FROM SUMMER HAND as a youngster to his current position as general manager, Jay Gray has been a fixture at the Gonzales cattle feeding facility known today as Graham Land and Cattle Company. Gray began working for Graham’s predecessors, Harrell Cattle Co., and came up through the ranks, staying with the outfit when it sold in the mid-1980s. He has seen a world of change in the South Texas approach to cattle feeding, and he says the changes aren’t finished yet.

South Texas Feeder Survived
Through Willingness To Change

By Colleen Schreiber

GONZALES, Texas — Graham Land and Cattle Company has been in the custom growing and finishing business since the mid-1980s when Charles Graham, DVM, bought out Harrell Cattle Company. It’s one of the few South Texas custom facilities that has been able to survive and prosper. Today the outfit is one of the largest in South Texas, turning over some 15,000 head a year through their growing program while their feedlot has a finishing capacity of 18,000 head.

Jay Gray was the man behind the scenes long before Graham took over the operation. He started out working for the Harrell brothers during the summers when he was just a kid, and he’s been at the Gonzales facilities full-time since graduating from Texas A&M University with an agricultural economics degree in 1974. He has a wealth of experience in growing, finishing and marketing cattle in South Texas, working his way up from head pen rider to his current position as general manager of the operation.

The Harrell brothers were originally in the order buying business. To reduce their risk somewhat, they decided that they needed a place to go with their cattle. They began construction of a large-scale preconditioning facility in 1966 with completion coming in late 1971.

It rapidly grew into one of the biggest custom preconditioning facilities in South Texas. In its peak it turned some 75,000 head a year. Calves would come to the yards weighing 400 to 500 pounds. They would straighten them out and the owner would generally send them to wheat or to grass in the Panhandle, Kansas or California, depending on the season.

They had a finishing program as well, but Gray says it was more or less on a part-time basis. Back then there were some 25 different packers in South Texas, and Gray says about 97 percent of their fed trade consisted of light heifers fed to a finished weight of about 700 to 800 pounds.

In the mid to late 1970s the cattle industry was once again facing change. Perhaps the two biggest influences were a shift from carcass to boxed beef and a mid-1980s change in tax law which eliminated a lot of tax shelters, including provisions that had kept feedlot pens full of investor-owned cattle.

South Texas feeders and packers struggled to adjust to the changes. Some feeders, Gray says, vowed that they would never feed cattle like were fed in the Panhandle. Gray could see the handwriting on the wall, and he understood that to remain viable, change was the only option.

Sam Kane Beef Processors Inc., Corpus Christi, chose to remain viable as well, and put a fabrication line in place shortly thereafter. The 20 or so other packers didn’t handle the changes as well, and from about 1977 on, South Texas lost about a packer a year. Other than Sam Kane, the only ones left today are Gulf Packing Company, H&H Packing and Eddy Packing Company, and at times they struggle to maintain their kill, Gray says.

It was during this transition period that the Harrell brothers sold out to Graham. Gray took over as yard manager for Graham Land and Cattle Company at that point. Prior to that he had been assistant yard manager, and in 1977 he took on the task of computerizing the feedyard records. Back then there wasn’t a lot of feedyard software in the business, so Gray had a difficult task.

It was through this experience that Gray had the opportunity to see first-hand what was working and what wasn’t, and the preconditioning part of the operation, he learned, just wasn’t penciling out.

"We were using the facilities and our people a lot harder. It took a lot of employees. We had 25 people riding horseback every day," Gray says. "We were turning our inventory over every 60 days or so with low returns. About the time we got them to eating good is about when we would ship them. What a feedyard does best is sell feed, and there wasn’t much feeding to that type of calf," he explains.

This was the impetus behind Graham Land and Cattle Company’s decision to phase out their preconditioning program and shift to finishing more cattle. Gray had listened closely to the experts’ predictions of how the feeding industry clientele would change once the new tax laws went into affect. They predicted that in South Texas only two to three percent of the feeder customer base would be left.

Thus in 1984, Gray made a conscious effort to focus on that three percent and to build a new clientele from there. He focused on those who were interested in growing their cattle and then carrying them on to the finished stage at a heavier weight to meet the rapidly growing demand in the boxed beef trade. He started out small, selling a pen or two a month of the heavier cattle, 950 to 1200 pounds, to Sam Kane.

A few changes had to be made to the existing yard, primarily in the form of better fences, better roads and roadside bunks. Graham Land and Cattle’s diversified enterprises, Gray says, allowed them to make the necessary adjustments and get back in the black a little quicker.

Today Graham Land and Cattle is strictly a custom yard which provides services for growing cattle and/or finishing. Early on, customers had the option of growing their cattle out and shipping them elsewhere for finishing, but today that option is no longer available.

"Our customers have always liked the way we grew cattle, but we lost some customers who didn’t want to feed in South Texas," Gray admits.

The growing operation utilizes existing ranch land and a growing ration which Gray developed around the traditional four-weight feeder heifer. By using some byproducts easily accessible in the area, such as brewers’ grain, Gray was able to develop a fairly cheap high-roughage, low-protein growing ration.

The cost to grow them varies, but Gray is able to cheapen up the gain by utilizing existing native pasture. He usually stocks two head to the acre. Sometimes, depending on the kind of season, he might run one to the acre. Pastures are divided into 80 to 100 acre units.

The cattle are fed a limited amount of growing ration every day.

"That’s the secret of growing cattle; doing something to them every day," Gray says.

Ideally, Gray wants the heifers to gain about a pound and half a day and steers three-quarters of a pound a day.

"If they gain two pounds a day they’ll get too fat," he explains. "The idea is to provide just enough protein to condition the body. The ration is only about 9.6 percent protein. It’s not a hot ration at all. In fact, it’s just the opposite."

The heifers will usually go on the finishing ration weighing around 650 to 700 pounds and the steers 700 to 800 pounds.

Because Gonzales County is one of the larger calf producing counties in Texas with some 100,000 mother cows, Graham Land and Cattle grows a lot of ranch calves as well.

"A lot of my customers start their calves at home, but they may not have enough grass to get them up to feeder weight, so they’ll start them and then we’ll finish growing them. They use my grass and growing ration as an extension of their grass," he explains.

Some are preconditioned and others aren’t, but Gray says more and more ranchers are realizing the importance of preconditioning their calves, and he attributes part of that acknowledgment to the work done by Texas A&M’s Ranch to Rail program.

"That program does a good job of explaining to people what preconditioning really is, what it costs, and that it really needs to be done somewhere other than at the feedyard."

Though Gray prefers to stay away from preconditioning at the yard, he won’t generally turn a customer away. However, the cost to grow those calves, Gray points out, is structured differently, meaning that preconditioning is basically figured into the overall cost, which adds to the cost of growing.

Graham Land and Cattle accommodates all sizes. Gray says that on occasion there is a waiting list for the smaller pens. Cattle are never mixed, though some customers might prefer to share a pen with their neighbor. In that scenario, cattle are tagged separately but fed together.

Gray prefers to feed quarterblood cattle.

"We used to feed more of the three-eighths to halfblood type cattle, but we started shifting away from them in the mid-1980s. We’re getting picky on what we’ll feed, not only from the profitability standpoint, but also from the standpoint that I’ve got to sell them," he adds. "I like to look at good cattle, plus they’re just easier to sell when they’re average to better cattle."

That’s not to say he doesn’t feed some plainer cattle. "They won’t ever totally be eliminated. Sometimes if you can buy them cheap enough, you can make them work."

Fat cattle are not only sold to Sam Kane but also to the Panhandle packers as well. Sometimes the Panhandle market, Gray says, is better.

"There’s always someone else out there who will cut their heads off," Gray insists. "If Kane is buying cattle $3 back, we can use that $3 anywhere we want if the cattle are good enough. We might even be able to make 50 cents to a dollar more."

The majority of his cattle are sold on a cash basis, but his marketing strategy changes from time to time.

"Value-based marketing and formula marketing," Gray says, "leaves a little to be desired. They say the premiums are there, but they’re really not. I still say the cash market does a pretty good job of seeking out those numbers."

Gray says the toughest challenge to feeding in South Texas is dealing with dry weather.

"Everyone says it rains too much down here. The rain creates other problems, generally good problems. Dry weather causes an increase in inventory, which for us is good because we increase feed sales, etc., but it’s not good for the producing sector. Plus, generally dry weather causes grain prices to go up."

What’s the future for the small investor or the small rancher?

"If you’re a small rancher, I would be very interested in several factors staying viable right now," Gray remarks. "One is the feedyard industry, the independent feedyard, I should say, and not so much the corporate side. If the formula/corporate side gets ahold of you, you’re really going to have to change. The majority of those small people won’t be able to conform."

Gray, however, believes the industry will continue to see more alliances, particularly alliances between packers and feeders who will in turn try to tie up the calf producer.

"Ranchland is being cut into smaller and smaller parcels. Thus, we’re seeing fewer and fewer viable cattle operations. Many are turning to recreation and other alternative uses for their land.

"This makes it very difficult for the present marketing structure to see past the yearling stage," he continues, "because it’s a land-based, fixed-asset type situation. These corporations can’t own all the land it takes to produce 500,000 calves themselves, much less the million that Koch wants to produce, so they’ll have to form alliances with producers. They’ll give the producer certain flexibilities, but basically they’ll specify what bull to use, what kind of cows, etc. Some will conform to that and some won’t."

Parts of South Texas received a little relief from the scorching hot temperatures and parched earth over the Fourth of July holiday.

"We got anywhere from an inch to an inch and a half," Gray says. "It greened some grass, but it better grow quick because it’s going to be clear and 100 degrees the next couple of days."

The rain, he says, will likely slow somewhat the need to bring cows to town, but he adds that people are certainly scrutinizing the weather forecast.

"If they can find any kind of hope of rain, they’re likely to hold on for awhile longer just so they don’t have to take some of these current prices," he says, "but if things don’t improve more by the end of the month, I think we’ll see quite a bit more volume move. People are still awfully scared of going into the winter without any hay."

Good general rains all over the Southwest, Gray believes, would help cattle prices, particularly stocker prices.

"The feeder market right now is pretty weak. It’s hard to find a buyer, and it’s just as hard to find a seller. The calf markets are holding in pretty decent. I don’t think we’ll see anymore slide in it, but there will likely be some quality slide still."

Thus far Gray hasn’t started receiving many ranch calves yet and he expects it will be a late fall affair like it generally is. That is, unless the market really improves, in which case he expects many producers would likely opt to sell rather than risk feeding them themselves on this market.

"We’re getting some yearling cattle that have drouthed out," he continues, "but most of them are going back out on a growing ration rather than on full feed."

As for the fat market, Gray says packers and retailers are still trying to figure out what the trade is going to do post-Fourth of July.

"It’s usually a big event for the retailer, and I’ve basically had no support from the retailer at all in the last 30 days," Gray remarks. "I think we might see a little strengthening just because of lack of supply. It will depend on how hard the guys want to chase it as to how high we can go, but I think it will probably go up a dollar or two at a minimum. After that, it’s hard to see much increase with the way they’ve got it knocked down right now."
Gray has pretty well cleaned up a lot of the operation’s fat cattle, but some 3000 head will be ready to go in July, a figure which he says is fairly typical for him.

Gray says he knew the potential was there for the summer to be a tough marketing period.

"Anytime you have break-evens in the high $60s and low $70s, that kind of gives you reason to be concerned," he remarks. But then he adds, "Prices are actually a little better than what many give us credit for. Demand is good, and if the export market will continue to grow and get better and we get more out of our hides, we’ll get a little more kick.

"It doesn’t take but about another dollar or two to get more people back profitable," he continues. "That’s how close we are in the breakeven scheme on what I see down here in South Texas. Several pens of cattle will lose $20 or $30 a head, but a couple more dollars would allow them to break even."

The South Texas market follows the Panhandle market fairly closely unless there’s a severe shortage of cattle or an excess supply.

"Generally, for the kind of cattle we’re selling, we would certainly be at least par to the Panhandle four or five months out of the year," Gray says. "You can figure a dollar basis between us and the Panhandle most of the time. Right now it’s running about a $2 basis, but it’s closing pretty quick."

There is talk that the grain crop will be a little short in South Texas, which will push feed costs up. That fact, Gray says, may cause more cattle than normal to be sent to the Panhandle to be fed out.

"Last year South Texas was pretty short of cattle starting in July all the way through January," he remarks. "We saw Kane going to the Panhandle to supplement his purchases every week. By the end of this month, Kane might be facing that same scenario. He’ll either have to cut his kill or supplement it with Panhandle cattle."