Brand Identity

[smcgrath76]

The mineral thread got me thinking, can you see the smoke through the rain?
GF talked about eliminating Ivomec, and a couple of others about eliminating minerals from their programs. We are always trying to cut costs, and further even eliminate inputs. While we are not yet in a position to capitalize on our "brand" with the consumer (we are still in the cattle business, not the food business at home), are we robbing Peter to pay Paul.
I am reading a book called the New Brand World and one of the cases he talks about is a large successful company that had the market cornered and focused totally on cost cutting (accountants in charge). A few years later they had competitors who had focused on product quality and were kicking their hind end. Even the company had to admit the competitors products were better.
We may be headed down the same path with our current cattle mentality (although I am not 100% sure how to get the value of increased cost back out).
For example we know Vit E late in the feeding period extends product shelf life, we know forage fed increases beneficial fatty acid composition, etc.
There are tradeoffs here, and I think we may have been making these tradeoffs for too long in some areas.
The lowest cost producer in the commodity game will win the race, but for us in our operation the finish line of that race is nowhere near where I want to be at the end of the day.

[grassfarmer]

Sean I would agree with your thoughts on this totally. For me being a low cost producer is the way to survive and outlast others in the same commodity business but we are also trying to seek/create new ways to do business by getting more value from our cattle by selling beef direct or into markets that would be prepared to pay more than commodity prices.
I see the two ideas as being complimentary as the things we are cutting costs on can also become marketing points for our value added output. I really feel the best long term future will be in the value added rather than commodity sector.

[Cattleman]

I agree with both of you, and in our situation, the low cost cattle has been created through the left overs of our hay business. I think all ag commodity producers face these same challenges of low-cost vs value. We produce and sell hay and this has been our focus on marketing, presenting quality, service, etc. etc.
The difficulty in the beef/commodity business, is the competition in all the middle man stages, and the amount of knowledge it takes to take a calf and sell it to consumers. There are new production stages to learn about, marketing skills, keen business skills, capital and cash flow requirements etc. For the average producer it is a lot harder to learn all these new skills and pursue these opportunities, than it is to find a way to reduce costs. But even in todays world, these new techniques really have to be cutting edge, to give you much of an advantage. My 2 cents

[rkaiser]

It's hard for me to see that stopping every practice as cost cutting. Some will argue that stopping feeding mineral will cost in the long run - I tend to agree. While others will say that not implanting will cost you money in the long run - on this point I disagree strongly. However, we are always arguing about one thing - money.

The funny part about showing some caring in this industry is like grassfarmer says - there are potential benefits. But only if you either attach yourself to a chain, or offer beef to a consumer.

Is stopping a practice like implanting, or conventional barley finishing a cost cutting measure if it actually means more potential profit? Does it make you a low cost producer or a good marketer? Maybe the best of both worlds.

I see it as not only an opportunity for profit for my family and those who wish to work with us, but as a chance to make a difference and actually feel damn good about what I am doing. I have mentioned this a number of times now to the folks at the Lacombe Research Center where we are working on a ration to combine the positive results of enhanced CLA and good trans fats with a low cost management of the cattle without the yardage etc. involved in conventional feedlotting of cattle. When the boys at the college suggested a potential carbon credit program for feeding oil seeds to ruminant animals, once again I had to remind him that I thought offering a healthy product to folks other than my family members was almost all I needed to move ahead with the project.

Most of you know me well enough to know that I am not overly churchy and have a strong will to compete and profit, however our industry allows us room to live with the dichotomy of profit and morality and that is something somewhat unique to agriculture. Now I may hear from those who will argue that implanting and conventional feeding methods are safe and fine, however we are still able to offer a choice and the consumer is becoming more aware as we speak. I think it is time for us as an industry to keep up to that changing consumer and follow his/her money at the same time as admitting that what we have been doing is following Cargill and Tysons lead and illusive money.

I would more relate some of the cost cutting going on in Organic or Natural beef programs to trimming of unneeded fat. Continuing to ad costs like we have over the past twenty or more years with promises of the trickle down effect has certainly not worked. We need to pay attention to our industry without the influence of those who are simply in it for money. This my friends will be where we do find profit once again and, like I said before, find satisfaction as well.

[cswilson]

Isn't it the highest profitability producer who will survive in any business-though I'm as miserly as the rest it doesn't do you much good if your returns are lower than your low costs.

[grassfarmer]

I maybe missed part of your original intent Sean - If I was offered $1000 more per fat animal if I massaged them and spoke to them in Japanese once a week would I do it? It needn't all be about cost and input cutting but the reward has to be there. Too often with commodity production the value a producer tries to add becomes the accepted standard and anyone not meeting this new higher standard is penalised.

[farmers_son]

Re quality and brands... Rolls Royce built quality cars but the car division was sold to Volkswagen in 1998. I would think that prior to 1998 Volkswagen would have admitted that the Rolls was a better car. Still, to the victor go the spoils.

It is important to position your product to best meet the customer’s needs for both quality and price. I do not know the company you used in your example but certainly cost cutting is a very viable strategy for any for-profit business. The competitors may have had to incur substantial costs in order to enter the market with their “better quality” product and there is no indication from your example that they were able to extract a higher price from the marketplace.

I think it may be missing the point to talk about being the low cost producer in the cattle game. The big packers consider themselves to be in the protein game and I think that is really the only game in town.

It is important to consider that primary agriculture produces goods to meet a derived demand. I think we need to be careful about comparing ourselves to organizations that are producing to a market demand. The relevant strategies would be very different.

The lowest cost producer does not necessarily win. Another way to consider who might win is to consider risk versus reward. The organization or producer who best manages his/her risk versus net profit is most likely to survive long term. I see a couple of very large farm sales every year.. Undoubtedly their cost per unit of production would be lower than mine but something happened to cause their sale. I suspect risk came up to bite them in the behind. As they say, the bigger they are the harder they fall. Large operations leveraged heavily with debt are vulnerable to risk from various sources. The fact that they are lowest cost producers will not guarantee their success.

[cakadu]

Might I be so bold as to suggest reading a book titled "The Omnivores Dilemma" by Michael Pollan. He closes examines 3 types of production - conventional commodity production - corn and cattle, organic and the type of production that Joel Salatin models.

He buys a calf and takes it from the field all the way through to processing and speaks very candidly about the whole process. As organic agriculture grows, it runs into the same logistical and distribution channels that conventionally grown crops and animals do. It also moves away from the locally grown aspect that made organic what it is.

Joel of course doesn't market beyond his own neck of the woods and the amount of production he gets out of 550 acres is phenomenal. Mind you, he can slaughter his chickens at home, which we can't do here.

It's an interesting read and gives plenty of food for thought, pun intended.

It is always a balancing act between the risk/reward aspects of production and the marketing your products.

[grassfarmer]

Cakadu, That is a good read for sure. I've been a fan of Joel Salatin for a while and read all his books. He looks like a bit of a madman sometimes with his very strong views on politics and religion and his amateurish way of doing things - fences tied up with bale strings, electric gate handles homemade out of wood because the $3 ones from a store are too expensive. He has the last laugh though when you see the returns he makes from agriculture - far above those of anyone else I have seen in North America. His biggest advantage is his close proximity to huge populations of affluent consumers in the Washington area - many millions of people within a half day drive. This makes his direct selling a very good proposition on a large scale. I admire the man, he's a genius.

[grassfarmer]

Some figures from Salatins operation for those of you not familiar with it.
550 acre farm with around 450 of that being forest. Only around 100 acres is intensively managed pasture that produces all the meat. They gross $350,000 a year with a net of over $150,000. They produce annually 30,000 dozen eggs, 10,000 to 12,000 broilers, 100 head of cattle, 250 hogs, 800 turkeys and 600 rabbits.