Ron Rowan Interviewed By The American Angus Association
Jan. 5, 2009
FOR IMMEDIATE RELEASE
For more information contact: Crystal Albers, assistant director of communications/web editor, 816-383-5100 or calbers@angus.org
I Am Angus: A Q&A with Ron Rowan
When the Wilson family staked their claim on a piece of northeast Oregon valley in the 1880s, they had their share of challenges. But despite the harsh winters and rugged West, the Wilsons established a stocker operation that thrived "so much so they began a feeding venture near North Powder.
Today, fifth-generation producers John and Jim Wilson continue to operate the Wilson Cattle Co. and have grown the family's once small-scale feedlot into the well-established Beef Northwest "a diversified agribusiness with lots in Nyssa and Boardman, Ore., and Quincy Wash.
Ron Rowan, Beef Northwest customer service and alliance manager, says the company has a one-time capacity of 95,000 head and supplies fed cattle to Tyson's plant in Wallula, Wash., and AB Food's facility in Toppenish, Wash.
Rowan attributes the company's sustained success to the Wilson's overarching commitment to one thing "partnerships. Which is why the 28-year cattle veteran spends the majority of his day at Beef Northwest helping producers get the most out of their cattle and fostering that partnership philosophy.
Q: Tell us about yourself and explain your role at Beef Northwest.
Previously, I worked for the two largest cattle feeding operations in the Northwest prior to coming to Beef Northwest. I started out at Agri Beef, learned the grain business and bought grain for the feedlots there. Then I went to Simplot and was involved in marketing and grain procurement there. Then had an opportunity to come to Beef Northwest as a partner. Basically, I'm still involved in the same thing I've been doing for 28 years "marketing, grain procurement, cattle marketing, cattle hedging, grain hedging. In the last four or five years, I've also become a lot more involved with customers and customer development.
At Beef Northwest, one of John and Jim Wilson's biggest strengths is constructive partnerships that bring value to both parties. And so, my role in customer development is to work a lot with cow-calf operations and help them market their calves to the maximum value through feeding and marketing programs.
We're serving almost like a consultant. We bring them into our operation and they become customers, and partners in many ways. I spend quite a bit of my day working with people, marketing their cattle and helping them make decisions like whether they should put them on grass or in the feedlot. Is it better to sell or better to feed them? How can we maximize their value? That's a role that we play "adding value to cow-calf operations' product, their calves.
Q: Beef Northwest has developed alliances with several seedstock suppliers. How did that develop and what's the motivation?
Over the last 15 years, we've fed a lot of Angus genetics and we found that they bring more value to the bottom line than the average cattle. So we developed an alliance with them where we pay producers using Angus genetics a bonus for their cattle "especially if they partner with us on them and if they grade over 70% Choice.
The idea is that if the cattle can make us $40 to $50 a head more because they have better-than-average genetics, then we're willing to give part of that back to the producer to get top-quality cattle. It's a benefit for the seedstock producer because then they can meet with those producers, look at carcass results and see how those cattle have performed. This gives the commercial guys an idea on what kind of bulls they should buy and how they can increase their genetic performance all the way through to the feedlot.
Q: How has shrinking profit margins in the cow-calf sector affected retained ownership? In the coming months, should producers consider retaining ownership?
It ebbs and flows. Retained ownership hasn't been that popular the last two years. And it's difficult this year because a lot of these producers are financially struggling. Their bankers are restricting the amount of risk that they're allowing them to take, so we're seeing some retained ownership, but I wouldn't say that it's increasing.
It's market-driven. For example, for about the last 6 months, it's been very advantageous to retain ownership vs. selling your cattle. The feeder cattle price has been depressed relative to the fed cattle price, so anyone who's sold their cattle recently has left money on the table by selling them. But there are times when there are big premiums for feeder cattle and the fat cattle futures market is not advantageous, so the producer is taking a lot more risk.
We would like to see increased retained ownership because I think it gives the producer some real advantages. In the past, once calves left the pasture gate producers were unable to get back any kind of feedback on their calves and how they performed. They're really at a disadvantage because they don't have the information on the cattle to market their product in the future.
But through retained ownership, cow-calf producers can capture information and use it to further enhance productivity on the ranch and to make more money.
Q: Fluctuating corn prices and a volatile fed cattle market have obviously complicated life for feeders. What trends do you anticipate in the future?
We're in the margin business. Just like the packers and retailers are in the margin business. We buy something and we sell an end product and we try to make a margin in the middle. What's happened, especially in the last two years, is that we've seen a heightened degree of volatility in these markets.
The classic example is 2008, when crude oil went to $147 per barrel and corn went to $8 per bushel and cattle went to $118 in the futures market. That kind of volatility is very difficult to manage when you're in the margin business.
So with corn prices, we saw that the same volatility had a huge impact on what we do as cattle feeders and in the cattle industry. It affected the spread between calf and feeder cattle values.
Corn demand for ethanol can be a fairly inelastic demand component. A few years ago, we only used 9 billion bushels of corn. Now we're expected to use 13 bushels. We produced the second-largest crop ever this year and we didn't increase our stocks.
What that's telling us is that we have to continue to produce a huge crop to satisfy the demand, and the demand is becoming more inelastic. Plus, these big speculators using commodity markets as an investment vehicle rather as a typical hedging tool also adds a lot more volatility.
Corn prices now look to be in a trading range just because we've been blessed with record yields this year. We've got a surplus wheat situation around the world, and even with our record demand we're going to keep our ending stocks unchanged this year versus last year.
So fundamentally, we have plenty of corn this year, but because of the volatility I think corn will continue to stay relatively high. This makes it a challenge for any end user of the product to manage the risk.
An advantage that we have in the Northwest is that we feed potato byproducts. So as a percentage of our ration, corn is quite small compared to a typical Midwest ration. We don't have the same degree of risk with the corn market as someone feeding 80% corn in their ration.
Q: That volatility is felt by cow-calf producers too. What can cattlemen do to survive a challenging environment?
I think what's working for people is quality. When we look at all the cattle that we feed and the difference that quality cattle can make, it can be huge. It's the difference between making money and losing money a lot of times.
That's what Angus cattlemen need to focus on " continuing to produce not only a quality beef product but something that's going to be efficient and productive in the system.
That will reduce their risk as a producer. In any business the key to success is to look at all the things that you can do to keep costs down and be efficient while producing a good quality product.
If you look at CattleFax information on low-cost and high-cost producers, even in rough times the low-cost producers are not that bad off. High-cost producers that aren't as efficient make some money in good times, but they get hammered in the bad times. That's why we're trying to develop alliances with people that have quality cattle, because it's less risk for us. Those cattle are more efficient in the feedlot and on the rail. We have less risk.
Q: What trends have you noticed in recent years regarding quality grade?
The overall percent Choice has gone up as a nation. The percentage of cattle qualifying for CAB (Certified Angus Beef®) has gone up overall because the cattle are grading better. So the trend is up "partially due to good feeding weather and partially due to better genetics for our feedlots.
Q: Beef Northwest states on its web site, www.beefnw.com, that the "cooperation between ranchers, feeders, packers and processors is the key to the continued strength of the rural Northwest."? Can you explain?
The Wilsons have worked a lot with the Oregon Department of Fish and Wildlife to rebuild riparian areas, establish sustainability models and implement rotational grazing.
We don't commercially fertilize any of the pastures anymore. The pastures have become more productive with less weeds and no commercial fertilizer. We're using the impact of animals on the land to make the land better and more sustainable and doing that naturally.
We're also very much into animal well-being and animal husbandry practices. We do a lot of coaching of our crews on how to handle and process animals, and use low-stress handling techniques both on the ranch and in the feedlots.
The bottom line is that it makes more money because the animals are less stressed and it's the right thing to do.
It's part of our culture here and how we manage our cattle.
We've developed Standard Operating Procedures that details everything from the cattle handling processes to inventory management to medicine protocols. Everything that we do in the feedlot is documented. Then a third-party audit is conducted to ensure we're completing these environmental sustainability practices properly. It's all part of our process here.