Recent prices haven’t only surprised cattlemen but taken a lot of the fun out of marketing feeder cattle.
Ironically, when prices adjust downward, the interest in creating value seems to increase, as well. But it becomes a little trickier when one tries to put together a marketing approach that will consistently capture the added value being put into the cattle via genetics and marketing.
We all want to be part of making an aggregate improvement in beef demand, but we also want to benefit directly, as well. There are a multitude of alliances, marketing avenues, and the like out there, but they usually involve a certain amount of risk, to boot.
The more specialized you become in terms of your marketing targets, the greater tendency toward increased margins and reduced price risks. But with those advantages come increased market risk (if the market isn’t there, then everything reverts back to a commodity setting).
The tough thing is selecting the right partners. In some ways, the more focused you become the less flexibility you Troy Marshall have in marketing. For example if you’re targeting an ultralean, low Select, all-natural product line, you may be able to significantly increase revenues, but you’re also locking yourself into a market that – if it doesn’t materialize – may leave your product with less value than the average in the commodity marketplace.
That said, one of the top priorities in selecting someone to align with (integrity and trust are always paramount) is a willingness by both parties to make a long-term commitment. A marketing partnership doesn’t produce significant returns if it doesn’t involve a true commitment from both parties.
Saying “I will try to buy my hay from John X” is one thing; a five-year pledge to buy 700 tons of specification hay at $80/ton is quite another. It means the supplier will deliver, even when $90 is the going price one year; and that the buyer will purchase, even when that hay is available elsewhere for $70/ton.
Without a long-term commitment, it isn’t an alliance; it’s a convenience.
Troy Marshall is a seedstock producer and contributing editor to BEEF Cow-Calf Weekly.