If you’ve attended just about any industry meeting the last couple of years, likely someone talked about the value of building relationships and collecting and using information. The trouble is that while we all appreciate the wisdom in that advice, the marketplace made it easy to ignore.
Numbers were tight, demand was growing and the upper segments were burdened with over-capacity. Customers didn’t have much opportunity to differentiate on the basis of value or relationships.
In fact, for those with a commodity mindset, the opportunities to make money on poorer cattle and questionable management were extremely good. And the marketplace actually has been rewarding to some degree those who elect to take short cuts in management and genetics.
Things are changing, however, and the shift will be very dramatic. Rising input costs are going to squeeze margins. And with the overall economy slowing, it’s difficult to foresee a continuation of the demand we’ve been enjoying. The net effect is that the leverage in the marketplace over the next couple of years will likely shift toward the segments higher in the production chain.
Looking out at the situation today – what with feeders competing for tight supplies of feeder cattle, carcass specs widening instead of tightening, and with the Choice/Select spread retreating to non-existent levels – it might be hard to imagine that things are really shifting, but they are.
The analogy of the duck swimming across the lake is a good one. On the surface everything looks serene, calm and smooth, but the duck’s legs are actually paddling to beat the band just below the water’s surface. Outwardly in the industry today, there seems to be very little change in the marketplace. Internally, however, things are happening that will reshape not only cattle’s value but the way they’re marketed.
It’s not too late to start building relationships with customers and to begin to collect the information necessary to assess whether your cattle are working for them. But the window of opportunity is drawing narrower all the time.
Change occurs in this industry when profits are slipping, not when prices are solid. In just six short months, we’ll begin marketing the 2008 calf crop. The choice is simple: Will you fight it out in a brutal battle with the vast majority of your competitors? Or will you have built the relationships, accumulated the data and assembled your story to the point where you’ll be considered a leader with an advantage over most everyone else selling their calves?