It was at this time I realized how hard it was to build up capital. With few assets, nobody wanted to lend us money. We had to be creative, work hard and “have a go”; David Blackmore.
I have been asked to discuss with you a bit about my life and our business. Not everything we have done may suit anybody else, but some ideas may spark an idea that will suit your operations. My golden rule in our endeavours has always been “To farm with your brain and not your heart!”
By that I mean that everything that your father or grandfather did, may not be the correct way to farm today. There may only be subtle changes, there may be radical ones – like changing breeds, or districts, or consolidate the business by not actually farming yourself.
Just a bit of history, I am a fifth generation farmer, born and bred at Mount Schank near Mount Gambier S.A. My grandfather had sheep and beef cattle. My Dad purchased half of the family farm and started milking cows in readiness for when I left school. The farm had to be paid for and it was envisaged that in time it would have to support two families.
In 1972, I was offered a job with a stock firm. We thought it was a great idea for five years, to get out and see what other farmers did, pinch their ideas and come home. With the sale of the family farm in 1976 due to Dad’s health, I spent eleven years as a stock agent. It was some of the best training I received, especially in marketing. I married Julie and we had four children. On a stock agent’s wage it was impossible to raise a family and buy a farm.
During these years (in 1979) I started Australia’s first on farm Embryo Transfer programs. E.T. has stayed as a big part of our business to this day.
In 1982 I left the stock firm and started Share Dairy Farming in the Adelaide Hills. It was at this time I realized how hard it was to build up capital. With few assets, nobody wanted to lend us money. We had to be creative, work hard and “have a go”.
The share farming agreement we came to was simple, the land, house and buildings were supplied, and we supplied the herd and the labour. We shared all costs and the milk cheque, while the cattle replacements and sales were ours. We purchased one of the oldest and most respected Holstein herds in S.A., the Yadnarie herd from Tumby Bay, which included everything from calves to matrons. To finance this we leased the herd from the Stirling Family over five years. I still remember the monthly payments of $1,913.95! There was nothing like this at the time. We got a copy of a bank lease form for horses, crossed out the bank’s name and put in Stirling’s, crossed out horses and put cattle. We gave the Stirling’s second mortgage on our house in Adelaide for security (which we had kept and leased out as our fall back) and away we went.
The herd number had to be kept the same throughout the lease, but cull cows were replaced with natural offspring, and it let us sell surplus stock to help our cash flow.
As mentioned the E.T. business stayed with me. When I left the stock firm, I formed a company with partners that also involved export of live cattle. In about 18 months the E.T. business had grown to an extent that we had to come to another arrangement for the cows, which we wanted to keep as a source of income. We contracted a dairy farmer to milk our cows. All expenses except semen were the dairy farmer’s. All male progeny sold as bobby calves, and the female progeny returned to us as 3 – 4 month old calves. All cattle sales were ours. The dairy farmer got all the proceeds from milk sales. The better he looked after the cows, the more milk he got and the better the pedigree was for us to sell the female progeny. This gave us a steady income with no management or expenses.
Changing Breeds: Japanese Wagyu
In 1988 while visiting Texas A & M University I found Wagyu cattle.
Here was an ugly breed of cattle from which I envisaged we could make money. I remember two quotes from this time. A U.S. Jersey breeder was addressing an Australian Jersey Conference. He was asked “What were U.S. Jersey breeders doing to improve the popularity of the breed in the U.S.” He replied “We went out and found a cow that made us money and learnt to like her.” The other quote was when I was looking at the first Wagyu with the owner/breeder in the U.S. I said to him “Don, these cattle are so ugly that I don’t know how I am going to go back to Australia and describe them.” In his Texas drawl he said “Son, they just look like money to me!” I had imported over 10,000 embryos from all breeds, dairy and beef for clients all over Australia. A lot were from the new breeds like Salers and Gelbvieh plus the traditional breeds. I fell in love with a lot of great cattle, structurally correct, big, good looking and except to increase growth rates, I couldn’t work out how I could make more money than was traditionally being done in Australia. This wasn’t going to get me the capital that I would need to go farming full time.
Wagyu was a different story as our largest market was Japan. They also paid the top price per kg., but research showed that Australian beef was the cheapest in Japan. They were paying a premium for the lot fed U.S. beef, but still not as much as for their own beef produced from using Wagyu genetics. It was a no brainer I had to get into Wagyu. There was a huge market at a premium price.
I still had no money. Along with the bank we owned a house and 100 acres at Serpentine. We started small, purchased 7 Wagyu embryos that resulted in 5 pregnancies, four heifers and 1 bull. I sold the heifers for $20,000 each as two month old calves. Peoples said I was crazy selling some of the first Wagyu females in Australia, but I would have to wait 12 months before I could flush them, and there was no guarantee they would flush good numbers of embryos. That $80,000 gave me the money to buy a bigger batch of embryos immediately and it put me 12 months ahead. Those 17 heifer calves that resulted are the foundation of our herd today.
We initially agisted our cattle around Serpentine and made use of the long paddock! It got to the stage with numbers building up we needed something more secure, so we leased a property near Melbourne that belonged to Sir William Angliss’ family. A beautiful blue stone homestead set in an old English garden. We would pick up our Japanese customers from the Melbourne airport and bring them to “Marnong”. They would get out of the car impressed. Then they would say to me “Ah you are a wealthy man owning all this!” to which I would reply “No I lease this property.” Their answer was “Ah a smart man – Banks don’t own their own buildings!”
Our business was growing nicely. We had gone from flushing 17 Wagyu donors to having 350 Angus recipients dropping 100% Wagyu calves, but our business wasn’t growing fast enough for our customers. We decided to sell our small farm and put all our money into the business. I guess that is when we became virtual farmers. We farmed without owning any land. I don’t believe in owning machinery that you don’t use on a day to day basis. We only employ a few staff of outstanding ability and give them control of their areas. Everything else we outsource.
Along with the bank we did purchase a townhouse in Melbourne. That was not only to give us a house to live in if things went bad, but it was used for accommodation for our four children while they went to University. It was used as a back up but not as we intended. It was sold to help purchase the feed to get us through the 2003 drought. By this stage we had leased the property across the road giving us 5,000 acres of leased country and around 1500 head of cattle. We couldn’t afford to breed all our calves by embryo transfer, so we were breeding F1 cattle – Angus/Wagyu cross.
We custom feed these steers at I.C.M. Feedlot at Peechelba. We developed a ration, insisted that ICM sign a confidentiality contract and went about feeding and marketing. We started with 12 steers on feed and didn’t quite know how we were going to pay the feed bills but we got through and 12 paid for the next 24 and 24 paid for the next 48 and so on.
We marketed our steers exclusively to the largest Japanese meat company. They also owned an abattoir, feedlot and four farms in Australia. They saw first hand the success we were having with our Wagyu and started their own Wagyu program, for which I acted as a consultant. This was successful and helpful to both sides. I was taken to Japan 6 or 7 times, I went to all the major research farms, Agriculture Universities, Bull Studs, feedlots and farms. I saw our beef unloaded at the wharf and followed its progress to the supermarket shelves. It gave a wonderful insight into the industry. It showed me what the customer wanted and what he was prepared to pay for it.
By going to the breeder and farmer organisations it showed me how to get the bloodlines and the process right. After a while they started to do taste tests between my product, their Australia produced product, their Japanese produced product and some Fullblood product. I always beat their Australian produced beef and often beat their Japanese produced F1 product but never their Fullblood product. In frustration their Australian manager came to me one day and asked ‘how come you always beat us, we do the same as you, and we follow your breeding plan, why?’ I hit my heart a couple of times and said ‘you have to do it with passion’.
This relationship gave us confidence to grow our business. We breed our herd to about 1200 breeding F1 and F2 cows with natural breeding, plus grew our Fullblood herd with embryo transfer. But with F1 and F2 crossbred breeding we couldn’t get the consistent quality in our carcass that we wanted. Even though we called our cattle Wagyu, in reality they were 50% and 25% Angus.
In 2002-2003 two things happened, first the drought used up nearly all our resources, and second (and more serious) was the confirmation of BSE in Japan and following that a labelling scandal that our customer was caught up in. They stopped buying our beef over night. This was the time for a couple of big breathes. We actually decided to go a bit harder. We purchased over 700 extra Angus heifers and impregnated them with Wagyu embryos from our herd.
At the end of the drought we were able to sell our F1 and F2 breeders for good money which helped us get back up again and allowed us to buy a nice little farm on the Goulburn River with 650 mgl licence and our own house again. So now we have changed over to Fullblood cattle and carcasses. We had to find new markets.
Consolidating the business
We believed our quality probably had the edge on other people involved in producing Wagyu beef. We decided to create our own brand name, our own box lids and market to the best restaurants in Australia, Asia and North America. For three months we held some cattle on feed longer than we would have liked but we didn’t drop our prices. Our beef was served at the Hollywood Oscars, and top restaurants started buying in Korea, Taiwan, Hong Kong, USA, China, Japan and Australia. We ran out of product so we had to expand.
We still don’t have money to buy land and if the banks lent us the money to buy land, we wouldn’t have money to buy cattle, machinery, employ staff or expand the business. Our solution has come from various sources. We have contracted with some farms that have been following our breeding and management plan. They own their own farms, cattle and management. Their steers go the feedlot to be fed our ration under our management, which they pay for. At the time of slaughter the beef is sold under our label, they receive the same price as we do and we charge them 5% management fee for the work we do.
The other plans we have in place are that we contract farmers to put our embryos into their cows. We take delivery of the resultant calf at about 10 months of age after it has met the contractual arrangement, which involves health, weight, performance etc. We pay a bonus to farmers who exceed the specifications. This saves us owning land, cattle, machinery and management.
A third option we have just put in place is we own all the cattle including the breeding cattle on a farmer’s property. He supplies the land and management and he delivers the calf to us at 10 months of age, meeting specifications. In all instances we pay well above market prices so it becomes a win/win for all parties.
After we take delivery of the calves they are backgrounded before going to the feedlot where we custom feed. They supply all infrastructure, machinery, management and staff, and buy the feed twelve months in advance. We pay for it 14 days after it is fed to our cattle, saving us a huge capital outlay. After 500-600 days on feed they go to Rockdale abattoirs to be processed, packaged and shipped to our customers, all who have different cut specifications. The abattoir is contracted to carry out this work, again we don’t own anything.
So as you can see the process we have in place has seen its growth being fully self funded. It was principally forced on us because we had to find solutions to the fact that we didn’t have any money or owned land that the banks want as security.
We have four children who all have business degrees and are employed by big corporations. All want to eventually return to the family business – but none want to be farmers. I must have worked them too hard on the farm when they were little kids.
We have a succession plan in place, and one daughter has joined our company six months ago. One of Danielle’s first jobs was to manage IDW 2007, which had started to put a lot of pressure on my wife Julie and myself at the that time of year. Secondly we wanted to put more work and continual updated information onto our website. Currently we get 15 international enquires a month and can’t supply any.
The fact that none of our kids want to be farmers, has encouraged us to expand our business but become less involved in farming. We will start feeding female cattle in the next few months. These will become our donor herd. We will collect embryos from our females on feed to transfer into our partner farmer’s herds. It will also give us unbelievable carcass data to select our breeders as we will have information on the dam, the sire, and full brothers and sisters. Our genetic gain will lead to the consistency of product that we are striving for.
We have a terrific young couple who manage our farm. We see their role changing to operating the production side of the business in the future. They are looking forward to this role which will involve the production of embryos from females in the feedlot, liaising with our partner/farmers to produce the calves, raise and send them to the feedlot. Currently we produce about 30 carcasses per month. Infrastructure is in place to process 50 carcasses per week – needing about 4000 cattle on feed at any one time.
My role is constantly changing, whilst the genetic side is also growing, selling embryos, semen and breeding stock, I find it is increasingly important to be talking to our customers – the chefs. Prior to the recent opening of Rockpool Bar and Grill Restaurant at Crown Casino in Melbourne, I spoke to about 50 staff, chefs, waiters and managers to explain the Blackmore brand and Wagyu, so they can converse with the customers, our end users.
Currently our beef is the highest priced beef being sold in the USA, predominately to the world famous chef Thomas Keller who owns the number 1 rated restaurant, French Laundry near San Francisco and the number 2 rated restaurant, Per Se in New York. He recently visited our farm and during my next visit to the US, I am to speak with his staff.
Whilst it was only necessary once, to read the farming paper or breed journals, I have needed to start reading the restaurant and epicure style magazines to keep up with what’s going on and learning who’s who. These are now my customers.
So my role is changing. In retirement I want to get back to the breeding. I love working on family trees, and working with the carcass data to make improvements. If I can put an extra 1kg into each of the strip loins and cube rolls from each carcass it would increase the carcass valve by $520. That shouldn’t be too hard to put 4kgs weight into the primals of a 470kgs carcass. But for now management and marketing is my main role.
I will leave your with a true story about an acquaintance of mine, Professor John Morris, who was doing market research with Australia lamb in a major US supermarket. They were handing out small cubes of lamb on toothpicks to taste test to customers. On approaching one lady, she turned and said ‘oh no I am vegetarian’. Quick as a flash John replied ‘so was the lamb’. You have to be quick on your feet and ready to approach each hurdle as it arises and adapt to your customers needs.
David Blackmore address to the Australian Dairy Conference.