My corner of the institution: South Africa

Today we had a long drive to Heidelberg, and a big feedlot.

It was a rainy day today, and the traffic through the city was bumper to bumper. One thing we noticed is that several labor workers ride in the backs of bakkies (trucks). They even do this on the interstates.

We arrived at Karan Beef, a family owned company that has grown over the past 30 years. Since 1974 with 2300 hectares. Karan Beef is an integrated operation with its own feed mill, where 15 million tons of feed is produced per day. The balanced rations contain no animal byproducts.

Thirty minutes away Karan also slaughters 1800 carcasses per day in the packing plant. The beef is graded to rigorous international standards and exported. The processing plant produces 15 million tons of hamburger patties per day. They distribute all over Africa 24/7/365.

The company does only beef, and they have 35 percent of the market share. Karan is a big player, but not the only one. They have a 140,000 capacity and 75 percent if all beef in the South African market comes from feedlots, 25 percent is ground beef, and 75 percent is cuts. Karan supplies wholesale at about 80 percent of their business.

Young beef with medium fat (11 to 14 percent body fat) is the best A grade beef (18-24 mo age) this is a bulk of their business. Weaners start at 235 kg and will be on feed 120 days. The end carcass weights stay small because consumer demands affordability.

Three big drivers for profits: weaner price, feed price, and beef price.

Weaner price is about 60 to 70 percent of the profit picture. They do not buy from open auctions due to health risks of animals and traceability. Instead they have dedicated team of 15 buyers who buy in areas direct from farms. They do not do custom feeding. Custom feeding does take place in other yards, just not at Karan.

Depending on the origin of cattle loads processing as far as vaccinations may vary slightly. However, most health programs focuses on lungs.

Feed prices are 30 to 40 percent of the profit picture. Maize and corn are large components. Wheat and bran is also involved, as well as protein cakes. They also provide grass hay, sugar cane, and wheat straw for roughage. They do not feed silage. They mix rations with molasses.

Another challenge is securing ration ingredients. Molasses is now being used in biofuel digesters, so it is harder to secure at competitive prices.

Hedging does not readily take place, because there is no market system in South Africa. The only thing they can hedge slightly is maize. They purchase everything on the open market. They try to use some contracts and anticipate needs, but that doesn't always play out.

The processing procedure is very similar to the U.S. They have health programs and sorting systems. They will process again after 40 days in order to keep pens as uniform as possible.

The challenge regarding traceability for Karan is, "what is the world standard." Now they use a tag numbering system paired with a computer software that works well. Data is then given as feedback to farmers as breeder reports, it also helps production trends. Nationally South Africa uses a branding system that is their national standard.

Consumer demands on beef quality has shifted the market, as well as the increased middle class.

Karan employs 750 people on feedlot, 120 management staff the rest is all labor. Labor is 1600 Rand per month min wage. Management 7000 to 8000 rand per month. The slaughterhouse employs 700 employs and make 10000 to 12000 per month because of skilled labor.

The top management lives on the farm. The security force also stays on the farm.

Carcasses of the dead animals are sold to lion and crocodile farms. These farms are certified carnivore farms and they can by these dead cattle at a discount because they are not fit for pet or human markets/consumption.

Pens are walked daily.