TCFA's Schwertner Says Change
Needed In Fed Cattle Marketing

By David Bowser

SAN ANTONIO — A lot of things have changed over the last millennium, says out-going Texas Cattle Feeders Association chairman Jim Schwertner. Things have changed over the last century, and things are about to change again.

"It's time for change," Schwertner insists.

The closing century has seen the emergence of cars, airplanes and computers.

"People had to change," Schwertner says. "They didn't like to change, but they had to change for the better."

There have also been changes in the cattle feeding industry.

"I was lucky enough as a young boy to have a father who was patient and took me with him wherever he went," Schwertner says.

He says that when his father, Eugene Schwertner, started in the livestock business in 1946, cattle feeding was centered in California, Nebraska and Iowa.

Cattle feeding was so prosperous in California that Schwertner's father put another office in the Golden State.

"When I was a young boy, my dad would take me on the train, and we went to California," Schwertner recalls. "On the way, my father made sure that I met everybody on that train. I thought those were the cattle feeders until I found out they didn't have any money. They would have been cattle feeders if my dad thought they could."

In the 1950s, farmers and ranchers started irrigating in the Texas Panhandle.

"All of a sudden, we had water where all the feeder cattle were coming from," Schwertner says.

There were people in the Panhandle who wanted to change — A.L. Black, Walter Lasley, Jay Taylor, Paul Engler, Ed Barrett, E.C. and Jay Crofoot, Ladd Hitch, Bob Carter, Glen Deen and a lot of others, Schwertner says.

"One of my mentors and friends was A.L. Black," he continues. "Mr. Black was one of the first guys my father introduced me to in the Texas Panhandle in the 1950s. He told me, 'Son, this man knows what he's doing. This is where it's going to happen.'"

Schwertner says Black had the vision to build a feedyard.

"He decided we had the water, we had the grain, and we had the cattle, but we needed a packing house," Schwertner says.

So Black and several others, in two weeks, raised the money to buy 800 acres and talked Missouri Beef into coming to Friona, Texas.

"Today, they're now Excel," Schwertner says. "Missouri Beef was bought out. They are the largest tax base in Friona."

It was a major change for Friona and the Texas Panhandle.

"We've always seen change," Schwertner says. "We just don't like to talk about it."

In May 1967, a group met at the Holiday Inn in Amarillo and the Texas Cattle Feeders Association was founded. Schwertner points out that the final vote to form the association was seven to three.

"They had some issues, just like we have today," he concedes.

In the late 1960s, Schwertner says, times were good and everybody wanted to be in the cattle business.

"Everybody wanted to feed, and everybody had a different idea of how they wanted to do it," he says. "Sound familiar?"

Schwertner notes that over the last 10 years, the industry has been trying to figure out where to go next.

But Schwertner's father knew how to change.

"He taught me how to change," Schwertner says. "When I was getting ready to go to college, everybody in my family was an Aggie. Everybody. You just went to Texas A&M."

He says his dad told him that if he really wanted to be in the cattle business he needed to go to Texas Tech, because that was the part of the country where the action was going to be.

"You're going to meet a lot of people, and that's where the new business is going to be," Schwertner says his father told him. "When Eugene Schwertner talked, we all listened, so I went to Texas Tech."

Cattle feeding was booming in those days.

"I remember going to college and there were over 100 feeding clubs," Schwertner says. "Every doctor and lawyer in Austin was feeding cattle. They didn't know what feeding cattle meant, but they knew it was a heck of a deal. They were making good money on it and Uncle Sam was helping them."

Then came the wreck of 1973.

"I remember it real well because in 1973 I was just getting out of college," Schwertner recalls.

Schwertner had just sold a pen of cattle and lost $300 a head.

"Aviation was looking a whole lot better," he quips.

But his friends in the feeding business told him that the way to make it work was to double up.

"We always want to blame somebody else when we have a problem," Schwertner says, "but we had too many cattle. It's kind of like we've seen the last six years."

They also faced a beef boycott and a retail price freeze.

"I can tell you, it was tough," Schwertner says.

Tough enough to force change and rebuilding.

Cap Bailey was chairman of the TCFA market committee, Schwertner remembers, and Bailey he wanted some changes.

"They were real simple," Schwertner says. "They were things we take for granted today. He wanted prompt payment. He wanted early morning weigh-up. He wanted four percent shrink. He wanted a seven-day pickup. That's not too tough. We take it for granted now."

But in order to accomplish those goals, the cattle feeders had to unite in the 1970s to force such changes.

After the boycott, all the packers boycotted Cap Bailey. They wouldn't buy his fat cattle.

"Think about that," Schwertner says. "You think we've got it tough now? At least we have one or two guys calling on us."

But the association stood together, and they made it work.

Then the packing industry started consolidating. There were fewer packers. The ones that survived grew and became stronger. There were also some feedyard consolidations.

"It's working as far as feeding cattle," Schwertner says.

In the 1980s, beef began losing market share to pork and poultry.

"There were a lot of reasons for that," Schwertner says. "It takes more real estate to own a cow. We can't change as fast. We kind of had the mindset of General Motors: 'By golly, they'll eat what we build,' but we did change."

They formed the Beef Board and began deducting a dollar a head for the cattle that sold.

"That's one of the most important projects we've had," Schwertner insists. "If we let this get away, we're sunk. Somebody has to tell our story, and I think it has to be us."

Today, Schwertner says cattle feeders are price takers. The question is whether they will continue to be price takers or will become price makers.

He believes cattle feeders have to change their ways, and they have to change them quickly.

"Or we're going to be like the chicken folks," Schwertner warns. "We'll just be growers for other people. I don't want to do that."

He says it's time to act.

"It's time to get up and talk about consolidated marketing."

He sent a letter out earlier this fall on the subject. In 10 days, feeders enrolled a million head in the still-undefined consolidated marketing program.

"Paul Engler and Ladd Hitch tried to get this going 15 years ago," Schwertner reminds. More recently James Herring and Bob Sims tried again two years ago.

"This isn't the first time we've heard this," Schwertner says.

He says it's an idea whose time has come if cattle feeders are going to survive.

By the time TCFA held its annual convention in early November, 1,148,000 cattle were enrolled.

"We're there," Schwertner says. "We can do it. This thing is going to fly."

But they still need to line up cattle.

What they have now, he says, is three times the size of the largest alliance.

Schwertner says he still has cattle feeders tell him they want to remain independent. They want to sell their own fat cattle.

Schwertner asks them to recall the last time they were able to negotiate with a packer.

"Not in the last 10 years," he insists.

"They're price takers, and they have 15 minutes to decide whether to take the price. There are weeks that they have only 30 seconds.

"I saw the same thing in the banking industry in the 1980s," Schwertner says. "A lot of independent banks were afraid of being independent, so you saw mergers and acquisitions and bank failures."

But he says the banks that stayed together in associations stayed independent because they worked together with the Texas Independent Bankers Association.

"We can do the same thing," Schwertner contends. "We're scared of ourselves."

Schwertner concedes that consolidated marketing in the fed cattle business is something new, and he doesn't know how well it will work.

"I do know that collective bargaining works."

He points out as well that when the country's founders gathered in Philadelphia in 1776, they didn't have a clue how their idea of democracy would work.

"They feared for their lives, literally, but they had the guts to do it," Schwertner says.

And, he adds, when TCFA was first organized, the founders of the association weren't sure what the organization would look like.

"But they knew they needed change and they knew they needed to get organized," Schwertner says.

The dairy people have done it, he notes. The cranberry people have done it. The orange juice people have done it.

"It's time for us to do it," Schwertner insists. "We are our own worst enemies. We want to blame the packers and talk about monopolies. We need to fix our own problems."

Consolidated marketing through collective bargaining will keep cattle feeders independent, he believes.

"We just have to work together as a team."

He believes the cattle feeding industry also needs to work with packers.

"We need to work with the packers and quit fighting them — after we get organized and develop some better products that are value-added where we can receive more money," he says.

"I guarantee you that if we have a better product, we have the packers in sync and we have the retailer in sync, we'll all get more money. My father always told me, 'You want to stand next to a guy that's eating steak. You might get a sandwich.'"

Beef demand is up, he notes. A number of new steak houses have sprung up, there are a number of new beef items in the supermarkets, and diets are now featuring beef.

"We're in the driver's seat," he says. "The timing is perfect. The new millennium is here. We can control our future. The question in my mind is when are we going to do it, not if."