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CASE STUDY 10 Livestock Farming in Colorado: Coleman Natural Beef THE MAIN HEADQUARTERS OF COLEMAN NATURAL BEEF {CNBJ is located 1 mile west of Saguache, Colorado, but the Colemans operate their owned and leased pastures and irrigated meadows over a 50-mile distance. They have been ranching in the area since the 1970s and own 13,000 acres, 4,500 of which is near Saguache. They lease another 13,000 acres (some from family members and relatives) in the same area. The Colemans' base ranch is located in the very arid northwest section of the San Luis Valley, a great, dry lake bed, approximately 8,000 feet in elevation. The summer ranch is 50 miles west of Saguache on Highway 114 along the Continental Divide, in the high meadows and mountain lands known as the Cochetopa. The meadowland (known as parkland in the West) is at an elevation of approximately 10,000 feet. The summer ranch consists of 8,500 owned acres with grazing permits on 250,000 acres of Forest Service and Bureau of Land Management summer lease land. GENERAL DATA The CNB operation is a beef ranching business with an extensive market- ing component selling to a specialized clientele for premium prices. The Colemans' own beef cattle herd totals 2,500 cow-calf units; they contract with local ranchers to provide an additional 12,500 head to meet the de- mands of their clientele (Table 1~. Climate The climate and topography on both the main ranch at Saguache and the Cochetopa play a key factor in the way this traditional cattle ranch is run. 388

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COLEMAN NATURAL BEEF TABLE 1 Summary of Enterprise Data for Coleman Natural Beef 389 Category Description Size 21,500 acres owned, 13,000 leased, 250,000 made available by grazing permits; 2,500 beef cattle Labor and Two brothers provide all the management: one focuses primarily management on production; the other handles marketing and public relations. practices Four full-time hired men work the ranch, each receiving about $1,000 per month plus housing, paid utilities and insurance, and use of a vehicle. The man on the summer ranch receives similar pay and benefits. Jim Coleman's wife works off-farm. Livestock All replacement cattle are produced on the ranch; 300 cows are management artificially inseminated each year, and breeding bulls are selected practices from their offspring. After calving, half the cattle and calves are herded 50 miles to summer pasture; half are pastured at the base ranch. Feeder stock is wintered on rented wheat pasture in eastern Colorado and western Kansas. Breeding stock fed at the base ranch are given hay produced without pesticides or fertilizers, plus supplemental cottonseed cake. In spring, feeders are shipped to feedlots and fed under contract with specific feeds that do not contain growth-promoting chemicals. The death rate is 2 percent at Coleman Natural Beef (CNB) compared with the industry average of 6 percent, although these data are not precisely comparable. Marketing strategies CNB has approximately $15 million in annual sales, including on- farm production plus cattle from selected neighbors, totaling 15,000 head. The 25 percent premium above regular carcass prices is key to the profitability of the operation. Weed control All plant material is harvested as hay, including weeds. practices Insect and nematode The dry climate and high elevation greatly reduce the incidence of control practices pests. Cattle receive an injection of ivermectin to eliminate scabies and lice; no other pest control is used. Disease control Three-way inoculations are used, compared with the conventional practices seven-way vaccine. There are some problems (minor) with lumpjaw and pinkeye (due to feeding of foxtail and barley). Sick animals are segregated, given medication, and removed from the natural program. Soil fertility No fertilizer or lime is used. management Irrigation practices All hay acreage and some pasture are flood-irrigated from mountain streams. Crop and livestock Feeder cattle are estimated to be 25 to 50 pounds smaller than yields those of conventional producers who apply subtherapeutic doses of antibiotics or other growth-stimulating drugs. Daily rates of gain are slightly less than those of conventional producers. Financial performance Net returns to the ranching operation (producing feeder cattle with minimal inputs of chemicals) are reported to be less than hired labor wages. The finishing and beef packing and sales operations, using CNB's own beef plus that of neighbors, appear to be financially stable because of the 25 percent premium received.

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390 ALTERNATIVE AGRICULTURE Annual precipitation in Saguache is S.7 inches, falling mostly in the summer (Table 2~. Snowfall averages 31 inches per year. Annual rainfall at the sum- mer ranch is 10 inches, and average snowfall is 2 feet. The snowfall may vary from less than 7.5 inches on the meadowlands to many feet in the mountains. Soil The Colemans describe their soils in the San Luis Valley area as alkaline desert soils. They describe their Cochetopa mountain meadow soils as acid. Data on the pH of the soils are not available. Buildings and Facilities Barns are provided for the horses but not for the cattle. Seven-foot-high wooden windbreaks are provided in places where trees are too sparse to provide protection. The corrals are constructed of lodge-pole pine logs. One squeeze chute, sorting pens, and a loading ramp are provided at each of the several areas in which the cattle are grazed. Instead of a barn for sick animals, a 500-acre pasture is provided for ill or, occasionally, snake-bit cattle that require special observation, increased feeding, or medication. Irrigation and Haying Because of the limited rainfall in the area, all of the hay ground and some of the pastureland (more than 6,000 acres) on the farm are gravity-irrigated from mountain streams, which are primarily fed by snow melt runoff. Two hired men manage the floodgates during the summer. Native hay is cut once, both on the Cochetopa and at the base ranch, yielding about 1 ton per acre. The grass is basically native fescue, timothy, and wheat grasses, except for 150 acres of alfalfa from which two cuttings per year are taken yielding about 3 tons per acre. The Colemans apply no fertilizer or lime. It is not known whether the productivity of the cropland can be maintained indefinitely without the application of fertilizer or lime. Labor In addition to Jim and Me] Coleman (brothers), the Coleman ranch oper- ation has four full-time hired men, who are paid about $1,000 per month. They also receive housing, paid utilities and insurance, and use of a vehicle. The man on the Cochetopa ranch receives similar pay and benefits. Because the cattle ranch has proven only marginally profitable, km Coleman's wife works as a school nurse in Saguache to help cover family living expenses.

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392 ALTERNATIVE AGRICULTURE Machinery Jim Coleman, his son Tim, and one hired hand harvest approximately half the hay (2,000 tons) using their own equipment, most of which is at least 6 years old. The farm has one self-propelled swather, which cuts, conditions, and places the hay into windrows; a square baler; and a round baler, all purchased in about 1980. The Colemans harvest approximately half of their hay in round bales and the other half in square bales in Saguache. They have two tractors and self-loading hay wagons so that square bales can be handled with relatively little labor. Haying starts in July and lasts 5 to 6 weeks. Other equipment used by the Colemans are front- end loaders on the tractors to set out round bales for feed and a 10-year-old dozer that is used to make winter trails to feed bunks and for irrigation ditch work. MANAGEMENT FEATURES During a she vis* in July 1986, the Coleman beef herd appeared to be in excellent condition. The cows are primarily offspring of a foundation herd of Herefords purchased 25 years ago. Since then, Red Angus, Limousin, Gelbvieh, and other breeds have been introduced into the herd by artificial insemination. Black Angus have been used to breed first-calf heifers for ease of calving. Between 300 and 400 heifers each year are selected as herd replacements. Breeding The Colemans have not purchased any cattle since 1959. Instead, they artificially inseminate 300 cows per year (and have been doing so for more than 25 years) to upgrade their foundation herd. According to D. Lamm, assistant director for agriculture and research at Colorado State University, this practice is generally carried out by only the top 3 to 5 percent of the beef cattle operators in the state (correspondence, 1987~. The Colemans watch the bull calves from these cows closely and select the best as herd replacement bulls, running 5 bulls for every 100 cows. Before the cattle are taken to the summer pastures, they go through one heat cycle at the ranch, during which they are carefully watched. During this heat cycle, approximately two out of three cows win become pregnant. The Colemans report that, because of the high altitude and a genetic predisposition, animals have a tendency to get brisket disease. This disease is associated with congestive right heart failure as a result of the stress of high altitudes. Animals born at high altitudes, however, tend to adjust more easily than imported stock. Neighboring ranchers who have purchased animals from lower elevations have lost many cattle because of this prob- lem; yet, the Colemans' death loss for all of their cattle from all causes is typically under 2 percent, compared with an industry average of 6 percent.* *Exactly comparable data have not been located. Ensminger (1983), however, estimates

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COLEMAN NATURAL BEEF 393 In November of each year, all 2,500 cows are tested for pregnancy. No open (nonpregnant) cows are kept. Age is not a selection factor, and some pregnant cows are 10 years old or older. km Coleman reported that they can pregnancy-check approximately 500 cows per day (D. Lamm, correspon- dence, 19871. The ranch has excellent working corrals at different locations, and the herd is subdivided into groups of 300 cow-calf units for ease of management. Much of the ranch work is done on horseback. The Coleman ranch owns 30 horses, and some of the hired men ride their own horses. The cattle are observed twice daily, once in the morning and again in the evening. Feeding Approximately half of the cows are kept in Saguache year-round, and the other half are herded to the Cochetopa summer pastures approximately 50 miles away after calving each spring. The calves are weaned off their moth- ers in the Cochetopa in later October and November, and by the first of December the cattle are being herded back down to Saguache for the winter. About 4,000 tons of hay per year are harvested from the ranch. Half of this amount is harvested in the upper range, usually under contract for $27.00 per ton. The other half is baled by km Coleman, his son, and one hired man. At least 1 year's hay reserve is always kept for emergencies. If there is any excess above that amount, it may be sold. During the winter the younger cows get approximately 1 pound of cotton- seed cake each day and all the hay that they can eat without wasting it. The old cows are fed cottonseed cake every other day with free choice of hay. Replacement heifers are fed 1.5 to 2.0 pounds of ground barley or wheat, or both, to promote growth. Animal Health The beef cattle are inoculated with a three-way vaccine for the common diseases of brucellosis, blackleg, and malignant edema; they are also in- jected with ivermectin to eliminate scabies and lice. No medicines or growth hormones other than these materials are given prophylactically. The pri- mary cattle health problems on the ranch other than big brisket have been lumpjaw and pinkeye. km Coleman has said that these diseases are related to feeding foxtail and barley, which have barbs on the seed. Me] Coleman also indicated that climate makes a big difference in animal health prob- lems. In this area the weather is dry with a great deal of sunshine. Believing that animal stress causes illness, which may involve costs associated with that "calf losses from birth to weaning average 6 percent. About 1.5 million head of cattle die in feedlots each year." Based on an estimated 25.8 million head of fed steers and heifers slaughtered in 1983, feedlot deaths also average about 6 percent (U.S. De- partment of Agriculture, 1986~.

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394 ALTERNATIVE AGRICULTURE medicines and veterinary services, the Colemans have based their herd health program on minimizing stress. Because the grazing area per animal is large, diseases associated with confinement are eliminated. Animals re- quiring drugs for illness or chemicals for external parasites are red-tagged and do not enter the natural beef feeding program. Instead, these animals are sold through regular marketing outlets. The Colemans report that shipping fever and other related weaning stresses have been kept extremely low by conditioning the calves on hay at the ranch prior to trucking them to winter wheat pastures in eastern Colo- rado and western Kansas. The cows are bred to calve in late February through May. Of those cows who calve early, the best are selected for artificial insemination. Bull calves are castrated at 2 to 4 weeks of age, except for those sired by artificial insemination; these bulls are retained for possible selection as breeding stock. Strong, healthy calves weighing 450 to 500 pounds are weaned in the fall without the use of hormone implants. According to Colorado State University livestock specialists, these weaning weights compare favorably with those of calves that do receive growth stimulant implants (D. Lamm, correspondence, 1987~. The Colemans report that their use of artificial in- semination has improved the herd's weaning weight and average daily gains from weaning to market. Other economically important factors taken into account in herd improvement include carcass grade and area of the rib eye. Also, by selecting for ease of calving among first-calf heifers, the Cole- mans report that they have significantly reduced calving problems and parturition death loss. Marketing The Colemans have developed a unique system for marketing their beef. In 1979 they were being squeezed by rising land payments, higher costs of production, and falling cattle prices; prof* margins were nonexistent. They knew that they had to try something different to prevent failure of the firm. The Colemans stopped using most of the drugs, fertilizers, and pesticides commonly used in their operation during the 1960s. They have never used any growth hormones or implants. According to R. E. Taylor, a professor of animal sciences at Colorado State University, feed additives, such as sub- therapeutic doses of antibiotics, are routinely applied by only about 5 per- cent of Colorado beef producers. A much more common practice is the use of growth stimulant implants in the animal's ear, which increases weaning weights by 10 to 25 pounds (R. E. Taylor, correspondence, 1987). Before they started CNB, the Colemans sold their calves to other beef feedlot firms that fed antibiotics and growth stimulants. Although their feeder calves brought top prices, the prices were still too low to cover all their expenses and land payments. Mel Coleman decided to devise a marketing scheme in which he would control the way their cattle were being fed, and then sell the beef to health-

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COLEMAN NATURAL BEEF 395 conscious consumers at a premium price, thereby covering their higher costs of production. He felt that the growing health food market was ready for natural beef and devised a way of managing his cattle throughout the feeding process so he could be assured that the cattle were free from chem- icals (antibiotics, implants of growth hormones, and feed residues of pesti- cides). As business grew, Mel Coleman began to specialize in marketing, and km operated the ranch. The current demand for Coleman Natural Beef has outgrown the Cole- mans' own herd's production capacity. They have therefore devised the Coleman Certified Rancher Program, entering into agreements with certain neighbors to raise calves using methods compatible with CNB policies. Today, CNB sales exceed 15,000 head per year, including cattle from other ranches in the Coleman Certified Rancher Program. Such a vertically inte- grated system, from cow conception to the supermarket, took several years to develop. In the first year, 1979, only one beef carcass was sold. In 1980 sales were up to three per week. As debts mounted, Mel Coleman looked outside Colorado and entered the expanding health food markets in Califor- nia and then in Massachusetts. In 1985 Coleman Natural Beef and other natural meat product sales totaled almost $15 million. Mel Coleman re- ported that as the CNB volume has increased, so have the logistical prob- lems. The Colemans' major challenges have included making sure their calves were fed properly and then butchered, packed, and shipped on time. All of the weaned and conditioned calves are trucked from the Saguache base ranch in late November to rented wheat pastureland in eastern Colo- rado and western Kansas. They arrive on wheat pasture weighing 450 to 500 pounds and are grazed there for 90 to 100 days. One man from the Coleman ranch operation goes with the cattle to take care of them. Because of the low rainfall and minimal weed and insect problems in eastern Colorado and western Kansas, it is not difficult for the Colemans to find wheat fields that have had little or no application of chemical herbicides or fertilizers. In nonirrigated wheat pastures, summer fallowing of the crop- land every second or third year with tillage usually controls the weed population without herbicides. According to a telephone interview with Mel Coleman (1986), the Cole- mans' feeder cattle gain an average of 2.25 pounds per day while on wheat pasture. D. Lamm, a Colorado State University livestock specialist, observed that a normal rate of gain may be about 2 pounds per day while the cattle are on range, but depending on such factors as weather and the genetic potential of the beef animals, an average rate of 2.25 pounds per day is attainable (correspondence, 1987~. During adverse weather conditions, however, the animals sometimes gain no weight at all. When the Coleman feeder cattle reach 700 pounds, they are shipped to a custom feedlot where they are fed until they reach a weight of 1,000 to 1,100 pounds. In a 1987 telephone interview, Mel Coleman reported that his cattle gain an average of 2.75 pounds per day while in the feedlot. D. Lamm, however, states that the normal rule of thumb is that heifers will

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396 ALTERNATIVE AGRICULTURE gain 2.8 pounds per day and steers will gain 3.2 pounds per day while in a feedlot, implying that the Coleman rate of weight gain is slightly below the expected range for feedlot operations using conventional practices. While in the feedlot the cattle must be fed according to Coleman specifi- cations, thus requiring that they be fed separately from other cattle because their special ration contains no growth hormones or chemical feed addi- tives. This practice requires additional labor expenditure by the feedlot operator and results in a somewhat slower average daily weight gain, for which the Colemans have to pay an extra fee to the feedIot operator. The Colemans strive to purchase feed grains that have been produced without chemical pesticides or fertilizers, and toward that end, chemical tests are done by commercial laboratories to check for pesticide residue in the feed. The effectiveness of this approach in assuring residue-free feed grains is difficult to verify. It is unlikely that the analytical methods used by commercial laboratories could detect at very low levels (in the parts per billion range) all of the pesticides used on feed grain crops. Nor has this committee found any data indicating that natural beef is different from conventionally produced beef in composition or nutritive value. The impli- cations of alternative management practices, such as those used by the Colemans, on meat product quality and safety deserve further study, how- ever. Carefully controlled protocols and sensitive analytical methods are needed. Once the cattle reach about 1,100 pounds, they are slaughtered at a Denver packing plant. Again, keeping their cattle separate requires more logistical attention from the Colemans and added cost. Currently, to prevent their cattle from being mixed with other beef, the Colemans have managed to ensure that theirs are the first batch of cattle to be slaughtered on a given day (normally on Fridays). The carcasses are hung in cold storage for 1 week, and then the beef is transported to the Coleman sales and distribu- tion office, where it is packaged and shipped. Some beef is cut into prime cuts and vacuum-packed in plastic; some is cut into portion control cuts. Some is shipped as carcass beef, depending on what the retailers order. The Colemans receive a price for their beef that is approximately 25 percent higher than the regular carcass price. The cattle are bred and fed to reach a low Choice grade, with a yield score of most of their beef in the number 2 grade. The Colemans guarantee their beef; if a consumer or retailer is dissatisfied, the beef is replaced. Their goal is to have all their cattle grade number 2 and still make the Choice grade without having to trim off excess fat. PERFORMANCE INDICATORS Management factors tend to reduce the Colemans' cash operating costs, as compared with typical Midwestern crop-livestock operators and feedlots. The ranch's death loss from calving problems and disease has typically been very low: 2 percent versus an industry average of about 6 percent. For example, in the year ending July 1986, out of the Colemans' 2,500 cow-calf

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COLEMAN NATURAL BEEF 397 units on the summer ranches, only ~ animals died (6 calves and 2 cows), all reportedly struck by lightning. Good management practices (not unique to the Coleman ranch) are used to reduce stress on the beef animals. Crowd- ing is avoided through the use of ample acreage per animal unit. Infections from outside herds are avoided by not introducing new animals to the herd. Improved genetic material is introduced through artificial insemination rather than by the purchase of breeding stock. Feeder calves are conditioned prior to shipping. Fertilizers and pesticides are not used in the production of crops or pasture on the ranch. The effects of this method of production on the quality of the beef (in terms of food safety and nutritional value) have not been scientifically established. The Colemans have observed that signifi- cantly higher yields of hay could be obtained by fertilizing but only if they introduced plant cultivars other than native species. They have also noted that these pasture improvement practices increase costs and the risk of more sizable crop failure during low-rainfall years. Native species are re- puted to be more winter-hardy and drought-resistant than other hay culti- vars that the Colemans or their neighbors have tried. The ranch uses a minimum of buildings and machinery and provides natural and manmade windbreaks rather than barns to protect the cattle from severe winter weather. Haying equipment and other machinery are considered minimal for an operation of this size. Although their costs appear to be relatively low, the Colemans' production may be reduced as a result of some of their management practices not using fertilizer or growth hormones, for example. Yet, these management practices are apparently essential to receive premium prices. The Colemans are obtain- ing a premium price of up to 25 percent or more for raising and marketing their cattle as natural beef, catering to people willing to pay a higher price to obtain foods produced with minimal or no chemical inputs. Nonetheless, the owners report that the Coleman ranch is currently earrung a return on labor and management that is less than the wages they pay their hired personnel. The rate of return on their investment thus is extremely low if not actuary negative- at present. Clearly, the marketing operation is supporting the ranch: more than 12,000 additional cattle are marketed under agreements with neighbors who produce their beef to CNB specifications. There does not appear to be any technical efficiency incentive for beef producers to adopt the Coleman technology; the premium price appears to be necessary to keep this beef operation going. Today CNB is one of several suppliers of natural beef. If the total market production of natural beef increases more rapidly than demand, the 25 percent premium price now obtained could be greatly reduced, thereby substantially reducing the prof- its of the operation. REFERENCES Ensminger, M. E. 1983. The Stockman's Handbook. Danville, Ill.: Interstate Press. U.S. Department of Agriculture. 1986. Livestock and PoultrySituation and Outlook Report. Report No. LPS-22. Economic Research Service. Washington, D.C.