Dairy Cattle Breeding Industry

A little while back I was comparing three different contracts offered to three different breeders for a lease of comparable sires, all from the same A.I. unit. The interesting part was that all three of the lease offers were drastically different, with the “best” contract being potentially almost twice as lucrative as the other two. This got me to thinking about the whole leasing of bulls to A.I. units and how it really is biased in favor of the A.I. centers and how the divided nature of dairy breeders has led to the failure of the seed stock industry.

Back in early 2012 we first raised the question Should A.I. Companies Own Females? At that time, we commented “some A.I. companies have taken early steps to control the source and supply top genetic animals to their customers. The world is changing and so will the inter-relationship between breeders and A.I. companies. In many cases they are no longer just a customer they are now a competitor.” Since that time, what was a smart business decision for A.I. companies has led to the devaluation of elite dairy cattle genetics and, in the long run, could lead to the end of the seed stock industry. (Read more: Why Good Business for A.I. Companies Can Mean Bad Business for Dairy Breeders)

The Enemy Is At the Gate

Many seed stock breeders are asking me what they can to do combat this challenge. While part of me wants to say, “I told you so” and another part tells me that it’s too late, I find myself still searching for answers. While the “I told you so” answer is pointless, I have been doing some thinking about whether it really is too late or not. In talking with some breeders about this issue, they raise the point that perhaps we need to form a variation of a union. This would be similar to the way pro athletes (the product) unionized in order to get a larger share of the revenue.

There are two problems with unionizing:

This reminds me of attempts to form a union in the NHL. In the late 1950’s Ted Lindsay rallied other players to form a union, after watching how Tim Horton, star defenseman for the Toronto Maple Leafs, had his pay cut after breaking his leg. This was at a time when players had to work summer jobs and could barely afford to cover their bills. To cripple the movement, the Red Wings traded Lindsay to Chicago, where he was less effective in organizing key players to join him. Other influential players across the league were also traded away or banished to the minor leagues. Lindsay was successful in creating a small association of players but the group folded shortly after Lindsay was traded. I see the same thing happening in today’s breeding industry. Those breeders that do try to make a stand are being undercut by their fellow breeders. Most seed stock breeders are so eager to sell, at any price, they don’t think about the ramifications those actions will have on their fellow breeders. In fact, I doubt that many are even aware what effect their actions are having. Breeders have no idea what other breeders of elite or similar bulls are getting, so they are at a tremendous disadvantage.
Many of the larger A.I. companies are now investing heavily in ownership of females, and they already have a stranglehold on supply. So unlike the way pro sports unions were ultimately formed as a result of an inferior product being offered with non-unionized players. The A.I. companies already have their supply and are in full control.

So What Can Seed Stock Breeders Do?

First of all seed stock breeders need to communicate openly about what is truly happening to their livelihoods. These seed stock producers are investing heavily in IVF and the purchase of top females and they are padding A.I.’s pocketbooks by purchasing early release semen at a significant premium. At the same time, breeders should be well aware of what females are worth, as they watch them going through public auctions for large sums of money. However, do they have any clue what other seed stock producers are receiving for their males? From the discussion with many seed stock producers, and as per the example at the beginning of this article, I would so, “No!”

In my career outside of the dairy industry, I have been fortunate to be involved in many merger and acquisition deals. In working with a few seed stock producers, I took a sample of one of the contracts to a lawyer who specializes in contracts similar to these that I worked with in my career outside the dairy industry. His reaction was almost comical. He first explained to me that since seed stock producers are the ones who have the ownership of the animal, it should be them developing the lease agreement. He then went line by line through the contract and pointed out how many of the stipulations would not holdup in court, or why seed stock producers should never sign such an agreement that is so vague and poorly worded. Now I understand that most seed stock producers are not lawyers and, if they were, why are they not practicing law instead of dairy farming? But still these agreements are pivotal to breeders’ income and yet they don’t have a clear understanding of what they are actually signing. (Read more: Top 10 Questions to Ask Before You Sign That A.I. Contract)

Seed stock producers are also not professional negotiators, yet they are going into contract negotiations with individuals who are. Don’t let the “Sire Analyst” title fool you. , The last time they actually had a real say in what sires they brought in, I was 60lbs lighter, had hair color, no kids and drove a mustang. (Read more: You’re Fired: The Future of the Sire Analyst) The role of the modern day “Sire Analyst” is to become your best buddy so that they can leverage that relationship to get the best contract they can for the A.I. company they work for. Seed stock producers need to become great negotiators, or at least learn that friendship is one thing, but this is a business, and business is business when it comes to the negotiating table. In my career, I have had to do tough negotiations with some of my best friends. I have learned that real friends know that business is business and what happens at the negotiating table has nothing to do with our friendship outside of work. That is what being a professional negotiator requires.

The Bullvine Bottom Line

The ship may already have sailed on this issue as there is a growing trend for A.I. companies to produce their own supply of elite sires. If you don’t think that could happen, take a look at the swine industry where this has already occurred. Seed stock producers need to start to unite now, if they want to have any hope of salvaging their livelihoods before the dairy genetics industry is taken out of their hands.