ATTRA--National
Sustainable Agriculture Information Service
PO Box 3657
Fayetteville, AR 72702
Phone: 1-800-346-9140 --- FAX: (479) 442-9842
By
Richard
Earles and Anne
Fanatico NCAT Agriculture Specialists May 2000 |
http://attra.ncat.org/attra-pub/PDF/altbeef.pdf 19 pages 141 kb |
Abstract
Introduction
Part One: Adding Value to Beef in the Conventional
Market
This publication explores marketing alternatives for small-scale cattle ranchers who would like to add value to the beef they produce. Part One discusses methods for adding value within the conventional marketing system, including retained ownership and cooperative marketing. Part Two introduces alternative marketing strategies, including niche markets for "natural," lean, and organic beef. Production considerations for pasture-finished beef are given special attention. A section on direct marketing focuses on connecting with consumers and developing a product. Processing and legal issues are also covered. Two case studies from a UC-Davis report including and economic analysis is available as an additional resource by calling ATTRA and requesting the print version enclosures for this publication. A list of resources at the end of the document provides suggestions for further reading, contact information for several producers and marketers of "alternative" beef, and Web pages of interest. This document is intended as a beef-focused supplement to ATTRA's Alternative Meat Marketing, which presents in greater depth the many issues and challenges associated with small-scale meat sales.
In the present production and marketing structure, about half the value of beef is added after cattle leave the farm, and net returns to the cow-calf producer tend to be low. At the sale barn, the rancher's profit is trimmed by wholesale price fluctuations, "middle-man" fees, and the grading process. Producers who sell in this highly competitive market can be described as "price-takers," competing with many other producers of relatively homogeneous commodity products (1).
Working within the conventional market, the rancher can significantly
increase profit per head of cattle by retaining ownership
past the weaning stage, by producing higher-grade and heavier animals,
by carefully managing the culling process, and by minimizing the
costs of production. Small producers can further empower themselves
by forming marketing cooperatives or other types of alliances.
Some ranchers, however, judging the conventional market as unresponsive
both to their needs and to the changing desires of consumers, choose
to develop markets outside the conventional system. They add value
to their beef by differentiating it from the supermarket fare that
is the end product of the commodity market. Alternative marketing
of beef primarily means niche marketing and direct marketing. The
"niche" is simply a segment of the buying public unsatisfied
with conventional beef, and willing to pay a premium for a leaner,
tastier, or more "natural" product. The most likely way
for the producer to connect with these consumers is by marketing
directly to them. In the words of researchers at the University
of Wyoming:
This approach can add value to cattle [by allowing] producers to capture much of the margin otherwise going to middlemen in the marketing chain. Of course, the producer also 'captures' much of the work and associated costs, as the producer must identify and attract customers, perhaps provide added feed, arrange for slaughter, distribute the product to customers, and secure payment (1).
Differentiating your beef from the conventional product entails
changes in production as well as marketing. If your customer is
a meat packer, your production will have to conform to industry
standards for everything from breed selection to use of antibiotics
to yield and quality grades. But if your customer is an individual
looking for lean beef raised and finished on a local family farm,
or raised organically, you will be working with a very different
production model. Integrating meat production and marketing may
radically alter the whole enterprise. For instance, to improve efficiency
within the conventional live-sale market, many ranchers have consolidated
their calving schedules. Some alternative marketing strategies,
however, may require year-round production to meet year-round demand
(2).
Beef that is slaughtered off pasture and sold locally is generally
considered more sustainable than feedlot-finished, mass-marketed
meat. Sustainability means that the best interests of the farm family,
the community, and the environment are being taken care of. For
some consumers, sustainability is already a strong selling point.
Many others can be educated about the values they are fostering
when they choose an alternative beef product over the supermarket
cut. Pasture finishing combined with direct marketing can substantially
benefit the farm family, the rural community, and the environment
by:
Alternative marketing strategies can turn price-takers into price-makers, but "the added time, labor and resources needed to perform these added functions beyond producing a calf or yearling" should not be underestimated. "Marketing management expertise also is required, along with the traditional knowledge of the production side of the business" (1). The more you learn and prepare before entering a new market, the less surprising, expensive, and frustrating your "learning curve" will be.
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The "Beef Marketing Flowchart" on page five of the enclosed University of California report will help you visualize the issues involved in pursuing different marketing strategies.(This print version enclosure is available by calling ATTRA and requesting it.)
One of the first things you hear when you get into the subject of marketing with a commercial cattle producer, and even with people who run some pretty good size yearling operations, is that cattle are only worth so many dollars a hundred on the market, and it doesn't matter what you do, you aren't going to get more than that. This just isn't true. In fact, you can have a great deal of control over the prices you receive for the cattle you sell (3).
The passage above appears in Cowboy Marketing by the late Jay Nixon. According to Nixon, "most commercial calf producers in this country are losing from $50 to $100 per cow." They incur this loss by not being active enough in their marketing effort, and not focusing their production on the quality preferences of the market. Cowboy Marketing is a primer for producers who have not considered themselves as marketers, and perhaps have a prejudice against marketing.
Nixon advocates raising a marketable product by producing what the packers want, and encourages producers to carefully choose a sale barn, get to know buyers, and prepare a list of the animals they are bringing to market. He also maintains that "culling what you cull, how you select it, and finally how you market it is an income decision of major proportion." The book includes chapters on selling cattle in the country by private treaty and co-op marketing, and development of a marketing plan. For information on obtaining a copy of Cowboy Marketing, see the Resources section at the end of this publication.
Another guide to increasing profits within conventional marketing channels Value-Added Cattle: Guidelines for Cow-Calf, Stocker, Feeder emphasizes retained ownership options. By retaining ownership through some of the post-weaning production stages (preconditioning, winter pasture, summer grass, and the feedlot), producers can decrease losses from shrinkage and sickness, eliminate middleman fees, and improve the return rate relative to production costs (the pre-weaning stage is the most expensive stage of production). Retained ownership can provide buffering from seasonally low prices, giving some measure of price protection not available to those "selling a bawling calf straight off the cow" (4).
Value can be added to beef through improvement of carcass value.
This means turning out carcasses:
The authors of Value Added Cattle recommend the Texas A&M Ranch to Rail program, which provides feedback to producers about the performance of their calves after weaning.
Producers complain that they get average prices in the market place for superior genetics and that they don't receive a premium for delivering a product to the market that has been managed to perform above the average of the industry The cattle industry is a segmented business in which most calves lose their identity in the market channels. There is little feedback of information to cow-calf producers on how their calves fit the needs of the beef industry [The] Ranch to Rail program is an information feedback system that allows producers to learn more about their calf crop and the factors that determine value beyond the weaned calf phase of beef production. It also helps them to establish the relative value of their calves compared to the industry norm (4).
To learn more about the Ranch to Rail program and retained ownership considerations, and for information on yield and quality grades and breed sire selection, contact a local Extension office.
In a marketplace dominated by large buyers, the independent small producer is at a disadvantage. By creating economies of scale and allowing for effective coordination, alliances among producers with similar goals can add value to beef and increase the members' marketing leverage. Alliances can integrate the cattle market both horizontally (among producers) and vertically (among producers, breeders, feedlot operators, packers, etc.).
An alliance is generally developed around some common goals or values, which may include a health and management program, a specific breed, a geographic identity, or an emphasis on leanness. Alliances allow cow-calf producers to share equally in potential profits through retained ownership, and improve beef cattle consistency by grouping together animals of like type, finish and cutability. Alliances do not guarantee profits. Premiums are given only to cattle that meet specifications. Good management is the key. Most alliances provide carcass data feedback to producers (5).
Colorado rancher Dan Kniffen offers the following cautions for those
considering whether to join an alliance:
According to financial consultant Tom Hogan, few cattle producers
really have a grasp on their costs of production. Before joining
an alliance, Hogan recommends first finding out the carcass quality
of your cattle.
Retain a set of cattle, run them through to the rail and see how they do. Once you've figured out where you are and where you want to be, pencil out what it will cost you to get there The key is to avoid discounts. If that means a rancher has to participate in an alliance to learn how to do it, then join one. But in chasing a premium, don't lose sight of all the other efficiencies. That premium won't cover what you lose. Whether marketing through an alliance or outside of one, you're still a price taker and the only way you can be profitable is for production costs to be lower than your receipts (7).
An increasingly common type of alliance is the marketing cooperative. A cooperative is a producer-owned, democratically operated business structure with written by-laws. Cooperative marketing arrangements among cattle producers often take the form of packaging cattle in pools for sale. Packaging means that cattle are merchandized by putting them into groups with particular characteristics to meet the needs of buyers (8).
While most cattle operations in the U.S. are relatively small, the marketing system is geared toward large, uniform lots of cattle. The number of cattle in a lot influences the price buyers are willing to pay. The optimum lot size for feeder cattle sold through a regular ring auction is 50-55 head; for a video auction the number rises to about 240 head. Uniformity of weight and sex is also important in getting the best price for a lot. A study conducted at Utah State University found that buyers at a video auction paid approximately $1.70/cwt. more for uniform lots of cattle than for lots that were not sorted by sex and weight. This means that a 500-pound calf sold in a uniform lot would bring $8.50 more than a similar animal sold in a non-uniform lot (8).
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1.) Each member of the co-op indicates the number of steer and heifer calves he or she will provide to the pool the coming year. This becomes a marketing agreement between the co-op and the producer. 2.) The calves are pre-priced through a video auction using videos and descriptions of "representative" calves. The calves normally are sold in six pools-three for steers and three for heifers, based on different weights. For example, the three steer pools may have average weights of 450 lbs., 525 lbs., and 575 lbs. The pools normally range in size from 150 to 250 head. Pre-pricing through a video auction eliminates the need to gather the cattle to obtain bids. Producers know the day delivery will take place and the price they will receive before the cattle come off the range. 3.) On the day of delivery, producers are responsible for bringing their calves to the loading/unloading facilities. After unloading, the calves are brand inspected and sorted for different pools. The sorted groups for each producer are weighed, and then are placed into their respective pools. Records are maintained on the number and weights of cattle for each producer in each pool. After the pool is completed, the cattle are loaded and shipped. 4.) The co-op is paid by the video auction company and the co-op issues a check to each producer based on the total weight they contributed to each calf pool. Producers
in this cooperative believe that pooling has been a very
successful method for them to increase the price they receive
for their calves. No members of the co-op have more than
200 mother cows, and some of the producers have fewer than
10 calves to contribute to the overall |
According to the 1997 Census of Agriculture, the majority of farms with cattle have fewer than 50 head of beef cows (9). The average cow-calf operator, after accounting for weaning percentage and held replacement heifers, probably has fewer than 30 calves to sell each year of both sexes and with a range of weights. Packaging cattle into uniform lots of optimum size is therefore not possible for most cow-calf operators on an individual basis (8).
For the small producer selling in the conventional market, a cooperative calf pool is a great way to get the best possible price. It does require commitment, time, extra work, and, obviously, a willingness to cooperate with other ranchers. For a co-op to work, rules must be firm, fair, and strictly enforced. The rules must set the quality standards of the group; any member whose cattle do not meet the standards is not allowed to sell through the co-op.
The cooperative should be set up as a corporation. As Jay Nixon advises in Cowboy Marketing, "Each member should have a real financial stake in the co-op, money he took out of his pocket and invested up front, the amount based on the number of cattle he will deliver for marketing so that if the co-op makes money, each member is paid according to his interest" (3).
For detailed information and assistance on forming a cooperative, contact the USDA-RBS Cooperative Services Program (see Resources). For a "yellow pages" of existing alliances, contact:
BEEF Magazine
7900 International Dr., Suite 300
Minneapolis, MN 55425
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Corporate consolidation in the beef industry has narrowed the marketing options for small-scale producers. It is increasingly hard for the family ranch at the bottom of the food processing chain to maintain profits at an acceptable level. This environment has pushed many ranchers out of the business, and inspired others to by-pass the industry and market their own products.
At the same time, the industry has faced a continuing decline in
beef consumption. By the early 1990s, chicken sales had surpassed
beef sales for the first time (2). Factors in this
decline in market share include
It is clear that the industry is failing to meet the demands of a considerable number of consumers. The successful niche marketer will target those poorly served consumers, identify their needs, and produce a consistent, high-quality product that satisfies those needs. Alternative beef marketing operations typically describe their product with some combination of the following terms: lean, organic, natural, pasture-finished (or grass-fed, or grass-finished). Other common selling points for alternative beef include "no antibiotics," "locally raised," "family farm," and "humanely produced."
Before a beef product can be labeled with terms that denote uniqueness or superiority of some kind the producer must file an "Animal Production Claim" with the Labeling Review Branch of the USDA. This involves submitting a label application, a prepared (manufactured) label including the claim in question, and an Operational Protocol (OP). An OP must be in the producer's own words and must state in detail how the animals are raised, including ration formulations, sick animal protocol, herd health management, and other facts relating to the proposed claim (e.g., "no antibiotics," "natural," "organic"). The term "chemical free" is not allowed to be used on a label (2). For details on submitting an "Animal Production Claim", including specific requirements for the OP, contact the Labeling and Additives Policy Division of FSIS (see Resources).
While the industry has paid some heed to the growing consumer demand for lean beef, the existing system is still based on USDA standards that give the best grade to carcasses with the most marbling. There is growing agitation within the industry to reform the grading process to better reflect current market trends. Jay Nixon addresses this issue in Cowboy Marketing:
I know that many cattlemen consider the current diet fads of the consumer, our ultimate customer, as a passing thing. And many of them are. But the most rabid prejudice those consumers have is against fat in their diets. This makes the marbling standards of the grading system for beef a negative factor in the marketing of the product To have a so-called Quality Grade based solely on the single factor that consumers object to most strenuously is just plain stupid. And, I don't believe that this objection is just going to go away (3).
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Based in Kentucky, Laura's markets lean beef in nine states and is endorsed by the American Heart Association. No preservatives, salts, or fillers are used in packaging. Started in 1985 as a "value adding experiment to a family stocker operation," by 1995 the company was debt-free, worth $20 million, and employing 30 people. Today, Laura's Lean Beef is sold in 2,400 stores in 30 states. Retail sales for 1999 are expected to top $55 million. The company contracts with family farms to raise genetically lean breeds such as Limousin and Charolais, on natural feeds only, with no routine antibiotics or hormone implants. Grazing, particularly rotational grazing, is an important part of their program, as is low-stress handling of the animals. The cattle are pasture-finished, with a quick grain feed at the end. As
a high-volume commercial business, Laura's Lean Beef
is not suited to working with small cow-calf producers
on an individual basis. Like the beef inductry in general,
the company deals with truckload lots of uniform weights
and breeding. Small producers would need to create a
cooperative calf pool in order to work with the company,
which does offer price protection to ranchers with whom
it contracts (10). Producers interested
in the details of Laura's cattle program should visit
the company's website: |
Lean beef appeals to more than a niche market the mainstream consumer trend is toward low-fat and fat-free foods. Though the industry has been slow to respond to this reality, the grading process will most likely be changed to accommodate production and marketing of lean beef, which is defined as having 25% less fat than the industry average. While "organic" and "pasture-finished" beef clearly represent niche markets, lean beef is suited to the conventional marketing structure. Laura's Lean Beef (see box) is an example of a large-scale alliance that combines an unconventional product with conventional marketing methods. The small niche marketer probably cannot rely on leanness alone as a selling point. To compete with lower-priced conventional lean beef, other qualities lacking in the mainstream product will need to be highlighted, with an emphasis on customer service.
Until recently the USDA did not permit "organic" labels for livestock products, pending federal standards for organic certification. Even farm names with the word "organic" were not permitted on the label. However, in January 1999 the USDA approved the use of a federal label for the interstate sale of "organic meat" (11). As with other labeling claims, the "organic" label must be evaluated and approved by the USDA's Food Safety Inspection Service (FSIS). An application must be submitted, accompanied by the proposed label and the documentation provided by the certifying organization.
In general, organizations certifying organic beef have the following
requirements:
The National Organic Directory lists organic beef buyers and suppliers around the country. Some market conventionally; others direct-market. (See Resources for information on ordering this publication.) For a more detailed discussion of organic certification, and a list of certifying organizations, request the ATTRA publication Organic Certification.
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Based in Colorado, Coleman is the nation's largest producer of certified all-natural beef, and the first to receive a USDA "natural" label. Coleman contracts with more than 600 ranchers throughout the West to produce meat without hormones or antibiotics, and the vacuum-packed cuts are marketed nationwide in many natural and mainstream food stores. Coleman promotes itself as a steward of the environment, educating ranchers about grazing practices that improve range conditions. This appeals to "green market" customers who seek ecologically raised products. Their meat production is advertised as natural, humane, and "unhurried." See Resources for contact information. |
Under current USDA policy, meat may carry the "natural" label if it contains no artificial ingredients (color, flavor, preservatives, etc.) and is minimally processed. The label must explain the use of the term (e.g., "no added colorings or artificial ingredients" or "minimally processed"). "Natural" production methods must be documented. In popular usage, the term "natural" commonly refers to beef that has been raised mostly on pasture, without routine use of medication. The feed is not necessarily organic.
The 1997 UC-Davis report on "Natural Beef", in summarizing the history of beef finishing in the U.S., notes that:
The feeding of high energy, grain-based diets to beef animals prior to marketing is a relatively new phenomenon. Prior to World War II, beef was primarily finished on forage. Beef animals were developed relatively slowly on forage-based diets, were significantly older at slaughter, and aged post-mortem to enhance tenderness The majority of these animals were marketed through small, community-based packing plants, with the financial rewards for the production and marketing of the product remaining in the local economy (2).
In recent years there has been a resurgence of interest in pasture finishing among North American graziers. The monthly periodical The Stockman Grass Farmer is a forum for these new pioneers. Its editor, Allan Nation, proposes that producers of beef cattle begin to think of themselves as grass farmers, with pasture as their main crop. This is an idea whose time has come, though it is not a new idea. Nation quotes a classic reference book, Forages, published in 1951 by Iowa State: "The grassland farmers are often craftsmen in the culture and use of grass. [One] takes into account soils, plants, animals, and interrelationships. Adequate acreages of adapted grass-legume combinations are provided, depending upon soil needs. High quality forages are emphasized in livestock production, with grains supplementing rather than dominating the feeding practices" (12). The term "grass farming" reflects the fact that high quality pasture is the prerequisite for healthy animals and healthy profits.
In 1997 The University of Missouri's Forage Systems Research Center completed a five-year study "designed to research the finishing of beef cattle on pasture without the use of a confinement feedlot" (13). According to one of the researchers, animal scientist Fred Martz, "What will push [the practice of grass finishing forward] are people with environmental concerns. Pasture finishing won't ever totally replace feedlot finishing, but if we get to a level of finishing 25% of cattle on pasture, it would be a significant change" (14). To repeat a point made above by Jay Nixon, the wants and needs of beef eaters the producer's immediate or ultimate customer are worth considering. Who are those "people with environmental concerns" going to buy their beef from?
Pasture-finished beef (PFB) is lean beef. Sometimes it is finished entirely on pasture; sometimes there is a short period of grain-feeding (as in the case of Laura's Lean Beef). The essential elements of high-quality PFB are high-quality pasture, appropriate genetics, young slaughter age, attention to factors that affect flavor, and aging of the carcass.
As noted earlier, the USDA grading system is based largely on marbling. Because of this, beef finished on pasture tends to grade relatively poorly. In a University of Georgia study that compared carcass quality of PFB and feedlot-finished beef, the USDA grades were split as follows:
The taste panels, however, detected no difference in eating quality between the two types of beef. Canadian researcher Paul McCaughey comments, "The taste panel work we've done shows there are many factors affecting eating quality apart from marbling. In fact, USDA experiments have shown that marbling accounts for only about 5% of beef's eating quality-yet marbling is what we base our entire grading systems on" (14).
It is clear that PFB sold conventionally under the present grading system will "take a price kickingto the tune of $220/head, or up to a 24¢/lb. discount." However, this loss may be offset by cost-of-gain savings. The five-year research project in Missouri showed cost of gain for grass-finished cattle to be as low as $27/cwt., compared to $60/cwt. for feedlot cattle. Land, labor, interest, feed, and all other variable costs were included (14). The Missouri researchers concluded that "cattle can be finished on pasture and the resulting beef will be acceptable for the conventional meat trade The use of maximum inputs of pasture into the finishing of beef will usually result in the most economic gains as long as cattle are taken to a level of finish to grade Choice and/or Select and market discounts are avoided" (13). But until the conventional market learns to deal rationally with PFB, alternative marketing structures are better suited to this premium product. Rather than being graded and sold on the hoof, PFB is typically custom-processed and direct-marketed to consumers.
There is plenty of evidence that grass-finished beef is more nutritious and healthful than grain-fed beef, and the case is presented definitively by Jo Robinson in her recent book, Why Grassfed Is Best. All PFB producers should read this book, and then use it as a reference for educating customers. See Resources for ordering information.
Before beginning an alternative marketing enterprise, it is crucial to understand the differences between commodity marketing and direct marketing. Allan Nation, editor of Stockman Grass Farmer, has stated,
A commodity orientation means that as long as you meet the specs and can stand the price you pretty much tell everyone else to go fly a kite. Such a selfish attitude absolutely will not work in direct marketing In the U.S., consumers expect an attitude of deference and responsiveness to their wants and needs. If you are unable or unwilling to develop or convincingly fake such an attitude, stay in commodity-priced agriculture. However, if you see service to others as a noble calling, don't let the lack of specific marketing or production skills deter you. Aptitudes are rather easily learned. It is our attitudes that are difficult to change and that most often determine our fate (17).
Direct marketing brings the producer and the consumer together in a way that the mass market cannot, and this is its greatest strength and advantage. Direct marketing is "relationship marketing." The first step in building the relationship is identifying your customers, who will not be "just anybody." Your customer base will consist of folks who desire a special product, and their needs should be your first consideration, before you actually develop your product. First, talk to potential customers one at a time. Find out what characteristics they value most in a premium beef product high quality, low price, leanness, organic or "natural" production, home delivery, particular cuts, and so on. Develop a brand name and a marketing/packaging strategy that capture the most important of these elements and preview your "brand" to your intended customers.
When you feel you have the right combination to appeal to your niche market, then develop the actual product. This approach can conserve resources, including your limited capital. It is both risky and inefficient to develop a product first and then try to find a market for it. Remember that the "product" is much more than the beef itself; the product is also service, packaging, your farm's identity, your production philosophy, and even price. For your product to stand out from the competition and attract repeat customers, it must be carefully differentiated from other types and brands of beef. Take time in developing your beef product and working the kinks out of the production process. Begin by making the product for yourself and your family. Next, produce it for your friends who have tried it, liked it, and asked for it. The last step should be marketing to consumers. Allan Nation writes, "If you are considering getting into direct marketing, don't bet the farm on it. Keep doing what you are doing for a living and start learning and experimenting on a small scale [T]he best guinea pig for this period of trial and error is yourself, your family and your friends." If your family and friends are not crazy about your grass-fed steaks and don't request more, "you are still in your apprenticeship period and are not yet ready to be in business." Don't try selling anything that you yourself are not completely satisfied with. "A new business needs virtually 100% customer satisfaction from day one to survive. This is because any new business is necessarily drawing from a very small customer base" (17).
The authors of the University of California study, Natural Beef: Consumer Acceptability, Market Development and Economics, recommend transferring only a portion of your cattle production into the new system at first. This will give you an opportunity to learn the ups and downs of alternative marketing while putting only a small percentage of your income at risk. Diversify your production a portion at a time, increasing the number of animals in the new system as you develop retail skills and market connections (2).
While you have "relationship marketing" on your side, the major beef packers have economy of scale on theirs. Since you will not be able to compete with mainstream beef producers in terms of price, you must determine the appropriate premium to place on your product. Pricing is a critical and difficult task, and under-pricing is a common pitfall. The price has to cover costs of production, re-capitalization of the enterprise, and an acceptable profit. Profit should be planned for at the outset. If profit is thought of as "whatever is left over" there will probably be no profit. At the same time, an over-priced product will not sell. Your initial market research should determine market size, market share, and the price your niche consumer is willing to pay for premium beef. Is that price sufficient to make this a profitable venture?
Joel Salatin, a nationally recognized grazier in Virginia, has been very successful at raising and marketing pasture-finished beef. He gains $200-$300/head net by direct marketing to 400 regular customers (16). His book Salad Bar Beef presents a proven production and marketing system "that can make an excellent profit from a small cow herd regardless of the commodity price of calves." "Salad bar beef" is Salatin's consumer-friendly term for lean, healthy, tasty meat raised locally on fresh, high-quality pasture. Salatin describes a three-pronged approach to developing a clientele for this type of beef:
Other educational methods include brochures, newsletters, newspaper articles, and one-on-one conversations. It is up to you to educate potential customers on how and why your beef is different and better than the conventional product. Education should include instructions on proper cooking as well. Salatin points out that the common fast-cooking methods are suited to marbled USDA Choice, but not to grass-fed lean beef. He recommends slow cooking his beef for the best taste, greater tenderness, and improved digestibility.
Salad Bar Beef is recommended reading for anyone considering alternative beef marketing. It covers both production and marketing topics, all from the perspective of a successful alternative beef operation. See the Resources section for ordering information.
Salatin sells his beef and other farm products direct from the farm, taking orders once a year by mail and phone. Other potential outlets for direct sales to consumers include farmers' markets and local grocery or health food stores interested in carrying farm-fresh products. Stores, however, are usually uninterested unless you can ensure a steady supply.
Finer restaurants constitute another possible outlet. Many chefs appreciate the flavor and freshness of locally raised, grass-fed beef. Some restaurants have developed informational packets on where their ingredients come from, "to build rapport with customers and set the restaurant apart from other dining experiences" (2). Quality and consistency will be this market's main concerns. Chefs may be interested in prime cuts as the majority of their purchase, making it necessary to develop other marketing outlets for hamburger and roasts. Marketing to restaurants may provide the greatest return on investment for primal cuts, but is generally smaller in volume and requires more work per unit of sales (2). Taking your operation from live sales to marketing of meat may require changes in your production focus. Inventory management will be a primary issue. Beef producers who have had a short calving and marketing period for the sake of efficiency may have to time production to match variable consumer demand. Restaurants often have a highly variable demand for product, so that you may either have to carry inventory or be able to move products quickly from live to useable form. Selling directly to consumers as Salatin does could allow you to focus on seasonal production. Freezing beef increases the ability to manage inventory, but adds storage charges to the cost of production. Generally, the larger the scope of your enterprise and the more outlets you have, the less challenging inventory management will be (2).
This section is intended only as an introduction to some aspects of direct marketing of beef. ATTRA's Direct Marketing publication provides more detailed information on enterprise evaluation, marketing research and planning, promotion and publicity, pricing and profitability, and direct market alternatives. Also refer to the Resources section of the present document, which includes sources of information and assistance for creating a small business, as well as contact information for beef producers who direct-market. Your best resource for information and inspiration is fellow producers, whose experience can save you many surprises and missteps.
Marketing activities are affected by a wide variety of laws and regulations at federal, state, county, and city levels. While regulations vary by type of enterprise and location, there are some general rules to be aware of in all areas of direct marketing. Some of these legal considerations include the type of business organization (sole proprietorship, partnership, etc.), zoning ordinances, small business licenses, building codes and permits, weights and measures, federal and state business tax issues, sanitation permits and inspection, food processors' permits, and many, many others. If you plan to employ workers, there will be still more requirements to meet, such as getting an employer tax identification from the IRS and getting state workman's comp insurance. Environmental laws are also becoming increasingly important to farmers.
Always check with local, state, and federal authorities before trying to market any food product. Processed foods are heavily regulated to protect public health. Stay informed, since rules and regulations change often, and keep good records to prove that you're in compliance.
Adequate insurance coverage is essential. "The closer you get to the consumer direct marketing, the higher the liability risk" (2). Insurance that every operator should have includes liability insurance for your product and your premises, employer's liability insurance to protect you if employees are injured, and damage insurance to protect against loss of building, merchandise, and other property. General comprehensive farm liability insurance often does not cover on-farm marketing or direct marketing operations. See Resources for information on The Legal Guide for Direct Farm Marketing by Neil Hamilton of Drake University Law School, a comprehensive primer on the many legal issues that surround direct marketing of agricultural products.
Processing is an important consideration for direct marketers. Custom facilities are generally cheaper to use. Large commercial, federally inspected plants may not be geared to do custom butchering for the small beef producer. Producers should contact their state department of agriculture for regulations about meat processing and sale to the public.
Beef must be slaughtered and inspected at a federal- or state-approved facility in order to be sold to individuals, as in the freezer beef trade, or to restaurants. If beef is processed at a custom facility that is not federally or state inspected, then it can only be sold prior to slaughter (15). This means the cattle must be sold by the head or by liveweight, which doesn't account for wide variations in dress-out percentages between animals. Joel Salatin deals with this dilemma by selling his animals for $1 per head and then adding shipping and handling charges based on carcass weight. However, we cannot recommend this practice. The liability risk involved should not be underestimated.
Producers considering constructing their own slaughtering and processing facility should remember that it is very important to comply with federal, state, and local regulations for processing the axiom "ignorance is not an excuse" applies here. Farmers who intend to process on-farm should be aware of all federal, state, and local regulations. Your state departments of agriculture and health will have information about regulations. Your county Extension office should be able to direct you to the county agencies that regulat zoning, health, and other local regulations.
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Some producers who direct-market do not castrate their bulls (producers who market conventionally do castrate since they get docked for intact males). Bulls put on weight 17% faster than steers and make leaner gains, giving them a higher dressing percentage. However, they may need to be slaughtered young (by 18 months) to minimize gristle, and run in a separate herd to prevent unplanned breeding. But separating the herd may not be convenient. Joel Salatin, for example, chooses to castrate so that he can run all his cattle in one herd. |
In 1996, the USDA's Food Safety and Inspection Service (FSIS) announced implementation of new rules meant to ensure the safety of meat products. A major component of the regulations is the Pathogen Reduction/Hazard Analysis and Critical Control Points (HACCP) system. FSIS works with small and very small processing plants to make sure they comply with the HACCP. All facilities must comply by January 25, 2000. To learn more about HACCP mandates, or to obtain copies of FSIS-developed models for designing HACCP-compliant small facilities at the least cost, contact FSIS (see Resources for contact information).
Retail and individual meat sales require packaging in accordance with state food laws. Since good packaging enhances sales, label design and presentation are important. Vacuum packaging provides superior product protection as compared to hand-wrapping. Feeding high levels of Vitamin E for two weeks prior to slaughter increases the shelf life of meat (2).
Co-op marketing can be adapted to alternative markets. A great example is the CROPP cooperative, which markets certified organic dairy, eggs, produce, and meats nationally under its "Organic Valley" brand name. Formed in 1988, CROPP is now the largest producer of organic dairy products in the U.S. Among the more recent additions to their product line is pasture-finished beef. CROPP is a farmer-owned and operated marketing cooperative, consisting of over 190 small to mid-sized family farms in 10 states, from Maine to Washington. See the Resources section for contact information. For another example, read the enclosed article profiling a producers' marketing co-op in Kansas that specializes in "all natural" beef.
The shortcomings of the conventional marketing system have made the time ripe for a return to marketing beef directly from ranches to consumers. Niche marketing can give the farmer a larger share of the food dollar and a higher return on each unit sold. Adding value or marketing some minimally processed farm products directly to the consumer is a way of enhancing financial viability. While successful direct marketing may or may not increase profits, it will provide protection from fluctuating live-market prices. However, direct marketing is a labor-intensive job demanding time and effort, creativity, ingenuity, sales expertise, and the ability to deal with people in a pleasant and positive manner. Producers must be absolutely sure they are ready for the job.
Bauer, Lisa. 1999. Profile of a Kansas beef co-op: From ranch to retail supermarket. Small Farm Today. April. p. 63-65.
Levi, A., D. Daley, S. Blank, and G. Nader. 1998. Natural Beef: Consumer Acceptability, Market Development, and Economics. Agriculture Department, California State University, Chico. p. 1-25.
Reeves, Lisa Cone. No date. Direct Marketing Farm-Raised Beef. Manuscript. 4 p.
Wulf, Duane N. 1999. Did the locker plant steal some of my meat? The Shepherd. January. p. 12-13.
Go To TopCowboy Marketing
A Primer On Cattle Marketing Practices That Will Increase Your Bottom
Line
By Jay Nixon. 1995. 135 p.
Managing for Today's Cattle Market and Beyond
http://ag.arizona.edu/arec/wemc/TodaysCattlePub.html
USDA Rural Development/ Cooperative Services
Stop 3250
Washington, D.C. 20250-3250
Telephone: (202) 720-7558
e-mail: coopinfo@rurdev.usda.gov
http://www.rurdev.usda.gov/rbs/coops/cswhat.htm
Alternative Marketing Programs
Cattle Fax. 1998. 39 p.
Natural Beef: Consumer Acceptability, Market Development, and
Economics
by Annette Levi, Dave Daley, Steve Blank, and Glenn Nader UC SAREP
1996-97 Research and Education Report. Available on-line at: http://www.sarep.ucdavis.edu/grants/reports/nader
Salad Bar Beef
By Joel Salatin. 1995. 368 p.
The Legal Guide for Direct Farm Marketing
By Neil D. Hamilton. 1999. 235 p.
Emerging Markets for Family Farms: Opportunities to Prosper Through
Social and Environmental Responsibility
Center for Rural Affairs. 1997. 45 p.
USDA Farmer Direct Marketing Website:
http://www.ams.usda.gov/directmarketing
Starting in 1999, the USDA's Agricultural Marketing Service (AMS)
has announced a plan to help small farmers sell their agricultural
products directly to consumers. Within the next three years, the
AMS will create new direct marketing networks and a one-stop information
clearinghouse, as well as developing training and information
programs for farmers market managers, and small farmers. The "Farmer
Direct Marketing Action Plan is available from Errol Bragg at
(202) 720-8317, or on-line at: http://www.ams.usda.gov/directmarketing/frmplan.htm
Organic Certification.
National Organic Program, USDA
Ted Rogers
202-205-7804
http://www.ams.usda.gov/nop
The National Organic Directory
Community Alliance with Family Farmers
Upper Midwest Organic Livestock Producers Directory
Cooperative Development Services. 1999. 76 p.
The following ATTRA publications are available free of charge:
American Farmland Trust
http://www.grassfarmer.com
Why Grassfed Is Best
by Jo Robinson. 1999. 107 p.
The Stockman Grass Farmer
P.O. Box 2300
Ridgeland, MS 39158-2300
(601) 853-1861
Pasture Profits with Stocker Cattle. 1992. 192 p.
Paddock Shift: Changing views on grassland farming. 1997. 184 p.
Grass Farmers. 1993. 192 p.
USDA/FSIS/OPPDE
Animal production Food Safety Staff
1400 Independence Ave, SW
Washington, D.C. 20250-3700
(202) 690-2683
http://www.usda.gov/agency/fsis
http://www.fsis.usda.gov/OA/haccp/imphaccp.htm
HACCP hotline: (800) 233-3935
e-mail hotline: Haccp.Hotline@usda.gov
Some producers and marketers of natural and grass-fed beef products who are willing to share information: |
CROPP Cooperative/Organic Valley
507 W. Main St.
La Farge, WI 54639
(888) 444-6455
http://www.organicvalley.com
Polyface, Inc.
Joel Salatin
Rt. 1 Box 281
Swoope, VA 24479
(540) 885-3590
Laura's Lean Beef
2285 Executive Drive
Suite 200
Lexington, KY 40505
1-800-487-5326
e-mail: llb@laurasleanbeef.com
http://www.laurasleanbeef.com
Coleman Natural Products, Inc.
5140 Race Court
Unit 4
Denver, CO 80216
1-800-442-8666
http://www.colemannatural.com
Alaska Natural Beef
Bering Pacific Ranch
(888) 384-5366
http://www.alaskanatural.com
Van Wie Natural Foods
6798 Route 9
Hudson, NY 12534
(518) 828-0533
http://www.vanwienaturalmeats.com
Ervin's Natural Beef
128 E. 19th Street
Safford, AZ 85546
(520) 428-0033
e-mail: info@ervins.com
http://www.ervins.com
Lasater Grasslands Beef
Matheson, CO 80830
(719) 541-2855
e-mail: lasater@rmi.net
http://www.lasatergrasslandsbeef.com
Homestead Healthy Foods
Rt. 2 Box 184-A
Fredericksburg, TX 78624
(830) 997-2508
Debbie Hawkins
Saguaro-Juniper Natural Beef
P.O. Box 1884
Benson, AZ 85602
(520) 212-4769
Tom & Martha Mewbourne
Thorntree Farm
Route 2 Box 776A
Nickelsville, VA 24271
(540) 479-3057
Rob & Alanna Reed
Overlook Farm
233 Spruce Rd.
Karns City, PA 16041
(724) 756-0540
Mike, Jennifer & Johanna Rupprecht
Earth-Be-Glad Farm
RR 2 Box 81
Lewiston, MN 55952
(507) 523-2564
David Schafer & Alice Dobbs
Schafer Farm
56 SW 52nd Ave.
Trenton, MO 64683
(660) 359-6545
Dennis & Brenda Wohlgemuth
Box 2, Site 6, RR #1
Crooked Creek, Alta.
Canada T0H 0Y0
Kent & Lisa Shipe
Rt. 1 Box 423
Mathias, WV 26812
(304) 897-5136