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Published September 24, 2012, 10:23 AM

Family feedlot

Jeff and Jona Kvamme purchased Pipestem Feeders LLC north of Carrington, N.D., in March. They had managed the custom feeding facility since 2004 and oversaw its complete remodeling in the past four years.

By: Mikkel Pates, Agweek

CARRINGTON, N.D. — With corn pushing $7 per bushel, is now a good time to be in the cattle business?

Sure, if you’re Jeff and Jona Kvamme, who purchased Pipestem Feeders LLC north of Carrington, N.D., in March. The couple has managed the custom feeding facility since 2004 and has overseen its complete remodeling in the past four years. Among the 7,000 cattle they keep this winter will be up to 600 head from drought- and fire-stricken parts of Colorado and Wyoming.

“They’re either dried out or burned out and need a place to go,” Jona says.

Pipestem Feeders is one of the longest-running feedlots of its size in the state. It was established in the 1960s under the Butts Feedlot name. One of its custom feeding customers, Jim Krueger of McKenzie, N.D., purchased it in 1999, and ran it as Foster County Feeders.

The North Dakota Stockmen’s Association in Bismarck, N.D., says there are some 860,000 beef cows in the state, with an estimated 100,000 fed to finishing weights. Perhaps a dozen feedlots are the size of Pipestem Feeders and Jeff is on the organization’s feeder council, which helps answer questions for people who want to develop them.

Krueger was looking for a new manager in 2004, when Jeff and Jona came on the scene. Jeff grew up in Velva, N.D., and went to Montana State University in Bozeman, where he majored in animal science and competed in rodeo. Jona, a native of Rhame, N.D., was studying child development and family science.

A new start

Krueger renamed the facility Pipestem Feeders, in part because it sits atop Pipestem Aquifer. The feedlot initially was rated at a capacity of about 10,000 head, but actual capacity was about 6,000 head.

“It needed to be updated; it needed a lot of tender loving care,” Jona says. “We’d always hoped we could own it.”

The Kruegers were willing to put money into updating the feedlot to current standards. Feedlots with more than 999 head have to be permitted and need things such as holding ponds for manure. This site had a permit, but not under updated regulations.

“It was either meet the requirements or ‘doze’ it into a pile,” Jeff says.

Pipestem Feeders moved 250,000 yards of dirt to build holding ponds, he says. “We’ve reshaped all of the pens so we have different drainage. The feedlot is about 85 percent rebuilt in the past four years — all new bunks, all new ponds. All of the pens have mounds and new fences.”

Only about four feedlots of similar size exist in North Dakota. Pipstem operates at about 65 percent of capacity year-round and is full from fall to spring.

In the winter, the feedlot has about 20 customers, and six to 10 in the summer. The feedlot charges a daily “yardage” of 28 cents per head per day, plus feed costs. Customers control feed costs by deciding what daily weight gain they want — two or 2.25 pounds per day, for example.

Custom customers

About 10 percent of the cattle are at Pipestem for heifer development for a beef operation. When done, they’ll go back to a ranch as a replacement heifer. Some went to Kazakhstan this fall.

About 30 percent of the Pipestem Feeders cattle are for cow-calf producers wanting to “background-feed” their calves. Calves come in at 500 to 600 pounds in October and are moved out at 850 to 900 pounds at the end of December or January. Some go to sale barns and some are sold directly to feedlots in southern states.

About 60 percent of the Pipestem cattle are taken to finished weight — either for cow-calf operators or for investors. They are brought in at 600 to 800 pounds and leave at 1,300 to 1,400 pounds.

Typically, Jeff decides when the cattle are ready for market and their owners will put a market hedge on them. “When you have (market-ready) cattle, you have only so many days until you need to ship them,” Jeff says. “It isn’t like putting corn in a bin and if you don’t like the market, you sit and wait.”

Revamping the facility took a lot of thinking and investment. The Natural Resources Conservation Service helped with the paperwork required to improve the feedlot to today’s specifications.

That included creating a Nutrient Management Plan, arranging for acres to spread the company’s manure byproduct. The 2,000-acre plan includes a rotation, so each parcel gets an application every third year or so. The Kvammes bought 300 acres in addition to the facility itself, which is just shy of 40 acres.

The Kvammes found out that financing feedlots doesn’t come easy. Few feedlots come up for sale, so some lenders often aren’t confident they can evaluate them. Some lenders perceive the livestock industry as more volatile and risky than an established crop farm. Risks about unforeseen environmental issues do come up.

The Kvammes qualified for an Agriculture Partnership in Assisting Community Expansion loan, through the Bank of North Dakota, with a resulting interest rate reduction.

Besides financing, feedlots deal with finding customers, labor and feed, Jeff says.

“You need people to put cattle in your feedlot,” he says. Some 70 percent of his customers every year are repeat customers. “After eight years, you’re somewhat established. Even though there’s a change of ownership, but there’s not a change of business.”

The past few years have seen the availability and stability in the region’s agricultural processing industries that produce affordable byproducts, including distillers grains and “wheat midds” or middlings, a byproduct of milling.

Waiting on Aberdeen

The Kvammes are among those yearning for a new beef processing enterprise in the region. The Northern Beef Packers in Aberdeen, S.D., continues to hold promise. The $109 million plant is ultimately supposed to process 1,500 cattle per day, but the opening has been long-delayed and nothing concrete is in sight. If it could become a reality, freight costs of 150 miles from Carrington to Aberdeen would be much better than the 450 miles they now travel to Dakota City, Neb., Jeff says.

Rising and volatile commodity prices are causing some challenges.

Farmers have used their profits to increase on-farm grain storage, allowing them to sell when they want to and not necessarily when feedlots need it.

“They’re not coming to you, looking to sell corn anymore,” Jeff says. “I like to buy it at the lows. They like to sell it at the highs, so it’s getting a little tougher that way. If we have a late corn harvest, a little wetter, it’s easier to get the corn bought. If it’s dry, they can store it until they want to sell it.”

If corn is more than $7 a bushel, feeder cattle become cheaper and the cattle market comes down. Profit margins tighten.

Labor, however, is the biggest issue. It’s a challenge to keep good feedlot help, especially with a booming oil patch only a few hours away. The Kvammes currently employ two Nicaraguan nationals. The last time they advertised for an opening, they ran ads in eight Upper Midwest states for a month. They got eight phone calls and only interviewed one prospective employee.

They had employed a married couple who left without warning after the first pay day.

“It’s hard to find good reliable help,” Jona says.

So they’re growing some of their own.