Sign on the near-term dotted line if you want, but leave plenty of room for others to compete for your cattle.
That's the common-sense approach many producers are taking as they sift through a growing number of vertically coordinated production and marketing systems that promise market access, even as some systems hint that long-term production commitment will ultimately be the cost of this market access.
“It's a confusing issue, and some are pushing the idea that if you don't get lined up with someone you'll be out of business, and that's just not true,” says Tom Woodward, manager of the Broseco Ranch at Omaha, TX. Broseco Ranch is a founding member of Ranchers Renaissance, a vertical production system partnered with Excel and retail giant Kroger to market beef under the “Cattleman's Collection” brand.
“You don't have to sign up with anyone for life. There will be more and more opportunities to sell these good cattle,” says Woodward.
But, if producers want access to value-added markets, they must be willing to work with facts rather than guesses by finding out more about their cattle. After all, it's not really the cattle opening broader gates of market access; it's their performance and the knowledge of that performance.
“Don't worry about market access, worry about the kind of market you're going to get out of that access,” suggests Dave Nichols of Nichols Farms, Bridgewater, IA. Besides being a seedstock mainstay, Nichols has also crafted a branded beef supply chain that is the exclusive beef supplier for the Midwest's Machine Shed Restaurants.
“Because cow/calf producers, for the most part, are small and spread out, market access will not be a problem; market access at what price will be the problem,” says Nichols.
Nichols believes producers who take care of their genetics, herd health and management with an eye on hitting defined consumer targets can already access markets that pay them more. Conversely, he reckons producers who calve year-round and view the neighbor's fence-hopping, sale barn leftover as an opportunity to reduce breeding costs will continue to have market access, too, but at drastically lower price levels.
“I think producers should do everything they can to add value to their calves, then explore the possibilities of coordinating with people who have the ability to market their product at a premium price,” explains Nichols.
But as producers sort the potential, they should keep their focus leveled on mainstream beef production, recommends Bill Mies. He's assistant vice president of supply for Future Beef Operations, a coordinated system partnered up with retail giant Safeway.
“If someone were asking me to produce something for the supply chain that would be difficult to market somewhere else, I'd want to think carefully about that,” says Mies.
Indeed. As it turns out, the largest vertically coordinated systems aligned with the largest beef retailers are after the same basic cattle. The complicated formula reads like this: English X Continental crossbred cattle — a touch of Brahman grudgingly accepted. They desire cattle that will consistently convert in the feedlot, quality grade at least mid-Select, and yield grade at least in the 2s.
No one wants cattle that serve up too much morbidity or mortality, nor do they want those lightweights and heavyweights that crush production efficiency throughout the system.
That means good old-fashioned competition, as long as producers leave themselves the option.
Again, Woodward emphasizes the power of information. “It's a lot easier to find out something about cattle today,” he says. “And, if I decide to sell outside of the system I'm in, I have lots more information to use… I think producers, large and small, have more opportunities today rather than fewer.”
While information is the price of admission to value-added access, Mies cautions, “The other issue is that if you're entering into an alliance, the formula that creates the price has to be transparent to both sides and be easily calculable by both sides.”
Moreover, no type of contract guarantees a long-term relationship.
“Even if you do have a contract, keep in mind that if someone else comes out with a better product and more service, you'd better be ready to compete. People can and do change suppliers,” says Nichols. “But if I'm doing all of these things right, at least I have the product that will allow me to pick and choose between the markets.”
As Woodward points out, “If you have good cattle, there will always be someone looking for them.”