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With increased interest in alliances and marketing cooperatives throughout the beef industry, a Kansas-based group reports a 45 percent increase in equity value in the two years since it was formed. U.S. Premium Beef is a closed marketing cooperative that consists of beef producers from all segments of the industry, said Brian Bertelsen, U.S. Premium Beef spokesman. They have over a 1,000 members from 26 different states, including everyone from purebred seedstock to cow-calf to backgrounders and stockers to commercial feedyards and farmer-feeders. "They went together and purchased stock in our company, U.S. Premium Beef, which in turn went and negotiated purchase of a percentage of Farmland National Beef," Bertelsen said. "We are partners with Farmland Industries, also a cooperative, in owning Farmland National Beef Packing Company with a plant in Liberal, Kansas, and another plant in Dodge City, Kansas. They buy finished cattle on a value-based marketing arrangement. Their grid, Bertelsen said, rewards producers for quality that is being pulled through the system by consumer demand. They have several brands within the Farmland System as well as Certified Angus Beef. Producers get a larger premium for hitting those targets which the consumer prefers, Bertelsen said. Those products make more money for the packing company. The two requirements for U.S. Premium Beef to buy finished cattle is that the person selling the cattle has to be a member of the cooperative, and they have to have access to shares, Bertelsen said. They have to have one share per animal that they sell per year. "If you want to sell a 1,000 head a year," Bertelsen said, "you need to have access to 1,000 shares every year. You can either own those or lease them from someone else." He said there are two different options for membership. A producer can get a calendar year membership for $100 or a lifetime membership for a one time fee of $500. A producer can either own or lease shares in order to deliver the cattle. While the price is set by the people who own the shares, it has been running about $10 per head for the lease fee. While U.S. Premium Beef only buys finished cattle, Bertelsen said they have members that buy lightweight cattle or calves and graze them, then retain ownership through the feedyard. "We have people that buy feeder cattle and put them directly on feed," Bertelsen said. "There are some relationships that can be developed there. We encourage that, but we don't get involved directly." Through 1999, they returned about $14.50 a head over the cash market in Western Kansas. The top 25 percent of the cattle averaged $40.26 per head above the cash market. At their annual meeting last year, grid premiums were $13.87 per head. Returns from the ownership of the packing company was $17.99 per head, $6.30 of that was paid out in cash. Bertelsen said the rest is being held by the company. "That will go back to the producers that sold us the cattle after a period of time," Bertelsen said, "when our company is more solvent. We're still only two years old." Shareholder equity in U.S. Premium Beef also appreciated. "They were originally bought at $55," Bertelsen said. "They have now increased in appreciation all the way as high as $80 in the most recent transaction." Ending their second full year of operations in 1999, USPB also saw a dramatic increase in grid premiums. According to the company's newsletter, the average grid premiums were 55 percent greater on cattle delivered in 1999 compared to 1998. |
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