. Selection indices and decision aid models will become the standard in the future.
  5. Commercial cow-calf enterprises and industry alliances focused on cost efficiencies and meeting diverse consumer demands will dictate the selection criteria of seedstock producers. Staying close to the customer will not be an option but rather a prerequisite.
  6. Those with information will have opportunity to share in value-added returns. Those without information will be resigned to trying to survive in an increasingly limited commodity market.
  7. English breed genetics will dominate the cowherds of North America. However, maternal heterosis is one of the “aces-in-the-hole” in regards to lowering cost of production at the cow-calf enterprise. Terminal heterosis is one of the “aces-in-the-hole” for offering “product lines” instead of “a product”.
  8. The beef industry must find ways to engage a new generation of people who have “the right stuff” to assure a successful future. As the First Things First study pointed out, access to labor is increasingly becoming a top of mind concern for cow-calf producers.

Capturing the opportunity from these trends will require shifts in mindset and structural transformations. Organizations tend to respond to change with one of two approaches - ignoring them or being motivated to action. Which of the following will describe the beef industry a decade or two hence?

Heirs to a society which had over-invested in empire, and surrounded by the increasingly shabby remnants of a dwindling inheritance, they could not bring themselves at the moment of crisis to surrender their memories and alter the antique pattern of their lives. At a time when the face of Europe was altering more rapidly than ever before, the country that had once been its leading power proved to be lacking the essential ingredient for survival – the willingness to change.”

J.H. Elliott’s description of the fall of Imperial Spain.

“Change breeds opportunity. The renewal factor is the opportunity that transforms threat into issue, issue into cause, cause into quest. The complacent manager merely presides. The renewing manager is engaged in a daily effort to fight entropy, to welcome change, to uproot habits, and to use renewal to build our future. Dreams, not desperation, move organizations to the highest levels of performance. Our dream ought to be institutions that work for, not against, our needs. That is the hope, the power, the dream, and the challenge in renewal.”

R. H. Waterman, Jr. in The Renewal Factor