The cost side of the equation will always be important, but the top side or value part will determine profitability more and more going forward.
The debate over low cost vs. high quality and high output is one university experts, allied industry and seedstock producers have been waging for as long as I can remember. And while those same folks continue to argue their side, I think the average producer is probably tired of the conversation.
They’re tired because they understand that both sides of the question have valid and erroneous points. The average producer is more interested in finding the “right” balance between the two viewpoints. The frustration comes from the difficulty of finding that balance for their operation, and that there are so few good tools out there to help them do that.
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It’s not an either-or proposition. In fact, one must do both effectively. Fail to be a low-cost producer and you’re out of business; focus solely on being a low-cost producer and not only are you doomed to low margins, but you have to hope you can keep selling on the average in an imperfect commodity system. So, ultimately, we have to be a low-cost producer of a product that consistently makes/exceeds customer expectations for a specific market or niche.
Marketing has made it popular to believe that the two – low cost and high quality – are not compatible, or even antagonistic. But that’s simply not the case with today’s tools. Of course, if you’re going to maximize either efficiency or quality for any one segment, it will likely decrease it for the other. Nothing is more short-sighted or has less staying power than a segment mentality; cattle must work for everyone throughout the system. By definition, that means finding optimum levels at the various segments to create maximum system profitability.
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What we do know is that those optimum combinations are always changing. Who would have believed that so many rations would have removed both traditional hay and corn from their lists? Market specifications are narrowing and there are multiple targets, plus everyone’s resources and management options are different. In the end, the extreme views may be right, we just have to figure out how to combine them in the same package.
The bottom line is that the cost side of the equation will always be important, but the top side or value part will determine profitability more and more.