Wagyu Cattle Shift Profit Outlook

ANTHON, Iowa (DTN) -- Losing more than $115,000 during the height of the COVID-19 pandemic forever changed the Feddersen family's cattle operation, based in rural Anthon, Iowa.

"My mom (Marge) was bawling at the kitchen table, thinking we were going to lose everything," Brad Feddersen recalled. This happened after a cattle broker failed to pay half of what was owed the family for 30 fullblood Wagyu finished cattle sold March 2020.

Marge and Larry Feddersen had years in the cattle business, and there was a lot on the line. The family has fed cattle in the gently rolling hills of northwest Iowa since 1960. Brad joined the cattle operation in the late 1990s, and he was determined not to let this financial setback ruin decades of hard work and the life his parents love.

"It's something we enjoy doing," said Larry, who has no intention of retiring. "I've done it all my life." Every day at 6:30 a.m., he and Marge, both 81-year-olds, still get up and feed the herd together.

COVID SETBACKS

The family had started a shift earlier, launching Feddersen USA Waygu in 2017, a fullblood Wagyu cattle operation. After several years of contract feeding Wagyu-Angus crosses for a Texas rancher they had the background and knew what they were looking for. They sold their first two loads of fullblood Wagyu cattle without issue in January and February of 2020, with each load totaling about 30 head.

But as the COVID-19 pandemic began to build, many cattle feeders and ranchers found finances pinched. Producers who only sold live animals, like the Feddersens, were hit especially hard as packing plants and eateries temporarily shut down. As this happened, demand for high-end Wagyu meat largely dried up. So did the open market for Wagyu cattle.

That cattle broker, who had paid the Feddersens half up front for 30 head in March of 2020 and took the animals, didn't have enough funds to cover the balance still owed the family. Legal action has been taken by the Feddersens against the broker to recoup the money, but Brad said he doesn't expect restitution.

"I told Mom and Dad, 'let me handle it,'" said Brad, referring to formulating a recovery plan and reassuring them everything would work out.

RECOVERY PLAN DEVELOPED

His solution was to diversify and grow Feddersen USA Wagyu and make its beef so desirable that robust sales and financial security would follow. His plan had several keys, which read like a "how to" for anyone wanting to get into a high-demand niche market like this.

1. Acquire top genetics.

2. Implant fullblood Wagyu embryos into surrogate cows owned by area farmers. The goal was to quickly increase herd size in order to sell/harvest 60 head a month instead of 30.

3. Adopt a combination of direct and wholesale marketing of meat and cattle. The goal was to have customers prepay for animals before harvest.

4. Create a sales and promotion website: www.iloveWagyu.com.

5. Establish relationships with meat buyers and chefs throughout the country.

6. Offer a complete line of branded meat seasonings and grilling accessories.

7. And, possibly most important, have a can-do and positive attitude.

Today Brad is confident: "We're going to blow this out of the water."

WHY WAGYU?

Wagyu beef is known for exceptional marbling, tenderness and flavor. The American Wagyu Association (AWA) states the meat is the pinnacle of the beef world. The Feddersens want to be able to cash in on the growing popularity of the high-end product.

In a restaurant, it's not uncommon for a 100% Wagyu steak to cost hundreds of dollars. One fullblood market steer can fetch about $14,000 (after grade premiums are included), said Brad Feddersen. That's double the value of a Wagyu cross and several times more than other breeds.

A report released in December 2021 by Market research company Technavio (see the report here: www.technavio.com/report/Wagyu-beef-market-industry-analysis) indicated Wagyu beef market share would increase $2.4 billion worldwide from 2020 to 2025.

Daniel Levine, director of The Avent-Guide Institute, a trend consultancy in New York City, agreed that Wagyu is definitely growing in popularity despite the higher price and even the recent downturn in the U.S. economy.

"First of all, when people taste it, it's like nothing they've ever had before. It's so delicious," said Levine, who's eaten many high-dollar Wagyu steaks. "More and more people are becoming food connoisseurs and are treating themselves to luxury food."

Brad Feddersen said he's found that's absolutely true, whether people live in a large city or a small town.

When the family started selling Wagyu directly, they initially lowered prices. They were at about $5 per pound for hamburger, for example. They provided free samples to get people to try Wagyu. Once people did try it, Brad said they were hooked, adding that 100% Wagyu often grades higher than prime.

As they worked to build their market, for five Saturdays leading up to Christmas of 2020, the Feddersens gave out samples and sold meat at a local vendor event in Sioux City, Iowa. The result was an astounding $120,000 in sales.

"When we opened the booth on the second weekend, 100 people were already standing in line," Brad told DTN.

Along with the one-to-one sales, Brad reached out to Fareway, one of the Midwest's largest grocery store chains known for its fresh meat selection. He provided $8,000 worth of beef samples to employees. Fareway has purchased about 300 head since 2021, and they sell the premium product both in stores and online. (See www.farewaymeatmarket.com) Brad told DTN the company plans to buy most of the cattle currently in the Feddersens' feedyards.

Today a Feddersen 16-ounce Wagyu ribeye sells for $80 to $90 at Fareway. Dalten Davis, operations manager for the online meat market, said sales are strong to individuals and are gaining with restaurants. He noted customers often buy Waygyu for special occasions, such as birthdays and holidays, and some only buy it.

"With restaurants being closed, people were forced to cook at home but they still wanted quality meat," said Davis, noting that Fareway ships Feddersen Wagyu regularly to New York City and other large urban centers. "It's a fantastic eating experience," he added.

GROWING THE HERD

As the Feddersens have worked to build demand, they are now working to meet it. The family works with local cattle producers to boost the Wagyu population through the use of surrogate cows. This year they implanted about 800 fullblood Wagyu embryos into surrogate cows. Eggs were flushed from fullblood Wagyu females the family has acquired, and those eggs were fertilized with semen from fullblood Wagyu bulls, all with elite genetics. Some semen straws cost $10,000.

The Feddersens hope about 70% of the embryo transplants result in a calf. After that, it usually takes more than three years for Wagyu cattle to reach a market weight of 1,450 pounds or more. Some females will be retained for breeding.

The advantages of transplanting embryos is that one female can supply four to more than 20 unfertilized eggs when flushed. Semen from one straw can be used to fertilize multiple eggs. The process isn't cheap. The Feddersens expect to have $3,500 invested in a calf once the farmer is paid for supplying the surrogate cow, raising the yearling to 450 pounds and paying vet bills. That also includes the embryo work.

"The main goal of embryo transfers is to take that superior female and mate her with a sire that's hopefully out of this world, whether for meat quality or show quality, and exploiting it. Instead of one calf per year, we're having multiple calves," explained Travis Hargens, a veterinarian and certified embryo transfer practitioner with the Audubon Manning Vet Clinic at Audubon, Iowa. He works with the Feddersens.

Brad Feddersen said they are still recovering from the financial loss in 2020, but he's optimistic now. The business shifts, he told DTN, have put the family's Wagyu business on a path to recovery financially, and on a path to achieve their ultimate goal.

"We want to produce the highest quality meat to give people pleasure eating," Brad said.

For more information, go to the American Wagyu Association website at https://Wagyu.org/….

Matthew Wilde can be reached at matt.wilde@dtn.com

Follow him on Twitter @progressivwilde

(c) Copyright 2022 DTN, LLC. All rights reserved.