All cattle are processed at IBP’s plant in Lexington, some three hours to the east.

They generally don’t hedge their cattle.

"Our hedge," John says, "is basically that we’re selling in the spring of the year, we’re feeding our home-raised cattle, what cattle we buy are light, and if we put on cheap gains we keep our breakevens low. In other words, we feel more comfortable managing risk by managing breakevens rather than using futures and options."

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Another somewhat separate part of the Maddux feeding operation is the cutting bull enterprise. Some 500 head of bull calves are kept intact annually at weaning. The bull calves are sorted and culled down, and about 300 of the 500 head are selected for a 45-day gain test. At the end of the test they’re sorted and culled one more time. Those that don’t stand up to the rigorous selection process are castrated and put on feed.

The remaining 200 head of bulls go into the breeding program. Those bulls are kicked out with the cows as yearlings, but they’re only used for one season. Immediately after the breeding season, which occurs the latter part of July, those 1000-pound yearling bulls are castrated and put on feed. They come off feed at about 18 months of age beginning in November and December, and weigh about 1400 pounds.

"They don’t convert like the calves," John admits, "and consequently the cost of gain will be higher, but we weigh into that the fact that we’re able to sell them at steer price rather than as cow meat."

Both John and his father wonder about the long-term viability of feeding their calves out at home.

"A family-owned and operated farmer/feeder kind of an operation is pretty much a dinosaur," John admits.

Thus far they’ve been able to keep up with all the regulations, but John worries that in the near future a 3000-head feedyard will no longer be an economically viable enterprise with impending environmental regulations.

Curtailment of groundwater pumping for irrigation purposes is another reason the Madduxes worry about the viability of home-raised fats. They’ve already seen a significant drop in the Ogallala Aquifer in recent years, and pumping for irrigation purposes is limited to 14.5 acre-feet per year. Further restrictions, John opines, will be needed in the near future.

Jack has other reasons for questioning the viability of their feeding operation.

"We have so much bunk capacity in the U.S. today," he points out. "That, coupled with the management tools that are available, hedging, for example, has helped fuel the demand for feeder cattle to a point that we almost always bid any profit out of them.

"That’s always been kind of true in this business," he adds, "but it’s even more the case today. We have all these commercial feedyard managers who are being pressed to keep these yards full, and we have all these feeding complexes that are willing and eager to accept returns based on yardage.

"I’ve heard some numbers quoted, and I believe they’re true. If you have a reasonably priced yard, and you keep it full, you can make 20 or 30 percent on your investment. That is so different from how it was in 1918," Jack concludes.