Cattle Economics

Industry’s Future Is In Sector Collaboration

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Increasing production efficiency and improving customer satisfaction through more consistent eating experiences demand increased cooperation between segments. After all, if the right hand doesn’t know where to find the left, no one knows what’s working and what needs work.

Industry alliances have yet to remake the beef cattle business the way many expected a couple of decades ago.

Back then, lots of folks thought that by this point in time the industry would be an amalgam of well-defined supply chains, dictating both market access and opportunity to receive something besides the average price.

That vision took flight with the 1993 Strategic Alliances Field Study funded by the beef checkoff. The study – the first of its kind – attempted to objectively measure how much of the money lost to the industry’s fragmented production, management and marketing system could be recovered if all segments worked together to eliminate the losses and share the gains.

There’s exponentially more vertical cooperation today than there was then, everything from branded beef programs and special feeder cattle sales to a slew of value-based grids for fed cattle. But the current industry is less a series of supply chains sorting out product that doesn’t fit added value programs and more of a central channel sorting in products that do.

Several programs have tried to forge massive, closed-loop supply chains; and some failed miserably, such as eMerge and Future Beef. Others continue to succeed beyond what anyone believed possible – U.S. Premium Beef comes to mind. Likewise, the venerable Certified Angus Beef®, which forged a market category of its own, continues to foster an array of supply chains.

Still others fly beneath the proverbial radar at one stage of formation or another.

All deserve plaudits, as do producers willing to take the risk and participate in them.

On the other side of the spectrum, average-based, commodity beef production and marketing deserves appreciation, too. It may not be trendy, but it continues to garner more returns for some than the added cost of participating in value-added programs.

Yet, increasing production efficiency and improving customer satisfaction through more consistent eating experiences demand increased cooperation between segments. After all, if the right hand doesn’t know where to find the left, no one knows what’s working and what needs work.

Arguably, that’s been the overarching benefit of periodic National Beef Quality Audits (NBQA), which include thoughts and objective measures from all industry segments. The most recent industry report card was released at the end of July. In the meantime, the beef checkoff, which funds NBQA, released a YouTube video (www.youtube.com/nationalbqa) offering an overall sense of the findings and the value behind the process.

“Too often, we get caught up in our own segment of the industry. We don’t consider implications for our partners either upstream or downstream,” says Steve Sands, vice president of protein at the Performance Food Group. It’s the parent company of a family of food service distributors that delivers more than 94,000 national and proprietary branded food and food-related products.

“One of the great things about the audit is that it brings people together from the beginning of the supply chain, the cow-calf operation, through the feedlots, the packers, the distributors and the restaurants. By bringing us together we can begin to coordinate our activities and eliminate many of the inefficiencies that plague us and work together to produce a better product,” Sands says.

“I think the most important thing to come out of the audit is not the data,” says Donnie Schiefelbein of Schiefelbein Farms at Kimball, MN. “But given what we’ve just learned, the important thing is asking how can we as producers raise the bar and improve the product we’re raising for the consumer?”

Really, that’s the essence of the alliance concept.

“Quality is hard work,” says Tom Field, director of the University of Nebraska’s Engler Agribusiness Entrepreneurship Program. “The NBQA provides our families and the industry a route to measure our performance. It’s an honest, true look at where we are as a business and it asks the question: Do you have the commitment to get better?” 

Discuss this Blog Entry 1

on Aug 1, 2012

And there's also the cross-sector collaboration. Beef raisers are coordinating with chicken, pig, and other raisers in order to defend their mutual interests against activist extremist special-interest groups (HSUS, PETA, etc.)

One of the interesting alliances is with those who raise hunting dogs - who have been having to take brunt of a lot of these attacks. Since a lot of beef producers also like to hunt, this is a natural.

But Beef producers infrequently have other commercial concerns (raise other livestock or crops), so inter- and intra-sector alliances will ensure their diverse production all remains profitable. Soy and Corn, for instance, have their own programs to defend and expand their industries. One beef farmer down the road from us raises organic grapes as well.

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Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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