Ethan Haywood
Hello, and welcome back to another episode of The Select Sires Podcast. I'm your host, Ethan Haywood, and today I'm very excited to be joined by Mark Johnson, director of beef and dairy supply chains from Low Carbon Technologies (LCT), to discuss GeneNet®
and beef grid marketing. Mark, thanks so much for taking the time to join us from South Dakota today.
Mark Johnson
Thanks for having me on.
Ethan Haywood
Mark, we're going to introduce a lot of different program names and a lot of really cool arms under the Select Sires family of businesses. Could you start by introducing yourself and your involvement with Low Carbon Technologies and how GeneNet and Low Carbon altogether fit within the Select Sires family?
Mark Johnson
Appreciate you having me on. I came to Select Sires via Low Carbon Technologies, which is a subsidiary of Select Sires. We are basically the sustainability arm. I like to call us the little venture sustainability program that we're putting together. We're working in a lot of areas right now. One of them is GeneNet that we're going to talk about today. Other things that we're working on are a labeled beef product that's labeled low carbon or Certified Sustainable. We're also doing some carbon intensity work, some things that are going to chase into maybe the carbon credit space. All things we'll talk about on future podcasts, I'm sure. But the availability for grid marketing is one portion of what's under LCT at this time. And yeah, that falls under my management. I started a couple of years ago with Select Sires’ LCT. Prior to that, I worked in North and South Dakota mainly as a cattle marketing agent for a company called Producers Livestock, where we worked with independent farmers on marketing plans, financing, buying and selling cattle. So it was a pretty natural move for me to come into LCT and then manage this grid that we have.
Ethan Haywood
And as you mentioned, there's a lot of really cool programs under the hood at LCT and this beef grid marketing opportunity named GeneNet is probably one of the best established right now. Tell us for our listeners that aren't as familiar, whether they're in the dairy space, the beef on dairy space or the native beef space, what is beef grid marketing and why does that matter to me as a producer?
Mark Johnson
Yeah, in its simplest terms, a lot of cattle in the past were purchased on a flat rate on a live on the hoof basis or hanging, dressed in the meat at the plant. And the unique thing about grid marketing is it will as you invest different feeding technologies, different genetic cattle into your operation, all that is done so that hopefully you're doing better than average, right? So this gives a person the chance to capture premiums through the plant by producing the product that the plant actually wants. Otherwise they're just buying it, figuring that your cattle are average and here's the average price. Now this was identified, GeneNet was actually started, I believe back in the 1990s and it was a really forward thinking way of marketing at that time because there just wasn't the ability to gain premiums on individual cattle prior to that. Now, a lot of different grids have spun off since that time, but GeneNet was actually one of the founding grid marketing programs in the country or in the world for that matter. It was founded by a gentleman by the name of Ken Conway. He recently wanted to retire, and that's when Select Sires purchased the grid that he had negotiated and crafted over many decades to come under our ownership, which then we set into the LCT family of products. Ideally to start having a home maybe for some of these beef on dairy cattle that we're creating through our ProfitSOURCE®
programs. But ultimately just to give us a place at the table with a major packer when it comes time to have an outlet for individual cattle feeders. Market accessibility is another big area that GeneNet can help. I mean, not everybody has access to the same types of grids. GeneNet is a very high-quality grid that is available to anyone virtually in almost any geography, Central U.S. and West. We have plant locations that we can deliver to in the Midwest at Grand Island in Nebraska; Greeley, Colorado; and out west in Hyrum, Utah. And then kind of in the Texas panhandle at the Texas plant there. And these are all JBS plants. GeneNet's worked with JBS since its inception. And we're happy that they continue to see us as a partner to move forward with.
Ethan Haywood
One of the early and forward thinking beef marketing grids, as well as, as we've talked in the past, one of the most advantageous with a lot of potential for upside. As far as what we are grading and rewarding above average cattle for, what specific traits are being weighed in there into the final pricing factors?
Mark Johnson
I would say GeneNet excels in two areas, both as a high-quality grid and also as a high just red meat yield kind of a grid. And that's been one of the adaptations over the years is as we've bred for more marbling, more quality into our cattle, the fact that we can produce a higher percentage of Choice and Prime cattle makes this a really good fit. The other thing we're seeing in the industry as cattle become more scarce and there's fewer cattle on feed, fewer cattle to buy. One thing that's interesting about our grid is we actually have a premium for carcasses between 950-1,100 pounds. So they're incentivizing a larger carcass with more red meat, more yield and usually with those heavier carcasses comes a higher grade. So in the past, there was usually a discount if your carcass got over 950 pounds. And then there was a discount if they were over 1,000 pounds and then a discount if they were over 1,050. And they just slowly kept raising the bar for what they were going to discount for. Part of it was because there were fewer cattle to buy so if the ones they were buying were heavier they just had more red meat at their disposal, right? The other thing is as we're breeding up these cattle they're just more efficient at heavier weights. So the fed steer of today or the fed heifer is an entirely different animal than it was five and 10 years ago. The heritability of the genetics we're putting out into the general population, these cattle can just be bigger animals and still be feed efficient, which was not always the case. So the packers also having to adapt as these cattle feeders have higher breakevens, just like everybody does. They have to take them to a higher weight to be profitable. So the grids have adapted over time. So the premium for the heavier weight carcasses is something that we see as unique to our grid. The other interesting thing is we negotiate this grid or we evaluate it with JBS annually. The last time we changed it was 2023 under our ownership. The one thing we did there is, we noted quality of Choice versus Select probably becoming more of the trend. We keep more of our grid on that Choice/Select spread both in the base pricing and in the Prime premium. So as we speak today, we're recording this in early January, 2025. And right now our Choice/Select spread is noted in the USDA as being about $30. Well, that's what we're actually paying for a Prime premium. And it's been higher than that in the last several months. So the cattle that grade Prime all of a sudden on a 1,000 pound carcass, if there's a $30 premium, that's $300 a head that we're seeing on Prime cattle. So as the Prime percentage goes up and the Choice/Select spread goes wider, the guys that are getting into the grid with some Prime cattle are really ringing a bell as far as premiums right now.
Ethan Haywood
Wow. A lot of upside within a grid that continues to evolve as the market evolves. And one of the key evolutions of this market is how native beef and beef on dairy are kind of merging together as they get to the plant. And we have to find ways to price both of these fairly. We have to find ways to evaluate both of these types of carcasses fairly. As far as being involved in GeneNet, does it matter if you're a native beef producer or raising beef on dairy calves?
Mark Johnson
This is another area where we're unique with GeneNet. It speaks to two things. It speaks to the limited availability of fed cattle at this time, but it also touches on the heritability that we're seeing in our carcass and feedlot performance genetics as a whole within the industry, and we'd really like to focus that within our ProfitSOURCE program to bring those types of cattle into the Holstein crossbreeding system and feed those kind of cattle and run them through this type of a grid because the heritability and those certain genetics of production traits have made these cattle leaps and bounds better than they were even five years ago, like I touched on before. The grid itself was developed for native beef cattle. We can harvest beef on dairy cattle under the same grid. To answer your question, it's available for all the cattle. They get graded under the same circumstances.
Ethan Haywood
So available for both of those types of cattle, available in a very large geographical area.
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Ethan Haywood
How about as far as producer size or connections? Who do you have to be to be able to get involved in this program?
Mark Johnson
That's the unique thing. I mean, this grid was started in the 1990s, the farmer feeder was probably a lot more prevalent than they are today. So it was set up, load lots were easily put into the grid. We have small farmer feeders that are participating. We have some larger feedlots that dedicate cattle to our grid on a weekly basis as well. The other thing that we've done is as more and more dairies that are producing beef on dairy calves and are maybe owning them into the finishing phase, that are selling them from the dairy. We've done customers that are obviously load lots but then we have been able to, I don't know if this will always be the case but they've sure been good about taking in even trailer loads at certain times of the day that work for the plant. So a producer could maybe bring in 10 head if they're close enough to the plant.
Ethan Haywood
And as a producer who's interested in getting involved in this program, is this something that I've got to plan as this calf hits the ground so that I know that I can be a part of the program or how easy is it to get started within this?
Mark Johnson
Well we'd like to evolve this with some of the sustainability things that we're doing where maybe it is a little bit more of a life cycle program. However, at this time, it is just as these cattle are ready, you can contact us and then we book them. And that is another unique thing about our grid. If you call me by Tuesday at noon, I can get these cattle scheduled for the following week. And that's not the case everywhere. There's times when packers get put two to three weeks out from the time that you sell them the cattle. So it makes it a little easier for maybe managing some of your risk protection if you're a hedger. And also just turning cattle into cash and getting them moved down the road, right? Because if you have them sold, nothing worse than looking out your window and seeing a pen of cattle that you're feeding and they're sold and they're just not delivered. So we have a really good delivery schedule and we have very easy access. So I would encourage if people are interested just to reach out to me, maybe by email at first, and that's just mjohnson@selectsires.com. And then we can do a consult from that point on when the best time to market your cattle would be and just get a better feel for your operation.
Ethan Haywood
A really unique blend of market accessibility and being able to get those cattle to market, but also an extreme amount of flexibility within that. And I think it's cool that if you're going to be involved in this program, you're going to talk to Mark and that's how it's going to work. And he's going to get you set up and it's a very personalized experience to make sure that he's covering your specific producer needs. As far as cattle that are coming within this system there's a lot of data involved that is generated in order to quantify the quality and size of these carcasses. What happens to that data and is that accessible to me as a producer to see how my cattle did grade?
Mark Johnson
Yeah we have different levels, of course when you sell them on the grid they're priced based on how your cattle perform, so you would get the group data back regardless. We also have the ability to schedule these cattle on a day when basically an independent third-party is in the plant and they do the tag transfer, trace that animal from your farm or ranch or feedlot, through the USDA grading process and can tell you, we can get ribeye measurements, we can get all the carcass statistics that you might want. If that's something that's part of what your breeding decisions might be down the road.
Ethan Haywood
And I find that so interesting as the beef industry continues to become more data driven and to be able to quantify the management changes and both the genetic changes in investments that you're making to make sure that your investments are paying off. And I think this puts you in the driver's seat to be able to see that data and utilize better decision making models. As far as cattle that you've taken recently, what are you seeing for performance indicators, and what are you seeing for cattle that are flowing through this program at the current date?
Mark Johnson
Our current trend is definitely that people are making cattle larger. So they're grading better. The Choice/Select spread, as I noted, is wider. These higher grading cattle are just making more money above and beyond what the base price is and if I could just reach back a little bit. Depending on where these cattle are harvested, like if they're in Grand Island, let's say they're based off the Nebraska average, and then we mark these cattle up dependent on where the Choice/Select spread is, and then we grade them. So let's just say the market is $3, and that would be like a dress price. If that's what the number is, then we're starting at $3.05 when we grade these cattle. And that premium above the Nebraska average is keyed off of the Choice/Select spread. And like I said, if they make the Certified Angus® program, well, then it's another $5 a hundred or roughly $50 a head. If they make Prime, it's anywhere from $250 to $300 a head for that. As these cattle are larger, they're higher grading. I would say that the current trend is that we're making bigger cattle that grade better.
Ethan Haywood
When you multiply that out by a hundred weight or by load or by pen, there's some huge numbers there to deal with for potential increased income for anyone that's striving to be above average and utilizing modern genetics and modern management and just doing a good job being a good cattleman. What does it cost conversely to be involved in a program like this and gain this market accessibility?
Mark Johnson
Our slot fees for the program are $7 a head. They're a little more a la carte if you want more data beyond just group data. So what I would again suggest is that if you're interested in participating, just reach out to me and we can go through all that person-to-person.
Ethan Haywood
Yeah, that sounds fantastic. And it sounds like a really good opportunity for a lot of producers. There's some room in the program to be able to expand and grow and really gain some advantage for a lot of our customers that are currently working with us or customers that want to start working with us and get involved via this program. As you mentioned earlier, there's a lot of other programs that are going to start dovetailing into this grid and hopefully in the future through LCT, we're going to have some other really cool topics to be able to talk about. Again, do you mind mentioning what is the contact information for a producer that's interested in learning more about this program or where can they go to find info?
Mark Johnson
You can visit our website, which would be lowcarbontech.com. And aside from that, if you want to just reach out to me directly, my email is mjohnson@selectsires.com.
Ethan Haywood
Well, Mark, thank you so much for the time that you've taken here today. It's really interesting to hear about this other side of the cattle industry than we normally talk about here. And it's having such a large influence in today's crazy beef markets that we want to make sure we're giving our producers all the information that they can have at their fingertips to be able to make good decisions. Is there anything else you'd like to add to our conversation today?
Mark Johnson
Like I say, we just try to make it a full service offering. And as you alluded to before, we go to four different JBS plants within the country. And within that I'm the contact for all of them at this time. So it really makes it simple for guys to get involved, good market access. And if you have any questions, please just feel free to reach out.
Ethan Haywood
Awesome. Thank you so much, Mark. We appreciate the work that you are doing and the work on behalf of the entire Low Carbon Technologies team. To our listeners, thanks for listening, and we'll see you next time.
Mark Johnson
Thanks for having me.