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Calling all cattle feeders

EDGELEY, N.D. -- Jay Mathern loads cattle on a truck, headed for a processing plant in Dakota City, Neb., and wonders out aloud one question: Why? "That's 360 miles," he says, after handing a brand inspection certificate to the driver. "Five-and-...

The Matherns
Jay Mathern (right) and his brother, Grant, are partners in a feedlot at Edgeley, N.D. They hope to see the North Dakota feeder industry rise to the challenge of supplying a planned kill plant that would take 750 market cattle per day. (Mikkel Pates / Agweek)

EDGELEY, N.D. -- Jay Mathern loads cattle on a truck, headed for a processing plant in Dakota City, Neb., and wonders out aloud one question: Why?

"That's 360 miles," he says, after handing a brand inspection certificate to the driver. "Five-and-a-half hours, one way. Why do we do that? Cuz it's our only option."

Mathern, 41, thinks a lot about this topic.

For five years, he has been chairman of the North Dakota Feeders Council, a subgroup of the North Dakota Stockmen's Association. The group and its board are thinking of ways the state can help pull itself up by their boot straps, preparing for the prospect of a new kill plant.

SK Partners of South Korea has announced its intention of building a plant that could process 750 cattle per day, or 225,000 a year, at full capacity. By Mathern's math, that one plant would take more than double the existing output of the fed cattle industry in the state. The state produces about 85,000 finished cattle a year.

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"We have to get ready," he says.

Besides being good for the cattle industry, Mathern says there is no better solution than feeding livestock as a rural development plan for the very rural areas of North Dakota. Dollars generated by feeding livestock turn seven times in the community, compared with the "multiplier effect" of grain farming, or almost any activity.

"This packing plant: I don't know if people understand how huge this is for our state," he says.

A family story

Jay and his younger brother, Grant, operate Mathern Cattle Co. Theirs is a quintessential North Dakota farm/ranch story.

Their ancestors were Germans from Russia, first settling in the Zeeland, N.D., area. Their grandfather, John, and others transplanted themselves 80 miles to the east to Edgeley, N.D., when a priest named Father Long established a church there in 1937.

Initially, the Matherns in Edgeley were in the dairy business, raising replacement heifers. They shifted into beef in the mid-1970s. Jay and Grant were the two youngest of four children. Their father, Richard, had a few cows.

R. "Jay," born in 1968, graduated from high school in 1986, at the end of the lingering farm credit crisis. He went to North Dakota State University in Fargo during the drought years of 1988 and 1989. He emerged in 1991 with a degree in agricultural economics and a minor in animal science.

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With the farm economy still shaky, Jay sold Farmers Union Insurance and farmed part time with Richard. The Matherns had a cow-calf operation of some 350 cows.

"The longer I went, the more I found out my heart was into farming," Jay says. "Things started to turn in the early 1990s. It looked like a better opportunity, and so that's when I got into farming."

But Jay figured he needed to find a new enterprise. It wasn't a good time to be getting into the grain-based agriculture.

"For one thing, we didn't really have enough land for everybody, so we got into cattle," Jay recalls. "We decided we wanted a feedlot to take our calves to finish, but also do some custom feeding to diversify."

Grant, six years behind Grant in school, followed his brother to NDSU and picked up his own ag econ degree in 1996. Immediately after graduation, Grant joined Jay and Richard at the farm.

Richard continued to run the cropping enterprise, and his sons became partners, focused on the feedlot.

"It was for the diversification, yes, but I also had a passion for cattle," Jay says. "Grant had the same feeling about the industry."

Beyond background

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A decade ago, the Matherns laid plans for a feedlot with a 1,000-head capacity.

The project totaled roughly $400,000, with about 60 percent from federal grants.

Besides loans from local lenders, they acquired a cost-share through the Natural Resources Conservation Service, using the agency's Section 319 Funds. The funds are available for building manure management systems in compliance with the federal Clean Water Act. The Matherns did everything but the concrete and engineering work themselves.

For the first four years, the partner-brothers did custom feeding and background feeding.

"When we were just getting our feet wet, we did a lot of backgrounding for feeders in Nebraska and South Dakota. We'd take them, wean them -- get the 'hard stuff' out of the way. Then, when they started eating good, we'd turn them over to the southern guys, who could really 'feed cattle,'" he says, with a hint of sarcasm, holding his fingers up as though in quotations. The first year, the Nebraska feeder they were backgrounding for kept the cattle at Edgeley for 90 days, then 75 days the next year, and finally 55 days. Their cut continued to go down.

"We'd get all of the sickness out of them, and then their truck would show up to pick them up," Jay remembers.

The Matherns eventually started owning their own cattle, shifting to finish-feeding.

Managing price risk

Through the process, they've been careful to protect their margins.

"Lots of times we don't make the most profit, but we try not to lose," Jay says. "Normally, we're pretty hedged up with a pretty tight risk management program. Sometimes that limits our upside potential, but it limits our risk. We're not paying for our feedlot more than once."

The Matherns have been successful enough that they're working toward expansion. They are in a zoning effort to allow for an additional 2,000 head -- a total of 3,000 head.

Jay says the partnership buys a variety of different kinds of cattle -- whatever the market seems to dictate.

"We focus on good cattle and generally North Dakota has good cattle," Jay says. "Whatever we can project is the best return on investment, that's the size we start at. If the market is dictating six-weight (600-pound) heifers, that's what we buy. If it's 850-pound steers, that's what we put in. We let the market dictate the size and sex of the animals we feed."

Feasible feeding

Jay says that despite success by numerous cattle feeders, there still are misconceptions about feeding cattle in North Dakota.

"Everybody says you can't do it, the winters are too harsh," he says.

Vern Anderson, an NDSU animal scientist at the Carrington (N.D.) Research and Extension Center, has done extensive feedlot research and preaches that North Dakota can more economically feed cattle than southern feedlots in eight out of 10 years.

Jay says there are continued challenges for the industry.

Among other things, the lenders aren't as comfortable with financing feedlot operations as they might be.

Jay became aware of the North Dakota Feeders Council in the late 1990s. It's a sub-group of the North Dakota Stockmen's Association.

"I was looking for education in cattle feeding, and I found it in the Feeder Council," Jay says.

Early on, he attended council meetings and the Mathern feedlot was on one of the council's tours. At the time, it was only one of about three Section 319 installations in the county at the time. The council often is advised by Scott Ressler, environmental services director for the stockmen's group.

Mutual support

The council has activities every other month.

"I found that people going to Feeder Council functions were very giving of their knowledge," Jay recalls.

Among other things, the group hosts "Beyond the Bunk" educational forums in December, focusing on a variety of topics, ranging from pharmaceuticals to marketing to cattle handling. There is a feedlot tour in June. Other meetings are in are February and April, as well as a golf outing in July at Washburn.

Jay has been a member o the council board since 2000. In 2005, Jay only half-jokes that he missed a meeting and was elected chairman. While the post takes some time, he's happy to be involved.

"One of the big benefits of the group is the relationships -- establishing a network," he says.

Mentors and informal advisers are numerous, but he makes special mention of board member Al Elliott Jr. of Galesburg, N.D., and council members, including Bill and Dan Price of Mandan, N.D.; Fred Berger, a cattle buyer from Mandan; Tom Bresnahan of Casselton, N.D.; and Enoch and Grady Thorsgard of Northwood, N.D.; as particularly generous with their guidance and insight. Some of these people have sponsored an agricultural student through the council's internship and mentoring program.

"I think the thing that was amazing to me was that some of the people I'd known in the industry before, they were all of a sudden part of this council," Jay says.

Among other things, the council has worked to educate producers on the benefits of cattle vaccinations, including the Pfizer SelectVAC, a branded preconditioning program that involves vaccination and management to prepare calves for weaning and shipping.

"You need a protocol," Jay says of vaccination programs. "Sick cattle take the fun out of feeding. I'd say that 10 years ago, maybe 25 percent of the cattle in the fall had pre-weaning vaccinations. Now, I'd say less than 25 percent don't. That's an accomplishment for the council."

Finally, a kill plant?

Of course, cattle feeders in the state have worked toward efforts to establish a kill plant in the state.

North Dakotans launched efforts in the 1990s, often ending in a fizzle. A small kill plant was established in Harvey, N.D., but it now stands empty. The North American Bison Cooperative in New Rockford, N.D., in the past two years has expanded more into beef, but primarily for the "natural" niche market. Another proposed larger plant in Aberdeen, S.D., has suffered setbacks.

It's been frustrating and confusing.

Jay thinks a historic break happened in 2008, when members of the Russell family who owns Cloverdale Foods Co. in Mandan were in South Korea on a trade mission. The Russells met Korean businessman Jack Kim of Seoul, who was interested in establishing an American source of beef for Korean consumers. The Russells later introduced Kim to the Price family of Mandan, one of the state's prominent beef cattle feeders. Bill Price eventually got Jay Mathern to get the Feeder Council involved.

The council took a collection from its members to host Kim in North Dakota on one of his visits to the state. Jay was impressed at how the council rallied, raising $7,000 in two weeks.

"They said, 'What's a $500 donation if we have even a little chance of getting a packing plant in North Dakota?'" Jay recalls.

In January 2009, Jay was part of a delegation that traveled to Korea to assess the situation. A few weeks later, Kim visited North Dakota and met with the Feeders Council. Kim's group eventually was called SK Partners of USA.

"It just kept getting better and better," Jay says. "Jack has a way of assembling a pretty good team. What we were most impressed with was that he was building the meat market in Korea and then moving backward into the slaughter. That's why it's going to work. Before, we'd say let's build a packing plant and kill some cattle and sell them wherever -- usually in competition with the four majors."

Responsible growth

With the Korean opportunity, Jay thinks North Dakota producers may be entering a period of growth and says they need to be mindful of stewardship.

"We need to be responsible today so we can preserve our environment and our opportunities," he says. "It's our responsibility and I don't think anyone would purposely flout the rules. I would say we are fortunate to live in a state with a government, the Department of Health that regulates us, that has a common-sense approach," he adds. "I am counting on the industry respecting that and that we do our share to keep North Dakota as a cattle expansion-friendly state."

Part of that is that feeders need to know the rules and follow them.

Jay says the feeder industry is looking for ways to improve, so cattle feeders can be ready for the SK Partners opportunity -- or others. The Feeder Council is to come up with new ways to improve communications among industry phases -- cow-calf and feeder. He thinks an important piece of this is a simple, user-friendly form of source and age verification program, probably branded to North Dakota. Such a program should build on existing age and source programs.

As for whether the feeder industry in the can double in two years, he says: "We know the cattle will be there if there's profit in it. Good old capitalism."

Mikkel Pates is an agricultural journalist, creating print, online and television stories for Agweek magazine and Agweek TV.
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