Lamb feeder controls costs and builds market
Mike Harper doesn’t mince words about the challenge of feeding lambs at a time 50% of the protein is imported from Australia and New Zealand.
“With great risk comes great reward, or a healthy dose of reality, sometimes,” says Mike, who with his wife, Mary Ann, holds half-interest in the family’s feedlot in Eaton, Colo., which feeds out up to 200,000 head of lamb each year.
Yet where risk can be found, there also are opportunities. Mike and his father, Harold, have built a legacy of excellence on that premise. As other lamb producers exited the industry, the Harpers emphasized clear-headed business planning and logistics to ensure a steady supply for buyers.
The feedlot operates in Weld County, a national hub for lamb feeding. The county is one of about two dozen nationwide to produce more than $1 billion of agricultural goods annually, according to the 2012 Census of Agriculture.
As grain producers prepare to buckle down for what could be several years of tight margins, they can look to producers such as Mike for lessons on cost control, steadfast relationships and perseverance.
“You should never be resting on your laurels,” he advises. To understand how Harper Feedlot positioned itself for success even as U.S. lamb producers faced challenges trying to increase market share, it’s necessary to start with Mike’s father, Harold.
A native of Worthington, Ind., Harold grew up on a diversified operation with sheep, cattle and hogs. He learned to shear in high school and sheared his way through college at Purdue University, winning the Junior National Shearing Championship at age 20.
Out of college, he went to work for Rath Packing in Waterloo, Iowa. He later worked with Wilson Packing and eventually transferred to Colorado in 1968. He fell in love with the west.
He settled in the Eaton area in 1974, forming a partnership with two other men. He shipped lambs from the western slope of Colorado as well as from Texas and California. The central location was ideal. In 1978, Harold sold his partnership shares and bought the farm that became the feedlot.
Harper Feedlot added corrals in 2006 along with 3,000 cattle as a way to diversify its operation in light of lamb market ups and downs. By comparison, the feedlot hosts up to 65,000 sheep at once.
From Packing To Pasture. Three years later came disastrous interest rates that forced many producers out of business. The operation weathered those times and expanded in 1988. Then, in the 1990s came the elimination of the Wool Act, which had provided a safety net for wool prices. Mike recalls “lots of exodus in the sheep industry” thereafter.
Against the odds, Harper Feedlot expanded again in 1996. The feedlot now could house 65,000 head, up from just 15,000 several years earlier. Then, in 2006, the Harpers added corrals and 3,000 cattle as a way to diversify their operation. Mike and Mary Ann acquired half-interest in the feedlot in 2008.
In a single year, between 170,000 and 200,000 lambs make their way through Harper Feedlot. Most are Brockle-faced and are the progeny of Columbia or Rambouillet ewes crossed with either a Suffolk or a Hampshire buck. Fed lambs arrive at the operation from California, Colorado, Idaho, Nevada, Texas, Utah and Wyoming. They are fed on a mix of ground alfalfa and corn silage produced on a nearby 700-acre farm the Harpers own. The operation also purchases up to 5,500 tons of hay annually.
“Having the farm around the feedlot gives us a nice barrier from our neighbors to help keep peaceful relations,” Mike explains.
Lambs average 100 lb. on arrival and are fed between 75 and 85 days. Then, they are loaded onto trucks for processing at one of two major local packing plants: Superior Farms in Denver or JBS Packing in Greeley.
Because there is no futures market for lambs, the premiums paid to Harper Feedlot are dependent on what packers are paying. Lambs delivered to a plant currently bring from $150 per cwt. to $160 per cwt., prices that have stayed about the same for the past three years, Mike says. In recent years, finished lamb prices have ranged between $1 per lb. and $2 per lb. on a live weight basis, notes Jeff Held, State Extension sheep specialist at South Dakota State University. Fed cattle, by comparison, recently ranged from $157 per cwt. to $160 per cwt., or $1.57 per lb. to $1.60 per lb.
Lamb Production Leader. Mike and his father purchase lambs by contracting with about 30 sheep producers, who benefit from guaranteed sales to packers, a floor price placed on lambs as feeders and 50% of any feedlot profits with no loss.
The value Harper Feedlot adds is critical to gaining market share, particularly since the U.S. sheep industry actually grew 1% in 2014. “The question is: Will consumer demand continue to match up with higher lamb cut values?” Held says. “From the grower’s perspective, input costs, especially feed costs, have risen significantly compared to a decade ago. Subsequently, the breakevens are higher; the risk is higher.”
Mike’s operation is generally most crowded in October, when lambs are taken off of cheaper summer forage found on land maintained by the Bureau of Land Management.
For Mike, the challenge is handling the glut of fall lambs to create a steady supply of meat bound for grocers and restaurateurs. Fully 80% of Harper Feedlot lambs are shipped to Midwest or East Coast cities, such as Chicago, Boston and New York, where buyers purchase whole carcasses, prepare cuts and distribute them to high-end restaurants.
“Spreading out our inventory is the hardest part of our business,” Mike explains. In addition to the challenges posed by natural cycles of supply and demand, Mike has faced the additional curve ball of the persistent western drought. Dry conditions have devastated pastures in numerous states where lambs normally graze before arriving. To keep a continuous supply of lambs flowing through his feedlot, the Harpers ship lambs to California’s Imperial Valley, located near the Mexican border, during winter months. They are pastured on alfalfa and gain weight at a rate of 0.25 lb. to 0.3 lb. per day, which is slower than the 0.65 lb. they can gain at a feedlot.
Although the practice has yielded a steadier supply of lambs arriving on-site, it comes with enormous transportation costs. It can cost $7 per cwt. to ship lambs from a state such as Utah to California and another $9 per cwt. to get the lamb back to Harper Feedlot.
“There’s been nothing cheap about it,” Mike says.
Attention To Detail. To maximize profitability, Mike targets a 150-lb. to 155-lb. optimal finished lamb. The lambs get at least 60 days to acquire the proper length of wool regrowth for the sheepskin. A quality sheepskin can be the difference between an $11 pelt credit or a $6 pelt credit, and that $5 difference can determine whether a producer is profitable or barely breaks even.
To ensure the high caliber of his livestock, Mike personally evaluates feed levels twice each day.
“That keeps me attuned to what’s going on and keeps my finger in the pie,” he relays. The operation employs 12 staff, including two middle managers, two office staff and four workers who provide daily care.
To foster good working relationships, the operation aims to give each worker one day off per week.
“You have to have good staff you can trust,” Mike explains. “You can’t be here 24/7.”
That can-do attitude and sense of hard work is as clear in Mike as it is in his father, Harold, who remains integral to the operation as half-interest owner. Mike has learned many lessons from him.
“Always honor the deal,” Mike says. “Once you’ve ruined your word, you don’t have much to look forward to. Especially in a small industry like we have, your reputation is everything.” That kind of integrity is evident to those who’ve worked with Mike.
“He’s a very good livestock person,” says Mark Dumdi, livestock procurement, Superior Farms, and a friend of Mike’s since 1996. “They have probably one of the top-of-the-line feedlots in the country. He’s very meticulous about the way he does things and has always been a really good ambassador for the industry.”
As a sheep rancher in northern Utah, Junior Goring has come to appreciate the Harpers’ integrity in difficult times. For the past 15 years, he has taken up to 6,000 lambs to Harper Feedlot. Goring recalls a time several years ago when packers found themselves with a surplus of lambs, so Mike personally reached out to explain he couldn’t pay the forward-contracted price. They negotiated to a lower price, but when it came time to make sales, Mike paid out 75% of the net profits to Goring to bring his returns back to market levels.
“If they’ve got any extra money, they’re willing to share it,” Goring says. “That’s impossible to find anyone else willing to do that.”
Legacy Of Excellence. Mike isn’t sure what the next generation of his operation will look like. He and Mary Ann have three daughters, seven nephews and three nieces, yet only one of them is out of college. One of their daughters will begin college this fall and plans to return to the feedlot after graduation to work alongside her father. At the same time, the ever-changing nature of the lamb market is worrisome.
The greatest opportunity for growth likely lies overseas in places such as Mexico, the Middle East and Asia, Mike says, but packers will have to take the lead. Even then, he cautions, it would be hard for U.S. producers to guarantee supplies.
At the same time, he’s entrenched and committed to the industry.
Mike’s operation lies in view of the stunning Rocky Mountains, with peaks and valleys that mirror the cycles of the lamb market. It took courage for Mike’s father to move west and start Harper Feedlot, and it will take courage to continue on. Yet the opportunity to nurture lambs and manage a family business in an industry he cares about makes the uphill climb worthwhile.
Boots on the Ground
Feedlot manager Dave Morgan (far left) and Mike visit at his family’s lamb feedlot. The operation employs 12 staff, including four who provide daily animal care.
Mike Harper of Harper Feedlot in Eaton, Colo., ensures lamb production standards are high from growth phase to harvest, says Donna Mays, former co-manager of Mays Land & Livestock, Inc. in Howe, Idaho. Her husband, James, is a third-generation sheep rancher.
“Mike wants the range man to make money and stay in business as much as he wants to make money to keep in business,” Mays says.
Not only is Mike active in the field, he is also a student of the industry, says his wife, Mary Ann, with whom he holds half-interest in Harper Feedlot.
“He’s been able to make advancements in the feedlot because he’s doing it every day and he knows when he needs to move a pen or make an investment in the feedlot that will help with that conversion with those lambs,” Mary Ann Harper says. “That has been amazing to watch him grow into that position.”
Top Business Priorities For Lamb Market
QUALITY: One key to gaining ground will be to improve the uniformity of lamb quality, says Dan Morrical, Extension sheep specialist, Iowa State University. The industry’s national check-off has developed The American Lamb Industry Roadmap, a five-point guide that seeks to get sheep producers on the same page with production. “The goal is that the consumers will have a great eating experience every time,” he says.
VALUE: The industry must further hone its requirements for lean cuts of lamb, tying packer premiums to top-quality cuts, Morrical explains. A focus on genetics and value-based marketing will also be steps forward.
DIVERSIFICATION: More and more U.S. sheep producers are raising haired varieties, particularly in the Midwest and South. “We’ve got a very large immigrant population now that wants a different lamb than our traditional market lamb at 140 lb.,” Morrical explains. “It’s estimated that roughly 1 million lambs a year are going through the ethnic market.” He projects sheep producers will increasingly opt to specialize in one sector of the sheep market or another to meet consumer demand.