Allowable US Imports

[kpb]

greybeard, I tried to look up the article you suggested but could not get past the main GAR page. Can you summarize or will someone else who knows about computors give us a link that works directly to this article. The one you gave us, greybeard, will not go through--at least a doufus like me can't get it to go past the main page.

thx, kpb

[InAHurry]

Greybeard's referenced article

Why is profitability so rare in the cattle business
— Troy Marshall (Reprinted from BEEF Cow-Calf Weekly electronic newsletter.
To get your free subscription, sign up at www.beef-mag.com.)

The data tells the story: there isn’t much
profit in ranching. Even with good prices the
last several years, ranching still remains a
lifestyle choice for most operators. If they
looked at it strictly as a business, they would
invest their money elsewhere.
A large percentage of producers subsidize
their ranching habit or are eroding the equity
positions that were built by previous genera-tions.
As a result, smaller producers who work
off the ranch, as well as large operations, are
growing in numbers while the number of mid-size
producers shrinks.
As frustration builds, everyone’s searching
for the reasons behind this lack of profitability.
Often, they point to such things as competi-tion
from other meats and foreign countries,
concentration, vertical integration, captive
supplies, price transparency, value/price dis-covery,
government regulations, etc.
Admittedly, all these factors have a role in
the industry’s lack of profitability. Ironically,
however, the primary culprit is often heralded
as the solution—the cash/commodity market.
By its very definition, a commodity busi-ness
isn’t profitable for the average producer
because, over time, prices tend to hover
around breakeven. This definition is what
makes the discussion about price spreads and
marketing power so ironic and irrelevant.
If a commodity market is functioning prop-erly,
the only relevant factor is the breakeven
cost, because that’s around where prices will
end up on average. This basic fact is com-pounded
by the reality that many producers
aren’t profit motivated.
When functioning effectively, a commodi-ty
market tends to concentrate, as high-cost
producers are forced out of the system.
Another component of commodity markets is
that individuals have no pricing power;
they’re strictly price takers.
The biggest problem with a commodity
market is that it does a poor job of differentiat-ing
the product on a quality basis. In addition
to its inability to reward quality and send prop-er
incentives relative to consumer demands, a
highly segmented commodity business can’t
transfer the information, if it’s available,
throughout the production system. Why then,
with all of these problems, do so many folks
hold the cash/commodity market up as the
solution to our current marketing woes?
The branded revolution, the value-added
pricing systems, the grids, the forward-con-tracted
cattle, etc, were all created as attempts
to address the cash market’s shortcomings.
Meanwhile, proponents of the cash market
argue that it’s all about competition, that these
alternative marketing methods reduce the
amount of competition.
At some level, they’re likely right, but pure
competition in a market that guarantees that
only the low-cost producers are profitable and
which increases risk in a cyclical business, isn’t
a very exciting prospect. Fact is, a cash/com-modity
market guarantees margins so tight that
any significant profits that are generated are
mirrored by losses in another segment.
Most importantly, this cash/commodity
business has led and will always lead to
decreased demand. The reasons are numerous:
Narrow margins and a lack of profitability
mean insufficient revenues for new product
development, research and marketing.
The competition between segments
rewards the segment with the most knowl-edge.
That means that information isn’t shared
up and down the system. The result is that the
focus isn’t on meeting consumer demands.
Competition that doesn’t differentiate the
product actually results in rewarding the bot-tom
end more than the top end. Thus, the
incentives are reversed.
The cash/commodity system’s support of a
segmented mentality also decreases efficiency
because each segment uses its own measures,
which may not equate to overall system
efficiency.
Competing protein sources steal market
share as they make system-wide efficiency
gains, and as they respond more readily to
consumer demands. It is true that a commod-ity/
cash market may represent the purest form
of competition, but the results of that compe-tition
are not beneficial.
Certainly, we must maintain healthy com-petition.
We must have price discovery sys-tems
that are transparent, and producers must
be able to maintain market access. But, the
next time you hear someone declare the evils
of value-based, value-added marketing, while
trumpeting the need to return to the cash/com-modity
system, keep in mind that competition
can and does take place outside of commodi-ty
markets. Remember that those who make
money off transactional costs, those who
make money by selling inferior cattle at aver-age
prices, and those who hold a competitive
advantage from either a cost standpoint or
knowledge standpoint will also advocate a
return to the previous system.
Those who claim that a cash/commodity
system is the only means for competitive price
discovery are simply wrong. Personally, I have
very little interest in having my kids enter a
commodity/cash-driven business where the
winners are simply the low-cost producers
with economies-of-scale advantages from both
a cost and knowledge standpoint. I am, how-ever,
very excited about having them enter a
business that rewards quality, creates an
expanding demand base, and produces prod-ucts
that are competitive with the other protein
sources from a value standpoint, and a system
where brand equity can be created by meeting
specific customer needs and where margins
are both sustainable and sufficient not only to
be profitable but to prepare for the future.

[grassfarmer]

kpb, This was our first year of direct marketing so we are still learning. It was a way to utilise my experience of grass fattening cattle and grass management but the marketing side was all new and rather daunting.
We deliver the cattle to a local slaughter plant who custom cut it to the specs the customers request (once we've helped the customer understand what cuts you get from an animal)and we then deliver the finished product cut, wrapped and frozen. We marketed through friends and contacts in year one but hope to expand it through their friends in future as well as internet marketing and local advertising.
The concept is not mine - it has been running for many years now in the US particularily in the New England area. The Stockman Grassfarmer magazine covers this area of production in depth.
In a recent issue a Vermont producer was running dual purpose Devon cattle which he milked seasonally as well as fattening their calves off grass at 2.5-3 years old. His cows produced 1000 gallons per lactation which sold for US$5000! His steers weighed in the 700lb carcass weight region and sold for US$3500 each! This is an extreme case, the opposite of your maximising numbers in a commodity market situation, but there are plenty consumers out there willing to pay a premium for a product they perceive as superior. Imagine the output from even 40 cows on such a system!
Joel Salatin and his family from Virginia were pioneers of this pasture produced, health food direct marketing angle. He is the master of land use intensity - stocking poultry, pigs and cattle all on the same pastures to achieve income levels that easily match that of modern city workers. Something we all aspire to I'm sure, but done without sacrificing quality of life or the fresh country air for city smoke.
The idea has really taken off now and suppliers are really struggling to supply the market they have created.
This system really favours producers close to a large population, I wouldn't like to try it in rural Saskatchewan but there is enough oil money in Calgary and Edmonton to consume a lot of beef. I also have a lead in the NWT that could sell many cattle for me to workers in the diamond and resource sector but it needs to be Federally slaughtered to allow that out of province sale.

Our cattle were killed at 18 months old off grass only, to yield 690lb carcases. It is a fairly complicated task matching the right cattle genetics and growth stage to the pasture quality given the short summers we have up here. It's not as easy as chucking piles of barley at feedlot cattle.
The reports we have had back from customers have been extremely positive thus far. The concept of grass fed beef is sometimes a hard sell in Alberta (even here on Agriville, LOL) but the proof is in the eating. An interesting comment we get from customers who grew up on farms is that it tastes like the beef they remember growing up with and they have been unable to find with supermarket beef.

[cakadu]

Right you are grassfarmer. Direct marketing is not for the faint of heart and consumes a great deal of time because you take over the middle man spot if you will. The benefits are there, but they come with a lot of hard work.

Joel is the pioneer and is certainly on the money. The one thing that Joel has that we will never have here in most of Canada is the ability to pasture much longer. Pasture chicken is still around here in Alberta, but it can only be done for 5 months of the year - maximum - and of course you have the supply management guys to deal with. I see that Joel has gone to pasture raised turkeys, which is kind of appealing to me but again you have to deal with the supply management system.

Our most recent experience with the processor has been an absolute nightmare. We thought we would try someone new as the waiting lists are so long. I couldn't have made the cutting instructions any more detailed if I tried and they got them totally wrong. We ended up with NO trim at all so there went the ground and the stew meat and there was a lot of waste. We had 4 lambs cut the same way and told them explicitly that we wanted one lamb per box and instead we got boxes of legs, chops and shanks and WE had to figure out what belonged with what.

So, who has to live with that mistake - WE do and the customers that got lamb from us this time got one heckuva deal.

We are trying to move more towards a grass based system, but being babes in the woods so to speak and having the drought, grasshoppers and a steep learning curve, we are going to be working at it a little longer. One day we do hope to get there, so I hope that yourself and others will be around to call upon for advice.

There are never any failures, only things to be learned and we have certainly learned for next time when it comes to ensuring the processing is done properly.

[kpb]

InAHurry and Grassfarmer, thx for taking the time to reply to my questions. Everyone should read both your messages--they are thought-provoking.

kpb