Beef Market Advisor

Thursday, June 14, 2001

Sample Beef Cow Lease Form -- Draft Only


Parties to the agreement.
Party of the first part.__________________________________
Lessor and owner.
Party of the second part.________________________________
2. Party of the second part desires to lease from party of the first part
(It) __________________, (type) ________________ from (date) _______________

to (date)
3. Party of the second part is to have his choice of the class of animals mentioned in
Paragraph 2 above, to the extent that much class of cattle is available and on hand in the
inventory of the party of the first part, on the date mutually agreed by the parties.
4. Party of the first part agrees to provide an adequate number of bulls to service the cows
selected by the party of the second part.
5. Division of the calves. Party of the second part is to receive two-thirds (2/3) of the
calves, and party of the first part is to receive one-third (1/3) of the calves.
Unless otherwise mutually agreed, party of the second part is to divide the calf
crop into three equal parts and allow parts of the first part to have first choice of
the three groups of calves.
Division o f calves is to be done annually or more frequently if necessary or if
mutually agreed.
It is mutually agreed that the division is to be done at weaning time, when the
calves are at an age of approximately six months or a weight of approximately
four hundred pounds.
6. Obligations and duties of the party of the second part.
(a) Party of the second part agrees to adequately care for cattle owned by the party of
the first part. Cattle shall be provided adequate summer grass and winter feed, and
ample water shall be provided at all times. If adequate care cannot be, or is not,
provided for the cattle, party of the second part agrees to return all or any part of
the cattle to the party of the first part at the______________________________ at
no expense to the party of the first part. The number of cattle to be returned, in
any event, is to be withing the sole discretion of the party of the first part.
(b) Party of the second part agrees that all fences, corrals, enclosures, sheds and such
shall be kept in good repair and that they will retain the cattle. Party of the second
part also agrees that all corrals, lots and pastures shall be kept free of debris, trash
and other objects which could be reasonably assumed harmful to cattle.
(c) Party of the second part agrees to pay all property taxes, trucking expenses both
ways, veterinary expenses, feed, salt, inspections, insurance and other expenses
incidental to the normal business of raising cows and calves.
Party of the second part agrees to carry liability insurance in the amount of
$___________ and provide the name of the carrier to the party of the first
(d) In the event of the death of any animal owned by the party of the first part, while

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in the possession of the party of the second part, party of the second part agrees to
present that portion of the hide containing the brand, or a certificate from the
rendering company stating the brand on the deceased animal, to the party of the
first part.
In any event, party of the second part agrees to noti& party of the first part of any
death, emergency or unusual event as soon as is possible, in writing.
(e) Party of the second part agrees to report at least quarterly and in writing to the
party of the first part as to the condition of the cattle. Such writing shall be sent to

(fl Party of the second part shall allow party of the first part to visit and inspect the
cattle at reasonable times. Party of the second part further agrees to keep party of
the first part informed as to the location of the cattle.
(g) Party of the second part agrees to be financially responsible for any losses
occasioned by neglect, absence or inattention the care and feeding of the cattle.
(h) The party of the second part agrees that if he shall return the cattle to the party of
the first part prior to the expiration date of this contract or any extension thereof;
that he shall pay the party of the first part the sum of$__________ per month per
head, which amount is agreed to be the reasonable cost of feed per month per
7.Extensions of this lease, if mutually agreed between the parties, may be accomplished by
written memorandum on this document. All provisions of this contract are to apply to any
period of extension.
Dated this __________ day of ____________, 19 at (City) , (State)


Party of the First Part


Party of the Second Part



posted by Dr. Harlan Hughes 12:54 PM [edit]

Monday, June 11, 2001

Paper presented at Western Animal Science Section Symposium Paper, Bozman, Mt June 20, 2001

Change is now a common everyday word in beef marketing and change is the central theme of this paper. Today’s beef industry is also caught up in the U.S. economy’s overall drive for efficiency. Consumers are demanding value in everything they purchase and beef purchases are no exception. Changes in beef marketing are in the works.
The beef industry is changing into two distinctly different marketing systems based on two distinct production systems – one production system for commodity beef and one production system for value-based beef. By definition, commodity beef is a homogenous product with little or no product differentiation. Without product differentiation, commodity beef producers compete by being the lowest cost producer.
In order to increase economic efficiency, reduce production costs and increase overall beef cow profits, the beef industry has developed and implemented the Integrated Resource Management(IRM) and the Standardized Performance Analysis (SPA) Systems. The key focus of IRM is on integrating financial management and production management into a single management information system that sends integrated management signals for enhancing beef cow profits. Today’s leading IRM cooperators are generating profits of over $200 per cow producing commodity beef.
Value-based beef is the newer beef marketing system and is being marketed and priced based on selected quality factors targeted toward consumers’ expressed wants and desires. Value-based beef producers are recognizing that consumers have specific quality specifications for what they consume and consumers are willing to pay a premium price for that quality product.
Consumers demand for year around supply necessitates value-based producers banding together to meet this year around demand. Certified Angus Beef is the best known example of value-based beef alliance. Today, there are many difference beef alliances and new ones are forming each year. The logical next step in value-based marketing will be branded beef.

There are six fundamental factors underpinning the change in the current beef marketing system. These six factors are:
1. Cattle cycle and its resulting beef price cycles
2. Economic hurt in the mid-1980s
3. Increasing production per cow
4. Decreasing demand for beef
5. The good news is that consumer demand has turned up
6. Ranchers are marketing on an up-market

The single most important factor impacting beef marketing is the cattle cycle and it resulting beef price cycle. Beef prices go in 10-year cycles that correspond to the decades. Market prices are typically high in the beginning and ending years of the decade. Produces can expect the cycle low in beef prices to occur in the mid-part of each decade. Farm Business Management data also suggests that beef cow profit margins are getting smaller and smaller with each progressing cattle cycle.
Change is again impacting feeder cattle marketings. As beef cow producers now decide to divert heifers from feeding to breeding, the supply of feeder cattle will decrease. This reduction in feeder cattle supply over the next 2 years will put beef cow producers in the drivers seat with respect to feeder cattle sales.
Over the past 30 years, beef cow numbers have trended downward and total beef production has trended upward. Beef production per cow has increased over the years due to increased carcass weights, increased feeder cattle imports, and reduced veal calf slaughter. Beef production per cow has been increasing at such a rapid pace that lagging beef demand has led to reduced beef cow numbers.
While the amount of beef per cow is rising at a rate of 1.8 percent per year, domestic and foreign demand is only increasing at about 1.3 percent per year. This means that the production increases per cow will continue to decrease brood cow numbers over time.
Long-term decreasing demand for beef led to a long-term decrease in the real price of beef. While nominal steer prices trended upward since the early 1960s, inflation has driven the real (inflation adjusted price) ever downward. By 1995, the real steer price was only one-half of the real steer price in 1979.
To remain competitive during times of decreasing demand, beef producers have had to increase production efficiency. This was the only way that they could even begin to maintain the family living draw from the ranch in times of reducing real market prices. Over the last 25 years, ranch after ranch has been forced out business by decreasing demand. This pressure for generating family living led to the general consolidation of smaller ranches into larger, more efficient ranches as a way of reducing family living draw per cow.
Producers feeling continued pressures to increase production efficiency, looked to the exotic breeds for significant increases in size and cutability as another means of increasing production efficiency. This industry wide focus on increasing weaning weights lead to the rise in the production of USDA Select grade beef. At the same time, meat retailers turned to increased the use of USDA beef quality grading systems in response to the heightened consumer demand for quality information and segregation at the retail level.
It appears that today’s beef industry is currently living with its focus on weaning weights in the 1970s and 1980s. During the 1990s, the percent of the carcasses grading Choice went down while the percent of the carcasses grading Select went up. The net result of all of this is that the market is demanding more Choice cattle and producers are producing more Select cattle. Quality price premiums are now being established in the market.
Increased demand for quality beef at the retail level has resulted in beef packers offering value-based cattle producers premiums based upon the quality and yield grades of their cattle. Today, meeting the demand for Choice cattle includes importing Choice cattle from Canada.
Change spells out “Cattlemen Have A New Great Encore” and the most exciting encore is that beef demand may have turned upward for the first time in 25 years. This is the best news that the beef industry has received in many, many years. Increasing demand changes the dynamics of beef marketing.
Ranchers are once again marketing in an up-market. Part of this up-market is due to the cattle cycle and part of this up-market is due to increased demand. Yes, change is here -- “Cattlemen should Have A New Great Encore.”

posted by Dr. Harlan Hughes 1:57 PM [edit]

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