Kansas brothers propel feedlot by investing in people, focusing on values
When Black Diamond Feeders owner Doug Laue first approached Shawn and Shane Tiffany in 2007 about buying his operation, the brothers thought he was joking.
They were well acquainted with Laue and the Herington, Kan., feedlot their dad managed from 1988 to 2002. Never in their wildest dreams did they expect to own it. Laue wanted the business to remain family-owned, but it wasn’t a fit for his children. Meanwhile, the Tiffany brothers had completed animal science degrees from Kansas State University. Shawn had taken a job running a purebred Angus ranch, while Shane was working as a corporate cattle buyer. The brothers, both under age 30, had little capital. Yet what they lacked in cash they made up for in vigor and values.
After reflection and discussion with advisers, they took the plunge.
“Shane and I have driven personalities,” explains Shawn, 38. “Neither of us wanted to look back and wonder what would have happened if we hadn’t stepped out in faith and taken that risk.”
Next Generation. Laue didn’t just hand over the keys. The three worked as equal partners before the Tiffanys bought the feedlot and adjoining farmland. “I’d hate to guess what the cost of tuition would be for the education we received during those 3½ years,” Shawn says.
It built the brothers’ acute focus on business and risk management.
“He taught us how to run a business, not just do a job,” says Shane, 36. “That’s a big distinction. There are a lot of guys who are good at doing a job but horrible at running a business.”
When Black Diamond Feeders transitioned to Tiffany Cattle Company, it had 3,000 cattle, six employees and a dozen customers. Margins at the 27,000 U.S. feedlots are thin, especially after the droughts of 2011 and 2012 forced liquidation of America’s cattle herd to 60-year lows. Tight supply produced all-time highs in cattle prices in 2014.
“Even with low grain prices, feedlots have faced nearly unattainable break-even prices,” says John Nalivka, president of Sterling Marketing. “As a result, the industry is now more geared on pounds per beef that are being produced on a weekly basis versus just number of head being fed at the bunk.” Managers also seek to achieve and maintain customer retention. “Feedlots capture value around their customer list and feed mill,” Nalivka says. “If you have happy customers, you’re making money.”
For each of their 150 customers, the Tiffany Cattle Company team mixes specific feed rations of corn and roughage to add weight to the cattle.
Relationships And Retention. To build their customer base, Shane, who leads customer relations, spent hours making cold calls and driving across the country to visit potential customers. The brothers’ networking, energy and dedication paid off. Few feedlot owners are in their 30s, Shawn says, so their youth became an advantage, allowing them to show customers how serious they are about developing relationships.
“Since there are two of us, what sets us apart is the level of customer service we can provide,” Shawn says. “Everything in our industry is about people. Cattle and crops are the vehicles to generate wealth and livelihood, but it’s the relationships that have to be sustained.”
Today, Tiffany Cattle Company has 21 employees. For six to eight months out of the year, the business operates at maximum capacity of 14,000 head.
The feedlot is located on a former Army air base, and the site’s 42 acres of concrete and runways-turned-feed alleys create less mud and more cattle comfort across 160 pens. The operation also includes 2,500 acres for feed crops.
The company’s customer list totals 150 and is centered on Kansas and Missouri, but patrons dot the country from the Rocky Mountains to the Atlantic Ocean. “They range from an 87-year-old retired corn farmer in Illinois to cow-calf operators to real estate agents in Las Vegas to commodity brokers in Chicago,” Shawn says.
Custom Coaching. Of their customers, about 40% retain ownership, while another 40% finish their cattle at the feedlot. The remaining 20% are investors.
“We’re providing room and board with expert oversight,” Shawn says. “For many years, the feedlot industry was taking below-average cattle and trying to sell them for average prices—it was just producing cattle. We’ve strived to help our customers transition from being cattle producers to beef producers.”
The diverse client base allows the Tiffanys to spread out their risk as the industry evolves. “We have guys who are rapidly growing and guys who are older and rapidly getting out,” says Shane, who clocks in 3,000 to 4,000 minutes per month on his cellphone with customers, suppliers and advisers.
To best serve their varied customers, the Tiffanys design personalized risk-management and marketing strategies, which can include forward contracts, options and cash trade. About 60% of the feedlot’s cattle go to U.S. Premium Beef, and the rest go to regional packers.
“We’ll look at the market and find out which marketing window is the most advantageous,” Shane says.
Their feeding and health programs help them capture premiums at these markets. Since Sept. 1, 2015, cattle at the facility have averaged more than 90% choice.
“We get to feed the best cattle in the country,” Shane says. “That makes us look good as a feedlot.”
To manage margins in a volatile industry, the brothers have resisted buying the latest and greatest equipment. Many of their employees ride horses to scout pens for sick cattle. They’ve brought jobs such as planting and feed-mixing in-house. Their dad chops silage.
Since they started, the brothers have leaned on a set of key advisers. For major decisions and to set five- and 10-year goals, they consult experts such as their banker, business adviser, nutrition consultants and consulting veterinarian.
“Every major portion of the company has a consultant over it,” Shane points out.
Balancing Act. Shawn and his wife, Nicky, have two sons and three daughters, and Shane and his wife, Morgan, have two sons and one daughter. They constantly seek to balance work and personal life.
“Shawn and I are both passionate about being good dads and husbands,” Shane says. They want the same for their employees.
The workday at Tiffany Cattle Company runs from 6 a.m. to 4 p.m. The schedule allows everyone to have family time in the evenings.
The positive culture on the feedlot is also bolstered by benefits including paid overtime, health insurance, retirement programs, vacation time, sick leave and personal days.
“We want to see our employees prosper along with us,” Shawn says.
The brothers take pride in their communities. Both are elders in their respective churches and sit on numerous boards. Shane is mayor of Alta Vista, Kan., population 450. He and Morgan co-own the local grocery, which they reopened in 2014 after it had closed.
From fulfilling a dream of owning their own business to being a sought-after employer in rural eastern Kansas to advocating for cattle production on behalf of their industry, the Tiffanys feel blessed by the opportunities they’ve seized.
“Shane and I both agree that we are doing exactly what God put us on this earth to do—at least for this season of life,” Shawn says.
They are quick to recite mantras that have shaped their business and regularly return to one of former owner Laue’s sayings: You don’t have to be big, but it’s important to be part of something big.
By the Numbers: U.S. Feedlots
Feedlots with capacity of fewer than 1,000 head represent the vast majority of the more than 27,000 feedlots in operation throughout the U.S. Yet those same businesses also market a small share of fed cattle as the industry shifts toward a small number of large specialized feedlots.
Non-Family Succession Planning Tips
Shawn and Shane Tiffany’s path to feedlot ownership is unique because they bought the operation from an unrelated owner. Many established operations face the challenge of not having a family member ready to take over the business when the time comes. That kind of situation calls for creative thinking, says Dave Goeller, transition specialist with the North Central Risk Management Education Center in Lincoln, Neb.
“Odds are you may already know the people who will take over your business,” Goeller says. “But you may not have thought of them.” He provides this advice to farmers looking to start a non-family partnership.
Make Your Wishes Known. Whether you are an owner looking for a successor or a successor looking for an owner, use your network to spread the word. This is often a great way to find a potential partner.
Share Your Goals. Each party should list goals covering personal and business aspirations. Then the two can discuss the goals to ensure they align. Do this for job descriptions, business practices and strategic plans.
Test The Transition. For a year or longer, the owner and potential partner can work side by side, allowing both to ease into the arrangement.