Bringing it home
Dakota Prairie Beef Co-op adding
value to home-grown cattle, grains
By Raylene F. Nickel
Editor’s Note: Nickel is a freelance ag journalist based in Kief,
North Dakota.
orth Dakota’s rolling grasslands grow nearly a
million beef calves each year. In the fall and
early winter, soon after the calves are weaned
and possibly fed for a while on farms, semitruck
after semitruck carry the calves far out of state,
typically to feedlots in Kansas and Nebraska. About 95 percent
of those North Dakota calves leave the state, in spite of
the fact that North Dakota’s fields raise bumper crops of feed
grains. Much of that grain also is shipped out of state, often to
the very feedlots where the North Dakota-bred calves end up.
This tradition of feeding North Dakota grain to North Dakota
calves in feedlots in states to the south got its start because
farmers and ranchers believed North Dakota’s cold winters would
cause poor gains in cattle on feed. But research and experience
are refuting this perception, leading producers to look for ways to
plant the seeds of a feeding industry in North Dakota.
In the arid southwestern corner of the state, this desire for
an in-state feeding industry has resulted in a network of new
feedlot pens built to hold 6,500
head of cattle. Surrounded by
open prairie, the feedlot facility
is owned by Dakota Prairie Beef,
a cooperative of 145 members,
most of them farmers and ranchers,
each of them owners of cattle
being custom fed in their cooperatively
owned lot.
Long time coming
“The idea behind this feedlot
cooperative was a long time in
coming,” says former board chairman
Lance Larsen. Larsen, who
ranches in western North Dakota,
is one of the founding members.
“We’re the first ones to get
such a concept off the ground,”
Larsen adds. “We didn’t form the
feedlot cooperative in order to create an investment opportunity
simply for the sake of earning eventual dividends. The
members are the customers. We retain ownership of our cattle
all the way to processing and pay the cooperative to feed them.
“The feedlot is really only an extension of a member’s own
farming or ranching operation. The purpose in forming a
cooperative to build a custom-finishing lot was to maximize
the economies of scale that a larger feedlot affords.” This
provides cheaper gain than a producer might obtain by feeding
small numbers of cattle at his or her home feedlot.
Larsen was among a handful of western North Dakota
ranchers who began talking together 6 years ago about the
possibility of forming a cooperative to build a custom feedlot
in the region. It was during the time that a regional cattle
producers’ cooperative, Northern Plains Premium Beef, had
organized with the intent of establishing a producer-owned
packing plant. Larsen’s group believed that the formation of a
producer-owned custom feedlot could be a source of fed cattle
for the NPPB packing plant.
Though the cooperatively owned packing plant never
came to fruition, the ranchers plowed ahead with their vision
of building a producer-owned feedlot in the state. For a year,
the steering committee staged community meetings in North
and South Dakota as well as in Montana. The goal of the
meetings was to raise enough equity for the group to build a
new feeding facility on purchased land near the small town of
Gascoyne in southwestern North Dakota.
Two share types offered
Two types of shares were offered to producers: “B” shares
cost $60 each and bought the buyer bunk space each year for
one spring-born calf delivered to the feedlot between Oct. 1
and March 30; “C” shares cost $55 each and bought the buyer
bunk space each year for one yearling delivered to the
feedlot between April 1 and Sept. 30.
“We offered 6,500 calf shares and sold all of those shares,”
says feedlot manager Mark Vachal. “We offered the same
amount of yearling shares and sold 2,400 of those. So yearling
shares continue to be available, as well as some calf
shares from individuals who have decided, for one reason or
another, to sell their shares.” Sales of preferred stock to local
one spring-born calf delivered to the feedlot between Oct. 1
and March 30; “C” shares cost $55 each and bought the buyer
bunk space each year for one yearling delivered to the
feedlot between April 1 and Sept. 30.
businesses also contributed to the final capital pool, which
amounted to $500,000.
This sum provided equity for a start-up loan of $900,000
from Farm Credit Services. Local businesses, such as Slope
Electric Cooperative, a preferred stockholder, also helped initial
funding by providing smaller loans to the feedlot cooperative,
says Vachal.
The 145 members purchasing feeding shares in the cooperative
are from North and South Dakota and Montana. The
first cattle arrived at the feedlot in the summer of 2000.
Vachal expects the lot to be filled to capacity, with 6,500 head
of cattle, by early 2003.
Members pay for the feeding services they receive at the
feedlot just as they would pay for the services provided at any
other custom feedlot. Twice a month, members who have cattle
on feed receive an invoice from the cooperative. They’re
charged for the amount of feed their cattle have eaten in two
weeks. They’re also charged a yardage fee of 25 cents per head
per day. The yardage fee covers the member’s share of the cost
for the use of the facility and equipment. The fee also covers
the member-customer’s share of the cost of labor and utilities.
The cooperative employs eight full-time individuals.
Besides managing the actual feeding of and caring for the
cattle, Vachal’s responsibilities also include marketing the
finished cattle to packing plants.
Co-op provides grading, conversion data to members
Member-customers of Dakota Prairie Beef have the
opportunity to get detailed information back about individual
animals fed at the feedlot. The information tells them how
their cattle performed in the feedlot in terms of feed conversion.
It also tells them how their animals’ carcasses graded
and, in some cases, even the characteristics of each individual
animal’s carcass, such as the size of the ribeye.
“The ribeye is one of the highest-value cuts in the carcass,”
says Vachal. “The larger the ribeye, the more valuable
the carcass.” When producers sell their finished animals to
packers on a grid basis, they earn premiums for such highquality
traits as large ribeyes.
Tracking the performance of individual animals and their
carcasses is possible because of an electronic button implanted
in the ears of cattle at the time owners deliver them to the
feedlot. The button’s number, along with the number on the
animal’s visual eartag, permanently identifies the animal and
its carcass. Scanners at the packing plants “read” the number
on the button at the time the animal is harvested and its carcass
measurements recorded.
Western North Dakota rancher Wes Andrews, chairman of
Dakota Prairie Beef, views this local opportunity to get feeding
and carcass information back on his cattle to be a key benefit to
feeding cattle at the cooperatively owned feedlot. “Learning
the carcass quality of my cattle and how they perform in the
feedlot helps me to make genetic improvements in my herd,”
he says. Breeding cattle for higher carcass quality, for instance,
could increase Andrews’ income in the long term.
Andrews will begin making genetic changes after a couple
more years of data give him a broader picture of the feeding
and carcass-quality genetics in his cow herd. Andrews, who
runs a cow herd of 350 head, partners each year with his father
to feed 150 head of calves at the Dakota Prairie Beef feedlot.
When the cooperative was being organized, Andrews
joined a steering committee. Along with other early members,
he envisioned Dakota Prairie Beef as an opportunity to
add value to cattle and feed grown in the region.
Indeed, the feedlot provides a local market for hay, corn
and silage. This year, Dakota Prairie Beef purchased 3,000
tons of corn silage from farmers within a four-mile radius of
the feedlot. In addition, the co-op purchased upwards of
1,000 ton of hay from growers within 100 miles of the lot.
First dividends expected soon
The financial performance of the cooperative is on schedule,
says Vachal, with debt repayments being drawn from the
feed and yardage charges paid by member-customers.
Indeed, payment of dividends could begin as early as next
year, with holders of preferred stock receiving the first dividend
payments. If there is sufficient net income after dividends
are paid to preferred stockholders, customer-shareholders
will be paid dividends as well.
Despite good rates of gain of cattle fed at Dakota Prairie Beef
feedlot, profits earned by individual member-feeders have, however,
been poor, due to reduced prices packers have paid for finished
cattle during the past 2 years, says Vachal. He expects
market conditions to improve in the coming year. The slim
profit earnings in feeding cattle are industry wide, he notes, and
do not result from the northern location of the feedlot.
Concerning location, former co-op chairman Lance
Larsen adds: “We can feed cattle here cheaper than they can
in southern feedlots. We know we’re not too far north to
feed cattle successfully because there are Canadian feedlots
several hundred miles north of us that do very well.”
Critics of feeding cattle in North Dakota often point to
North Dakota’s distance from packing plants to the south, saying
that it’s too costly to transport finished cattle from the state
to processing facilities typically located farther south. But Vern
Anderson, an animal scientist at the Carrington (N.D.)
Research Extension Center, says the criticism is unfounded.
“Feed is more expensive to haul than feeder cattle,” says
Anderson. “Cattle should be fed as close as possible to
where the feed is grown. The Canadians have proved this
rule of thumb to be true. The potential is great for feeding
cattle in North Dakota. We’ve got plenty of feed because
we’re a grain-producing state. In addition, there’s an
increasing amount of ag processing going on, making coproduct
feeds available. Typically, we can meet a feedlot animal’s
nutritional needs with combinations of grains, coproducts
and forages for substantially less cost for feed than
they can in Kansas feedlots.”
Indeed, such information fuels the vision held by Bill Patrie,
economic development director for the North Dakota Association
of Rural Electric Cooperatives. Patrie, who helped organize
Dakota Prairie Beef as well as a number of other farmerowned
cooperatives in the state, sees great potential for farmers
and ranchers to own a larger share of the beef-production
chain, rendering the industry more efficient in the process.
“Under a farmer-owned system,” says Patrie, “the beef
feedlot would be a cooperative owned by the same people that
own the calf; the same people that own the processing plant,
the fabrication plant, the rendering plant and the distribution
company. In such a system the feedlots would be placed where
they made the most sense geographically. Ownership of the
production chain would extend from prairie to plate, from the
calf all the way through to the end consumer.”
