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S.D. producers to put stamp on quality beef

Many think buyers will pay premium for upscale steak

Argus Leader - April 17, 2005
By TERRY WOSTER,

HUDSON - Someday, a black-faced steer much like the ones eating a morning ration of feed in John Haverhals' pens on a hillside west of Hudson could be part of a South Dakota-branded package of steaks in a Tokyo market or restaurant.

Haverhals, who has farmed near Hudson since the 1970s, has no doubt a market exists in Japan, Korea and other parts of the world for high-quality beef with a premium price tag. He doesn't doubt South Dakota farmers and ranchers can produce that kind of meat.

He's sure he can do it at his 4,500-animal feedlot that he's preparing to join SOUTH DAKOTA CERTIFIED™ Beef, a campaign promise of Republican Gov. Mike Rounds that the 2005 Legislature wrote into law.

"I know South Dakota beef is as good as any in the world," Haverhals said during a pause in midmorning feeding, one of three meals on the daily schedule for his farm's feeder cattle.

"And when the governor comes along and says he wants to spend money promoting our product worldwide, well, that's just huge. We can make it work."

Niche market
The goal of SOUTH DAKOTA CERTIFIED™ Beef is to create an upscale, niche market - read that as higher prices for meat on the hoof and under cellophane - for farmers and ranchers, feeders and processors in the state by creating a quality-controlled program with its own trademark.

The trademark, or brand, sells itself as the symbol of consistently high-quality beef, produced and pro-cessed in a system that is monitored and regulated at every step - from the birth of a calf on a South Dakota ranch or farm to a package in a butcher shop or cut of steak on a restaurant plate.

"We believe consumers will step forward, and they will be paying a premium price," Rounds said when he signed the bill into law.

The object is to improve cattle prices and spur economic growth by convincing consumers the premium price they'd pay for South Dakota brand beef is worth it.

"If we can do that, and do it right, I think we can set our own course here in marketing this beef for premiums all across the world," state Agriculture Secretary Larry Gabriel said during a legislative hearing on the program. "We don't intend to sell this meat to Sam's Club.

"We're talking about selling it in upscale grocery stores and upscale restaurants in South Dakota, in New York City, in Los Angeles, in Tokyo, in Seoul, maybe even in Paris, France. ... This program can evolve to that."

What is required is a willingness by South Dakotans at every step of the beef chain to take the extra effort to follow a list of protocols being developed as state rules.

Forming trademark
A Chicago law firm known for work in intellectual property has been hired to handle the process of obtaining the trademark for the state.

The rules will outline what records must be kept, what feed is allowed and other aspects of the program. Electronic identification using a bar code on a tag in each animal's ear will provide a way to track the animal from birth through feedlots and butcher shops to the final consumer.

Only cattle raised from birth to slaughter in the state could qualify for the voluntary program, which will require those who participate to pay fees.

The record keeping likely will keep some producers out of the program, Gabriel told legislators.

"It probably will appeal to our younger producers," he said. "Most of us don't like keeping records. If they're not prepared to do that, they're probably not going to get a license."

The bar code record is what could let a consumer in New York City or Tokyo go to a computer and trace the T-bone or ribeye steak back to the farm where the calf was born and learn the birth date of that animal.

Most people won't bother, but Haverhals says some will, and he thinks among those who will are consumers in Japan.

"I'd expect some of them to trace the quality," he said. "In Japan, people tend to trust the government to regulate the product. There will be people there who will trace the meat back to its source through their laptops."

Record keeping
Haverhals, who plans to put only part of his production into the program, has been using electronic ID techniques for seven years. He doesn't see the record keeping as a big burden.

"I was doing that part anyway," he said. "All it's doing is using the technology that's available today. We're not manipulating the animal or manipulating the feed. We can make real-time decisions on feed and markets, though.

"And we can get consistently high quality in the product."

Gabriel once estimated that a market in Japan could mean selling beef for as much as $10 to $25 a pound.

Haverhals would like a piece of that value-added premium to put a little profit into his existing operation, rather than to expand. He buys most of the cattle he feeds, and he has them processed where he can find capacity.

One of those places is Hudson Meat and Sausage, where owner Doug Klarenbeek hasn't decided whether he'll try to be part of the program.

In business in Hudson for 22 years, Klarenbeek has four full-time workers and a couple of part-timers. The plant handles between 15 and 20 head of cattle a week, he says.

The town is located on the South Dakota-Iowa border, and about half the plant's business comes from each state, Klarenbeek said.

He's waiting for final rules so he can figure out how much he would have to separate the carcasses from South Dakota and from Iowa to participate in the program.

"It'll be a business decision, and right now I just don't know," Klarenbeek said. "I don't think I could just turn away from the Iowa business. It means a lot to this plant and the town.

"I'd like to be part of the South Dakota program. I think it's going to be a great thing for the livestock people in the state. I just have to see what it would require of me, and then make a business decision on what's best."

Processors needed
Places like Hudson Meat and Sausage could be crucial to the success of the program, Haverhals said. The state will be able to produce Certified Beef-qualified animals, he said. Whether it will have the capacity to slaughter and butcher them isn't certain, he said.

Klarenbeek agrees, saying "There needs to be more processing than exists right now."

Jafar Karim, deputy secretary of the state Department of Tourism and State Development, says processing capacity will need to increase, but he counsels patience. He expects the program at every level to grow relatively slowly, beginning with a limited number of livestock operators, a handful of feeders and a few processors.

Handled properly, all of those numbers will grow as the program shows success, he said.

"The focus is on quality," Karim said. "We all want quantity, but first we have to make sure we're producing the best product we can."

Karim thinks a plant like Klarenbeek's at Hudson could participate in the state program without giving up its Iowa business, if its records system tracked the Certified Beef animals to the finished meat products.

Don Ward, operator of Bad River Pack in Fort Pierre, says he thinks the processing concerns can be addressed in part, at least, by a network of relatively small facilities that each bump up its business capacity modestly.

"If every one of them added one or two more employees, think how much impact that could have on parts of South Dakota," he said.

Karim says a working goal is to have the first SOUTH DAKOTA CERTIFIED™ Beef produced and labeled "in the summertime, and that's going to be a really focused effort ... with a modest amount of beef available."

That initial effort will have importance beyond the quantity of beef, he says, because "the first experience is going to set the tone. We need to make sure we're getting it right."

What it Means
Gov. Mike Rounds campaigned in 2002 with a promise to create a program he called Dakota Prime, a value-added agriculture idea that would market certain South Dakota beef as the world's best value.

That became SOUTH DAKOTA CERTIFIED™ Beef, a fledgling program aimed at branding the best there is in beef raised, fed and processed in South Dakota. Rules are being finalized for the program, which requires livestock producers, feeders and processors to follow specific protocols and keep detailed records. Program directors say the first of the SOUTH DAKOTA CERTIFIED™ Beef could come to market this summer. Although the goal is national and world markets, the initial focus is likely to be on South Dakotans and visitors to South Dakota.

The rules
* Program cattle must be born, raised and finished in South Dakota.
* Participants must obtain state-approved USDA premises numbers that assures animals can be traced electronically. Electronic ear tags will be used to verify sources and ages of animals.
* Sellers must certify in writing that they've followed requirements of the program.
* Original and subsequent owners must certify in writing at time of sale that they've followed the requirements of the program for such things as feed, management and record keeping.
* Cattle must be electronically age-verified to their month of birth through the electronic ID tag, generally must be less than 2 years old at time of slaughter and must be fed a ration of at least 50 percent corn or distillers' grain for at least the final 100 days.

Reach Terry Woster at 605-224-2760.