SIC 0211 Beef Cattle Feedlots

SIC 0211

This classification covers establishments primarily engaged in the fattening of beef cattle in a confined area for a period of at least 30 days, on their own account or on a contract or fee basis. Feedlot operations that are an integral part of the breeding, raising, or grazing of beef cattle are classified in SIC 0212: Beef Cattle, Except Feedlots. Establishments that feed beef cattle for less than 30 days, generally in connection with their transport, are classified in SIC 4789: Transportation Services, Not Elsewhere Classified.

NAICS CODE(S)

112112

Cattle Feedlots

INDUSTRY SNAPSHOT

America's favorite protein, beef is still what's for dinner. About 96,000 feedlots operate in the United States. According to the U.S. Department of Agriculture, at the beginning of 2005 cattle and calves for slaughter on feedlots with a capacity of 1,000 or more head totaled 11.3 million. Of the total feedlot inventory, steer and steer calves accounted for 7.2 million. Heifers and heifer calves totaled 4.1 million. The average head yields about 522 pounds of beef.

Three states accounted for two-thirds of all beef cattle feedlot production: Texas, Kansas, and Nebraska. The total number of beef cows in the United States was just over 33 million in early 2005. One-third of the nation's beef cattle is produced on large feedlots. The remainder are either grazed or raised on smaller feedlots with a capacity of less than 1,000 head.

The industry continued to be troubled by environmental and health questions in 2005. The fear of Bovine Spongiform encephalopathy (BSE), or "Mad Cow Disease," was especially prevalent, not only at home but among the larger exporters of U.S. beef, particularly Japan. The USDA responded to the threats by increasing testing and other cautionary measures.

ORGANIZATION AND STRUCTURE

The feeding of grain to cattle is unique to the United States. Americans and an increasing number of international consumers have developed a taste for American grain-fed beef, as opposed to beef cattle fattened on grass only. The cattle that are fed in U.S. feedlots are young steers and heifers that have been weaned from their mothers, perhaps run on grass for another season or two, and then placed in the feedlot for further finishing. This finishing period typically lasts between 110 and 150 days, during which the cattle may grow from 800 pounds to 1,250 pounds by eating a ration containing grain, by-products, and hay that gives American beef its unique taste known throughout the world.

Prior to the 1970s, farmer feeders would send their "fat" cattle to an auction or terminal market, and packers would have representatives there to buy them. But by 1993 less than 7.6 percent of fed cattle were purchased by packers through public auctions. Instead, packers staffed their own buyers, who visited the huge feedlots and perused the "show lists," which are pens containing cattle being sold that week. After settling on a price for particular cattle, buyers then purchased the cattle directly from the feeder.

Because ranchers have been increasing their investment in genetic technology, a growing number of them have been retaining ownership of their cattle from the time they are born until the time they are processed by packers. Owning cattle through the finishing stage allows ranchers to be rewarded directly when their cattle are sold to satisfy packer and consumer demands. Ranchers, however, are more vulnerable than other farmers during market drops. Under retained ownership agreements ranchers can buy feed outright and pay only a yardage charge, pay a set price per pound gain, or pay only for the amount of feed used.

Cattle are pen-lotted in a feedlot after being vaccinated. They are lotted by owner, and pen riders check the cattle daily and pull any sick or nonperforming cattle. Some feeders keep feed in front of the cattle at all times, while others feed them twice a day with huge feed trucks that place the feed in bunkers. The feed is mixed either in a large mill or by trucks that mix it while carrying it to the cattle. The ration contains grain, hay, and by-products such as cottonseed and almond hulls. Computers keep track of the amount of grain consumed, the cost of grain, the cattle's daily weight, and the number of days on feed. When the cattle are eventually processed, the owner receives a computer report with all of this information.

Cattle are fed by investors, ranchers, or packers, who want to guarantee a steady supply of cattle for their packing plants. Such cattle are referred to as "captive supply." The captive supply generally represents about 20 percent of the cattle on feed at any one time, and the government watches this number as an indicator of packer concentration. When cattle are considered good enough to be graded "choice," they can be sold in a variety of ways. They might be sold by the pound while the cattle are still alive, or they might be sold "in the meat," based on what they weigh when hanging on a packer's rail. The cattle business is currently attempting to...