Feedlot copes with changing input costs

CARRINGTON, N.D. -- A recent explosion of corn and commodity prices is having its effect on livestock feeding profitability in the livestock market, and North Dakota's larger feedlots are coping.

Pipestem Feeders of Carrington, N.D., is a feedlot that was built in the 1960s by the Butts family. In 2001, Jim Krueger of McKenzie,

N.D., purchased it and established it as Pipestem Feeders. It remains one of the half-dozen largest cattle feedlots in the state, which is most famous for cow-calf operations and sending calves to southern feedlots to finish them to market weights.

Kvamme, 43, a native of Velva, N.D., has been manager since 2003. The feedlot is theoretically rated at 10,000-head capacity, but Kvamme has kept it to a maximum of 7,000 head, and most of the time, it carries 4,500 to 5,000 head.

Krueger feeds some of his own cattle in the lot, but for the most part, it is a custom yard. At any given time, the lot probably has cattle from 15 customers.

"Our biggest feature is location," Kvamme says. "We're in good farming country. Feed availability is really good. We don't have a lot of (processing) byproducts really close, but they're not that far away."

Winters can be cold, he says, but for the most part the northern cattle feed well.

The feedlot uses wheat "mids" from the Dakota Growers Pasta Co., just a mile away.

There are distiller's grains about 110 to 150 miles away. The feedlot uses about 30 tons of distiller's grains per day, year-round. They use the "modified," which is 50 percent moisture.

"Availability of corn and hay is the biggest feature," Kvamme says.

Another advantage is the feedlot's cattle processing facility, which they've had in use for about three years.

"It's really top of the line," Kvamme says, noting that it was built in part to cope with a shortage of qualified labor. Within its life, the facility probably has paid for itself in labor savings, he says.

The handling facility has a Moly Manufacturing Inc. system. It has a turret gate and double-to-single alley and a Silencer brand squeeze chute.

"Behind the double-alley is the turret gate, and that's run with remote hydraulics," Kvamme says.

"Our biggest thing is that we're short on labor most of the time," Kvamme says. The feedlot employs four full-time workers plus Kvamme and a part-timer.

The feedlot is one of the few in the region with a "micro-machine." Kvamme can order a basic supplement and, with the micro-machine, he can add ingredients for specific customers and their cattle.

He can feed smaller pens of cattle for local area people.

"With the price of fuel and trucking anymore, it's more attractive to have customers that are local with 50 or 30 head. It's easier for them to feed their calves and then take them to market in a trailer load, rather than a semi-load."

On the other hand, smaller producers involve more management.

The feedlot has pens hold 50 to 250 head, each allowing 250 to 300 square feet per head.

The feedlot has its seasonal cycles.

In September, Pipestem Feeders starts bringing in yearlings. In October, the company brings in current year calves. In December and January, the feedlot starts shipping out yearlings to market.

Also in January, they're also starting to bring in cattle that have been background-fed. In By April, many of those will go to market.

"By July, our numbers are usually down a bit," Kvamme says.

Pipestem Feeders and its customers have been increasingly marketing into niche markets.

One of them is Dakota Farms Natural Beef, which has the new beef kill enterprise at the North American Bison Cooperative in nearby New Rockford, N.D., about 11 miles from the feedlot.

"That's a nice little market for my customers and me," Kvamme says. "Hopefully, this will allow us to stay in the upper end of capacity."

To Montana and home

Kvamme's path to feedlot management went through Montana State University in Bozeman, where he obtained his animal science degree in 1990. He also met his wife, Jona, a native of Rhame, N.D., who was studying family science there.

From 1991 to 2003, the Kvammes lived in Mandan, N.D. Jeff worked for the WW Ranch in Mandan and eventually leased it and ran it for himself for eight years. The Mandan 5,000-head feedlot didn't require a permit and was close to the Missouri River. Kvamme felt the pressure from ever-closer housing developments with $300,000 and $400,000 homes.

"Urban sprawl was kicking me out," Kvamme says.

Meanwhile, the couple had five children, born between 1996 and 2005.

Initially, Jona had worked in Bismarck, N.D., but later was working with the children and helping with feedlot bookwork.

With both sides of the family in North Dakota, the Kvammes wanted to raise their children in a smaller town, so Carrington -- the "Central City" -- looked perfect. His oldest children, Kylie, 12, and Keenan, 10, help with the feedlot.

Kvamme does feed some cattle for himself, as a customer of the feedlot.

"It's quite a challenge right now, the way feed prices are, the volatility of what's going on. But if you can get your feed locked up in the fall, if your timing is right, it can make a world of difference. Right now, it's hard to predict anything."

Coping, capitalizing

Everything is going up for farm costs. Pipestem Feeders charges 25 cents per head per day for yardage. Kvamme says that soon will go up to about 28 cents.

One of the services Pipestem Feeders offers is pre-buying as much feed as possible in the fall.

"We still have corn we bought last fall, so it's easier totell a feeder how much it's going to cost to feed his cattle," Kvamme says.

Feed was $170 a ton last fall and now is increasing as great as corn, which is a major component of the feed.

"It's changing the way people look at things," he says of the price volatility. "You've got to pay less for your feeder cattle and get more for your fat cattle to compensate for the higher feed costs. It's hard for investors, or someone who simply owns cattle, to feed their own cattle if there's no profit in it."

This volatility hasn't changed Pipestem Feeders numbers yet. Some of the cattle in the feedlot are showing profits, while last year there wasn't a lot of profit, Kvamme says.

"It could affect us next year, but then it could affect business the other way," he says, pondering the interplay of weather and markets. "More ranchers might background (feed) their calves because of poor feeder markets. If there's a little drought, that may pull cattle into the feedlot. Then they might have only enough feed for their cows, but not their calves. They might bring them to a feedlot."

For now, Kvamme doesn't expect to expand the feedlot.

"We don't have the room to expand," he says. The feedlot does have a permit, but because of its age, it needs to update to meet new rules from the Environmental Protection Agency and North Dakota Health Department rules.

Starting in early July, the feedlot is expanding some of its waste holding ponds. They're not big enough and aren't lined with clay. The project probably will last two summers. The feedlot will use some of the soil from the expanded ponds to build mounds in its pens.

Kvamme says there are many obstacles when feedlots or dairies want to establish or expand these days. Recently, a citizens group has been active in the Carrington area, working to block a new dairy there.

"It's definitely a surprise, especially because Carrington is such an ag town," he says. "There's not a lot of industry out here. It's all agricultural land."

Kvamme isn't directly involved in the situation, but he has a definite opinion.

"The way I look at it, feedlots and dairies are nothing but good for the state," he says. "They can provide a lot of employment and a lot of economic good."