AMERICAN HEREFORD ASSOCIATION
MISSION Drive beef industry and Hereford breed sustainability by ensuring cattle producers’ long-term profitability through pedigree registration, genetic evaluation, breed improvement tools and educational services.
CORE STRATEGIES I. Capitalize on the value of Hereford-influenced commercial females II. Document, communicate and improve Hereford’s sustainability story III. Fuel the growth of Certified Hereford Beef® IV. Increase the demand for Hereford-influenced feeder cattle V. Build a pipeline of future leaders
Annual report
Laser Focus
“E
stablish Hereford genetics as the essential component of the U.S. beef cow herd.” This crystalline vision of the current American Hereford Association (AHA) Strategic Plan represents a bold but attainable goal. Achieving the goal demands concerted action and collaborative effort. Much was accomplished in Fiscal Year 2023 (FY23) toward fulfilling the core strategies (see opposite page) outlined by the Strategic Plan adopted by the AHA Board of Directors in FY22. These are examples:
• Introduction of the commercially focused Baldy Advantage publication, illustrating the comparative benefits of Hereford-sired F1 females and feeder cattle. • Defining and sharing Hereford’s sustainability advantages with Certified Hereford Beef® customers and consumers. • Expansion of Hereford-influenced feeder calf and yearling sales, offering added value to both buyers and sellers. • Continuing research with Colorado State University and AgNext to evaluate genetic differences and relationships for traits associated with greenhouse gas emissions and other sustainability components.
• Ongoing research with the University of Illinois defining the comparative advantage of heterosis borne by Hereford’s inherent genetic advantages such as docility, efficiency, fertility, longevity and sustainability.
• Hereford Seedstock Academy, for breeders at the beginning of their professional careers, providing in-depth insight to how Hereford fits each sector of the beef industry and how AHA programs can benefit them and their commercial customers. You will find other examples as you browse this Annual Report.
Shared focus
AHA members received 1881 — A Historic Opportunity (1881) at the same time that they received the Strategic Plan. It illustrates the unprecedented opportunity Hereford faces as the U.S. beef cow herd likely rebuilds by about 2 million beef cows over the next several years. The 1881 booklet includes documentation of Hereford’s inherent genetic advantages and quantification of the benefits yielded by heterosis through disciplined complementary crossbreeding. It also outlines the breed’s deliberate evolution of research and genetic progress. Perhaps most important, 1881 provides key, common messages for Hereford breeders to share with their customers and the beef cattle industry. If it has been a while since you thumbed through 1881, I challenge you to do so and keep these messages in mind as you market and communicate. In FY24, you will receive a companion booklet to 1881, sharing new economic measures of Hereford heterosis in the commercial sector. “Establish Hereford genetics as the essential component of the U.S. beef cowherd.” It’s bold, and it’s attainable with everyone working together.
JACK WARD AHA executive vice president 1
AMERICAN HEREFORD ASSOCIATION
Facts Forward AHA research grows selection accuracy and broadens essential proof.
W
hen you follow the timeline of American Hereford Association (AHA) research, you see the logical, deliberate process of leveraging what’s known about the breed with what needs to be discovered. Fiscal Year 2023 (FY23) demonstrated this legacy via new and ongoing research projects.
and mainstay NRSP test herd at Olsen Ranches, Harrisburg, Neb., progeny from multiple sires randomly mated to cows comprise contemporary groups of 300 head or so. Faster proof with more accuracy also stems from the pedigree relationships between the bulls that are tested. NRSP sires influence 7% of the more than 2 million AHA performance pedigrees. It’s impossible to overstate the value of the NRSP and the Olsen’s ongoing involvement when it comes to the breed’s rapid genetic progress in key traits. Credit also goes to other NRSP test herds over time, including Amana Farms in Iowa, Mershon Cattle LLC in Missouri, Simplot in Idaho and Stahly Ranch in South Dakota. “This subset of cattle has proven invaluable to the breed in terms of genetic progress and the directions we’ve been
National Reference Sire Program
AHA’s singular National Reference Sire Program (NRSP) continues to be the lynchpin of Hereford’s genetic evaluation and the key to the extraordinary breed improvement Hereford breeders have made over the past two decades. Part of it has to do with how quickly the genetic merit of promising young sires can be proven by virtue of sizable progeny groups populating extraordinarily large contemporary groups. In the case of the foundation
2
Annual report
Demonstrating Hereford heterosis
able to go, such as the inclusion of feed intake, measuring efficiency and conversion,” explains Shane Bedwell, AHA director of breed improvement and chief operating officer. “It has definitely leveraged us with an unmatched data library to continue making progress.” Olsen Ranches have been investing in feed intake systems and collecting individual animal feed intake data since 1999 when NRSP began. The Olsens invested to enhance these systems in FY23 along with installing individual animal water intake systems. “None of this happens if members don’t nominate bulls. I don’t think we can take lightly how important it is for AHA members to be interested in the data and to nominate bulls. It takes everybody,” says Douglas Olsen, Olsen Ranches.
Ongoing research with the University of Illinois is evaluating and documenting production and economic advantages of F1 black baldies compared to black Angus peers. This project leverages previous AHA research efforts. During FY23, AHA initiated a research project with the University of Tennessee to quantify the economic advantage of heterosis born by Hereford genetics in complementary crossbreeding.
Aiding core industry knowledge
As AHA proves various aspects of Hereford genetics it also contributes to broader industry knowledge. For instance, cattle producers have long associated bovine pulmonary hypertension (BPH) in cattle with high altitude — typically 6,000 feet and higher — and High Mountain Disease (HMD), also referred to as brisket disease. Increasingly, BPH is also being found in feedlot cattle at lower elevations, dying late in the feeding period. While much remains unknown, it has been proven that heart scores of those succumbing to the malady are higher than those of healthy animals. Hearts are scored after harvest using a scale of 1 (normal) to 5 (excessively abnormal). Heart scores of 3-5 are most commonly associated with BPH. Industrywide, it appears 13-14% of feedlot cattle have heart scores of 3-5. In FY23, AHA collected heart scores from 1,110 fed animals in the Hereford Feedout Program, and approximately 10% had a heart score of 3-5.
Documenting sustainability relationships
NRSP’s structural design enables tackling new traits and technology as they come along. AHA’s collaborative research project with Colorado State University’s AgNext program serves as an example. Systems installed at Olsen Ranches collect methane emissions on individual cattle, from which nitrogen excretion data is also collected. Methane and nitrous oxide are key greenhouse gases. The project is examining sire differences for the production and heritability of both. Initial research results in FY23 suggest sire differences account for the majority of the variation in methane and nitrous oxide production. Like dry matter intake and other expected progeny difference (EPD) traits before them, the project could lead to a new selection tool.
480
sires enrolled in the National Reference Sire Program since 1999.
200,000 total genotypes recorded at the american hereford association.
3
AMERICAN HEREFORD ASSOCIATION
Precision Targeting Hereford heterosis is the key message.
T
he American Hereford Association (AHA) refined its communications and promotional message in Fiscal Year 2023 (FY23), which boils down to: profitable commercial cow-calf production demands heterosis, and heterosis created with Hereford genetics is unmatched. Likewise, AHA created a regional, connective communications and advertising strategy to leverage the message. The AHA promotional campaign in the western U.S. during FY23 provides illustration.
Inserts included the documented advantages of heterosis, as well as the those of Hereford-sired F1 black baldies compared to straightbred black Angus cattle. The inserts also highlight the breed’s inherent genetic advantages of efficiency, fertility, longevity and docility. Advertising inserts were distributed in weekly issues of the Western Ag Reporter and Western Livestock Journal during the spring bull sale season. Social media testimonials were promoted through targeted marketing during the same period. The message resonated. Breeders within the region heard positive feedback about the messaging from commercial producers and allied industry partners. This feedback suggests the AHA’s Strategic Plan and core strategies are in lockstep with needs and demands of the commercial sector.
Multiple entry points
The AHA communications team began development for the campaign by visiting with commercial producers in the West, asking about the value Hereford genetics offer in creating feeder cattle and replacement females. These visits, and their testimonials, served as a foundation for inter-related feature stories, informational videos, social media messages and advertising inserts, all aimed directly at commercial cow-calf producers.
Looking ahead
The AHA developed and will place a second insert in the mentioned publications in the fall of 2023 in tandem with targeted advertisements on regionally focused social media.
4
Scan the QR codes and use the videos to promote the Hereford breed.
SHARE THE MESSAGE
Annual report
More broadly, this campaign and strategy mirror the cohesive breed message shared in the 1881 — A Historic Opportunity booklet, which AHA members received in FY23. Sharing the common message conveyed in the booklet with a unified voice is key to Hereford capitalizing on its momentum as the national cow herd rebuilds. By the end of calendar year 2023, the AHA plans to launch a new website with a marketing portal for breeders to download assets for use on their own social media, websites, sale books and local advertising.
1,622,836
100,738
users reached through the american hereford associaTIon facebook page During the last fiscal year
Combined followers on facebook, instagram and Tik TOk
5
AMERICAN HEREFORD ASSOCIATION
Growing Demand Commercial interest climbs for Hereford cattle and AHA programs.
Some sales are longstanding. For example, Brent Lowderman and his family’s Carthage Livestock Inc. in Carthage, Ill., hosted their first Greater Midwest HerefordInfluenced Feeder Calf sale in 2007. It has grown by 200-300 head every year since with consignors from eight states. “I’ve said it for years here; as far as the quality of cattle that will run through this ring, I will put these Hereford genetics up against any black cattle in America,” Lowderman says. “These guys around my area buy good bulls. They know good cattle, and it proves when you lay your eyes on them in this sale ring. We’ll sell several black baldies too.” Some sales are new. “The reason we’re doing this Hereford-influenced sale is because we’ve had some exceptional sets of Herefords come through our barn. When they come through, they’re bell ringers and can really go right up there with the best of the blacks,” explains Jarrid Herrmann, owner and manager of Cherokee Sales Co., Cherokee, Okla. “We said, ‘Let’s offer something you can see is becoming a thing of the future.’ I feel like I need to get in on this thing, and it’s providing an opportunity to not only market great Hereford cattle, but to also be a part of something bigger.”
H
ereford and Hereford-influenced feeder cattle and females saw commercial demand increase significantly in Fiscal Year 2023 (FY23). For instance, more than 10,000 head sold in 20 Hereford-influenced special feeder cattle sales. The number of cattle and number of sales were significantly higher than those of the previous year. Indications are these numbers will take another step forward in FY24.
6
Annual report
Hereford breeders also offered more than 4,000 Hereford and Hereford-influenced commercial replacement females in their production sales. Typically, these females commanded noticeable premiums compared to same-class offerings at public auctions the same week. Increasing demand is also evident in the number of submitted feeder cattle and commercial replacement females listed in the commercial section of the American Hereford Association’s (AHA) website. As well, more Hereford breeders and commercial users of Hereford genetics utilized the Hereford Advantage, Maternal Advantage and Premium Red Baldy programs to add value to their cattle.
Consider the Hereford Feedout Program and the National Junior Hereford Association Fed Steer Shootout. Both offer participants the opportunity to feed cattle at HRC Feed Yards LLC, Scott City, Kan., and document how their genetics perform beyond the pasture. Use of these programs continued to grow in FY23 with almost 1,600 head enrolled by 97 participants in 22 states. “These programs provide value to those who have never fed their cattle before and those who do so on a routine basis,” explains Bill Goehring, Libertyville, Iowa, AHA president — a Hereford breeder, commercial cowcalf producer, and sale barn owner and manager. “These programs are a convenient, cost-effective way for Hereford seedstock producers and their commercial customers to identify how their genetics perform in the feedlot and in the packinghouse. The data also adds increasing accuracy to the breed’s genetic evaluation.”
Proactive progress
Hereford breeders’ dedication to continuous genetic improvement is behind the growing commercial interest, as is their commitment to discovering how improvements can be made.
Hereford Feedout Program and NJHA Fed Steer Shootout
1,592 97 22 Head
Participants
states
Hereford and Hereford-influenced commercial females in Production Sales
4,598 23 Head
states
Hereford and Hereford-influenced feeder calf sales
10,627 20 12 Head
Sales
7
states
AMERICAN HEREFORD ASSOCIATION
Creating Connection HPI serves Hereford in a variety of ways.
H
ereford Publications Inc. (HPI), owned by the American Hereford Association (AHA), crafts messaging and imaging that connects Hereford to the larger industry, cattle buyers to genetic providers and the AHA to its members. HPI publishes Hereford World and Baldy Advantage (see History and the Message). In those efforts, HPI staff work with breeders to create much of the advertising in these publications. During Fiscal Year 2023 (FY23), packaging print advertising with social media marketing received added focus to help Hereford breeders reach larger, more targeted audiences. HPI staff Caryn Vaught and Bailey Lewis oversee Hereford World and Baldy Advantage advertising, as well as Creative Services projects. Lewis assumed an expanded role in social media marketing and print advertising. Creatives Services continued to grow in FY23, producing more than 60 breeder sale catalogs and more than 40 promotional postcards and brochures with added utilization of trifold designs. When a sale catalog produced by Creative Services goes to the printer, it is also posted on the AHA website. At the same time, social media followers, including potential buyers, are notified with a link to the online catalog.
Adapting and expanding
Due to ever-increasing postage rates, FY23 saw more breeders using Facebook target marketing to drive interested parties to their printed promotional pieces and websites for additional information about their sale or event. Additionally, magazine advertisers and Creative Services clients receive extra exposure on the AHA website and via the Herefords on Demand (HOD) platform, which is HPI’s online catalog service featuring live expected progeny differences (EPDs). HOD, available for private treaty and production sales, helps potential buyers create customized catalog searches for their next herd sire or foundation female. Pictures and videos of catalog lots can also be found using HOD. Buyers of Hereford genetics increasingly seek out sales listed through HOD. AHA field staff continue to play a central role in connecting buyers and sellers of Hereford genetics. Field representatives also link advertisers to Creative Services staff and the breed to commercial producers and the broader cattle marketing channel. This includes strengthening and expanding markets for Herefordinfluenced feeder cattle and replacement females. New field staff joining the team in FY23 and on the cusp of the coming fiscal year, in order of arrival: Cord Weinheimer, Southwest region; Aaron Friedt, North Central region; and Emilee Holt, Western region.
8
Annual report
History and the Message Sharing Hereford value and values.
H
ereford World — the American Hereford Association’s (AHA) official publication — continued its long legacy of documenting and sharing the breed’s unfolding history. This includes the publication’s award-winning coverage of national shows, results from leading Hereford sales, pertinent management articles and profiles of breeders and operations, along with AHA and breed news. A highlight of Fiscal Year 2023 (FY23) was marking the golden anniversary of the publication’s annual herd reference issue. “We hold Hereford World to a high standard because Hereford breeders do and always have,” explains Joe Rickabaugh, AHA director of seedstock marketing. “Our team never takes lightly the responsibility we have to provide accurate reporting of Hereford news and events, industry information related to the breed, as well as helping breeders share information about the genetics they offer. We’re thankful for the readers and advertisers who make Hereford World possible.” For some perspective on breadth and depth of coverage in FY23, Hereford World comprised:
Besides producers who received the first issue of Baldy Advantage, an extraordinary number of other commercial cattlemen requested a copy. “Response to the introduction of Baldy Advantage has been more than exciting,” says Wes Ishmael, AHA director of commercial communications and executive editor. “It’s plain there are legions of baldy fans, for good reason, who welcome more information about utilizing Hereford in disciplined complementary crossbreeding, as well as news and industry analysis of issues relevant to the commercial cow-calf sector.” Hereford World and Baldy Advantage are key to core strategies set forth in the AHA’s Strategic Plan.
• 1,352 pages in total; 600 of them editorial. There were 83 pages worth of staffwritten feature stories about breeders, breed history and the like. • Editorial included coverage from 192 sales and 51 state, regional and national Hereford shows, most of them attended by AHA field staff.
Baldies front and center
The statistics above don’t include the first issue of Baldy Advantage, which was introduced in FY23 to provide information targeted specifically toward commercial cow-calf producers. It replaces the four issues each year that were formally known as the commercial tabloid issues of Hereford World.
9
AMERICAN HEREFORD ASSOCIATION
MyHerd
Top 10 Registrations State
Texas Nebraska Oklahoma South Dakota Kansas Missouri North Dakota Montana Wyoming Illinois
Collecting data for the future.
Breeders 9,560 5,967 4,987 4,984 4,347 3,880 3,055 2,715 2,505 2,224
Upstream Ranch, Taylor, Neb. 1,253 Rausch Herefords, Hoven, S.D. 829 Topp Herefords, Grace City N.D. 579 Shaw Cattle Co. Inc., Caldwell, Idaho 570 Van Newkirk Herefords, Oshkosh, Neb. 550 Mrnak Herefords, Bowman, N.D. 513 Fawcett’s Elm Creek Ranch, Ree Heights, S.D. 481 Bill King, Moriarty, N.M. 455 Durbin Creek Ranch, Worland, Wyo. 422 GKB Cattle, Desdemona, Texas 404
A
merican Hereford Association (AHA) members’ dedication to collecting and reporting pedigree information, performance and genotypes continues to improve accuracy of the breed’s genetic evaluation, elevating selection confidence. MyHerd enhances how users can access and search data. MyHerd was originally launched in 2014 as a data submission tool. Over the last two years the Association updated and improved the platform to include powerful yet flexible search tools, which users can use to pinpoint what animals fit their breeding goals. Stacy Sanders, AHA director of records explains MyHerd allows users to tailor the data their customized searches return. It offers producers assistance in interpreting expected progeny differences (EPDs) and helps them measure where an animal fits in relation to the breed. During Fiscal Year 2023, AHA positioned MyHerd to replace HerfNet in December 2023, by creating a series of interactive online tutorials and conducting informational webinars. As always, personalized help is always available via AHA customer service representatives during regular business hours. “MyHerd looks different from HerfNet and that is by design and necessity. We can’t add new features and capabilities, and have it look and work exactly the same,” Sanders says. “Once members give it a try and explore some of the new features, I think they will be pleasantly surprised.” Larry Woodson of Still River Ranch, Van Alstyne, Texas, uses MyHerd for all his records and transfers and to inform many of his management decisions. “I use it for all of my management tasks. I have set up searches that allow me to look at any day-to-day management questions with just a few clicks,” Woodson says. MyHerd and its expanded, savable searches, custom data output and new Animal List feature allows Hereford producers to easily and efficiently make the best data-based selection decisions to propel the breed forward.
2022-23 Registrations, Transfers and Memberships State Registrations Transfers
Cow Active Junior Registration Inventory Members Members Rank
Alabama 1,188 Arizona 34 Arkansas 947 California 1,013 Colorado 1,185 Connecticut 90 Delaware 16 Florida 319 Georgia 1,896 Idaho 1,697 Illinois 2,224 Indiana 1,294 Iowa 1,988 Kansas 4,347 Kentucky 1,498 Louisiana 507 Maine 87 Maryland 488 Massachusetts 28 Michigan 595 Minnesota 1,818 Mississippi 1,295 Missouri 3,880 Montana 2,715 Nebraska 5,967 Nevada 321 New Hampshire 50 New Jersey 42 New Mexico 1,359 New York 427 North Carolina 824 North Dakota 3,055 Ohio 1,157 Oklahoma 4,987 Oregon 929 Pennsylvania 719 Rhode Island 0 South Carolina 434 South Dakota 4,984 Tennessee 2,144 Texas 9,560 Utah 497 Vermont 15 Virginia 763 Washington 977 West Virginia 766 Wisconsin 1,651 Wyoming 2,505 Total 75,282
1,830 56 1,316 1,355 1,875 147 11 315 3,170 2,265 4,193 1,647 3,042 7,704 2,370 865 23 611 29 689 3,002 1,747 6,392 3,856 8,339 800 39 26 2,078 581 1,478 3,879 1,502 6,922 1,569 942 0 1,048 7,730 3,635 12,993 849 13 897 1,613 1,108 2,232 3,492 112,275
1,089 27 646 429 586 53 14 152 1,396 821 1,610 1,153 1,473 1,736 1,012 615 43 445 30 381 812 980 2,349 1,195 2,171 116 20 24 368 270 520 829 931 3,420 790 553 5 142 1,629 1,687 6,888 162 7 557 331 569 1,069 691 42,796
72 12 81 72 74 14 3 37 88 61 213 167 178 124 128 71 15 55 6 79 139 89 235 71 158 11 7 10 32 50 70 57 175 195 64 103 0 30 112 177 533 38 3 78 55 70 159 46 4,317
42 5 87 88 41 9 3 22 54 44 263 233 267 151 74 87 11 105 9 62 109 87 178 29 139 3 3 9 18 60 42 23 169 301 61 65 2 11 111 107 672 3 0 73 45 39 158 36 4,210
21 44 26 24 22 40 46 39 13 15 10 20 12 5 17 33 41 35 45 32 14 19 6 8 2 38 42 43 18 37 28 7 23 3 27 31 48 36 4 11 1 34 47 30 25 29 16 9
10
Annual report
Herefords Show Off Herefords find success in the showring and on the auction block.
Y
ear after year, Hereford breeders gather in barns and bleachers from coast to coast to attend sales and watch livestock shows. Fiscal Year 2023 (FY23) was no different. Whether it’s to find new additions to their herd and make breeding decisions, or network with fellow breeders and potential customers, shows and sales are popular places for Hereford breeders and livestock enthusiasts to gather.
Hereford sale prices churn higher
In FY23, American Hereford Association (AHA) field representatives attended nearly 200 sales across the country. At those sales, almost 12,000 head of Hereford cattle grossed $68.1 million and averaged $5,716 per head. Females averaged $5,026 and bulls averaged $6,256. The feeder calf/Hereford bull price ratio last year was historically high, reflecting growing commercial demand. The ratio quantifies the number of feeder calves required to buy a Hereford bull. It includes the feeder calf price for heifers weighing 550 pounds as reported by CattleFax and the average annual bull price reported by AHA. The number of bulls comprising the average were the most in history. As well, more than 2,000 commercial open Hereford and baldy heifers sold as part of Hereford production sales last year. They continued to garner premiums compared to sameclass, same-weight heifers trading in the area the same week. On the seedstock side of the equation, the National Hereford Sale at the Cattlemen’s Congress in Oklahoma City, Okla., serves as a benchmark for breed success, with bulls averaging almost $28,000 and females averaging more than $15,000. Consigners also brought pick lots, flushes and other elite genetic opportunities to the sale. “The sale grosses and averages underscore the soughtafter genetics consignors were willing to offer, as well as the strong demand for the Hereford breed,” said Joe Rickabaugh, AHA director of seedstock marketing.
Hereford shine in national competition
Hereford breeders exhibited more than 1,300 head of cattle at seven national Hereford shows across the country, from the Keystone International Livestock Exposition in Harrisburg, Pa., to the Western States Hereford Show in Reno, Nev. Cattlemen’s Congress in Oklahoma City, Okla., boasted the most Hereford numbers, with 321 head of pen cattle, females and bulls. The National Western Stock Show wasn’t far behind, with Hereford breeders bringing 223 head of pen cattle, females and bulls to Denver, Colo. “I think it’s so flattering as a breeder to be able to have the balance in this breed that we do,” said Cattlemen’s Congress judge Jason Hoffman before selecting the champion polled Hereford bull. “You can have these really nice heifers that can go out and compete, and their bull mates in a flush also serve a purpose. There’s no byproduct of the Hereford breed.” No matter the show, Hereford bulls and females both brought the quality. “The amount of interest and value this breed has is something to be very proud of,” said Fort Worth Stock Show judge Chad Wilson, before selecting the champion polled Hereford female. “It’s great to see out here.”
6,681.75 bulls grossed $42,801,933 and averaged $6,256
Based on FY23
11
5,236
females grossed $26,314,201 and averaged $5,026
AMERICAN HEREFORD ASSOCIATION
Building & Connecting Certified Hereford Beef® expands the brand’s story to grow demand.
C
ertified Hereford Beef® (CHB) melds time-honored tradition with premium quality beef to give consumers a memorable eating experience backed by the sustainability, integrity and heritage of the Hereford breed. Fueling the brand’s growth is one of five core strategies in the American Hereford Association (AHA) Strategic Plan. In Fiscal Year 2023 (FY23), the brand pushed back against a challenging economy to garner 2.6 million pounds of new volume. In total, more than 26 million pounds of Certified Hereford Beef was sold domestically and internationally during FY23 — a 2% increase of 473,144 pounds over the last fiscal year. This underscores how reliable CHB products, backed by superior customer service and rooted in the sustainability story of thousands of Hereford producers nationwide, can thrive in the face of market challenges. “We appreciate the hard work and dedication of our Hereford producers and their focus on continuing to produce a high-quality, high-performing product for us to sell and promote,” says Amari Seiferman, Certified Hereford Beef president and CEO.
CHB’s commitment to further document and share the sustainability benefits of Hereford-influenced beef grows as the brand does. For instance, the AHA teamed up with National Beef and the BlockTrust Network in FY23 to conduct a pilot project demonstrating how blockchain technology can be used to share data, including sustainability metrics across the supply chain. The project includes data shared voluntarily by participants in the Hereford Feedout Program. This project could pave the way toward enhanced CHB marketability. Certified Hereford Beef’s portfolio of educational materials continues to support this effort by providing in-depth information to industry stakeholders to further promote the brand and breed. These customized resources also help AHA members with direct-to-consumer beef sales and to develop their own marketing materials to promote Hereford beef. Additionally, the elite CHB Chef and Brand Ambassador programs continue to bolster the brand’s connection to consumers across the country.
Telling the Hereford story
Growing demand
The CHB team developed marketing and promotional materials touting Hereford’s inherent sustainability to various industry segments, including consumers, grocery stores, restaurants, distributor sales teams and prospective partners. As the brand continues to refine the Hereford story, its message becomes more approachable, relatable and applicable across all industry segments. In turn,
With ever-growing demand from consumers connecting to the Hereford story, CHB staff worked to increase the brand’s online e-commerce presence for more efficient delivery directly to consumers’ homes. Additionally, staff expanded resources and services to reach new ethnic and international markets, including creating advertising and educational assets in Spanish. At the same time, CHB staff continue to enhance domestic 12
Annual report
business partner support and education. The brand also continues to expand upon its value-added line by growing existing sales and researching and developing new products. CHB brings value to its business partners by offering streamlined focus on Hereford’s story through marketing and product promotions — from the meat case to consumers and distributors to restauranteurs.
Forging partnerships
Unwavering support from CHB business partners garnered a dozen new distributors and nearly 20 additional retail locations in FY23. Seiferman says retailers’ passion to promote the product, their steadfast belief in its quality and their willingness to look for new ways to serve their consumers and communities highlight the value of CHB relationships. To help communicate the CHB story and its unique differences to potential consumers, the CHB staff works with retailers to educate the meat department through in-depth training. In doing so, CHB provides its partners with marketing and advertising assets that can be displayed at the point-of-purchase, such as in-store or meat case materials, as well as adverts and circulars designed to drive business to the retail location. The brand provides local connections to Hereford’s sustainability story by encouraging nearby producers to share their farm-to-table story with consumers. “Our goal is to help drive traffic into the stores, so we work hard to help promote our partners in all forms of marketing and advertising platforms,” Seiferman says. CHB retailer, Rancho Markets, Salt Lake City, Utah, serves as a sterling example. Since adding CHB in March 2023, Seiferman says Rancho Markets grew its beef sales by approximately 25% and expanded its customer base. “We have had an increase in our volumes and customers that are returning with new friends to buy Hereford beef,” Eli Madrigal, Rancho Markets CEO says. “We choose CHB for its quality and reputation. Both the service and quality are exceptional, and we are honored to have Hereford beef in our stores.”
26,325,561
76%
Increase in Export Volume
12
TOTAL pounds of Certified Hereford Beef® Distributed duRing FY23
New Distributors
10%
New Retail Stores
17
623
Increase in Foodservice and Retail Distributor Volume
Salesforce Leads
13
AMERICAN HEREFORD ASSOCIATION
Setting Up for Success The National Junior Hereford Association provides countless opportunities for its members.
I
t’s hard to think of the National Junior Hereford Association (NJHA) without thinking about events like the VitaFerm® Junior National Hereford Expo (JNHE), Faces of Leadership and BOLD Conferences, and the Fed Steer Shootout. Between the 2023 Faces of Leadership Conference in Columbus, Ohio, and the second annual BOLD Conference in Desdemona, Texas, 88 juniors from 29 states attended the leadership development events. The sixth annual NJHA Fed Steer Shootout boasted more than 200 steers from 67 NJHA members representing 18 states. The 2023 JNHE in Madison, Wis., had more than 2,000 entries from 802 exhibitors in 38 states and Canada. Most important, however, are the young Hereford enthusiasts who make up the NJHA. The NJHA, through its conferences, contests and other programs, has helped thousands of young people find internships, navigate career options and earn scholarships. The junior association serves as a launch pad of sorts for Hereford youth. Trevor Johnson, Centerville, S.D., is one of many NJHA members who has utilized opportunities in the organization to find success. Johnson is a senior at Kansas State University (KSU) studying agribusiness, with aspirations of becoming the youngest person inducted into the Cattle Feeders Hall of Fame. His passion for the feedlot sector of the beef industry began on a West Texas feedlot during the 2016 Faces of Leadership Conference in Amarillo.
“When we pulled into the feedyard, I was just instantly infatuated with it,” Johnson says. “We had a feedlot at home, but nothing to the scale of what we saw during that trip. That’s really what kickstarted my interest in commercial cattle feeding and large-scale cattle feeding.” That same fall, the Fed Steer Shootout was introduced. “When they rolled out the Feed Steer Shootout that fall, I was pretty excited,” Johnson says. “I wanted that exposure and the experience of large-scale commercial cattle feeding and to get a broader look at that segment of the industry and how it plays into the cattle industry and the beef industry as a whole. The opportunity to learn from those industry leaders and be involved in a bigger part of the industry is what drew me there.” Since then, Johnson has enrolled cattle in the Fed Steer Shootout several times and was named Fed Steer Shootout junior of the year in 2019. He’s also attended Faces of Leadership multiple times and participated in the inaugural BOLD Conference. “JNHE, the Fed Steer Shootout and similar programs really helped grow my industry knowledge and outlook. But I wanted to take part in Faces of Leadership and grow as a leader and individual,” Johnson says. “I think it’s important to have that outlook and that scope of the industry, but I also think it takes some personal development and personal leadership skills to be good in any business.” Johnson has completed internships with the KSU Beef Cattle Institute and U.S. CattleTrace, and currently interns for Adams Land and Cattle. He is also involved in the KSU Center for Risk Management. He says his experiences in the NJHA helped him stand out to potential employers. Johnson grew up showing Hereford cattle and was active in his state junior association along with the NJHA. He’s received scholarships from the Hereford Youth Foundation of America. While his time as an NJHA member is winding down, the culmination of his experiences in the NJHA has helped Johnson jumpstart his career. “I really credit a lot of where I am today to the NJHA and the opportunities that it’s provided me,” Johnson says. “I’m pretty confident that I would not be where I am today without the National Junior Hereford Association. I think that goes from a personal standpoint and a career aspiration standpoint. I hope that kids continue to take part in the programs and find the same benefit that I’ve found from them.” 14
Annual report
Trevor Johnson’s participation in NJHA events, such as the BOLD Conference and Fed Steer Shootout, paved the way for personal growth and career success. Johnson’s NJHA involvement helped him stand out to potential employers and gain valuable experience through internships, which will help him land employment in the cattle feeding industry.
BOLd leadership conference
14
21
states represented
Junior members
Faces of Leadership
15
67
states represented
Junior members
NJHA Fed steer shootout
207 steers
67
junior Members
18
states represented
junior national hereford expo
802 38 2,051 junior members
states + canada
15
entries
AMERICAN HEREFORD ASSOCIATION
Foundation for the Future The Hereford Youth Foundation of America stands tall on its pillars of leadership, scholarship, research and education.
bred-and-owned females during the 2023 VitaFerm® Junior National Hereford Expo (JNHE). The organization’s total assets also increased by $1.4 million in FY23. The Season of Giving was held over five days in December of 2022. Donors provided various challenge donations, and every gift went towards unlocking the challenge values throughout the week. All donors were also entered into a giveaway for a custom Hereford-branded Priefert cattle chute. Over that week, HYFA backers raised $135,000 to support its pillars. HYFA will host the second annual Season of Giving Dec. 4-8, 2023. At the 2023 JNHE, the top five overall bred-and-owned females were selected for the first time. The exhibitor of the champion bred-and-owned female also received a custom stock trailer. These expanded awards and recognition are thanks to the GKB Cattle Youth Endowment, created in 2023 with support from Gary and Kathy Buchholz, owners of GKB Cattle, Desdemona, Texas. “My husband and I love to support juniors,” Kathy says. “It’s our way of continuing the breed for the future and continuing to help support all the educational aspects that the National Junior Hereford Association (NJHA) presents.”
W
ith help from its donors and supporters, the Hereford Youth Foundation of America (HYFA) continued to build upon its pillars of leadership, scholarship, research and education. During Fiscal Year 2023 (FY23), HYFA celebrated two milestone events — the inaugural Season of Giving and the selection of the top five
16
Annual report
Leadership
the research division. This year, donors supported AHA research through the inaugural Season of Giving. Through research projects, HYFA and the AHA work to improve the Hereford breed and strengthen the foundation for a bright future.
HYFA and the NJHA go hand-in-hand. Events like Faces of Leadership and the BOLD Conference take place with help from HYFA. These events connect young Hereford breeders across the country, enabling them to make lifelong friends while building their leadership skills. The GKB Cattle Youth Endowment, in addition to supporting the JNHE bred-and-owned female show each year, will also support the BOLD Conference, held at GKB’s Hi Point Ranch in Desdemona. The BOLD Conference provides a focused, close setting for an elite group of NJHA members to further develop skills they learned at Faces of Leadership.
Education
From the Fed Steer Shootout to educational events at the JNHE, funds from HYFA’s education pillar help cultivate well-rounded leaders and industry professionals who are ready to address the always-evolving challenges and opportunities in agriculture. Participants gain knowledge about Hereford cattle while developing communication, problem-solving and leadership skills. Moreover, attending conferences like BOLD and Faces of Leadership allows juniors to travel and experience new things. “Giving them the opportunity to travel to another state, to another operation and see something, we hope it leaves an impact on them,” explains Kathy. “As a person grows and develops, that’s how they can assemble new ideas and meet new folks.” HYFA is dedicated to empowering and equipping Hereford youth with the skills and opportunities they need to thrive and improve the breed. Through its four pillars, HYFA is ensuring that the Hereford breed continues to succeed in the hands of passionate young leaders. “Youth is what it’s all about. It’s tomorrow,” says Loyd Whitehead, HYFA supporter and former board member. “They’re our future. And, if we don’t keep up with tomorrow, we’ll forget today.”
Scholarship
Through the scholarship pillar, dozens of students receive financial support for their education from HYFA each year. During FY23, HYFA awarded more than $220,000 in scholarships to deserving NJHA members, a 17% increase from the previous year. Since HYFA’s inception, scholarships have made a difference in the lives of hundreds of Hereford youth. HYFA scholarships are made possible by many donors, including the Vanier family, who awards 10 scholarships in the amount of $10,000 each fall. “I am confident in saying, as the son of two parents who were unable to attend college, my family is extremely grateful to not only the Vanier family, but also the Hereford Youth Foundation of America,” says Tar Tut, a 2021 and 2022 recipient of a Vanier Family Scholarship.
Research
HYFA and the American Hereford Association (AHA) work together to fund breed improvement projects, like the industry-leading National Reference Sire Program. In previous years, an annual online sale raised money for
$221,500 $135,000 in scholarships were provided in FY23, up 17% or $36,500 from last year
was raised in the first ever Hereford Season of Giving
$1.4 million Total assets increased during FY23
17
AMERICAN HEREFORD ASSOCIATION AND SUBSIDIARIES INDEPENDENT AUDITORS’ REPORT
To the Board of Directors, American Hereford Association, Kansas City, Missouri We have audited the accompanying consolidated financial statements of American Hereford Association; Hereford Publications, Inc.; Certified Hereford Beef, LLC; American Beef Records Association; and Hereford Legacy Fund, LLC (collectively, the Association), which comprise the consolidated statements of financial position as of August 31, 2023 and 2022; the related consolidated statements of activities, functional expenses, and cash flows for the years then ended; and the related notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – August 31 ASSETS
Current Assets
Cash and cash equivalents Short-term investments Accounts receivable – net Prepaid expenses Inventories Opinion Due from Hereford Youth Foundation of America In our opinion, the consolidated financial statements referred to above present fairly, in Income tax receivable all material respects, the consolidated financial position of the Association as of August 31, 2023 and 2022, and the changes in its net assets and its cash flows for the years then Total Current Assets ended in accordance with accounting principles generally accepted in the United States Property and Equipment – Net of America (GAAP). Other Assets Basis for Opinion Investments We conducted our audits in accordance with auditing standards generally accepted in the Operating lease right-of-use assets United States of America (GAAS). Our responsibilities under those standards are further Deferred income tax described in the Auditors’ Responsibilities for the Audits of the Consolidated Financial Statements section of our report. We are required to be independent of the Association Other noncurrent assets and to meet our other ethical responsibilities, in accordance with the relevant ethical Total Other Assets requirements relating to our audits. We believe that the audit evidence we have obtained is TOTAL ASSETS sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with GAAP, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Association’s ability to continue as a going concern for one year after the date that the consolidated financial statements are available to be issued. Auditors’ Responsibilities for the Audits of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance, and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Association’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary schedules are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. — K. Coe Isom, LLP, October 10, 2023, Lenexa, Kansas
18
2023
2022
$755,093 647,843 629,975 62,220 144,956 – 6,371 2,246,458 582,939
$877,873 382,215 601,034 60,386 176,057 22,510 6,371 2,126,446 614,983
15,018,244 1,124,965 148,000 8,893 16,304,102 $19,129,499
14,691,640 1,365,384 92,000 6,100 16,155,124 $18,896,553
LIABILITIES AND NET ASSETS Current Liabilities Accounts payable $355,609 $286,667 Accrued expenses 190,195 462,604 Prepayments from breeders 86,923 104,234 Prepayments for advertising and subscriptions 147,483 159,364 Due to Hereford Youth Foundation of America 4,045 – Due to Junior National Hereford Expo 9,360 – Long-term debt – current portion 164,214 162,563 Operating lease liabilities – current portion 243,115 276,087 Total Current Liabilities 1,200,944 1,451,519 Noncurrent Liabilities Long-term debt – less current portion 110,419 274,626 Operating lease liabilities – less current portion 927,927 1,135,540 Total Noncurrent Liabilities 1,038,346 1,410,166 Total Liabilities 2,239,290 2,861,685
Net Assets
Without donor restrictions TOTAL LIABILITIES AND NET ASSETS
16,890,209 $19,129,499
16,034,868 $18,896,553
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF ACTIVITIES – Years Ended August 31 CHANGES IN NET ASSETS WITHOUT DONOR RESTRICTIONS Revenue and Support Services Advertising and subscriptions Program revenues Other revenue Total Revenue and Support
2023
2022
$4,271,991 2,098,146 434,456 918,755 7,723,348
$4,139,591 2,100,908 414,444 1,026,616 7,681,559
5,855,801 2,126,544 7,982,345
5,477,917 2,124,089 7,602,006
Gain on sale of investments 91,681 Gain on sale of property and equipment 10,000 Net appreciation (depreciation) in fair value of investments 803,003 Other income 154,179 Total Other Income (Expense) 1,058,863 Change in Net Assets Without Donor Restrictions Before Tax 799,866 Income tax benefit 55,475 Net Change in Net Assets 855,341 Net Assets – Beginning of Year 16,034,868 Net Assets – End of Year $16,890,209
243,582 28,341 (2,364,224) 191,765 (1,900,536)
Expenses
Program expenses General and administrative expenses Total Expenses
Other Income (Expense)
(1,820,983) 8,475 (1,812,508) 17,847,376 $16,034,868
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF FUNCTIONAL EXPENSES – Years Ended August 31 2023 2022 Program Expenses General and Administrative Total Program Expenses General and Administrative Salaries and wages Employee benefits Accounting and professional fees Supplies Telephone and utilities Postage and shipping Equipment rental Printing Travel Office rent Meeting and conferences Dues and subscriptions Insurance Publicity and promotional materials Credit card fees Maintenance and repairs DNA Advertising Premiums Genetic evaluation Research and development Miscellaneous NJHA expenses Creative services Consumer marketing Export Depreciation expenses Taxes Total Functional Expenses
$1,498,468 298,854 36,682 11,087 – 110,417 2,840 313,566 388,170 248,666 139,793 24,397 19,038 153,005 – 55,757 1,178,307 155,595 29,560 91,198 42,269 22,095 106,830 613,273 100,783 17,372 194,521 3,258 $5,855,801
$1,141,023 204,231 89,736 20,852 34,299 47,982 14,101 17,299 123,780 27,630 4,458 36,105 39,692 – 143,870 85,809 – – – – – 89,145 – – – – – 6,532 $2,126,544
$2,639,491 503,085 126,418 31,939 34,299 158,399 16,941 330,865 511,950 276,296 144,251 60,502 58,730 153,005 143,870 141,566 1,178,307 155,595 29,560 91,198 42,269 111,240 106,830 613,273 100,783 17,372 194,521 9,790 $7,982,345
$1,410,216 266,552 28,537 13,825 113 87,765 2,634 302,903 335,441 243,394 182,804 26,830 17,210 131,340 – 71,540 1,044,672 277,635 28,735 96,658 6,192 20,688 141,459 520,299 61,771 10,801 144,890 3,013 $5,477,917
$1,095,307 185,545 112,145 17,124 33,920 60,875 15,031 8,537 127,916 27,044 13,399 25,907 33,343 – 131,107 98,527 – – – – – 131,619 – – – – – 6,743 $2,124,089
Total $2,505,523 452,097 140,682 30,949 34,033 148,640 17,665 311,440 463,357 270,438 196,203 52,737 50,553 131,340 131,107 170,067 1,044,672 277,635 28,735 96,658 6,192 152,307 141,459 520,299 61,771 10,801 144,890 9,756 $7,602,006
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS – Years Ended August 31 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from members and subscribers Cash paid to vendors and employees Interest and dividends received Income taxes paid
2023 $7,530,840 (8,030,815) 390,302 (525)
2023 $7,636,499 (7,565,003) 473,302 (525)
NET CASH PROVIDED BY OPERATING ACTIVITIES
(110,198)
544,273
CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments Purchases of property and equipment Proceeds from sales of investments Proceeds from sales of property and equipment
(3,281,158) (162,478) 3,583,610 10,000
(2,157,407) (436,160) 1,931,320 –
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
149,974
(662,247)
CASH FLOWS FROM FINANCING ACTIVITIES Payments on long‐term debt
(162,556)
(98,411)
Net Change in Cash and Cash Equivalents
(122,780)
(216,385)
Cash and Cash Equivalents – Beginning of Year
877,873
1,094,258
Cash and Cash Equivalents – End of Year
$755,093
$877,873
$3,686
$12,417
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest
participates in and promotes the arrangement of fairs, exhibitions, and cattle shows to encourage the breeding of Hereford cattle; and assists with the promotion of the end product produced from Hereford cattle on behalf of Certified Hereford Beef, LLC. Members and subscribers of AHA are primarily owners and breeders of Hereford cattle. The members and subscribers are located world-wide; however, the largest concentration is within the United States. Hereford Publications, Inc. (HPI) is a for-profit corporation that provides publication services to Hereford cattle ranches and publishes a magazine periodically. Certified Hereford Beef, LLC (CHB) is a not-for-profit association whose sole member is AHA. CHB strives to increase demand for Hereford cattle by promoting Hereford beef as a premium beef product under the Certified Hereford Beef ® trademark. CHB was formed as a limited liability company on September 27, 2000. Prior to that date, CHB’s activities were performed and accounted for within the Association. American Beef Records Association (ABRA) is a not-for-profit association that is wholly owned by AHA. ABRA provides computer consultation in herd planning and management, breeding services, and marketing for commercial livestock of various breeds. Hereford Legacy Fund, LLC (HLF) is a not-for-profit association whose sole member is AHA. HLF holds the proceeds from the sale of AHA’s building in 2018 and makes distributions to the parent for a portion of its investment income to pay for the rent of the consolidated Association. HLF was formed as a limited liability company on April 12, 2018. A majority of the Association’s business activities are with customers in the cattle industry. Therefore, a substantial portion of its debtors’ ability to honor their commitments is dependent upon the cattle economic sector. Consolidated Financial Statement Presentation The Association classifies its information regarding net assets and revenues, expenses, gains, and losses based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Association and changes therein are classified and reported as follows: Net Assets Without Donor Restrictions: Net assets in this category are not subject to donorimposed restrictions and may be expended for any purpose in performing the primary objectives of the Association. These net assets may be used at the discretion of the Association’s management and the Board of Directors. Net Assets With Donor Restrictions: Net assets in this category are subject to stipulations imposed by donors. Some donor restrictions are temporary in nature; those restrictions will be met by actions of the Association or by the passage of time. Other donor restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained in perpetuity. Donor-restricted contributions are reported as increases in net assets with donor restrictions. When a restriction expires, net assets are reclassified from net assets with donor restrictions to net assets without donor restrictions in the consolidated statements of activities. The Association has no net assets with donor restrictions. Measure of Operations The consolidated statements of activities report all changes in net assets, including changes in net assets from operating and nonoperating activities. Operating activities consist of those items attributable to the Association’s ongoing animal services and interest and dividends earned on investments. Nonoperating activities are limited to resources that generate return from investments and other activities considered to be of a more unusual or nonrecurring nature.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements 1 — NATURE OF ORGANIZATION AND OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of American Hereford Association and its wholly-owned subsidiaries: Hereford Publications, Inc.; Certified Hereford Beef, LLC; American Beef Records Association; and Hereford Legacy Fund, LLC. All significant intercompany transactions have been eliminated in the consolidation. Collectively, the consolidation is hereafter referred to as the Association. Nature of Organization and Operations American Hereford Association (AHA) is a not-for-profit association that conducts research and experiments in the breeding of Hereford cattle; compiles and preserves pedigree records for owners and breeders;
19
Basis of Accounting The accrual method of accounting is used, which recognizes income in the period earned and expenses in the period incurred. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Association considers all money market investments and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Investments amounting to $662,008 and $572,353 were considered to be cash equivalents at August 31, 2023 and 2022, respectively. The Association maintains cash on deposit in various financial institutions. Due to the nature of the Association’s cash flow, amounts on deposit in individual banks may temporarily exceed the applicable coverage of the Federal Deposit Insurance Corporation throughout the year. Accounts Receivable Accounts receivable are presented at face value, net of the allowance for doubtful accounts, and consist of amounts billed, but not received by year-end, for magazine advertising, subscriptions, and member services. The allowance for doubtful accounts is established through provisions charged against income and is maintained at a level believed adequate by management to absorb estimated bad debts based on historical experience. The Association’s receivables are considered past due based upon contractual terms and are automatically charged off after three years. HPI’s policy states that accounts with outstanding balances beyond 60 days will accrue interest at 1.5% per month; balances beyond 90 days will no longer be provided with services; and balances beyond 120 days may be turned over to a collection agency. Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on the first-in, first-out method. Investments The Association’s investment portfolio is subject to the investment policy set forth by the Board of Directors. Investments are comprised of debt and equity securities and are carried at fair value The fair value of investments is based on quoted fair prices for those investments or similar investments as of August 31, 2023 and 2022. Gains or losses on sales of investments are determined on a specific cost identification method. Unrealized gains and losses are determined based on year-end market values and are reported in the consolidated statements of activities as increases or decreases in net assets. Fair Value Measurement Accounting standards generally accepted in the United States of America (GAAP) define a fair value as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date. The Association determines the fair value of investments using three broad levels of input as defined by related accounting standards. Level 1: Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities; Level 2: Observable inputs – other than quoted prices included in level 1 that are observable for the asset or liability through corroboration with market data; and Level 3: Unobservable inputs – include amounts derived from valuation models where one or more significant inputs are unobservable. The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used during the years ended August 31, 2023 and 2022. Equity Securities: Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. Fixed Income Securities: Corporate, government, agency, and municipal bonds and fixed income securities are generally valued by a computerized pricing service or, for less actively traded issues, by utilizing a yield-based matrix system to arrive at an estimated market value. Exchange Traded Funds: These assets are valued at the net asset value reported on the active market on which the securities are traded. The valuation occurs throughout the day based on the market value of the underlying securities, as well as the market supply and demand for the particular exchange traded fund. Mutual Funds: Each investor in the mutual fund will typically receive units of participation in the mutual fund. These units are valued daily, based on the underlying securities owned by the mutual fund, which are usually publicly traded debt or equity securities. Revenue Recognition Revenues from member dues, advertising and subscription, and hosting database services are recognized over the term of the contract. The contracts are generally for a term of one to three years. Advertising and subscription revenue is deferred and included in prepayments for advertising and subscription in the consolidated statements of financial position. Revenue is deferred at the time of sale to the customer and is recognized monthly, as outlined in the contract. At the end of the subscription period, the remaining balance is recognized as revenue, reported as advertising and subscription revenue in the consolidated statements of activities. The balances of the prepayments for advertising and subscription revenues were $147,483 and $159,364 for the years ended August 31, 2023 and 2022, respectively. Publication and advertising, genetic services, creative services, retail, and marketing services are recognized when the service is provided. A five-step model is used to determine the amount and timing of revenue recognized. The Association’s additional disclosures are included in note 12. Property and Equipment Property and equipment are stated at cost and depreciated using the straightline method over the estimated useful life of each asset. The estimated useful lives of assets range from 3 to 30 years for consolidated financial statement purposes. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements of activities for the period. The Association capitalizes all assets, major replacements, and betterments with a useful life greater than one year and cost in excess of $1,000. Maintenance and repairs are charged to expenses as incurred. Long-lived assets to be held and used in the course of business are tested for recoverability whenever events or changes in circumstances indicate that the related carrying amount of an asset may not be recoverable. When required, impairment losses on assets to be disposed of by sales are reported at the lower of carrying amount or fair value, less cost to sell.
Operating Lease Right-of-Use Assets and Liabilities The Association obtains the right to control the use of various assets under long-term agreements. The Association evaluates contracts to determine whether they include lease and non-lease components. The Association has elected to exclude any variable payments for non-lease components, such as maintenance and insurance, from lease expense. Leases are recognized on the balance sheets as right-of-use assets with a corresponding lease liability. Compensated Absences Employees are entitled to one week of paid time off each year. Unused paid time off cannot be carried over from one year to the next and is not paid out upon termination. Accordingly, no liability for accrued paid time off has been recorded. The Association’s policy is to recognize the costs of compensated absences when actually used by employees. Functional Expenses The costs of providing program and other activities have been summarized on a functional basis in the consolidated statements of activities. The presentation of expenses by function and nature is included in the consolidated statements of functional expenses. The Association charges direct expenses incurred for a specific function directly to the program or supporting service category. These costs can be specifically identified as being incurred for the activities of that program or supporting service. Other costs that are incurred by the Association that benefit more than one program or supporting service are allocated on a reasonable basis that is consistently applied. Payroll and related costs are allocated based on estimates of time and effort; other costs, including depreciation, certain occupancy and office costs, and consulting, are allocated based on estimates of usage or benefit received by each function. The Association reevaluates its allocation method each year to determine if there are adjustments that are necessary to the allocation method based on actual activities conducted during the year. Advertising Costs Advertising costs are charged to expense when incurred. The amounts expensed during the years ended August 31, 2023 and 2022, were $155,595 and $277,635, respectively. Income Taxes AHA, ABRA, CHB, and HLF are exempt from federal income tax under section 501(c)(5) of the Internal Revenue Code; therefore, no provision for federal or state income taxes has been made in the accompanying consolidated financial statements. However, AHA, ABRA, CHB, and HLF are subject to income taxes on any net income from unrelated business activities. AHA, ABRA, CHB, and HLF have been classified by the Internal Revenue Service as organizations that are not private foundations under Section 509(a)(2). HPI is a taxable entity, and is therefore subject to federal and state income taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards; deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. HPI includes interest and penalties related to income tax liabilities, if any, in income tax expense. Income tax credits are accounted for by the flowthrough method, which recognizes the credits as reductions of income tax expense in the year utilized. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect certain amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting period, and the disclosures in the consolidated financial statements. Actual results could differ from those estimates. Evaluation of Subsequent Events The Association has evaluated subsequent events through DATE, the date the consolidated financial statements were available to be issued.
2 — AVAILABILITY AND LIQUIDITY
The Association is substantially supported by the services it provides its members. Revenue from services provided can be affected by the number of registered cattle and current economic conditions. The following represents the Association’s financial assets: August 31 2023 2022 Financial Assets – End of Year Cash and cash equivalents $755,093 $877,873 Accounts receivable - net 629,975 601,034 Investments 15,666,087 15,073,855
Financial Assets Available to Meet Cash Needs For General Expenditures Within One Year
$17,051,155
$16,552,762
The Association has $17,051,55 available for general expenditures. This would cover approximately 2.14 years of expenses, even without the income it has budgeted.
3 — ACCOUNTS RECEIVABLE – NET
20
Accounts receivable consisted of the following: August 31 Trade receivables Allowance for doubtful accounts
2023 $549,678 ( 3,970)
2022 $523,781 (5,119)
Subtotals Other receivables
545,708 84,267
518,662 82,372
Total Accounts Receivable – NET
$629,975
$601,034
4 — FAIR VALUE MEASUREMENTS
$535,600. The note matures April 21, 2025, and has a fixed rate of 1% per annum. Interest expense on long-term debt was $3,686 and $12,417 for the year ended August 31, 2023 and 2022. The aggregate maturities of the above long-term debt for the years subsequent to August 31, 2023, are as follows:
The following tables set forth by level, within the fair value hierarchy, the Association’s assets at fair value: August 31, 2023 Level 1 Level 2 Level 3 Total Mutual funds $634,850 – – $634,850 Equity securities 10,057,192 – – 10,057,192 Government and agency bonds – 2,124,599 – 2,124,599 Corporate bonds 2,094,221 – – 2,094,221 Fixed income securities 755,225 – – 755,225
Total
$13,541,488
$2,124,599
$15,666,087
August 31, 2022 Level 1 Mutual funds $310,513 Exchange traded funds 10,747,167 Government and agency bonds – Corporate bonds 1,512,867 Fixed income securities 778,303
Level 2 – – 1,725,005 – –
Level 3 – – – – –
Total $310,513 10,747,167 11,725,005 1,512,867 778,303
Total
$1,725,005
$15,073,855
$13,348,850
Years Ending August 31 2024 $164,214 2025 110,419 Total
The Association has an unsecured line of credit with UMB Bank which provides a maximum available amount of $250,000 at August 31, 2023. The balance on the line of credit at August 31, 2023, was $-0-. The line of credit matures on November 30, 2023. The line of credit had a variable interest rate of 5.5% at August 31, 2023. Interest expense during the year ended August 31, 2023, was $-0-.
9 — INCOME TAXES
The provisions for income taxes consisted of the following components: Years Ended August 31 2023 Current Income Tax Benefit (Expense) Federal $ – State (525) City –
5 — PROPERTY AND EQUIPMENT
Property and equipment consisted of the following: August 31 2023 Leasehold Improvements $91,773 Furniture and fixtures 340,071 Vehicles 295,103 Data processing equipment 283,653 Software 495,422 Equipment 295,540
2022 $91,773 340,071 272,631 259,550 431,422 295,540
Subtotals Accumulated depreciation
1,801,562 (1,218,623)
1,690,987 (1,076,004)
Total Property and Equipment – Net
$582,939
$614,983
Total Current Income Tax Benefit (Expense)
The Association leases a copier from an unrelated third party under an operating lease. The lease requires monthly lease payments of $431, with a termination or renewal date in January 2024. The Association leases a postage machine from an unrelated third party under an operating lease. The lease requires monthly lease payments of $540, with a termination or renewal date in May 2023. The Association leases an office building from an unrelated third party under an operating lease. The lease requires monthly lease payments that increase each March, according to a set payment schedule based on a price per square footage rented. The monthly lease payments through August 31, 2023 and 2022, were $22,566 and $22,021, respectively, with a termination or renewal date in March 2028. Generally, the Association has elected to exclude any variable payments for non-lease components, such as maintenance and insurance, from lease expense. The operating lease does not specify an implicit interest rate. Therefore, the incremental borrowing rate was used, based on information available at the commencement date, to determine the present value of future payments when capitalizing the operating lease right of use assets and operating lease liabilities.
2022 $274,050 14,053
Total Lease Expense
$293,237
$288,103
The aggregate minimum annual lease payments under operating lease arrangements and discount factors used in calculating minimum lease payments on right-of-use assets are as follows:
Less: Current portion of lease liabilities 243,115 $927,927
Total Deferred Income Tax Benefit (Expense)
56,000
9,000
August 31 Deferred Tax Assets Net operating loss Depreciation Allowance for bad debt
2023
2022
$130,000 18,000 –
$83,000 8,000 1,000
Net Deferred Tax Asset
$148,000
$92,000
The Association’s major revenues are all within the United States of America and recognized as follows: Membership Services Membership services include registrations, dues, and service fees that fund research, advertising, and software development, as well as discounts for subscriptions and genetic services for the current fiscal year. Revenues are recognized over the term of the contract. Advertising and Subscriptions Advertising and subscriptions include revenues earned from catalog and magazine subscriptions and advertising, generally for a term of 12 months. Revenues are recognized over the term of the contract. Publication and Advertising Services Publication and advertising services include fees from advertising in Hereford World, as well as annual publications and banner ads on the website. Revenues are recognized as the services are performed at a point in time. Genetic Services Genetic services includes revenues from improving the Hereford breed, DNA testing, blood typing, and genomic services. Revenues are recognized as the services are performed at a point in time. Hosting Database Services Hosting database services include fees from hosting database services on the Association’s servers, generally for a term of one to three years. Revenues are recognized over the term of the contract. Creative Services Creative services include revenues from promotional media services. Revenues are recognized as the services are performed at a point in time. Marketing Services Marketing services include revenues from certifications and retail sales. Revenues are recognized as the services are performed at a point in time.
73,884
4.41 years 2.78%
8,000 3,000 (2,000)
12 — REVENUE RECOGNITION
Present Value of Minimum Lease Payments 1,171,042
Weighted‐average remaining lease term: Operating leases Weighted‐average discount rate: Operating leases
47,000 10,000 (1,000)
The Association provides eligible employees with a 401(k) qualified retirement plan. The Association also established a profit sharing plan for all eligible employees. The plan provides for employer and employee contributions based upon a percentage of annual compensation. Employer contributions for the years ended August 31, 2023 and 2022, were $121,693 and $95,039, respectively.
$1,244,926
Lease Liabilities ‐ Less Current Portion
(525)
11 — RETIREMENT PLAN
Years Ending August 31 2024 $271,943 2025 273,501 2026 277,202 2027 280,903 2028 141,377 Thereafter – Less: Amount representing interest
(525)
Deferred Income Tax Benefit (Expense) Relating to: Net operating loss Depreciation Allowance for bad debt
The Association has a collection of artwork, appraised at approximately $639,200 at August 31, 2023 and 2022, that is on public display at the Association’s headquarters. The most recent appraisal is as of April 2015 for new pieces added in 2015, and as of August 2011 for the rest of the collection. The Association has adopted a policy of not capitalizing the collection of artwork in its consolidated financial statements. Accordingly, no collection items are recognized as assets, whether they are purchased or received as a donation. Purchases of collection items are charged to expenses in the period when purchased. Proceeds from the sale of collection items are used to purchase new collection items. The Association plans to hold the collection items indefinitely. There were no pieces added to the collection during the years ended August 31, 2023 and 2022. There were no pieces disposed of during the years ended August 31, 2023 and 2022. The Association insures the collections with a policy that has a face value consistent with the appraised values.
Amounts paid through cash were $247,160 and $241,860, respectively, for the years ended August 31, 2023 and 2022.
Subtotal
$ – (525) –
10 — COLLECTION OF ARTWORK
The Association’s lease expense was as follows:
2023 $275,967 17,270
2023
Total Provision for Income Tax Benefit (Expense) $55,475 $8,475 Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of HPI’s assets and liabilities. The tax provision differs from the expense that would result from applying statutory rates to income before income taxes because of the valuation allowance applied against the deferred income tax assets. The components of the deferred tax assets were as follows:
6 — LEASE OBLIGATIONS
Years Ending August 31 Operating leases Short-term leases
$274,633
8 — LINE OF CREDIT
7 — LONG-TERM DEBT
On April 21, 2020, the Association qualified for and received a loan pursuant to the Paycheck Protection Program (PPP), a program implemented by the U.S. Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), for an aggregate principal amount of $535,600. The PPP loan bears interest at a fixed rate of 1% per annum, had the first 10 months of interest deferred, and has a term of five years. The Association applied for forgiveness of the PPP loan on November 30, 2020, with respect to these covered expenses, but was not granted forgiveness by the SBA. On November 11, 2021, the Association renewed the PPP loan with UMB Bank for the principal amount of
21