My View From The Country

Beef Up Your Competitive Position For Leaner Times Ahead

As managers, we should revel in the rewards we can expect over the next five-plus years, but we also need to prepare for what promises to be a radically different industry down the road.

There’s a tremendous amount of justified optimism about the future of the industry. However, the irony is that this optimism tends to lead to short-term thinking from a management perspective. Of course, capturing the opportunities that exist is good business, and no one would blame anyone for focusing the X’s and 0’s of implementation and execution when there are unprecedented profit opportunities to be realized.

The difficulty of short-term profit maximization, however, is that there’s little impetus to think farther down the road and to make the changes necessary to prepare an operation for the future. History illustrates that such a mindset can be problematic. The influx of capital and profits will lead to increased competition and narrowing margins at some point, and that means that innovation should be as big of a priority, if not a bigger priority, today than when profits are nonexistent.

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What I’ve always found interesting is that many in this industry are pretty open to innovative ideas when results are not good. That’s not surprising, as business case studies are legion with examples of companies that failed to innovate at the peak of their success and paid dearly for it later. While IBM is one that came roaring back, there are many others that have become just footnotes in history. 

One thing we can be certain of is that what we are producing today won’t be sufficient for tomorrow. I liken the situation to the Sony Walkman. In its heyday, it represented the pinnacle of portable technology, but it is difficult today to even find a cassette to play in one, if you still had a Walkman that worked. People, of course, still listen to music on the go, but there are much smaller, more capable and more convenient ways to do it today. The iPod came along and raised the bar, the latest progression from vinyl recording to digital.

Similarly, people want a great eating experience. They seek one   that is healthy and produced in an economic and environmentally friendly way. As ranchers, we’ll always be trying to produce tasteful beef in a profitable manner, but our management scheme and business environment will undoubtedly be totally different in 10-20 years.

Through the use of DNA and other new technologies, as well as new pricing structures and marketing opportunities, what we are producing today likely will be unusable a decade from now. And those who are behind today, but still being rewarded for producing inferior-to-average cattle, will likely find themselves facing a marketplace in 10 years that will reward them accordingly.

Does anyone remember how we sold our product before the advent of futures, contracts, branded beef, grids, etc.? The rate of change isn’t slowing, it’s accelerating; it’s simply not as noticeable.  

Record margins will accelerate margins. Our jobs as managers will be to identify as best we can how different our business will be in 10 years and position our operations for it. Admittedly, the seedstock business is evolving at an unprecedented rate, and the artificial insemination and seedstock businesses will be almost unrecognizable in 10 years.

Even the most mundane things are changing. Take a typical bull sale, for instance. We still retain the chant of the auctioneer, but the typical bull sale auction is much different today than a decade ago.

As managers, we should revel in the rewards we can expect over the next five-plus years, but we also need to prepare for what promises to be a radically different industry down the road. 

 

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Discuss this Blog Entry 6

Jared Decker (not verified)
on Jun 6, 2014

Great article! Now is the time to invest in new technology.

on Jun 7, 2014

All well and good..........but the unspoken tragedy is that the vast majority in the beef industry equate marbling with a great eating experience........while consumers link many other factors.

Bill brake (not verified)
on Jun 7, 2014

Been breeding for 9 years for tenderness and palacability(DNA testing) as will as feed efficiency;Black and Red Angus, do very will at local action but still can't get people to pay any more for bulls grading Superio (upper10% DNA testing). Soon buyers will ask cattleman what is your average palatadility score for your herd is and I think I won't be able to supply if cattleman start selling calves for palatadility and not hair color!

CalfDoc (not verified)
on Jun 8, 2014

Do we know what the market even is? There have been some interesting stories on growing steaks for a hamburger market.
I think Bill Brake brings up an interesting thought. We go on and on about on technology but probably the biggest driver in the market is color of the hair coat. Points out technology in the absences of marketing is a waste.
Doug Hoort

James McGrann (not verified)
on Jun 9, 2014

Producers in the business to make a living, which is a limited percentage of beef producers, will be using modern business management practices and information to find the markets and production systems that maximize profits.

James McGrann (not verified)
on Jun 9, 2014

The speed of change could be improved if better financial performance information was generated in the industry.
True profitability and ROA is seldom calculated or reported.

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What's My View From The Country?

As a fulltime rancher, opinion contribur Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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