Adding Value - Demand Pull

[smcgrath76]

I went to an interesting presentation today with Brenda Schoepp. She was talking about demand pull and I have really been thinking since about whether or not we have done much collectively (or myself individually) to create/find/seek out a demand for our cattle or if we simply trying to flog beef off because we have it available. the results are not encouraging industry wide.

[vagabonddreamer]

we have quite a few speckle park cattle (they have unique hide markings)...we were looking at going after the hide market in europe...then we found out that argentina/brazil are flooding the market with $150.00 tanned hides...it costs us more than that just to get the hides to the tanning place..lol...

i know what you mean...but somehow i think cattle are a kind of captive very NARROW market place...unless...maybe we could convince the asian market that parts of the cattle are an aphrodisiac??

did she have any ideas or even long shot avenues to try?? vs

[Sawbones]

Brenda is very interesting and has a good grasp of the industry. We heard a lot of talk about a value chain being pulled rather than pushed. it all makes sense until you try to put it into action. Once again..there are only two packers that control 92% of the slaughter capacity and they will only slaughter what does not conflict with their agenda. They have built such a fear into retailers that unless you are prepared to supply all their beef needs, you're not going to get shelf space. The only products that have made it to market are the organics of Diamond Willow. the natural products of Prairie Heritage and Spring Creek. We still have to overcome that basic obstacle...otherwise it's just talk

[smcgrath76]

That is a pretty good insight. How does a cowboy get to the consumer? It sort of brings us full circle to producer owned capacity.

[grassfarmer]

Sean, I sometimes think that we jump too easily to the conclusion of needing producer owned capacity. What producers really need is to connect with consumers who will buy their meat. That's what my beef retailing business is about and I don't need to own a packing plant to do it. There are lots of small, independent processing plants out there like the one we use. I know everyone will say "yeah, yeah but we need to go big scale" but do we? How about more and more producers sell direct to domestic consumers which would drive demand and possibly see more of these small plants built? One advantage they have as far as I can see is they are untouchable (directly at least) by the big packers. With a producer owned plant there is always talk of starting small and flying under the radar. The day will come when these growing plants get big enough to be an irritant to Cargill or XL ad then it's lights out - game over.
Just some alternative thoughts i've been having and I realise they won't help get beef off this continent.

[Sawbones]

Sorry GF I can't buy your logic unless you're ready to eat all the short ribs and tongues yourself. There are over 34 profit centers in each animal and it takes a container load (40,000#)of each product to move them efficiently. Unless your local packer can kill for $200 then you're leaving profit behind. We run about 450 cows and if I was to sell all direct and they took everything, I would have to sell to 4000 people assuming they ate 50#/year. I don't have that many contacts. I agree that we need to connect with the consumer but the retailer is as close as we can get on a larger scale. We need to have a retailer that is prepared to work with us.

[grassfarmer]

I'm not really arguing with you Sawbones, just playing devils advocate, but if you have 450 cows now how many would you need if you direct marketed? Don't assume we have to find a market for the number of cattle we have now - its all about retained profits in my mind. Maybe 100 cattle direct marketed could bring you a return better than 450 commodity cattle? Our average customer takes home a little over 150lbs of meat per year. Maybe you would need only 300 customers instead of 4000?

I'm increasingly coming to the conclusion that we have 2 things going on that we are calling 1. On the one hand there are folks that are actually selling beef to customers now - Prairie Heritage, Spring Creek, Diamond Willow, TK Ranch, Hoven farms, Randy's outfit, my small scale operation and many, many more. We are all getting cattle processed for us now, with existing packing infrastructure, at a price we can do business at.

Then there are a huge group of what I would call "commodity mindset" folks that talk about wanting more control over the returns for their cattle but don't really want to sell beef. They might back a producer plant IF someone else does the work to set it up AND they don't have to risk any capital until profitability is guaranteed. They will also expect someone else to be the expert that markets the beef for them - without taking a margin of course.
Don't get me wrong there are some great people involved in plans to build producer owned capacity with the genuine interests of all producers at heart. I just think there are a lot of dreamers too - who think building a plant will solve the flawed commodity system we have at the moment. I really don't think I any longer want to throw in my hat with a bunch of people who cannot get past wanting to be in the cow business but escape being in the commodity cattle business by jumping on someones bandwagon to build a packing plant.

Actually there is a third issue here and that is the problem of captive supply, packer concentration etc and the solution to that need not be tied up in a producer owned plant. We could still lobby and try to force governments to increase competition by helping more non-producer owned packing plants get established. There is venture capital to be had if a sound business model can be proven. If a sound business model can't be proven producers shouldn't be getting into building plants either.

[vagabonddreamer]

do you mind my asking g_f...what sort of on ranch infrastructure did you have to set up to market the beef that way?? do you have a large commercial freezer and how do you deal with customers and delivery...or do they come to your place to pick it up..and if so...is it by appt etc...i am only asking because i have thought long and hard about this...right now...we sell most of our beef as sides...CWF...the customers pick the product up at the processor...that limits the market vertically right away as only so many people are set up at home to handle 3-400 lbs of beef at a time...vs

[grassfarmer]

vs, We are set up much the same as you and do not find it limits our market too much. I want to sell beef but I don't want to run a butchers shop 365 days a year. We sell quarters, halves wholes etc - no individual cuts. I borrow the processors refrig. truck to deliver the product once it's ready. I drive to Calgary or Edmonton (@2 hours) and park in a shopping mall parking lot for a couple of hours where the buyers come collect their beef. The fact we are close to these two cities maybe helps me because we have plenty wanting to buy our product and I know there are many other producers direct marketing there too.
One suggestion you could share with potential customers not set up to store larger quantities of beef is to pick up an older freezer from the classified ads in the city - most times they are free to remove because they are heavy to shift. Set that up in a garage or basement and use it as a second freezer which you only open once a week to transfer meat to your regular freezer. Keep a heavy weight on the lid - we use an old tractor battery and the power consumption is surprisingly low. We ran a meter on one of ours right through January and February this year and it only used @70 cents of power. Sure, it will use more in summer but I don't think it will be a large sum compared to how much beef you can store in it.

[per]

Gf, are you raising fat beeves for just the grass market or do you have some year round supply? It occurred to me that there is a business out there for some ambitious young person to have a refer and make central point deliveries for direct marketers from across the province. I like your central parking lot delivery model better than our pick up a packer model. There are always some tarty (although we tend to take them off the list) customers. It is still not my first choice though, I would much rather be a commodity producer and deal with one or two customers. If Canada Gold works it will probably market most of ours, if not we have been pursuing Diamond Willow.

[kato]

Direct marketing is like being a purebred breeder in a lot of ways. You need to be a people person first, and like dealing with the public. The ones who enjoy dealing with customers face to face will be the ones who succeed. The ones who don't, no matter how good the product, just don't seem to do as well.

If you don't like people, you won't be happy direct marketing. I bet grassfarmer and Randy and vs are top notch people persons.

[rkaiser]

Kato,
Could you email me with your name etc.?

kaiser.randy@gmail.com

Yeah you gotta love people to market beef, but the best part is how much they like us for offering them non implanted beef that has been raised a little bit different than our conventional stuff.

[grassfarmer]

Per, We won't compromise our product quality by going year round. There is only one time to process grassfeds and that's early October in my opinion. I know some of the bigger ranchers selling cuts felt forced into going year round and now market "forage fed beef" sometimes fed in a feedlot on sprout pellets. Good luck to them but I have no desire to go there.

I don't know about an organised product delivery person but I feel there is an opportunity for an organised marketer. We already sell pasture-pork reared for us by a friend and had hoped to go to more products this year. Upon examination it doesn't interest me too much. The guys that rear chickens, lamb etc but don't like marketing seem to grudge me making any margin on retailing their product for them. Also with chickens for example how much do you need to move for it to be worthwhile ? even if I could take a $5 margin per chicken (before paying my time or delivery costs) 100 chickens only comes to $500 gross - it's not worth the hassle compared to selling an extra beef quarter.

Reality is Per, if you want to remain a commodity producer and take life easier by marketing through Canada Gold etc you will get paid for what you put into it. You will be paying them to market your beef and organise the business. You will remain a commodity producer getting a commodity return albeit maybe at a slight premium to the guy selling to Cargill. If you want the big bucks you have to do the work yourself - that's how life's meant to work isn't it?

Actually Kato I'm not a people person at all - certainly not someone who does well at face to face dialogue (ask the ABP reps, lol) My retailing business is based on internet selling and communication by email. It was painfully difficult and time consuming to start with but I'm getting better at it. It's one thing our customers comment on though - standard of service is a key feature, far more important than price apparently! We always respond to emails the day we get them and just try to be open and honest whatever questions they ask. We have found that lays a good foundation for a building up of trust between our customers and ourselves.

[per]

I hear you on all points Gf. I do market the same product as you in late Sept or Oct. as well as commodity beef. I understand the risk reward concept and do not begrudge those that do the extra step to get the extra reward. It is just that of all the things I enjoy, selling beeves by the side is not as fun as raising a whole bunch of them. That is why I do both but we need a way to extract an, albeit smaller, premium from the commodity end. I wish I had a better attitude toward direct selling as it is more profitable. In the mean time, commodity beef is something that is important to the country,imho, and finding a way to make it work is paramount to many people and communities.

[vagabonddreamer]

hey g_f...just to pick your brain some more...we tend to finish our beef market animals the same as the kids 4-H projects...which means forage in the form of hay and grain ( barley)...we have done the odd grass fed for certain friends/customers...but they seem to come back to preferring the grain fed...

how much longer (if any) do you find it takes to get an average steer to market weight on grass??? we try to accomplish a "finish" instead of a goal weight or time frame...i understand this may vary for different breeds as well...

how old is the animal you process in October and how do you judge the "finish"??

the reason i ask is because we have long contemplated going to grass finish...for a couple reasons including the high input costs of grains for a while...i anticipate grains to go up again in the future...thx..

per...boy do i hear you on the commodity thing...there is something to be said for spending the entire summer riding range and checking cattle and getting rid of most of them in november..vs